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P056416

 ICRR 11787 Report Number : ICRR11787 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 06/24/2004 PROJ ID : P056416 Appraisal Actual Project Name : Second Edu Sec Devp Project Costs 26\.7 25\.2 US$M ) (US$M) Country : Lesotho Loan/ US$M ) 21 Loan /Credit (US$M) 21 Sector (s): Board: ED - Secondary Cofinancing education (45%), Primary US$M ) (US$M) education (43%), Vocational training (8%), Pre-primary education (2%), Adult literacy/non-formal education (2%) L/C Number : C3192; CQ151 Board Approval 99 FY ) (FY) Partners involved : Closing Date 12/31/2002 12/31/2003 Prepared by : Reviewed by : Group Manager : Group : Helen Abadzi George T\. K\. Pitman Alain A\. Barbu OEDST 2\. Project Objectives and Components a\. Objectives This APL constituted the first phase (1999-2003) of a 12-year program aimed increasing the number of citizens that benefit from the education system and graduate with skills enabling them to meet labor market demand\. The first-phase objectives were to assist in (i) increasing the access and equity and improve the quality of primary and secondary education in order to lay the foundation for achieving universal primary education; and (ii) supporting the government to develop the policy and institutional framework for (a) early childhood education, (b) primary and secondary education, (c) technical and vocational education and (d) nonformal education\. b\. Components Components included: (a) For early childhood development (ECD) the project was to develop policy options to widely increase coverage and improve quality for ECD programs by developing an upgraded and expanded training program for ECD trainers and teachers, and conducting a feasibility study to explore the possibility of attaching community-run ECD centers to primary schools, particularly in inaccessible areas\. (b) For primary and secondary education, the project would finance six sub-components to increase access and equity and enhance quality and efficiency of primary and secondary education\. The sub-components included: (i) curriculum and assessment; (ii) teacher development and support; (iii) physical construction; (iv) targeted equity-based program; (v) school-level management; and (vi) capacity building in planning, monitoring, and evaluation \.(c) For technical and vocational education and training (TVET) the project would improve the efficiency and cost-effectiveness of the TVET system in order to better train citizens to compete locally and in regional niches and to ensure graduates have the skill mix demanded by the national economy\. (d) For non-formal education the project would improve the quality of life of citizens who have missed out on formal schooling by equipping them with skills\. c\. Comments on Project Cost, Financing and Dates This was an APL covering the first phase of a 12-year program\. The first phase closed after an extension of 12 months\. Phase II is proceeding\. 3\. Achievement of Relevant Objectives: (i) Increasing access and equity to primary and secondary education (US$17\.7 million) - substantially achieved with few shortcomings\. The project supported an expansion of enrollment in primary education and a gradual abolition of school fees \. Primary education enrollment increased by 12% between 2000 and 2003\. The gradual abolition (one grade every year) allowed opportunities for planning and budgeting to prepare for supply side increases\. Despite delays and difficulties, curricular policies were developed as well as a national sample-based assessment instrument through twinning with the Scottish Qualifications authority\. A distance teacher education program was developed, that sought to provide inservice and preservice training to the 27% of the country's teachers who are unqualified; 750 enrolled\. About 200 classrooms were to be constructed, but despite delays, targets were exceeded by almost 100%\. The new classes accommodate 20,000 students, easing the overcrowding\. School-level advisory committees were established to improve management, and about 10,000 participants from over 2000 schools (85% of the country) received training\. Scholarships were given to nearly 25,000 orphans and other destitute children\. Public expenditure reviews were carried out, and revealed that Lesotho spends 30% of education funds on higher education (compared to 20% of neighboring countries)\. An educational management information system was established, textbooks and materials were also provided\. (ii) The objective of supporting the government to develop the policy and institutional framework was partially achieved with some shortcomings, , as follows: - Early childhood care and development (US$0\.4 million) - fully achieved\. Coverage increased from 36,079 to 42,231 children (about 30% of all preschool children)\. The project developed needed regulations and trained cascade cadres of teachers\. Training targets of about 2200 persons were met or exceeded\. A home-based care pilot was successfully implemented with 500 children and volunteer mothers who received training to develop skills prerequisite for schooling\. - Technical and vocational education (US$1\.0 million) - not achieved\. None of the targets were achieved\. - Nonformal education (US$0\.4 million) - partially achieved with some shortcomings\. A series of learners' distance training centers were established for literacy and life-long learning\. 4\. Significant Outcomes/Impacts: As a result of the gradual abolition of fees, the net enrollment ratio in primary education increased from 64% in 1998 to 85% in 2002\. A national assessment showed that while students in grades 3 and 6 performed rather well in Lesotho, they had low achievement in English and math\. (Test results are not included in the ICR\.) The choice of adaptable program loan (APL) instrument proved appropriate for the education sector in Lesotho\. The instrument allows longer period to achieve overall objectives, an issue particularly important to the policy and institutional development aspects of the country's needs\. It also allows the government to make a long-term financial commitment regardless of government changes\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): The project was ambitious and Ministry of Education capacity was weak\. Implementing multi-level programs required substantial efforts from key players who sometimes lacked incentives to do so\. Following public expenditure reviews, needed changes in budgeting decisions were not made\.The selection of sites for school construction was often politicized, partly due to a great need for physical infrastructure; this problem caused implementation delays\. The initial selection criteria for the Bursary Program were not sufficiently clear or stringent\. Training time for the advisory committees was insufficient, and many parents did not understand the regulatory issues involved with teacher employment\. Policy outputs regarding nonformal education, including a means of financing this sector, did not materialize; because of disagreements over the extent of government provision of nonformal education, the Ministry of Education discontinued the work\. Capacity in the technical and vocational department was weak and there was limited support from the public and private sector\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev \.: Modest Modest 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: - Free primary education is an important means to bring about education to the poorest of the poor\. A phased approach may allow governments sufficient time to prepare for the large enrollment increases that follow\. - Scholarships for destitute students may enable them to stay in school and pay for their daily needs\. However, clear and enforceable criteria are needed to ensure that those who need the scholarships the most benefit from them\. - Triggers for APLs must be carefully designed to be realistic and achievable\. Flexibility in policy dialogue may prove to be more effective in bringing about agreements over subsequent tranches rather than attempt to enforce dated covenants\. 8\. Assessment Recommended? Yes No Why? Several unusual components have gone into this project, such as early childhood education and feeding interventions\. APLs have rarely been 'audited'\. 9\. Comments on Quality of ICR: The ICR generally explains the issues clearly and is overall satisfactory \. However, it would have benefited from reporting test scores for the national assessment that was created by the project \.

REVIEW

P094917

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) Report Number : ICRR0021194 1\. Project Data Project ID Project Name P094917 3A-WAPP APL 1 (CTB Phase 2) Project Country Practice Area(Lead) Western Africa Energy & Extractives L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IDA-42130,IDA-42140 31-Dec-2010 75,000,000\.00 Bank Approval Date Closing Date (Actual) 29-Jun-2006 30-Jun-2016 IBRD/IDA (USD) Grants (USD) Original Commitment 60,000,000\.00 0\.00 Revised Commitment 57,422,409\.39 0\.00 Actual 59,838,005\.23 0\.00 Prepared by Reviewed by ICR Review Coordinator Group Nestor Ntungwanayo Victoria Alexeeva Christopher David Nelson IEGSD (Unit 4) 2\. Project Objectives and Components a\. Objectives The Adaptable Program Loan (APL) was designed and implemented in two phases, and each phase project had its own Project Appraisal Document (PAD), and its own objectives\. Project objectives by phase According to the 2005 Development Credit Agreement (DCA) of the first phase of the project (with Ghana), "the objectives are to extend the lifetime and improve the quality of the bulk power transmission system by providing investment support to replace and expand facilities and by providing technical assistance" (DCA, p\.15)\. The project development objective in the PAD for phase 1 (page 9) was different, i\.e\., “to increase access of Page 1 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) WAPP “Zone A” coastal states to more stable and reliable electricity as a means to alleviate power supply deficits and/or to reduce their collective vulnerability to drought-induced power supply disruptions"\. As per the 2007 Financing Agreement (FA) of the second phase of the project (with Ghana and Benin), "the objective of the Project is to assist the Recipient in developing a more stable and reliable exchange of electricity between the national power systems of the West Africa Power Pool (WAPP) 'Zone A' Coastal States" (FA, p\.5 for Ghana, and p\.6 for Benin)\. 'Zone A' Coastal States are Benin, Côte d'Ivoire, Ghana, Nigeria and Togo\. The project objective in the PAD for phase 2 (page 12) was stated as follows: "to assure more stable and reliable exchange of electricity between WAPP “Zone A” Coastal States (Côte d’Ivoire, Ghana, Benin, Togo and Nigeria) as a means to alleviate and/or reduce their collective vulnerability to drought-induced power supply disruptions"\. Following the IEG/OPCS harmonized guidelines, the ICR validation will be based on the assessment of the project performance on the basis of the objectives as stated in the legal agreements\. Program's objective: The WAPP APL program comprised three mutually reinforcing sub-regional infrastructure development projects: (a) WAPP APL 1: the Coastal Transmission Backbone Project; (b) WAPP APL 2: the Western Zone Power Pool mechanism; and (c) WAPP APL 3: the Sahel Zone Power Pool mechanism\. As per the PADs of two phases of the project (respectively on p\.2 and p\.10), "the objective of the West Africa Power Pool (WAPP) program is the development of a robust platform for WAPP comprising three distinct but mutually reinforcing sub-regional power system infrastructure development sub-programs that are fully aligned with the WAPP Organization’s Road Map"\. b\. Were the project objectives/key associated outcome targets revised during implementation? No PHEVALUNDERTAKENLBL c\. Will a split evaluation be undertaken? No d\. Components The project has four components, which were planned to be implemented in two phases as detailed below: Component 1: Infrastructure Development- Coastal Transmission Backbone: US$80\.46 million at appraisal; US$105\.79 million at completion\. The component aimed to extend the operational lifetime of key transmission facilities, and improve the quality and reliability of bulk power transfers along the Aboadze-Tema segment\. • Phase 1 subcomponent\. Key Activities were to: • Construct (1) approximately 215 Km of 330 kV single circuit transmission line from Aboadze to Volta; and (2) a 330 kV switchyard at Aboadze, equipped with phase shifting transformer; • (1) Construct a 330 kV sub-station at Volta adjacent to the Volta Operational Control Center; (2) Page 2 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) supply and install terminal equipment at the Aboadze and Volta substations; and (3) supply and install switchgear equipment at the Akosombo and the Volta substations; and • Supply and install a 161 kV phase-shifting transformer, two 330/161 kV autotransformers, and spare transformers\. • Phase 2 subcomponent: Key Activities were to: • Co-finance the remaining segments of the Coastal Transmission Backbone (CTB): Prestea- Aboadze (Ghana); Tema (Ghana)-Mome Hagou (Togo); and Momé Hagou-Sakété (Benin)\. • Upgrade the Akosombo and Volta sub-stations through the supply and installation of: (i) a 330 kV power equipment at the Volta sub-station; (ii) a 161 kV power equipment at the Akosombo sub- station; (iii) control, relaying and metering systems; (iv) cabling systems, grounding, bus works and connections; and (v) steel structures; • Build a third bulk supply point for the Accra/Tema load centers through the design, manufacture, testing, delivery and installation of a 161kV/33kV high voltage substation; and • Upgrade the switchgear at the Kpong generation station through the design, manufacture, testing and erection of substation equipment\. Component 2: Upgrade of Transmission Control and Communication System: US$35\.09 million at appraisal; US$23\.75 million at completion • Phase 1 subcomponent: Upgrade of the VRA System Control Center in Tema, Ghana through: • the supply and installation of equipment for reinforcement and extension of the Supervisory Control and Data Acquisition (SCADA) and communication system; and • the upgrading of the Volta System Control Center to coordinate implementation of the Operational Mitigation and Security Plan for the 330 kV Coastal Transmission Backbone\. • Phase 2 subcomponent\. Upgrade of Communauté économique du Benin (CEB) System Control Center in Lomé, Togo: • The key activity was to upgrade the supervisory control and data acquisition, telecommunication systems and metering equipment of substations in the 161 kV transmission network within the Recipient’s territory\. Component 3: Upgrade of Strategic Power Generation Stations: US$13\.90 million at appraisal; US$17\.89 million at completion\. Activities under each phase were as follows: • Phase 1 subcomponent: • Upgrade of switchyard at Akosombo Generation Station and Tema Substation (Ghana)\. • Phase 2 subcomponent: • The relocation of CEB gas turbines to Maria Gleta Terminal of the WAGP in Benin; • The development and implementation of an emergency preparedness plan for the Akosombo and Kpong generation stations; and Page 3 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) • The rehabilitation of cranes and penstocks at the Akosombo generation station\. Component 4: Advisory Services: US$8\.97 million at appraisal; US$2\.75 million at closing date\. Phase 1 subcomponent A series of technical assistance activities were planned to be funded as follows: • Provision of technical assistance to the Authority, including the following activities: (i) improve procurement procedures for electricity imports, (ii) develop and put in place an “Operational Mitigation and Security Plan” for the 330 kV Coastal Transmission Backbone, (iii) develop a strategy to optimize power generation from the Akosombo and Kpong hydropower facilities, including regional peaking supply, and (iv) procurement activities and project implementation, • Provision of technical assistance to the Ministry of energy (MOE) and other regulatory bodies for licensing, regulations, tariff formulation, bid documents and contracts to establish an autonomous transmission utility operation, Phase 2 subcomponent Under this sub-component, planned technical assistance included the following: • To upgrade the Project Implementing Entity’s Akuse training center in support of the WAPP Organization through: (i) acquisition and deployment of a modular power system simulator; (ii) installation of a 330 kV transmission line training field; (iii) provision of capacity building support for the training center staff; (iv) development of specific training transfer modules; and (v) upgrading of the training center’s learning materials and resources, and • To prepare (i) a study on the options for transmission network development for the northern sector of the Recipient’s territory; (ii) environmental and social impact assessments, line route surveys and related engineering design and bid documentation for the construction of the Aboadze-Prestea-Kumasi and Tumu-Han-Wa transmission lines; and (iii) a study on the options for the future development of a modern system control center in the Recipient’s territory\. e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost: Actual project cost (phases 1 and 2) amounted to US$164\.74 million, as compared to the appraisal estimate of US$158\.5 million for both phases\. Financing: The project was financed by three IDA credits in the amounts of US$40 million equivalent for Ghana (phase 1), US$45 million equivalent for the Republic of Ghana, and US$15 million equivalent for the Republic of Benin (phase 2)\. Phase 1 was co-financed by the Kuwait Fund in the amount of US$12\.4 million, as compared to the commitment of US$17\.5 million\. The European Investment Bank (EIB) committed US$12 million at appraisal that did not disburse due to unresolved legal issues\. No cofinancing was planned under phase 2, but subsequently the African Development Bank (AfDB) provided US$23 million to support the financing of various components of the project\. The Kreditanstalt für Wiederaufbau Page 4 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) (KFW) also co-financed phase 2 for unreported amounts\. Borrower Contribution: The Volta River Authority (VRA) contributed US$41\.5 million (Ghana-first phase), significantly higher than its commitment of US$14\.0 million\. GRIDCo contributed US$10\.28 million (Ghana-second phase), as compared to its commitment of US$15\.0 million\. During project implementation, the energy sector was reformed, including the unbundling and creation of a separate transmission enterprise- Ghana Grid Company (GRIDCo), which assumed the VRA's transmission assets and became responsible for project implementation; the restructuring formally transferred the corresponding project obligations from VRA to GRIDCo\. Dates: The first phase of the project was approved on 06/30/2005, and became effective on 11/01/2005\. The second phase of the project was approved on 06/29/2006, and became effective on 01/30/2008 for Ghana, and on 11/29/2007 for Benin, with a closing date set on 12/30/2010\. The second phase of the project was restructured on 12/20/2010 for the Ghana component, and on 12/21/2010 for the Benin component\. Key changes during this restructuring were as follows: (i) for the Ghana component, project implementation was transferred from VRA to GRIDCO, and for the Benin component, there was a change in disbursement category to include expenses related to works; (ii) there was also a revision of the project's results framework; and (iii) the project's closing date was extended until June 30, 2013\. There were two additional restructurings for the Benin component on 06/24/2013 to extend the closing date for Benin until 06/30/2015, and on 06/12/2015, to extend it until 06/30/2016\. 3\. Relevance of Objectives & Design a\. Relevance of Objectives Despite West Africa's large energy endowments, the region's combined per capita energy consumption in 2003 was about 40,000 Giga Watt hours (GWh)\. This was as compared to the peak power demand estimated at 6,500 Megawatt (MW)\. With electricity demand projected to grow by over 7% annually until 2020, electricity demand was expected to reach 140,000 GWh and peak power demand expected to exceed 22,000 MW\. Given the differences in resource endowment among ECOWAS countries with significant electricity potential in countries with modest demand (such as Guinea), the goal of establishing a West Africa Power Pool (WAPP) mechanism aimed at integrating national power system operations was relevant in the regional context (PAD, page 6)\. The PDO was highly relevant in the regional context\. ECOWAS member states signed the "ECOWAS Energy Sector Protocol" in 2003, aimed at setting up a unified regional (legal and regulatory) umbrella for a regional energy sector development and in 2006 adopted the "Articles of Agreement" to setting up a semi- autonomous regional, collaborative, power utility-led WAPP to take over WAPP activities from the ECOWAS Member States (PAD, page 7)\. The PDO was fully aligned with the goals of the New Partnership for Africa's Development (NEPAD) (NEPAD was established to implement an integrated socio-economic development framework for Africa and was formally adopted at the 37rd Summit of the Organization for African Unity in 2001) (PAD, page 10)\. The PDO was fully aligned with the Bank’s strategies for the two countries and the Bank's regional Page 5 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) strategy\. The PDs was consistent with the energy sector interventions highlighted in the Country Assistance Strategies (CASs) endorsed by the Bank in 2004 for Ghana and for Benin in 2003 (PAD, page 9)\. The Bank's Regional Integration Assistance Strategy (RIAS) for West Africa that was updated in 2008 highlighted the need for supporting the ECOWAS initiative to establish interconnected electricity markets and the 2011 RIAS progress report reiterated the need for continued emphasis on cross-border connections (ICR, page 15)\. The Bank's Country Partnership Strategy (CPS) for Ghana for 2013-2016 identified the power sector as a priority infrastructure sector and highlighted the need for expanding power supply\. The first pillar of the CPS for Benin for 2013-2017 highlighted the need for increasing sustainable growth competitiveness and generating employment, through among other things, energy sector investments (ICR, page 15)\. Rating High b\. Relevance of Design An Adaptable Program Loan (APL) was used as the lending instrument to enable the participation of countries which had fulfilled the effectiveness conditions\. The PDO was clear and the causal links between the project activities, their outputs and outcomes were logical\. The intended outcomes were measurable, in principle\. Energy Infrastructure activities such as construction of transmission lines, substations and control centers in Ghana and Benin were aimed at getting interconnection benefits and the outputs were aimed at developing a more stable and reliable exchange of electricity between the national power systems of the WAPP "Zone A" coastal states\. There were several shortcomings in the design: • The project design which entailed simultaneous implementation of activities in two countries and concurrent financing of activities by other donors was ambitious\. This was exacerbated by the lack of a WAPP group for coordinating project activities\. These factors contributed to procurement and implementation delays and eventually to the non-completion of the Togo/ Benin component of the project (ICR, page 16)\. • There were shortcomings in technical design\. The lack of project-specific engineering background studies and bidding documents at preparation contributed to implementation delays\. Failure to address issues pertaining to frequency synchronization between the Ghanaian and Nigerian power systems meant that actions by the Nigerian power system are still required for making the interconnection system operational once the Togo/Benin component is complete\. (This activity as described in section 4 is not yet complete)\. There were implementation delays due to the Ghana transmission line (adding about 10 kilometer (Km) to the overall line length, when it was determined that maintaining the original route would result in unacceptably large compensation expenses (ICR, page 10)\. In the case of the Togo/ Benin project component, the original contract needed modification and switch from the existing communication system to a fiber optic system (ICR, page 11)\. • There were deficiencies in the Results Framework (RF)\. The original RF was designed to capture the development outcomes of collective investments (financed by the Bank and other donors) and were not ring-fenced to solely measure the impact of Bank's investments (ICR, page 5)\. This in conjunction with the fact that the project benefits could only be assessed when all project works were complete, necessitated the incorporation of additional indicators (discussed in section 10b)\. • Lack of a lead coordinating agency to provide supervision support undermined execution (ICR, page 8)\. Unlike in subsequent WAPP projects, the WAPP had not designated a lead coordinating agency\. This Page 6 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) hampered the bank to identify funding gaps early and play its role of donor of last resort more proactively and ultimately contributed to the non-completion of Togo-Benin component of the project (funding for this component from other donors was secured late in the project) (ICR, page 8)\. Rating Modest 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective To assist the recipients in developing a more stable and reliable exchange of electricity between the national power systems of the WAPP "Zone A" Coastal states\. Rationale Outputs (ICR, Data Sheet pages iv - vi, pages 16-17, 24-25 and 38-40)\. Ghana components\. • These activities were completed as targeted\. The 330 KV Aboadze-Tema transmission line, terminal substations were constructed\. Switchgear and electromechanical equipment at the Aboadze switchyard and Volta switching system (including circuit breakers, disconnect switches and protection and control facilities) were upgraded\. Equipment for the Third bulk supply point telecommunication system at the Accra East and Achimota substations were installed\. The Supervisory Control and Data Acquisition (SCADA) and the Energy Management Systems (EMS) were upgraded\. The Environmental Management Plan (EMP) and the Resettlement Action Plans (RAP) were completed\. Technical and institutional support, capacity building and logistics support was provided for the installation of contracts for both the phase 1 and phase 2 projects\. Expert Advisory Panel was formed to review West African Power Pool's (WAPPs) "Operational Mitigation and Security Plan" and provide advice on the management and operation of the WAPP interconnection system\. Technical assistance was provided to the relevant stakeholders (Ministry of Energy, Public Utilities Regulatory Commission and the Energy Commission) to develop and implement an action plan for an autonomous and commercially viable Transmission System Operator (TSO) within WAPP\. Evaluation and assessment of dam safety was completed, and an Emergency Preparedness Plan was prepared as targeted\. • The VRA control center study was not completed and the VRA training center was not set up as targeted\. Benin Components\. • Construction works along the 330 kv line were not completed at project closure as the Bank no longer had the available resources for financing this activity\. The World Bank closed the financing of this activity on June 30, 2016\. Page 7 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) • The new dispatching center at the Togo/Benin Bi-national Electricity Company's (CEBs) headquarters and the backup dispatching center of Cotonou were completed and operational at project closure as targeted\. The studies pertaining to modernizing the dispatch system, the rehabilitation study and the emergency plan were completed as targeted and the draft of the procedures manual for the West Africa Power Pool network was completed as targeted\. Outcomes\. • Indicators for both Ghana and Benin were output-oriented\. • The key outcome targets associated with the quantity (Mega Watts) of electricity traded between the West Africa Power Pool (WAPP) "Zone A" Coastal states, reduction in power losses (percent) along the principal transmission interconnection links and the percent of peak power demand in WAPP "Zone A" Coastal states met by economy power exchanges on the Coastal Transmission Backbone, were not realized as the project was not fully implemented at project closure Rating Modest PHREVDELTBL PHREVISEDTBL 5\. Efficiency Economic Analysis\. An economic analysis was conducted at appraisal for transmission infrastructure investments (such as upgrading key sub-stations for cross-border electricity exchanges, upgrading the system control centers of the Togo/Benin Bi-national Electricity Company and VRA and upgrading strategic power generation stations)\. These components accounted 85% and 87% of the appraisal estimate for Ghana and Benin respectively\. The global Net Present Value (NPV) at 10% discount rate was US$64 million (with a NPV of US$20\.00 million and US$38\.00 million for Ghana and Benin respectively)\. The Economic Internal Rate of Return (EIRR) for Ghana and Benin was 16% and 35% respectively and the global NPV was 23% (PAD, page 21)\. An economic analysis was conducted for the Ghana component of the project at project closure (given that the Benin/Togo component was not completed at project closure\. The analysis showed that under the current loading of the transmission line, the project yields unsatisfactory economic indices (with a Benefit-Cost ratio below one and EIRR below 12%\. Administrative and Operational Issues\. Project effectiveness was delayed in both Ghana and Benin\. Ghana\. Although the project was approved in June 2005 (phase 1) and June 2006 (Phase 2), effectiveness for the latter was delayed 1/30/2018, due to noncompliance with the VRA's solvency requirements as per the legal covenants (ICR, page 9)\. There were implementation delays due to a combination of factors including, technical design issues necessitating the rerouting of the transmission line, unbundling of the sector which was not anticipated at design, procurement delays associated with the Supervisory Control and Data Acquisition (SCADA) and Energy Management Systems (EMS), exacerbated by factors such as Ghana's new procurement statues (ICR, pages 9 and 10)\. The activities in Ghana were however completed, albeit with a Page 8 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) time overrun of 24 months\. Benin\. Although the Benin component was approved in June 2006, effectiveness was delayed until 11/29/2007 due to a combination of factors including, insufficient staff resources for the project, delays on the part of the company to comply with the conditions of the other donors (although the African Development Bank approved the project in 2007, it was only initiated five years later in January 2012 and the German Development Agency (Kfw) only agreed to participate in the project in 2011) and contractual disputes between the Togo/Benin Bi-National Electricity Company (CEB) and the contractor\. These factors contributed to implementation delays during implementation and the Benin component was not complete at project closure, despite the repeated extensions to the closing date\. Regional dimension\. It is not clear if the project could be evaluated as a regional project given that it is not complete and that there is no regional power trade (ICR, page 17)\. Further, even if the Benin component is eventually completed, actions within the Nigerian power system will still be needed for regional interconnections\. Efficiency Rating Negligible 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 (%) 23\.00 Appraisal  86\.00 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 objective for the countries, the Bank strategies for the respective countries and the Bank’s regional strategy for West Africa is rated as High\. Relevance of design is Modest in view of the technical drawbacks at design and inadequate implementation arrangements\. Efficacy of the single objective - To assist Ghana and Benin in developing a more stable and reliable exchange of electricity between the national power systems of the WAPP "Zone A" Coastal states - is Modest\. The indicators were output-oriented and the intended key outcomes were not realized as the project was not fully implemented at project closure\. Efficiency is rated as Negligible in view of the significant administrative and operational inefficiencies which contributed to implementation delays and eventual non-completion of activities in Benin, despite the extensions to the project closing date and complete disbursement of funds\. Taking these ratings into effect, the outcome is rated as Unsatisfactory, reflecting significant shortcomings in design and efficiency\. Page 9 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) a\. Outcome Rating Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating Technical risk is High, given that the Benin component was not yet complete at closure (owing to the differences between the Benin/Togo bi National Electricity Company (CEB) and its contractor)\. Given that the funding from the African Development Bank (AfDB) for this activity closed in 2017, it is not clear if CEB finds alternative financing to replace AfDB\. Even if this component is completed in the near future, actions would still be needed to address the issues associated with maintaining a constant frequency between the Ghana and Nigeria Power Systems (through investments in Nigeria), for the operationalization of the project when the CEB system is completed\. Financial risk is High\. Given that the transmission works (including substations and lines) need sustained sources of funding for maintenance, it is not clear whether the two electricity companies in Ghana and Benin would be able to provide funding for maintenance\. Given that resources needed for maintenance are dependent on the income collected by the distribution companies, which are affected by high commercial losses (due among other things to nonpayment of public sector electricity consumption) in the countries, it is not clear if there would be adequate funding for the sustainable maintenance of transmission works (ICR, page 15)\. Institutional and governmental commitment risk is Substantial\. Even if the Benin component is complete and the issue of frequency synchronization between the Ghana and the Nigeria power systems are resolved, significant regional power trade is still contingent upon sufficient generation of surpluses and implementation of WAPP protocols among the participating utilizes, particularly with respect to timely payment for power sales\. a\. Risk to Development Outcome Rating High 8\. Assessment of Bank Performance a\. Quality-at-Entry The project was prepared based on the experience from the five-decade evolution of the best known regional power market (the Nordic Power Market) and from the lessons from comparable Bank-financed regional adaptable program loans for the Southern Africa Power Pool (SAPP) and the Energy Community of South East Europe\. Lessons incorporated included establishing an institutional structure consisting of the National Transmission Systems Operators (TSOs) and greater autonomy for TSOs through their unbundling, tailoring activities to suit member countries, combined implementation arrangements at the national and regional levels and anchoring to the extent possible on the strongest performing of the beneficiary member Page 10 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) country covered by the regional project (in Ghana in this project) (PAD, pages 13-14)\. The arrangements made at appraisal for fiduciary compliance were appropriate (discussed in section 11)\. • As discussed in section 3b, there were several shortcomings at design including, technical design shortcomings, inadequate coordination arrangements for activities in two countries and for activities that were concurrently funded by other donors, weakness in the results framework and non-specification of a lead coordinating agency to provide supervision support\. These factors contributed to implementation delays and eventually non-completion of activities\. • The risks associated with donor coordination and a design that required sequencing of investments of several donors was underestimated\. At design, the preparation team did not anticipate the risks associated with funding a component activity (providing engineering services support) for an activity that was entirely linked to an activity funded by other donors (construction of the Benin/Togo bi National Electricity Company (CEB) transmission line)\. Given that the construction of the line was delayed and eventual non-completion of this activity by other donors, contributed to the delays in the bank funded activities (ICR, page 9)\. • There were significant shortcomings in M&E design (discussed in section 10a)\. Quality-at-Entry Rating Moderately Unsatisfactory b\. Quality of supervision Missions were conducted regularly (with seventeen Implementation Status Reports (ISRs) filed over a period of eleven years)\. The supervision team included energy specialists, financial, procurement and social specialists and a power engineer\. The continuity of leadership was maintained with few Task Team Leaders (TTLs) over an eleven-year period\. The supervision team provided support following the transition from VRA to GRIDC0 in Ghana and this aided in financial management compliance (discussed in Section 10)\. The team appropriately restructured the project in the wake of challenges that rose during implementation\. Although the supervision of activities associated with the Benin component was hampered by limited Bank leverage, the support provided by the team aided in the activity associated with the CEB control center\. Quality of Supervision Rating Moderately Satisfactory Overall Bank Performance Rating Moderately Unsatisfactory 9\. Assessment of Borrower Performance a\. Government Performance The project was prepared within the Economic Community of West African States (ECOWAS) Framework and the commitment of Ghana and Benin as ECOWAS member states was demonstrated by their Page 11 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) ratification of the ECOWAS Energy Protocol (EEP) aimed at setting up a unified regional umbrella to facilitate harmonization of legal, regulatory and institutional frameworks for the WAPP\. Ghana\. The government commitment to the project was demonstrated by their contribution to the project by way of counterpart funding (which was more than planned for the first phase but slightly lower than planned for the second phase)\. The government also facilitated the unbundling of the power sector and addressed issues associated with the allocation of transmission responsibilities to the GRIDC0\. Although there were procurement delays in the wake of the government’s new procurement statues, these were rectified during implementation\. Benin\. The government commitment to the project was limited during implementation and the government did not take measures to assist the Togo/Benin Bi-National Electricity Company with respect to nonpayment of its bills\. Government Performance Rating Moderately Satisfactory b\. Implementing Agency Performance The two power utilities - the Togo/Benin Bi-National Electricity Company (CEB) for Benin and the VRA were in charge of implementing the project\. Both utilities had set up Project Implementation Units (PIUs) at appraisal\. At the regional level, the WAPP Steering Committee consisting of ECOWAS Energy Ministers were responsible for policy oversight\. (PAD, page 16)\. Ghana\. The VRA and the GRIDCo followed the safeguard guidelines and although there were minor shortcomings (such as initiating works without compensation to the Project Affected Persons and lack of proactivity in dealing with the frequency synchronization issue), these issues were rectified during implementation\. The implementing agency ensured fiduciary compliance (discussed in Section 10) and generally made an effort to enable the project's success\. Rating: Moderately Satisfactory\. Benin\. The performance of CEB with respect to the oversight of contractors and payments was poor\. CEB was unable to reach a satisfactory agreement on project completion with respect to the construction of the transmission line\. The lack of timely decisions on the part of CEB contributed to the non-completion of activity associated with the transmission line\. Rating: Unsatisfactory\. Given the two different ratings for agency performance, the combination leads to an overall rating for implementing agency performance of Moderately Unsatisfactory\. Implementing Agency Performance Rating Moderately Unsatisfactory Overall Borrower Performance Rating Moderately Unsatisfactory 10\. M&E Design, Implementation, & Utilization Page 12 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) a\. M&E Design The three key outcome indicators disaggregated by power utility – the quantity of MegaWatts of electricity traded between the West Africa Power Pool (WAPP) “Zone A” Coastal countries, the level of power losses along the principal transmission links and the percent of peak power demand met by electricity exchanges- were appropriate for monitoring project performance\. These indicators however could only be measured when the entire regional project was completed\. An integrated WAPP Program M&E system building upon the country-specific M&E Systems and developed by the United States Agency for International Development (USAID) and the Bank, was to be used by the WAPP General Secretariat for monitoring project performance\. The intermediate indicators for the control center component and the generation station improvement implicitly assumed that the system was already operational and would have better been classified as outcome indicators\. b\. M&E Implementation Given that project benefits could not be assessed until the cross-border interconnections had been completed, it is not clear as to what extent the input, output and outcome indicators anticipated at design could be monitored\. Three new indicators were added to the Results Framework during implementation\. These indicators included the energy flows through the completed transmission lines and substations\. However, given that the components could not operate independently, and every transmission link needed to be operational to monitor performance, the incorporation of these indicators did not improve project monitoring\. The ICR provides no details on whether the agency responsible for M&E functioned effectively, whether the M&E was owned by the various stakeholders and the extent to which beneficiaries were involved in defining target indicators and assessing their achievements\. It is also not clear whether the system that was designed and implemented was sustainable\. c\. M&E Utilization Given that the transmission line was not complete, even the three added intermediate indicators were of little practical application in tracking project performance\. M&E Quality Rating Negligible 11\. Other Issues Page 13 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) a\. Safeguards The project was classified as a Category B project\. Two safeguard policies were triggered: OP/BP 4\.01 Environmental Assessment and Involuntary Resettlement (OP/BP 4\.12)\. The PAD (page 29) notes that environmental effects of the project were expected to be limited to the measures required to avoid adverse impacts of construction at existing substations\. Environmental Management Plans (EMPs) were prepared by the implementing agencies for Ghana and Benin\. The PAD also notes that as part of the project, the implementing agencies were expected to prepare emergency preparedness plans in lieu of the safeguards associated with Safety of Dams (PAD, page 29)\. Ghana\. There was compliance with environmental and social safeguards and the implementing agency prepared the emergency preparedness plans\. The ICR (page 13) notes that about 1,700 persons were affected due to project activities\. During project construction, project affected persons were compensated according to the VRA's valuation of crops, land and buildings\. The ICR (page 13) notes that initially the project was not in compliance with Bank policies because construction activities had started prior payment of compensation\. However, by 2011, the VRA had fully settled outstanding compensation to all affected parties (including landowners and stone crackers)\. Benin\. There was compliance with safeguards and the implementing agency prepared the emergency preparedness plans\. The project activities did not raise any social safeguard issues as implementation did not require land acquisition or resettlement of people (ICR, page 13)\. b\. Fiduciary Compliance Financial Management\. An assessment was conducted at appraisal to judge the financial management capacity of the VRA and CEB\. The assessment concluded that the financial management arrangements of the implementing arrangements were deemed to be satisfactory\. The financial management risk for Benin was rated High and for Ghana Substantial (PAD 56-57)\. Ghana\. The ICR (page 13) notes that the principal financial management challenge for the Ghana component was the transition from VRA to the GRIDCo in 2009-2010\. However since GRIDCo did not have sufficient capacity for financial management, the VRA was entrusted with the financial management responsibility of the project\. The Bank supervision team aided in the arrangements associated with finance and accounting, budgeting and financial reporting\. The ICR (page 13 notes that the financial management was satisfactory during implementation\. The ICR however provides no details on the quality of audits\. Benin\. The ICR (page 14) reports that financial managements of CEB were deemed to be satisfactory during implementation and the CEB complied with the Bank’s financial management requirements\. Procurement Management\. An assessment was conducted at appraisal to judge the procurement management capacity of the two implementing agencies\. Both VRA and CEB had managed prior Bank- financed projects and were familiar with the Bank's procurement policies\. The procurement risk for both Ghana and Benin were rated as Low (PAD, pages 68 and 71)\. Ghana\. Although procurement was delayed initially due to a new procurement law in 2005 and 2006, these were resolved and that was compliance with procurement management (ICR, page 13)\. Benin\. There was compliance with procurement issues (ICR, page 14)\. Page 14 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) c\. Unintended impacts (Positive or Negative) The ICR did not indicate any unintended impacts\. d\. Other --- 12\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Outcome Unsatisfactory Unsatisfactory --- Risk to Development High High --- Outcome Moderately Moderately Bank Performance --- Unsatisfactory Unsatisfactory Moderately Moderately Borrower Performance --- Unsatisfactory Unsatisfactory 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 draws the following main lessons from the experience of implementing this project (with some modification of language) (ICR, pages 20-21)\. 1 \. Risks associated with having two implementing agencies need to be considered at design\. Although this project was implemented independently by two implementing agencies, it was in essence an integrated endeavor that connected several countries\. The experience of this project showed that establishing a single company to build, operate and maintain the facilities and thereby avoiding the disruptions that originate from piecemeal construction, may be more effective in performing these types of projects\. 2 \. The risks associated with participation in a multi-donor project need to be taken into account during preparation and the full range of the Bank's instruments must be used to address unanticipated investment needs during implementation\. In this project, the Bank contribution to the Benin project component was restricted to financing the CEB control center and providing overall supervision of the transmission line construction funded by other donors\. An operational response to addressing gaps in funding could have been pivotal to proactively addressing implementation issues\. Page 15 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review 3A-WAPP APL 1 (CTB Phase 2) Project (P094917) 3 \. Government commitment needs to be secured through involvement of a high-level steering committee for regional projects\. Such a committee could help in coordination of the different players\. 4 \. A lead funding agency needs to be designated at design\. In this project, the West Africa Power Pool (WAPP) had not assigned the Bank as the lead coordinating agency and consequently the Bank was unable to proactively address issues associated with funding gaps that arose in the Benin project component\. 5 \. Better design of results indicators is required at preparation to monitor performance\. One shortcoming of this project was the lack of indicators for monitoring the Bank’s contribution as distinct from the whole operation\. 14\. Assessment Recommended? Yes Please explain The ICR indicates (para\. 55) that achievement of the PDO is possible within the next 1–2 years, as the obstacles to completion are resolved through negotiations or arbitration\. It therefore would be useful that the project achievements and outcomes be revisited in a couple of years from now to ascertain the completion of planned activities and assess the progress made toward expected initial outcomes and objectives of the projects and the program\. 15\. Comments on Quality of ICR The ICR is concise and well-written\. It candidly discusses the issues associated with a regional project with two countries and concurrent financing by other development partners\. It is also candid in discussing the limited leverage the bank had with respect to the Benin component of the project\. The quality of evidence provided in the ICR is adequate and the ratings are consistent with the guidelines and the ICR draws pertinent lessons from the experience of implementing this project\. The details provided in the ICR about the frequency synchronization issues is rather sparse and it would have helped to provide more discussion of this issue, considering the project's regional implications\. a\. Quality of ICR Rating Substantial Page 16 of 16

REVIEW

P107493

 ICRR 13879 Report Number : ICRR13879 IEG ICR Review Independent Evaluation Group 1\. Project Data : Date Posted : 09/20/2012 Country : Guinea-Bissau Is this Review for a Programmatic Series? Yes No How many operations were planned for the 2 series? How many were approved? 2 Series ID : S114937 First Project ID : P107493 Appraisal Actual Project Name : Economic US$M ): Project Costs (US$M): 8\.00 8\.50 Governance Reform Project L/C Number : CH507 Loan/ Loan US$M): /Credit (US$M ): 8\.00 8\.50 Sector Board : Economic Policy US$M): Cofinancing (US$M ): Cofinanciers : Board Approval Date : 06/16/2009 Closing Date : 12/31/2009 12/31/2009 Sector (s): Central government administration (57%); General industry and trade sector (43%) Theme (s): Public expenditure; financial management and procurement (42% - S); Legal institutions for a market economy (23% - P); Regulation and competition policy (14% - P); Administrative and civil service reform (14% - S); Other financial and private sector development (7%) Second Project ID :P114937 Appraisal Actual Project Name : Economic Governance Project Costs (US$M): US$M ): 6\.00 6\.16 Reform Grant - Dpg 2 L/C Number : Loan /Credit (US$M): Loan/ US$M ): 6\.00 6\.16 Sector Board : Economic Policy US$M ): Cofinancing (US$M): Board Approval Date : 06/29/2010 Cofinancers : Closing Date : 12/31/2010 12/31/2010 Sector (s): Central government administration (67%), General industry and trade sector (22%), Telecommunications (11%) Theme (s): Public expenditure, financial management and procurement (67% - S), Regulation and competition policy (33% - P) Evaluator : Panel Reviewer : ICR Review Group : Coordinator : Stefano Migliorisi Michael R\. Lav Navin Girishankar IEGPS2 2\. Project Objectives and Components: a\. Objectives: There were two Program Development Objectives (PDO) associated with this programmatic series of two operations (see Economic Governance Reform Grant - EGRG I Program Document p\. 25-26, and EGRG II Program Document p\. 30)\. The first PDO (PDO1) was to promote efficiency, transparency and accountability in the use of public resources through improved budget and public financial management (PFM) (EGRG I and II)\. The second PDO (PDO2) was to foster private sector development through (i) the development of a modern legal framework for private investment and improvements in the business environment (EGRG I); and (ii) improve specific aspects of the investment climate, including streamline procedures for business registration and targeted  reforms of the legal framework (EGRG II)\. 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: EGRG-I and EGRG-II supported reforms in two policy areas : public financial management (PFM) and private sector development (PSD)\. EGRG I EGRG I aimed at improving Public Financial Management through the adoption by Cabinet of a new budget law (the draft Organic Law for Budget and Public Accounting Decree ) drawing on WAEMU-directives (West-African Economic and Monetary Union) , the preparation of the budget applying a WAEMU -based budget classification, the installation and use of the new Integrated Public Financial Management System (SIGFIP), and the mandate to the General Finance Inspectorate of the Ministry of Finance to undertake control missions on the payment of civil service wages\. EGRG I also aimed at fostering private sector development through the adoption of nine OHADA (Organization for the Harmonization of Business Law in Africa ) acts of business law, a new Investment Code, and a new Public-Private Partnerships (PPP) Law\. EGRG II EGRG II aimed at improving Public Financial Management through a new legal basis on the attributions and organization of the Financial Controller ’s Office and the Budget General Directorate, and on the role of credit managers and public accountants; the preparation and distribution of a new manual of procedures for budget execution; the selection of an appropriate payroll IT system; and, the preparation and adoption of a new procurement code in line with WAEMU-s directives and the establishment of a central procurement unit \. EGRG II also aimed at fostering private sector development through the simplification of procedures for business registration and the adoption of a new Telecommunications Law \. While the programmatic series was supposed to include only two operations, the Bank eventually decided to launch a third operation, EGRG III in 2011, to support the adoption of a revised Investment Code \. As it was not envisaged at the time of the beginning of the series, EGRG III will be subject to a separate ICR \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Cost: Cost : The cost of ERG I was SDR5\.4 million (US$8 million equivalent) at appraisal, equivalent to about 2 percent of the country’s GDP and 5 percent of total government expenditures in 2009\. The cost of ERG II was SDR4 million (US$6 million equivalent) at appraisal, equivalent to about 1 percent of the country’s projected GDP and about 2 percent of total government expenditures in 2009\. Due to a slight appreciation of the SDR -US$ exchange rate, the two single tranche operations disbursed US$ 14\.66 million instead of US$14 million\. Financing : Two IDA grants of SDR9\.4 million (US$14\.4 million equivalent) funded EGRG I and EGRG II\. Borrower Contribution : There was no borrower contribution \. Dates : There was only one minor deviation from planned dates during the course of the two operations\. Approved on June 16, 2009, EGRG I became effective on August 4, 2009 and closed on December 31, 2009 as planned\. Approved on June 29, 2010, EGRG II became effective on August 5, 2010, about 1\.5 months later than planned, and closed on December 31, 2010 as planned\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: The relevance of the original objectives was substantial \. EGRG I and II are consistent with the National Poverty Reduction Strategy Paper of 2006 (NPRSP) covering  the period 2007-2010, and the follow on Second National Poverty Reduction Strategy Paper of 2011 (NPRSP II) covering the period 2011-2015\. These operations’ objectives are consistent with the first pillar of NPRSP I (modernizing the public administration, strengthening governance, and ensuring macroeconomic stability ), and with the first pillar or core area 1 of PRSP II (strengthen the rule of law and the institutions of the republic )\. As far the Bank’s Country Assistance Strategies are concerned, EGRG I and II were key operations for the 2008 Interim Strategy Note (ISN) designed to support the country ’s efforts toward the achievement of the Highly Indebted Poor Countries (HIPC) and the Multilateral Debt Relief Initiative (MDRI)\. The EGRGs I and II were also included in the 2009 Interim Strategy Note (ISN), covering a period of 18 months up to the HIPC Completion Point (FY09-FY10)\. No further country strategy has been prepared thereafter\. The first pillar of the 2009 ISN is “strengthening economic management and laying the foundations for improvements in the productive sector â€?, and the two EGRGs were the leading lending tools under this pillar\. b\. Relevance of Design: The relevance of the original design was substantial \. EGRG I and II were deliberately designed to focus on prior actions that were among the country ’s own priorities as most of them were long-standing commitments towards regional integration in the context of WAEMU (West Africa Economic and Monetary Union ) and OHADA (Organization for the Harmonization of Business Law in Africa)\. All prior actions were (a)technically ready; (b) politically achievable, and, (c) based on extensive analytical work and timely technical assistance \. 4\. Achievement of Objectives (Efficacy): The medium to long term impact of these DPOs ’ on their two primary objectives are assessed below \. PDO 1: promote efficiency, transparency and accountability in the use of public resources through improved budget and public financial management (EGRG I and II ) The efficiency in the use of public resources was increased in several ways \. According to a joint IMF-IDA HIPC-MDRI completion point document of December 2010 (p\. 19) and the ICR, the 2009 and 2010 budgets were prepared under a new budget classification following WAEMU directives, adopted in 2009\. The results from the biometric census of 2009 were reflected in the elimination of ghost and double dippers workers from the payroll in 2010\. Further controls on the payroll resulted in a reduction of the personnel expenses to domestic revenue ratio from 100 percent in 2008 to 70 percent in 2010-11\. The new procedures manual was published only in May 2010\. According to the ICR , more than 50 percent of budget managers were using it by the end of the year \. Transparency was supposed to be increased through the timely production and publication of quarterly budget execution report, and an annual debt report \. According to the joint IMF-IDA HIPC-MDRI completion point document of December 2010, the government started publishing quarterly comprehensive budget execution reports, including its spending on basic education, primary health care, and military expenditures at the beginning of 2010\. However, according to the IMF’s first three reviews under the three -year arrangement under the Extended Credit Facility and Financing Assurances Review, covering the period up to end December 2011, no annual debt report has been produced yet using the SYGADE (Debt Management Analysis System) system provided by UNCTAD (United Nations Conference on Trade and Development ), even though government had planned to do so from June 2011\. Accountability was supposed to be increased through timely submission of budgets to parliamentary scrutiny and of annual general administrative accounts to scrutiny by the Supreme Audit Institution (SAI), and the adoption of a new law strengthening the country ’s Supreme Audit Institution (Court of Accounts or Tribunal de Contas )\. Improvements in orderliness in budget preparation and reporting led to the timely submission of budget proposals and State General Accounts in 2010 and 2011, and strict controls in budget execution resulted in the continuous reduction of arrears in 2009-2011\. According to the ICR (p\. xi) the number of months needed to submit previous year’s government accounts to the Supreme Audit Court declined to 18 in 2009 and 9 in 2010\. This achievement is also confirmed by the joint IMF-IDA HIPC-MDRI completion point document of December 2010 (p\. 22)\., where it states that “the general administrative accounts for 2009 (…)were prepared with technical assistance and submitted  to the Court of Accounts in September 2010\.â€? However, the draft law proposal for the Court of Accounts was not prepared by the government, and the SAI was therefore not strengthened \. The efficacy of the first PDO is therefore rated as substantial as there have been significant achievements on efficiency and transparency, while the results on accountability have been more modest \. PDO 2: foster private sector development mainly through the development of a modern legal framework for private investment and improvements in the business environment (EGRG I ) or improve specific aspects of the investment climate, including streamline procedures for business registration and targeted reforms of the legal framework (EGRG II ) Development of a modern legal framework for private investment \. Nine OHADA acts were passed in 2009, although the ICR does not provide any information about their implementation \. According to the 2010 CPIA, the PPP law was adopted in 2009\. Statutory provisions authorizing case by case negotiations on granting private investment incentives were eliminated in 2009\. A new Telecommunications Law was promulgated by the President in May 2010 Improvements in the business environment \. Both operations supported the simplification of business registration procedures\. According to the Doing Business Report the total number of procedures to open a business, deal with construction permits, register property, and enforce contracts was is reduced from 82 in 2008 to 77 in 2010 and 69 in 2011\. The total number of days to start a business was reduced from 233 in 2008 to 216 in 2010 and 9 in 2011\. The efficacy of the second PDO is also rated as substantial as most outcomes were achieved \. 5\. Efficiency (not applicable to DPLs): 6\. Outcome: The review concludes that the relevance of both objectives and design was substantial, as the reforms supported by EGRG I and II had been identified as priorities in the country's PRSP and the Bank's strategy, and were technically ready, politically achievable and based on extensive analytical work \. The efficacy in achieving objectives was found to be substantial, mainly due to progress on efficiency in the use of public resources and improved transparency on the PFM side, combined with a significant improvement in the legal framework and business registration on the PSD side\. IEG therefore agrees with the ICR and rates the program's outcome as satisfactory \. a\. Outcome Rating : Satisfactory 7\. Rationale for Risk to Development Outcome Rating: IEG does not concur with the ICR’s assessment that the risk to development objectives is significant \. While the source of risk is the same as the one stated in the ICR, i \.e\., the difficult and unstable political situation, it is also true that the situation has worsened since the ICR was drafted in December 2011 due to the military coup in April 2012\. Some project achievements (e\.g\. submission of annual accounts to the Tribunal de Contas within 9 months, the publication of quarterly reports on budget execution ) could have worsened now that the HIPC -MDRI Completion Point has been achieved\. The drug trade is also a constant threat to the rule of law and good governance\. IEG agrees that reforms can still be undermined by vested interests, particularly the private commercial interests of members of the government \. A final risk is the possible discontinuation of support by several donors due to a possible protracted period of military rule and/or to the current international crisis which is having a strong impact particularly on some of the largest bilateral donors of Guinea-Bissau\. As noted in the ICR (p\. 13), “the sustainability of the EGRG-I and II outcomes are however challenged in case support from development partners do not continue compensating for the country’s limited financial and implementation capacity\. Donor support is needed to provide required funding for new and ongoing activities, as well as hands-on technical assistance aimed at raising the skills in public administration\.â€? a\. Risk to Development Outcome Rating : High 8\. Assessment of Bank Performance:  a\. Quality at entry: The project was designed with a focus on a limited set of actions in line with the country long standing commitments in the context of regional integration (i\.e\. WAEMU and OHADA)\. They were all technically ready and politically achievable\. These design features were important in an environment characterized by political instability and weak capacity like Guinea -Bissau because they ensured broad -based support for the reforms \. As noted in the ICR (p\. 13), these actions had also been identified through a substantial body of analytical work which comprised the 2006 Country Financial Accountability Assessment (CFAA) and Country Procurement Assessment Report (CPAR), various FIAS studies, early input from a planned Investment Climate Assessment, a Diagnostic Trade Integration Study, the 2009 PEMFAR and a 2009 EU-supported Public Expenditure Financial Accountability (PEFA)\. at-Entry Rating : Quality -at- Satisfactory b\. Quality of supervision: There were three supervision missions that took place in a difficult environment, with missions delayed or evacuated due to rocket attacks and the assassination of the country ’s president\. These missions were aligned with the government’s and other donors’ calendars providing adequate coordination of efforts \. Bank supervision suffered however from the weak monitoring and evaluation framework that did not provide adequate and timely information on progress\. The lack of PEFA (Public Expenditure Financial Accountability ) updates compounded the problems, even though important information in this respect was provided by the PEMFAR (Public Expenditure Financial Management and Financial Accountability Review ) and Diagnostic Trade Integration Study (DTIS)\. Quality of Supervision Rating : Satisfactory Overall Bank Performance Rating : Satisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: As noted by the ICR, the two main weaknesses in borrower performance were the limited quality of its monitoring and evaluation system and the weak fiduciary conditions in the country \. The prospect of attaining the HIPC completion point provided a strong incentive for performance to the Government, while stakeholders were widely consulted on the measures supported by EGRG I and II through the PRSP consultations \. Issues that emerged (e\.g\., the identification of alternative triggers for EGRG II when two became redundant or not feasible ) were addressed on a timely basis \. Government Performance Rating : Not Applicable b\. Implementing Agency Performance: According to the guidelines, for DPOs where government and implementing agency cannot be distinguished a rating is given only for the overall borrower performance \. Implementing Agency Performance Rating : Not Applicable Overall Borrower Performance Rating : Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: The M&E was supposed to be carried out through the existing structure monitoring the PRSP \. The project policy matrix identified ministries or agencies responsible for each indicator and the Ministry of Finance and the Ministry of Economy were responsible for coordination and reporting \. Periodic stakeholder consultations were supposed to provide additional feedback \. The monitoring also relied on studies not funded by the Bank, like the PEFA updates, that did not take place as the donor funding them (the EU) suspended cooperation due to the political situation in the country \. b\. M&E Implementation: In practice, the M&E framework was weak and did not provide useful indicators in the areas covered in the EGRG series\. There was not enough time to develop M&E capacity and M&E systems continued to be challenged by severe capacity constraints for the entire period covered by EGRG I and II (ICR, p\. 13)\. c\. M&E Utilization: The utilization of the M&E system has been limited, due in part to the weaknesses discussed above \. M&E Quality Rating : Modest 11\. Other Issues a\. Safeguards: There were no safeguard issues concerning EGRG I and II \. b\. Fiduciary Compliance: The financial fiduciary assessment had identified substantial fiduciary risks in Guinea Bissau, which were mitigated through a focus on improving fiduciary standards and continued assistance by IDA and other donors on PFM \. However, as noted in the ICR (p\. 21), while PFM improved during the EGRG period, fiduciary arrangements remained weak\. No fiduciary issue affected the implementation of these two DPOs \. c\. Unintended Impacts (positive or negative): There was no unintended positive or negative impact of EGRG I and II that IEG could identify \. d\. Other: 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Risk to Development Significant High The political situation has worsened Outcome : since the ICR was prepared\. Bank Performance : 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: There are three main lessons that can be drawn from the experience of this project : Even in a difficult environment characterized by political instability and weak capacity, progress can be achieved by focusing policy lending on a few actions that are in line with the country’s own priority, politically feasible and technically ready thanks to a sufficient body of knowledge built through analytical work and technical assistance\. Monitoring and evaluation should rely on predictable funding, possibly from the Bank through parallel operations or the use of trust funds\. The M&E performance was negatively affected by the design choice of not creating new M&E systems and relying on the existing PRSP process or studies like the PEFA updates funded by other donors\. In practice, the principle of avoiding duplication of efforts should be accompanied by an assessment on whether the need improvements or funding is likely to materialize within the program timeframe and by the preparation alternative measures in case either or both would fail to materialize \. Not all risks can be managed by the Bank, in particular those concerning political instability\. It is nevertheless clear that any progress will depend on the ability of the donor community to properly address the dominance of the military in the country’s history since independence and the infiltration of drug cartels in the country’s economic and political life\. Without addressing the root causes of political instability, any progress achieved could remain essentially fragile\. 14\. Assessment Recommended? Yes No Why? It is an interesting example of satisfactory performance in a very difficult environment, although the current political situation could make an IEG mission impossible \. 15\. Comments on Quality of ICR: The ICR provides a frank and thorough assessment of the performance of the program\. It includes some minor inaccuracies (for example a few indicators and targets were either changed or not measured correctly) that lower its quality\. Overall, the quality of the ICR is rated as satisfactory \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P125958

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) Report Number : ICRR0020864 1\. Project Data Project ID Project Name P125958 PK: Punjab Education Sector II Country Practice Area(Lead) Pakistan Education L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IDA-51060 31-Dec-2015 4,407,000,000\.00 Bank Approval Date Closing Date (Actual) 26-Apr-2012 31-Dec-2016 IBRD/IDA (USD) Grants (USD) Original Commitment 350,000,000\.00 0\.00 Revised Commitment 350,000,000\.00 0\.00 Actual 331,945,477\.37 0\.00 Prepared by Reviewed by ICR Review Coordinator Group Judith Hahn Gaubatz Christopher David Joy Behrens IEGHC (Unit 2) Nelson 2\. Project Objectives and Components a\. Objectives According to the Financing Agreement (page 5) and the Project Appraisal Document (PAD, page 4), the project objective was as follows: •To support the education sector reform program of the Government of Punjab to increase child school participation (at multiple levels) and student achievement\. Page 1 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) b\. Were the project objectives/key associated outcome targets revised during implementation? No PHEVALUNDERTAKENLBL c\. Will a split evaluation be undertaken? No d\. Components 1\. Results-based component (Appraisal: US$ 340\.0 million; Actual: not reported): This component aimed to improve teacher quality and performance, as well as to promote gains in school participation\. Funds were to be disbursed according to ten Disbursement-Linked Indicators (DLIs) in the following categories: field- based advisory support to teachers; test-based recruitment of teachers; teacher rationalization; school- specific non-salary budgeting; decentralized school financial management; teacher performance; school councils; student performance monitoring; private school vouchers; and secondary school stipends for rural girls\. 2\. Technical assistance (TA) component (Appraisal: US$ 10\.0 million; Actual: not reported): This component aimed to provide technical, advisory and capacity-building support to strengthen fiduciary, environmental management, administrative, and monitoring and evaluation activities\. Analytical and advisory support included, for example: teacher performance and management; school council performance; student assessment; fiduciary and environmental management; and school budget management\. e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project cost • The appraised project cost was US$ 4,407\.0 million\. The actual project cost is not reported in the ICR (Annex 1 reports costs, but these appear to be only Bank disbursements)\. IEG calculations, based on actual IDA, Borrower, and co-financier contributions, give a total of US$ 7\.945\.2 million\. Financing • The project was financed by an IDA Investment Policy Financing Credit of US$ 350\.0 million, of which US$ 331\.9 million was provided\. • DFID was expected to provide co-financing in the amount of US$ 200\.0 million (of which US$ 200\.0 million was provided); CIDA was expected to provide co-financing in the amount of US$ 19\.3 million (of which none was provided)\. Page 2 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) Borrower contribution • The Borrower was expected to provide US$3,387\.7 million, of which US$ 7,394\.0 million was provided\. Dates • June 2013: The project underwent a Level II restructuring, to revise one of the ten DLIs agreed with the government\. The original DLI devolved financial management power to clusters of schools, but subsequently, it appeared more effective and efficient to transfer powers directly to school council bank accounts\. This revision did not entail any changes to the PDO, results framework, safeguards, legal covenants, or implementation arrangements\. • December 2015: The project closing date was extended from December 2015 to June 2016, to utilize unspent funds under Component 2 (a sample-based learning assessment was dropped due to the existence of a comparable student assessment being conducted through another donor's technical assistance)\. • June 2016: The project closing date was extended from June 2016 to December 2016, in order to allow completion of technical assistance activities\. 3\. Relevance of Objectives & Design a\. Relevance of Objectives The objectives were highly relevant to the country context and the pertinent Bank and country development strategies\. Punjab is the country's largest province, comprising approximately three-fifths of the total population and total income\. At the time of project appraisal, there were approximately 58,187 government schools in Punjab, which enrolled 8\.4 million children in grades 1 and above\. An additional 1\.1 million children were supported through government vouchers to attend low-cost private schools\. Relative to other countries in the region and at similar levels of per capita income, the country's educational outcomes are poor, albeit slightly higher in Punjab compared to the other provinces\. Net enrollment rates at the primary, secondary, and high school level are 70%, 37% and 25%, respectively (2010-11)\. As noted in the PAD (page 2), the child's age and the household's socioeconomic status and location appear to be significant factors in school participation\. Student achievement levels are low, with province-level results for grade 3 in the subjects of English, Urdu and mathematics falling in the 27% to 38% range\. The province of Punjab has been implementing a multifaceted sector reform program since 2003, which primarily addresses public education at public and secondary school levels\. Reforms have included developing administrative systems, improving quality of inputs, and strengthening accountability for service delivery\. Teacher quality and performance, in particular, has been recognized as a key reform area\. The Bank's Country Partnership Strategy for FY 2015-19 identifies accelerating improvements in services as a key strategic pillar, including increasing enrollment and quality as key outcomes\. Page 3 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) Rating High b\. Relevance of Design Improving teacher quality and performance is at the core of the results chain, as improvement teacher quality and performance directly impacts student learning outcomes, and, in the longer term, positively impacts student retention and participation rates\. Project interventions to improve teacher quality and performance included support for institutional arrangements (i\.e\. teacher recruitment and deployment, decentralized school management), resources and advisory support (i\.e\. field-based advisory support through teacher educators, non-salary budget support), and accountability (monitoring school, teacher and student performance)\. The Disbursement-Linked Indicators approach was intended to build in some accountability for performance, by reimbursing government expenditures incurred for selected key education budget line items\. The project design also included measures to directly and immediately increase school participation (i\.e\. vouchers and stipends), including in low-cost private schools\. The rise in the number of institutions in the private school system, including those reaching low-income and rural populations, has been considered as positive development in the sector, with the share of children attending private schools increasing 6-7% from 2004/05 to 2010/11 for both primary and middle school age groups\. Therefore, private schools were utilized to ensure that attendance rates could increase even in the constrained environment of the public system\. These key outputs of improved teacher quality and increased enrollment were likely to lead to the intended outcomes of increased participation and achievement; however, a shortcoming was the focus on net enrollment increases rather than school participation increases, given the trend towards late-age entry into the school system\. Rating Substantial 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective To increase child school participation (at multiple levels) Rationale Outputs • Provision of private school vouchers to 361,000 students\. Page 4 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) • Provision of supplemental stipends to 411,000 female students in rural government schools\. • Recruitment of 33,000 teachers through a test-based process\. • Provision of field-based professional support for primary school teachers, including mentoring support from 4,000 district teacher educators\. Outcomes According to the project results framework, child school participation was to be measured by the Net Enrollment Rate (NER), which officially measures enrollment according to age and grade-appropriateness\. Per the ICR (page 10, footnote) and the project team (drawing upon extensive analysis of NERs, GERs, and participation rates to determine the appropriate indicator), this measure has shortcomings for the following reasons: i) Late entry into the school system is common in Punjab district; ii) It does not include children enrolled in katchi grades (early childhood/kindergarten); iii) It does not include children enrolled in NGO- schools, madrasses, or other private schools\. Therefore, the ICR suggests that School Participation Rate (SPR) (source: Pakistan Standards of Living Measurement Survey (PSLM) data 2010-11 and 2014-15, cross-checked by MICS data 2011-2014) is a more accurate measure as it calculates the share of children in a specified age cohort who are enrolled in school regardless of grade\. The ICR (page 11) notes that as both NER and SPR are calculated from sample-based household surveys which are dependent on up-to-date population census information, the last of which was conducted in 1998, there is still a need to further verify the numbers\. Primary level (ages 6-10) • The net enrollment rate remained at 70% (target: 75%)\. The school participation rate decreased from 73% in 2011 to 70% in 2016 (target: 77%)\. However, the school participation rate, including katchi, increased from 80% to 83% (no target set)\. • The net enrollment rate in rural areas decreased slightly from 67% to 66% (target: 71%)\. The school participation rate decreased from 69% to 66% (target: 74%)\. • The net enrollment rate for rural girls decreased from 64% to 62% (target: 69%)\. The school participation rate decreased from 65% to 62% (target: 71%)\. • The net enrollment rate in asset-poor households decreased from 47% to 45% (target: 49%)\. The school participation rate decreased from 48% to 45% (target: 50%)\. • The net enrollment rate in participation-poor districts decreased slightly from 55% to 54% (target: 59%)\. The school participation rate decreased from 57% to 52% (target: 62%)\. Middle level (ages 11-13) and High/Matriculate level (ages 14-15) • The net enrollment rate in middle level increased slightly from 37% to 38% (target: 44%); for high level, from 25% to 29% (target: 32%)\. The school participation rate for both levels remained at 70% (target: 76%)\. • The net enrollment rate in middle level in rural areas increased slightly from 31% to 34% (target: 39%); for high level, from 20% to 23% (target: 25%)\. The school participation rate for both levels in rural areas Page 5 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) remained at 65% (target: 71%)\. • The net enrollment rate in middle level for rural girls increased slightly from 29% to 31% (target: 33%); for high level, from 19% to 21% (target: 25%)\. The school participation rate for both levels for rural girls remained at 58% (target: 67%)\. • The net enrollment rate in middle level for asset-poor households increased slightly from 13% to 15% (target: 14%); for high level, from 7% to 7\.5% (target: 7%)\. The school participation rate for both levels for asset-poor households increased slightly from 38% to 39% (target: 40%)\. • The net enrollment rate in middle level for participation-poor districts increased slightly from 23% to 24\.5% (target: 25%); for high level, it remained the same at 17% (target: 21%)\. The school participation rate for both levels for participation-poor districts decreased from 55% to 50% (target: 60%)\. Administrative enrollment data from the government's monthly monitoring data also provides supplemental information\. • Public school enrollment in grades katchi to 12 increased 10%, from 8\.9 million students in 2011 to 9\.8 million students in 2014\. • Low-cost private school enrollment increased from 1\.2 million students in 2011 to 2\.1 million students in 2014\. Achievement of this objective is rated Modest due to mixed evidence\. Results on school participation are mixed, alongside some data limitations and the need to reconsider how to measure school participation given the increasing role of the private sector\. Rating Modest PHREVDELTBL PHEFFICACYTBL Objective 2 Objective To increase student achievement Rationale Outputs • Recruitment of 33,000 teachers through a test-based process\. • Provision of field-based professional support for primary school teachers, including mentoring support from 4,000 district teacher educators\. • Post-induction training of teachers\. • Provision of teacher performance bonuses\. Page 6 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) • Rationalization of teaching posts to improve deployment of teachers\. • Implementation of needs-based formula for setting school-specific non-salary budgets and support to School Councils to improve management of school funds\. Outcomes • The average share of correct answers on an independent test (DFID test) for grade 3 increased from 55% in 2014 to 60% in 2016 (target: 60%)\. • The mean test score (Punjab Examination Commission test) for grade 5 students in government schools increased from 158 in 2011 to 197 in 2015/16 (target: 174)\. • The mean test score for grade 5 students in government schools in participation-poor districts increased from 173 in 2011 to 209 in 2015/16 (target: 190)\. • The mean test score for grade 8 students in government schools increased from 188 in 2011 to 217 in 2015/16 (target: 207)\. • The mean test score for grade 8 students in government schools in participation-poor districts increased from 194 in 2011 to 239 in 2015/16 (target: 213)\. • The share of children in grade 3 (Annual Status of Education results) that could read a story in Urdu remained at 27% (no target provided)\. • The share of children in grade 3 that could perform 3-digit division (DFID test) increased from 13% in 2012 to 19% in 2014 (no target provided)\. • The mean monthly assessment score for grades 4 and 5 (Directorate of Staff Development results) increased from 32% in 2011 to 47% in 2013 (no target provided)\. Additional outcomes are reported below; however, more information on prior Bank interventions in the education sector would provide greater confidence that these results are attributable to the actual activities of the project, given the very short timeframe of implementation\. • The primary completion rate for ages 15-19 decreased slightly from 92% in 2011 to 91% in 2016 (target: 94%)\. However, the secondary school completion rate for ages 20-24 increased from 50% in 2011 to 52% in 2016 (target: 53%) • The primary completion rate for ages 15-19 in rural areas decreased slightly from 90% in 2011 to 89% in 2016 (target: 92%)\. However, the secondary school completion rate for ages 20-24 increased from 41% in 2011 to 44% in 2016 (target: 44%)\. • The primary completion rate for ages 15-19 for rural girls decreased slightly from 90% in 2011 to 89% in 2016 (target: 93%)\. However, the secondary school completion rate for ages 20-24 increased from 43% in 2011 to 48% in 2016 (target: 48%)\. • The primary completion rate for ages 15-19 in asset-poor households increased slightly from 76% in 2011 to 77% in 2016 (target: 78%)\. However, the secondary school completion rate for ages 20- 24 remained at 17% (target: 21%)\. Page 7 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) Also, • The teacher absentee rate decreased from 16% in 2011 to 6% in 2016 (target: 15%)\. • Recurrent non-salary expenditures increased from RPs 8 billion in 2011 to RPs 24 billion in 2016 (target: RPs 15 billion)\. On average, schools spent RP 1,000 more per student than in recent years\. • The share of non-salary expenditures as a percentage of total recurrent expenditures increased from 7% in 2011 to 13% in 2016 (target: 12%)\. • However, there were no other measures for improved teacher quality or performance, other than as reflected in student achievement\. Achievement of this objective is rated Substantial due to extensive evidence of improved test scores and decreased teacher absenteeism\. Rating Substantial PHREVDELTBL PHREVISEDTBL 5\. Efficiency The ICR presents a cost-benefit analysis in Annex 3, which covers both the project and the broader government sector program\. Costs include the government's budget expenditures (non-salary recurrent and development expenditures), Bank project costs, and private costs (direct household expenditures and opportunity costs of attending school)\. Benefits are estimated according to higher wage earnings for the additional primary and secondary school completers, higher productivity premium for primary school completers due to improved quality and relevance of education, and reduced wastage of public and private school resources due to lower repetition and dropout rates\. Actual enrollment data for 2011-2015 are used to estimate the number of primary and secondary school completers; however, the actual benefits materializing may be lower given the mixed outcomes on completion rates (primary completion rates decreased while secondary completion rates increased)\. Using the above elements, the net present value of economic benefits ranges from US$ 286 million (low case) to US$ 523 million (high case)\. The benefit-cost ratio ranges from 1\.17 (low case) to 1\.3 (high case)\. The economic internal rate of return ranges from 12% (low case) to 14% (high case)\. The ICR also notes a reduction in teacher absenteeism from 16% to 6%; which is a robust indicator of increased efficiency in the education sector\. Although it is unclear whether this was calculated for project- supported schools only, the province-wide nature of the project suggests that it may still be a valid indicator of project efficiency\. In addition, there was timely disbursement of DLIs and the use of the direct fund transfer system for non-salary budgets (which were disbursed directly to school accounts rather than a more centralized mechanism, which reduced the potential for fund leakages)\. Page 8 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) 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 100\.00 ICR Estimate  13\.00 Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome Relevance of the project objectives is High while relevance of the project design is rated Substantial\. Achievement of the objective to increase child school participation (at multiple levels) is rated Modest due to mixed evidence of the project's impact on school enrollment\. Achievement of the objective to increase student achievement is rated Substantial due to evidence of improved student performance\. Efficiency is rated Substantial\. Therefore, overall outcome is rated Moderately Satisfactory due to shortcomings in impact on school participation\. a\. Outcome Rating Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating The embedding of this project within the broader sector reform program has helped to institutionalize some of the project features, such as the use of data, the funding mechanisms, and the use of school-level entities\. A follow up Bank operation (Third Punjab Education Sector Project), third in the series, was approved in June 2016 and became effective in October 2016\. The project features similar investment levels and project design, with objectives also focused on improving school participation, school completion, and teacher quality\. Sector financing from the government has increased steadily in nominal terms, although still remains at sub-optimal levels\. Security and political risks also remain, although thus far these have had minimal impact on the sector operations, including effective mitigation of the politically sensitive reforms on teacher accreditation\. Page 9 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) a\. Risk to Development Outcome Rating Modest 8\. Assessment of Bank Performance a\. Quality-at-Entry The project objectives were highly consistent with the government reform priorities and the design drew upon lessons and experience from the predecessor Bank project, including the following: a significant technical assistance (TA) component to support achievement of Disbursement-Linked Indicators, and increasingly higher reimbursement levels of expenditures (as opposed to project advances) to ensure sustained levels of implementation\. The overall project risk was appropriately assessed as significant, highlighting macroeconomic shocks, political changes, and weak decentralized capacity as the main risks\. Notably, weak procurement capacity for the TA activities was highlighted as a lesson from the predecessor project but was not effectively mitigated\. The M&E arrangements were sound, drawing upon existing information systems to collect data, while also using third party assessments to validate outcomes\. However, there were shortcomings in the choice of key project indicators (see Section 10)\. Quality-at-Entry Rating Moderately Satisfactory b\. Quality of supervision Supervision by the Bank team was regularly conducted, with a relevant mix of specific skills present (specialists in ICT-based social mobilization, public-private partnerships in education, and conditional cash stipends) for supervision missions and in coordination with other donors\. While there were no major implementation problems noted in the ICR, the shortcomings in the results framework do not appear to have been recognized in a timely manner\. Implementation Supervision Report ratings were all in the satisfactory range for the entire project period, for both Implementation Progress and Development Objective reflecting the lack of realization of the shortcomings in the results framework\. There were significant delays in procurement of TA and in establishing the baseline for the key outcome of improved student achievement, and in recognizing the volatility of the NER\. Quality of Supervision Rating Moderately Satisfactory Overall Bank Performance Rating Moderately Satisfactory 9\. Assessment of Borrower Performance Page 10 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) a\. Government Performance The government of Punjab was willing to undertake politically unpopular, but critical, reforms including merit-based teacher recruitment and teacher rationalization, and was effective in initiating these measures\. It was also effective in taking the necessary steps to achieve all ten Disbursement-Linked Indicators, which was the key mechanism for access project funds\. The government provided increasing budget allocations to the education sector, as well as providing supportive actions such as increasing district administrators' oversight of schools and providing ancillary facilities for schools (i\.e\. latrines and drinking water)\. However, there were some delays in the transfer of non-salary funds to schools, and district-level audit reports were not submitted on an annual basis, as required by legal covenant\. Government Performance Rating Moderately Satisfactory b\. Implementing Agency Performance The School Education Department (SED) within the government of Punjab was the primary implementing agency\. SED was effective in taking actions to achieve all Disbursement-Linked Indicators, despite high turnover in the PMIU staff, and even expanded the scope of teacher mentoring and teacher rationalization activities beyond the geographic areas originally planned\. There were some shortcomings in procurement, as technical assistance activities were marked by delays in meeting deadlines and paying contractors, although as reported by the project team, the SED was still able to achieve all Disbursement-Linked Indicators by project closing\. There were no other problems reported in financial management or safeguards compliance\. Implementing Agency Performance Rating Satisfactory Overall Borrower Performance Rating Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization a\. M&E Design The results framework was overall sound with a robust project logic chain and sound monitoring arrangements\. Data collection arrangements relied on existing well-functioning administrative systems of SED, while achievement outcomes were to be gathered through learning assessments, some of which were to be conducted as part of project activities\. The regular monitoring sources included: Annual School Census (conducted by SED); monthly monitoring visits by the Chief Minister's Monitoring Force (unannounced school visits to collect data on school infrastructure, student and teacher presence); and third-party assessments\. However, there were some shortcomings\. Although the predecessor project had noted no problems with using Net Enrollment Rate (NER) as the key outcome indicator for participation (indeed, as noted in the PAD (page 4, Page 11 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) footnote), it was selected to align with the indicator for MDG2), the volatility of the NER and the failure to account for the late-age entry tendency in the province were not well-considered and led to difficulties in measuring achievements\. Also, given the emphasis on improving teacher quality, there were no official measures for this outcome other than as reflected in student achievement\. However, there were some shortcomings\. Although the predecessor project had noted no problems with using Net Enrollment Rate (NER) as the key outcome indicator for participation (indeed, as noted in the PAD (page 4, footnote), it was selected to align with the indicator for MDG2), the volatility of the NER and the failure to take into account the late-age entry tendency in the province were not well-considered and led to difficulties in measuring achievements\. Also, given the emphasis on improving teacher quality, there were no official measures for this outcome other than as reflected in student achievement\. b\. M&E Implementation Data was collected through the planned monitoring activities (annual school census, monthly monitoring visits, student assessments), although the baseline for the student achievement-related key indicator was delayed in being established\. Impact evaluations were carried out as planned for the teacher performance incentives program and supplemental stipends program, though results from the latter evaluation have yet to be finalized\. The shortcomings in the NER indicator were not recognized in a timely manner, as project restructurings did not revise the indicator\. c\. M&E Utilization As reported in the ICR (page 6), monitoring data was utilized in the following ways: annual census data was used to determine school-specific non-salary budget allocations; annual census data was used to determine school-specific teacher needs and to inform school report cards which updated community members on school quality; monthly monitoring data were reviewed quarterly at district meetings to track performance against indicators; and third party assessments were used to verify reforms supported by DLIs\. M&E Quality Rating Substantial 11\. Other Issues a\. Safeguards The project was classified as an Environmental Category "B" project due to potential rehabilitation of schools, thereby triggering the safeguard policy on Environmental Assessment (OP/BP 4\.01)\. An Environmental and Social Management Framework, which had been prepared under the predecessor project, was updated for this project and included mitigation measures and monitoring requirements\. The ICR (page 6) reports that safeguards compliance was satisfactory, with activities such as training and monitoring implemented as planned\. Page 12 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) b\. Fiduciary Compliance Financial management: Financial management performance was overall satisfactory, with the project implementation unit adequately staffed and funds made available in a timely manner\. There were some delays in the transfer of non-salary funds to the schools during the initial project period\. Financial reports for the education sector were prepared on a regular basis, although complete district-level audit reports were not submitted annually per legal covenants\. Interim financial reports and annual external audit reports were prepared as per Bank guidelines\. Procurement: There were some shortcomings with regards to the TA activities, including delays in meeting procurement deadlines and updating the procurement plan to accurately reflect project progress\. Payments to two contracted firms were also delayed\. Findings from the Post-Procurement Review include minor issues related to poor record-keeping, lack of appropriate documentation, and weak contract management\. However, there were no other significant problems reported\. c\. Unintended impacts (Positive or Negative) --- d\. Other --- 12\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Moderately Moderately Outcome --- Satisfactory Satisfactory Risk to Development Modest Modest --- Outcome Moderately Moderately Bank Performance --- Satisfactory Satisfactory Moderately There were shortcomings in Borrower Performance Satisfactory Satisfactory meeting of all legal covenants\. Quality of ICR Substantial --- Page 13 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) 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 Lessons drawn from the ICR: • The use of a results-based lending instrument creates effective incentives for government action, and also helps to increase focus on outcomes\. In the case of this project, the use of ten Disbursement-Linked Indicators, several of which were critical to key education sector reforms, helped to ensure that policy actions were followed through and also helped to clearly identify the desired outcomes\. • The selection of the original PDO-level indicator did not adequately take into account local context\. In the case of this project, the trend towards late-age entry into the formal school system had a significant impact on Net Enrollment Rates, while School Participation Rates were more accurate measure of the objective to increase child participation\. Moreover, the shift to a new operational model (inclusion of private sector) also warranted a reconsideration of measurement approaches\. 14\. Assessment Recommended? Yes Please explain To verify results in school participation rates, including outcomes in the private sector\. Also, to learn lessons from the significant focus on the private sector\. 15\. Comments on Quality of ICR The quality of the evidence and analysis is substantial\. The ICR is strongly outcome-oriented and does a commendable job in drawing upon data from various sources and for non-PDO indicators, in an effort to validate project achievements\. Note: The ICR assesses three project objectives - support to the government program, increase in child participation, and increase in student achievement\. However, the IEG does not consider the first - support to the government program - to be a separate, stand-alone objective, and therefore assesses only the latter two\. Page 14 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PK: Punjab Education Sector II (P125958) a\. Quality of ICR Rating Substantial Page 15 of 15

REVIEW

P002972

 ICRR 10975 Report Number : ICRR10975 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 11/15/2001 PROJ ID : P002972 Appraisal Actual Project Name : Educ Sector Adj Cred Project Costs 302 311 US$M ) (US$M) Country : Uganda Loan /Credit (US$M) Loan/ US$M ) 155 155 Sector (s): Board: ED - Primary Cofinancing 58 58 education (97%), Tertiary US$M ) (US$M) education (3%) L/C Number : C3049 Board Approval 97 FY ) (FY) Partners involved : DFID, Danida, EU, Ireland, Closing Date 12/31/2000 12/31/2000 USAID Prepared by : Reviewed by : Group Manager : Group : Robert C\. Varley Ridley Nelson Alain A\. Barbu OEDST 2\. Project Objectives and Components a\. Objectives The Education Sector Adjustment Credit (ESAC) provided core budget support (rather than earmarked project aid ) for a policy of Universal Primary Education (UPE\.) The Education Sector Adjustment Operation Policy Matrix (Annex 2, page 1 of the MOP) is used to state the objectives and the outcomes expected : 1\. Clarify UPE Policy - the targeted outcome being "Wide understanding of respective roles by parents, schools, communities, districts, Central Government and donor community \." 2\. Increase Resources Available to UPE - this implied more resources for primary education, the target being 19\.5% of total recurrent government expenditures in FY 1998/99 and 17\.5% in 1999/00\. Other resources were to be raised by reducing funding of tertiary education, and sustaining parental contributions for primary education \. 3\. Increased Efficiency in the Use of Resources - comprising introduction of double shift teaching, piloting of mulit-grade teaching, a plan to prevent excess supply of teachers and expansion of classroom construction through innovative financing methods involving communities, the private sector and government \. 4\. Protecting Quality Inputs - this was to be achieved inter -alia by lowered pupil:textbook ratios, and strengthening of teacher training by extending the Teacher Development Management System (TDMS) to cover all districts\. 5\. Strengthening Sector Management - an Education Management Information System (EMIS) was to be the basis for eliminating "ghost" teachers, reducing the hiring of untrained teachers, ensuring timely payment of salaries, implementing a system for monitoring and accountability of fund use and preparing district development plans\. The broad development objective of ESAC was to assure that increased resources were made available to sustain a sudden and dramatic growth in enrollment following Government's commitment to UPE in 1997 and a long period of civil war and its aftermath\. Five external agencies (DFID, Danida, EU, Ireland and USAID) united under Bank leadership to support the Education Strategic Investment Plan (ESIP\.) Initially donors used the ESIP as a framework for their earmarked budgetary support but have increasingly shifted to the non -earmarked approach adopted by the Bank\. b\. Components This was an adjustment loan - the traditional identification of separable expenditure components is not possible \. The IDA funds that were disbursed would represent 73% of the total estimated support for the primary education budget by donors\. The largest expenditure category was teachers salaries (58% of the total primary education budget ), instructional materials (6%), classroom construction (11%) and transfers to the Districts (18%), the balance being unclassified development budget items \. c\. Comments on Project Cost, Financing and Dates Total IDA financing was $155 million of which $75 million was a grant in the context of the HIPC (Heavily Indebted Poor Countries) initiative on debt\. 3\. Achievement of Relevant Objectives: Project objectives were mainly achieved \. Though the quality of education was not protected to the extent expected, resources available to primary education increased, resource use became more efficient, and sector management was strengthened\. More specifically: (a) The increase in enrollments in 1997 was sustainedy by the project \. The share of recurrent expenditure on primary education exceeded 20% on average during the project \. Increases in resources for UPE were partially achieved by re-allocating funds from tertiary and secondary education activities, but the main source of funding for achieving the increase was grant aid \. The project sustained the government UPE policy, which was associated with a significant reduction in wealth and gender differentials in primary enrollments \. (b) Community support for and understanding of the UPE policy remains uneven \. To the extent that multi-grade and multi-shift teaching were a part of UPE, the government was unable to convince the public of the soundness of this part of the policy\. Double shifting has not been embraced by stakeholders other than the Ministry \. (c) Resource use became more efficient, but there was a decline in quality of outputs /outcomes as well as inputs\. Pilots in multi-grade teaching have not had much impact on "massively overcrowded classrooms \." Progress has been made in classroom construction using community -based approaches which in future will be funded from a School Facilities Grants (SFG) with the pupil:classroom ratio projected to decline from 120:1 currently, to 70:1 by 2005\. (d) The dramatic deterioration in key inputs, which occurred in 1997 due to the surge in enrollments, is gradually being reversed\. However, the project did not meet its targets for partially averting a decline in education quality \. For example, textbook:pupil ratios average 6\.7:1 in core subjects, compared to a target of 3:1\. "The policy matrix condition to allocate at least 2\.8% of the primary education recurrent budget to instructional materials was symbolic compared to actual needs\." Student:teacher ratios were about 65:1 in 2000, compared to a target of 55:1 and a baseline, pre-UPE, of 40:1\. There is a persistently high variation among districts - urban areas have much lower ratios\. Classrooms remain overcrowded with a classroom -pupil ratio of 1:120\. The impact has been made worse by failure of the double shift policy and unexpectedly cumbersome teacher recruitment procedures \. (e) Accountability and transparency in resource use has improved - guidelines issued by the Ministry of Education and Science include publication in the press and public display of amounts received by schools \. An "Integrity Survey" in 1998 identified the education sector as one of the least corrupt \. Another study in 2000 indicated that 90% of funds allocated by Ministry of Finance reached schools (up from 28% in 1996\.) Administration of teacher salaries has improved and the teacher training system rationalized with closure of small Primary Teacher Colleges \. 4\. Significant Outcomes/Impacts: 1\. Uganda became the first country in Africa to implement an education Sector Wide Approach (SWAP) without the lengthy and complex preparations and negotiations characterizing SWAPs in countries such as Zambia and Ethiopia\. 2\. The project established a framework for coordinated donor support for UPE \. 3\. Responsibility for the implementation of the ESAC -supported investment program was placed clearly in the regular units of the Ministry of Education rather than parallel project implementation units \. 4\. Recurrent costs, especially teachers salaries and text books were integrated into a broader public expenditure and medium-term budget framework\. 5\. Changes in the way education was financed and managed provided a much stronger institutional base than in 1996 for dealing with the issues of education development \. 6\. The community-based classroom construction program was a major and successful innovation \. 7\. Social demand for education has been sustained "in spite of the often limited instructional effectiveness in schools, deprived of even the barest minimum of quality inputs \." 5\. Significant Shortcomings (including non-compliance with safeguard policies): 1\. 70% of sector spending comes from donor grants and external support for education has actually led to a decline in real value of GOU's additional expenditures, placing sustainability on a foundation which will weaken in the long-term\. The MOP recognizes the importance of local taxes, strong community ownership, accountability to parents and targeted subsidies to the poor, but sustainability is fragile, based as it is on continued aid from external donors \. 2\. There were extensive delays caused by lengthy administrative and procurement procedures \. 3\. A far reaching curriculum reform should not have been attempted at the same time as dealing with the implementation of the UPE program\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Highly Satisfactory Satisfactory Three of the four objectives were achieved\. The project was unsuccessful at meeting its targets for averting a decline in education quality\. Evaluated as  an emergency program, a timely response to a rapid expansion of primary education for 6-12 year olds, the operation was satisfactory\. Institutional Dev \.: Substantial Substantial Sustainability : Highly Likely Likely a) The decline in the quality of education makes the system vulnerable to abandonment by students who do may not learn enough to find school worthwhile and could compromise UPE goals\. b) The high reliance of the program on continued grants and assistance from external donors puts sustainability on shaky ground, despite the high political commitment to UPE\. Bank Performance : Highly Satisfactory Satisfactory The Bank carried out a pioneering dialogue with the government on UPE prior to the effectiveness of this project \. During the project the Bank tried to protect the quality of education, but the project design was too ambitious to make this possible, as reflected in QAG's assessment of quality-at-entry\. 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: 1\. Mobilizing parents and other stakeholders to play their role was a critical component of the implementation strategy which helped to keep the enrollment on the rise and to contain dropout rates \. 2\. For effective use of a budget support strategy, tranche release must be explicitly linked to policy change, framed in a robust macro framework and grounded in a long -term sector policy and financial plan \. Under these circumstances a sector-wide approach can greatly improve the coherence and transparency of external assistance, reduce the management burden on the recipient government and enhance the quality of the policy dialogue\. 3\. A central contracting approach results in classrooms that are about twice the cost ($10,000) of those constructed by the community -managed approach ($5000\.) 4\. "Big Bang" policies for UPE will almost inevitably result in severe disruptions of the functioning of the system and jeopardize the quality of instruction \. A more gradual approach, e\.g\. free primary education, beginning with 6 and 7 years old enrolling in first grade, would have avoided some of the most serious problems \. 8\. Assessment Recommended? Yes No Why? The project brings together poverty and education policies in the context of emergency operations in severely distressed countries, which are emerging from decades of disruption and civil war \. 9\. Comments on Quality of ICR: Satisfactory and well presented \. The ICR, however, misquotes the MPO stated objective as "improvement in the allocation of resources\." It requires further analysis to assess whether or not increased spending on education represented an improvement in the allocation of resources \. The actual MOP objective was "to increase resources allocated to education", which is much easier to evaluate and was achieved \. Although the project fell short of its targets in preventing a decline in education quality, a comparison of what actually happened with the counterfactual (what would have happened without the project ) would have provided better information on the project's accomplishments in this area\.

REVIEW

P067223

 ICRR 11783 Report Number : ICRR11783 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 06/04/2004 PROJ ID : P067223 Appraisal Actual Project Name : Sal Project Costs 202 202 US$M ) (US$M) Country : Croatia Loan/ US$M ) 202 Loan /Credit (US$M) 202 Sector (s): Board: EP - General Cofinancing industry and trade sector US$M ) (US$M) (40%), Central government administration (24%), Compulsory pension and unemployment insurance (18%), Other social services (16%), Health insurance (2%) L/C Number : L4641 Board Approval 02 FY ) (FY) Partners involved : Closing Date 03/31/2003 10/31/2003 Prepared by : Reviewed by : Group Manager : Group : Michael R\. Lav Emily S\. Andrews Ajay Chhibber OEDCR 2\. Project Objectives and Components a\. Objectives To support the Government in the implementation of a structural reform program that aims to place the economy on a path of rapid and sustainable growth through improving coordination and management in economic policy making; enhancing fiscal discipline; strengthening market institutions and the competitiveness of the economy; enhancing flexibility in the labor market; and strengthening social protection \. b\. Components 1\. Improving coordination and management in economic policy through high level policy committee \. 2\. Improve overall budget processes and strengthen fiscal discipline by, in particular, improving health care and pensions systems\. 3\. Strengthen Market Institutions and the competitiveness of the economy by : (a) settling arrears and accounts payable/receivables between public enterprises and between public enterprises and the Government, (b) facilitating the bankruptcy processes, (c) strengthening the framework for inter -enterprise competition, (d) enhancing the entry of new businesses, and (e) reducing barriers to domestic and foreign direct investment \. 4\. Enhance labor market flexibility by making it less expensive to hire and fire workers \. 5\. Strengthen Social Protection by developing a national strategy for poverty reduction and improving the effectiveness of social assistance \. c\. Comments on Project Cost, Financing and Dates The project cost US$202 million financed by an IBRD loan in two tranches \. The project was appraised in April, 2001, approved by the Board on December 4, 2001, made effective on February 8, 2002, and closed on October 31, 2003, 7 months behind schedule\. 3\. Achievement of Relevant Objectives: 1\. A high level policy committee chaired by the Deputy Prime Minister improved coordination \. 2\. To improve budget processes (a) a consolidated government budget was introduced and a modern and comprehensive Budget Law was adopted which improved the accuracy of budgeting \. Fiscal discipline was strengthened with the passage of the health and pension laws and amendments \. Health care co-payments increased and co -payment exemptions were restricted to 50 percent of the population\. For pensions, the minimum accrual rate of contributions was decreased and non-wage income was made subject to a pension levy \. Pension accruals are now based only on paid contributions, although this was partially reversed when a law was amended to re -establish the wage indexation of pensions\. 3\. To Strengthen Market Institutions and the Competitiveness of the Economy : (a) arrears and accounts receivable/payable between PEs and between PEs and the Government were substantially settled (although new arrears are emerging), (b) a new bankruptcy law was passed to increase court capacity and improve the quality of bankruptcy professionals (although the outcome will be dependent on implementation by the judiciary ), (c) A new Competition Law was enacted and the Anti -Monopoly Commission was given greater economic and legal expertise, (d) to enhance new entry of businesses, licensing and registration were streamlined, and (e) to reduce the barriers to domestic and foreign investment, many of the recommendations of the FIAS study were implemented, although more remains to be done\. 4\. To enhance labor market flexibility, worker severance benefits were reduced, as were mass layoff's provisions, notification periods and other benefits such as maternity leave which had been excessive \. 5\. To Strengthen Social Protection, the National Poverty Reduction Program was finalized, arrears were eliminated for social protection, and the effectiveness of targeting is now being monitored \. 4\. Significant Outcomes/Impacts: Reforms have improved Croatia's economic performance and brought it closer to negotiations for admission to the EU\. GDP has grown by more than 4 percent since 2001 when the SAL-supported program was initiated\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): 1\. The wage indexation of pensions may lead to financial problems over time \. 2\. Enterprise arrears are re-emerging as a problem, and more fundamental reforms of the largest enterprises (responsible for most of the arrears problem ) are called for\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev \.: Modest Substantial Institutional reforms in private sector development, labor markets, and government management of its resources all indicate that IDI should be rated "substantial"\. The ICR rating for IDI was upgraded because the reforms supported by the SAL should have a substantial impact on the way that Croatia uses its resources both initially and over time, in view of the agreed "likely" rating for sustainability\. 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: 1\. SALs should focus on a few key reforms essential for improved economic performance \. This SAL focussed on key reforms in 5 sectors and achieved almost all of its objectives \. 2\. Interagency coordination is essential \. In the case, the Deputy Prime Minister and the committee that he chaired played a constructive role in fostering ownership of the reforms in the line ministries and agencies, and adhering to implementation schedules \. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: The ICR covers the wide horizon of the project concisely and with clarity \.

REVIEW

P059481

 ICRR 12578 Report Number : ICRR12578 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 03/08/2007 PROJ ID : P059481 Appraisal Actual Project Name : Rural Access Project US$M ): Project Costs (US$M): 14\.9 14\.8 Country : Bhutan Loan/ US$M ): Loan /Credit (US$M): 11\.6 11\.3 Sector Board : TR Cofinancing (US$M ): US$M): 1\.0 1\.0 Sector (s): Roads and highways (88%) Central government administration (12%) Theme (s): Rural services and infrastructure (50% - P) Rural policies and institutions (25% - S) Participation and civic engagement (25% - S) L/C Number : C3309 Board Approval Date : 12/21/1999 Partners involved : Netherlands Closing Date : 04/30/2005 06/30/2006 Development Association Evaluator : Panel Reviewer : Group Manager : Group : Kavita Mathur Peter Nigel Freeman Alain A\. Barbu IEGSG 2\. Project Objectives and Components: a\. Objectives: The objectives of the Project were to assist the Borrower in: (i) Improving the access of rural communities to markets, schools, health centers and other economic and social infrastructure in order to improve the quality of life and productivity of rural communities; and (ii) Strengthening the institutional capacity for implementing environmentally friendly approaches to improve rural access, community involvement in rural roads selection and management and improved infrastructure maintenance\. 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 main components of the project were: (a) Construction of new priority feeder roads (appraisal estimate US$12\.5 million, actual cost US$12\.6 million)\. This component included construction and rehabilitation of 120 km of feeder roads\. (b) Office and transport equipment for Department of Roads (DOR) (appraisal estimate US$0\.3 million, actual cost US$0\.7 million)\. This included survey equipment, office equipment, computers and vehicles for project  implementation\. (c) Project management assistance and training (appraisal estimate US$1\.5 million, actual cost US$1\.4 million)\. Introduction and dissemination of environmentally friendly design and implementation practices for rural road construction and maintenance\. (d) Institutional strengthening and studies (appraisal estimate US$0\.6 million, actual cost not available in ICR)\. Institutional capacity building in both public and private sector, including community contracting\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The final project costs were very close to the appraisal estimate\. The savings in civil works costs were balanced against the higher costs in construction for the additional works undertaken as a result of damage caused by monsoons of 2004\. As of September 30, 2006, the disbursements were SDR 7,9 million against the original credit of SDR 8\.5 million\. The undisbursed balance of SDR 573,907\.58 was cancelled on November 24, 2006\. The credit closing date was extended by fourteen months to accommodate delays in construction works caused by the heavy monsoon of 2004 which caused landslides\. Additional remedial works had to be undertaken to remove material and to stabilize slopes\. 3\. Relevance of Objectives & Design: The project was the first roads project financed by the Bank in Bhutan\. It supported the Country Assistance Strategy (1994) which focused on improving rural access, expanding the essential road network, improving maintenance and increasing private sector participation\. The project objectives remain highly relevant to 2006 CAS which gave "improving rural access" a high priority\. The project was consistent with Bhutan’s Eighth’s Five-Year Plan (1997 to 2002) which aimed at developing a regionally balanced road network that is convenient and economical to use, and to preserve the past capital investments in roads, reduce vehicle operations and travel time and develop road construction and maintenance capabilities in the private sector\. Rural access improvement is critical for the sustainable development of the agricultural economy in Bhutan as according to Bhutan 's Population and Housing Census of 2005, 21 percent of rural households live within one to four hours of walking distance from the nearest all-season road, and another 21 percent live within more than four hours and up to three days\. The project design was appropriate and the Quality at Entry Assessment done by the Quality Assurance Group (QAG) rated it “highly satisfactoryâ€?\. IEG concurs with QAG's rating\. 4\. Achievement of Objectives (Efficacy): Improving the access of rural communities to markets, schools, health centers and other economic and social infrastructure in order to improve the quality of life and productivity of rural communities: High\. The project improved access of 39 villages in five project districts\. With the construction of roads in the project areas, a total of 3,771 households (compared to 3,400 estimated at appraisal) are within half a day walk to the nearest road compared to 1 to 3 days before the road was opened\. The Department of Transportation and Safety has started a bus services five times a week on Dhakpai-Buli and planning similar services on other roads\. The travel time to reach hospitals and markets has been reduced by 75% compared to 50% estimated at appraisal\. The prices of consumption commodities in villages accessible by roads have reduced considerably\. Residents of connected villages pay 4-14 percent more than the town where they used to shop before the project, while residents in the controlled villages (not connected by roads) pay 14- 30 percent more than the town\. Farmers have diversified their crops from cereal and rice to high value vegetables and fruits such as cauliflower, walnut and orange\. According to the socioeconomic impact monitoring study, project beneficiaries’ incomes have increased by 64% from the sale of agricultural produce\. The travel time of children to schools has not significantly been affected in most of the project villages as the Government built schools in most villages, regardless the road accessibility\. Moreover, children who do not have school in their home village cannot afford bus services on a daily basis\. Strengthening the institutional capacity for implementing environmentally friendly approaches to improve rural access, community involvement in rural roads selection and management and improved infrastructure maintenance: Substantial\. DOR developed an Environmental Code of Practice for managing environmental impacts for road construction\. Bhutan has been selected by the Bank as a pilot for the "country system for environment management" i\.e\.  Bhutan can use its own environmental policies and procedures for the second rural access project\. Bhutan was selected because of good track record on environment management\. The project piloted a community contract on the first 15 km of the Dakpai-Buli road\. The contract was renewed for another year and the DOR plans to scale-up the community contracting mode\. However, it is facing difficulties because of shortage of labor in the countryside\. DOR staff was trained in contract and construction management, financial management and procurement through short-term courses, study tours and local workshops\. 5\. Efficiency (not applicable to DPLs): The project was highly efficient as the actual investment per capita was US$365, significantly lower than US$560 projected at appraisal\. The ERR threshold for both appraisal and completion was set at 12%\. The ICR does not discuss the reasons for the lower investment per capita\. 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 overall outcome is rated satisfactory based on high relevance, substantial efficacy, and substantial efficiency\. a\. Outcome Rating : Satisfactory 7\. Rationale for Risk to Development Outcome Rating: Maintenance of the roads constructed under this project will be executed through the National Workforce and community contractors and financed from the government budget\. The Government's "monsoon damage restoration budget" would address roads damaged due to heavy monsoons\. The ICR gives no indication of the maintenance budget of the RGOB\. a\. Risk to Development Outcome Rating : Negligible to Low 8\. Assessment of Bank Performance: The Bank Performance during project preparation and appraisal was satisfactory\. Since this was the first Bank funded roads project in Bhutan, the project team took into consideration lessons from other Bank funded rural roads projects\. The main shortcoming was the lack of rigorous geo-technical risk analysis\. The Bank performance during supervision was satisfactory\. at -Entry :Satisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Satisfactory c\. Overall Bank Performance :Satisfactory 9\. Assessment of Borrower Performance: The Borrower Performance during the preparation and implementation was satisfactory\. The Government's commitment to the project was strong\. It supported the adoption of the Environmentally Friendly Road Construction (EFRC) methods for all road construction in Bhutan\. a\. Government Performance :Satisfactory b\. Implementing Agency Performance :Satisfactory c\. Overall Borrower Performance :Satisfactory 10\. M&E Design, Implementation, & Utilization: The Project Appraisal Document included key outcome and impact indicators, however some indicators were not fully measurable\. Overall, M&E was very good\. A socioeconomic monitoring study was conducted during preparation, implementation and after completion in eight project road corridors\. The study focused on indicators that were measurable and whose impacts could be attributed to the project\. Baseline surveys were carried out and the projects achievements and results were compared with the baseline data and documented in the ICR\. The good M&E was also helped by the existence of a well-developed community based-based participatory planning system\. See Section 4 above for monitoring indicators\. a\. M&E Quality Rating : Substantial 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): The project was assigned environmental assessment category B which was appropriate and at appraisal, a comprehensive Environmental Assessment (EA) was carried out for Lhuntse-Dungkhar road\. During implementation, DOR carried out EA and developed Environmental Management Plans prior to undertaking any civil works\. A Resettlement Action Plan (RAP) was prepared for the Dakpai-Buli road\. All social mitigation measures including land acquisition and resettlement were completed in accordance with the RAP\. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Risk to Development Negligible to Low Negligible to Low 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: The development of rural roads network in a country with scattered population and mountainous terrain is very expensive and yet critical for boosting rural economy and improving the welfare of rural populations\. The Bank and other development partners can play an important role in promoting environmentally sustainable approaches for road construction\. Geological surveys should be carried out prior to road construction especially in mountainous terrain to avoid implementation delays and costly remedial mitigation measures\. If a number of stakeholders are involved (e\.g\. head office, field office, PMU, site engineers), the responsibilities and roles of the stakeholders need to be clearly defined and reporting linkages established for smooth project implementation\. The combination of long-term and short-term Technical Assistance can be an effective means of strengthening  borrower capacity\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR is well written and provides a comprehensive analysis of implementation issues, and highlights important lessons which have broad applicability\. The summary of the socioeconomic impact monitoring study in Annex 5 is noteworthy\. A minor shortcoming is that the ICR does not discuss the reasons for the lower investment per capita for the roads and nor does it give the final amount spent on the institutional component\. Components 3 and 4 are merged in the ICR\. The ICR does not explain the reasons for the shortage of labor in the countryside which is posing difficulties for scale-up of the community contracting operation\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P000764

 ICRR 11717 Report Number : ICRR11717 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 03/04/2004 PROJ ID : P000764 Appraisal Actual Project Name : Water Supply Development Project Costs 65\.50 m 49\.79 m & Rehabilitation Project\. US$M ) (US$M) Country : Ethiopia Loan/ Loan US$M ) 35\.73 m /Credit (US$M) 30\.05 m Sector (s): Board: WS - Water supply Cofinancing (75%), Sub-national US$M ) (US$M) government administration (22%), Central government administration (3%) L/C Number : C2842; CP953 Board Approval 96 FY ) (FY) Partners involved : Closing Date 06/30/2000 06/30/2003 Prepared by : Reviewed by : Group Manager : Group : Peter Nigel Freeman George T\. K\. Pitman Alain A\. Barbu OEDST 2\. Project Objectives and Components a\. Objectives To ensure the long term viability of water supply and sanitation (WSS) operations in line with the Government's regionalization policies and, in the long run, to improve the health and productivity of the population by providing assistance for: (i) Capacity building of the regional governments and water supply and sanitation agencies for the management of urban water supply and sanitation schemes and rural water supply operations \. (ii) Formulation of policies to ensure the long -term financial and managerial viability of water supply operations, the establishment of regulatory arrangements and sound investment planning by the regional governments and water supply agencies\. (iii) Short and medium term physical rehabilitation schemes in the war -affected and most deficient regions \. b\. Components Institutional Capacity Building : (53% project cost)\. This included regulatory, organizational, financial and technical management studies and short term assistance with implementation of the study recommendations, including a pilot rural water supply development\. Also manpower development and training and provision of equipment \. Feasibility and Engineering : (10% project cost)\. This comprised pre-investment studies, detailed engineering designs including designs for proposed regional water supply headquarters \. Physical Works : (37% project cost)\. This included rehabilitation and extension of 25 urban water schemes and construction of four regional water supply headquarters \. c\. Comments on Project Cost, Financing and Dates At project closure, 76% of the project by value had been completed \. It fell short due to delays in procurement, technical issues and delays in the availability of counterpart funding \. The project delays were exacerbated by the war between Ethiopia and Eritrea and by the loss of equipment at the Port of Assab \. Decentralization reforms also caused some delays due to high staff turnover and an internal focus on process issues \. The project took seven years to implement, three years longer than envisioned at appraisal \. At the end of the project 88\.4% of the IDA credit had been disbursed\. 3\. Achievement of Relevant Objectives: At the mid term review in May 1999 the overall development objective was refined and project outputs made more specific, but the project was not formally restructured \. This reformulation was considered necessary to take cognizance of a new National Water Resources Management Policy, which was based on the provision of sustainable access to adequate and safe water supply, but did not fundamentally change the original objectives \. The objectives were all highly relevant and all three were substantially achieved by project closure : Physical improvements led to adequate and safe drinking water supplies and good practice was demonstrated \. The project contributed to the establishment of a policy and institutional framework for decentralized WSS service provision\.  Functioning utilities with autonomous Town Water Boards and the pilot rural WSS provided community -based management approaches among local communities \. The health and productivity impacts are long -term and are not yet matured\. However, the efficiency was lower than expected largely due to exogenous influences on the project \. Delays in the legal establishment of 10 water boards is a factor to be taken into consideration as well as the fact that three towns cannot be rehabilitated because of water source constraints\. Two towns remain only partially complete \. On the other hand all the studies, training and other technical assistance were implemented successfully \. 4\. Significant Outcomes/Impacts: The project resulted in significant improvements in access to safe water supply for over 600 000 people\. Substantial progress was made in the establishment of autonomous Town Water Boards \. An important unplanned result of the project was the stimulation of local private sector capacity; a number of consulting and contracting firms became established and gained experience \. Tariffs have increased by 80% on average and raised awareness of cost recovery, customer services and financial management has been achieved \. Financial management of the Addis Ababa Water Supply Authority has improved \. Some of the approaches that are advocated in the pilots are beginning to spread to other (none project) communities\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): The original overall objective as formulated was too broad to be fully achieved within the scope and resources of the project design\. The foreseen scale-up of the pilots through the Ethiopian Social Rehabilitation and Development Fund Project did not take place as anticipated because of lack of donor interest \. The project took considerably longer than anticipated to implement and at closure 10 utilities with autonomous water boards were still awaiting legal establishment \. The international selection of three consultants to carry out the planning, design and bid documents in the towns had to be repeated, resulting in a one year setback \. Recurring drought, coupled with fast population growth, affected the per capita income levels of the project communities and thus affected the ability -to-pay for improved water services \. The ERR remains acceptable at 11%, but only marginally so\. Monitoring and evaluation of the project was weak; there was no log frame and few indicators \. The Borrower contribution mainly for civil works corresponded to 45% of the appraised project - a highly ambitious committment that the Government could not fully achieve \. 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]\. Implementation has taken considerably longer than anticipated and 10 water boards are still awaiting legal establishment\. Construction work has not been completed in some instances \. The project should have been formally restructured 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: Decentralization is a prerequisite for demand -driven approaches for water supply provision because local institutions can best understand the demands of their customers and effectively interact with them \. Steps should be taken to encourage knowledge sharing and collaboration between different tiers of government when decentralized systems are introduced \. On-the-job-capacity building through project implementation is often more effective than formal training \. When framing project objectives task team leaders should avoid being over -ambitious and should changes of substance to such objectives be required - these should be formally approved by the Board \. Establishing new institutions takes time and project planning must draw on previous experiences to set realistic targets\. 8\. Assessment Recommended? Yes No Why? The project had some successful features with a strong institutional capacity building focus at town level and targeted national, regional and local government WSS issues \. 9\. Comments on Quality of ICR: Generally well-presented\. It would have been useful, however, if the ICR had elaborated on the reasons for having to repeat the selection of international consultants (which led to a one year delay ) and amplified in the text about what went unfunded at project closure (76% of total project funds were utilized and 88\.4% of the IDA credit)\. At present this information has to be largely deduced from the information in ICR Annex 1\.

REVIEW

P079935

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) Report Number : ICRR0020824 1\. Project Data Project ID Project Name P079935 PH- Natl Rds Improv\. & Mgt Ph\.2 Country Practice Area(Lead) Philippines Transport & ICT L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IBRD-75520 31-Dec-2012 576,020,000\.00 Bank Approval Date Closing Date (Actual) 13-May-2008 31-Dec-2016 IBRD/IDA (USD) Grants (USD) Original Commitment 232,000,000\.00 0\.00 Revised Commitment 232,000,000\.00 0\.00 Actual 186,698,535\.48 0\.00 Prepared by Reviewed by ICR Review Coordinator Group Kavita Mathur Vibecke Dixon Christopher David Nelson IEGSD (Unit 4) 2\. Project Objectives and Components a\. Objectives The Program goal was “the establishment of road management arrangements which ensure the upgrading and preservation of the National Road System (NRS) in an environmentally, socially and financially sustainable manner” (Project Appraisal Document (PAD) para 12)\. The project constitutes the second phase of the Program\. The project development objective (PDO) for Phase 2 was “to assist the Borrower in improving operation, organizational effectiveness and fiduciary control in the management and financing of the national road system, to enhance road user satisfaction in the project area and to improve efficiency in the use of financial resources in the road sector” (Loan Page 1 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) Agreement page 7)\. Revised PDO: To improve the condition of the national roads network and management effectiveness of the Department of Public Works and Highways (DPWH) at the national and local level (Restructuring Paper December 12, 2014)\. 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 12-Dec-2014 PHEVALUNDERTAKENLBL c\. Will a split evaluation be undertaken? Yes d\. Components Component 1\. National Road Improvement and Asset Preservation (appraisal estimate US$519\.3 million; actual cost US$421\.75 million)\. • National Road Improvement (appraisal estimate US$238\.5 million; actual cost US$168\.96 million)\. This included works and services for road upgrading, rehabilitation and widening, bridge replacement, and landslide rehabilitation, totaling approximately 450 km of roads and about 1,000 m bridges on the arterial National Road Network\. • Road Asset Preservation (appraisal estimate US$280\.8 million; actual cost US$252\.79 million)\. Preservation works on the National Road System (NRS) including: (i) long-term performance-based maintenance contracts for 1000 km of the arterial road network (including the Strong Republic Nautical Highway); (ii) preventive (periodic) maintenance of about 1,200 km of the NRS (annually over four years); (iii) advisory support for implementation of the asset preservation program and for improving the service delivery of routine/general maintenance under Department of Public Works & Highways (DPWH)/Special Roads Support Fund (SRSuF)\. Component 2\. Institutional and Capacity Development (appraisal estimate US$56\.1 million; actual cost US$45\.98 million)\. • Business Process Improvements: Institutionalize and implement the modern business tools for planning, financial management and procurement that were designed and piloted under NRIMP-1 in all regional and majority of district offices of DPWH\. Page 2 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) • Corporate Effectiveness: Upgrade and modernize the corporate structure, processes and operating codes of DPWH to make it a user responsive, transparent, and efficient public sector agency with high integrity standards\. This component included four subcomponents: (i) Organizational Effectiveness - enhancement of DPWH effectiveness through an institutional audit and organizational restructuring, including national initiatives on rationalization, corporate standards, integrity, performance management and leadership; (ii) Road Partnerships – provide support for a multi-stakeholder partnership of road users and non-governmental organizations for improving responsiveness and transparency in the road sector, for communicating with DPWH, Road Board and various government agencies; (iii) Road Management Service Delivery – support a pilot for commercializing the current operations of district engineering offices to improve service delivery of road maintenance and other functions; and (iv) Integrity Support - strengthen the fiduciary integrity of the project implementation, through independent technical audit, parallel procurement evaluation, and strengthening institutional integrity\. • Strategic Sector Reform: Support to strengthen the operations of the Road Board and update its mandate, review road cost recovery, and to revisit options for restructuring the management and delivery of services in the sector\. • Training and Workshops: Activities for facilitating achievement of the project objectives and related skills development\. Revised Components: During the first restructuring on December 6, 2012, the project components were revised as follows (ICR para 16): • the number of road improvement sub-projects was reduced from 12 to 10, one was dropped due to procurement issues resulting from two failed rounds of bidding, and a second was to be implemented with separate GoP funding; •the scope of preventative maintenance was reduced due to cost increases associated with higher pavement design standards; • a number of road improvement and bridge replacement activities were dropped; • advisory services were dropped; • four out of the eight long-term performance-based maintenance contracts were dropped as the implementation time frame was too short; • the supply of some information technology equipment and software was dropped as DPWH decided to Page 3 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) procure these separately to the project with local funds; and •the district office commercialization pilot was dropped due to the DPWH rationalization plan which was being implemented\. During the second restructuring on December 12, 2014, a new component “Technical Assistance to Local Government Units (LGUs)” was added to enable DPWH to provide technical support to LGUs for reconstruction activities in the wake of Typhoon Yolanda/Haiyan which struck the Philippines in November 2013, causing large scale destruction to physical infrastructure (ICR para 17)\. This component included: (i) support for selection of activities, detailed engineering designs, management of social and environment issues, and preparation of contract documents for infrastructure such as city/municipal/barangay (a Philippine unit of local government) buildings, classrooms, public hospitals/health centers, local roads, water supply and irrigation facilities; (ii) construction supervision for local infrastructure; (iii) project management and capacity building support to DPWH and LGUs including training, workshops, and preparation of related technical documents; and (iv) preparation of maps and road inventory database for the local road network in Mindanao\. The scope of some Component A activities on road improvement and asset preservation was reduced\. Activities on corporate effectiveness, strategic reform, maintenance services and training under Component B were merged\. e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Costs: At appraisal, the total project cost was US$576\.02 million\. The actual project cost is US$488\.06 million\. Financing: The original credit amount from IBRD was US$232\.0 million\. The actual credit is US$186\.7 million (source: project portal)\. At project closing US$44\.2 million (19 percent of the loan value) remained undisbursed\. The ICR (para 35) reports that this represented a lost opportunity for both the Government of Philippines and the Bank to maximize the development impact of the project as these funds could have been used for other road improvement or asset preservation sub-projects which fitted the project objectives\. The project was cofinanced by the Australian Agency for International Development\. The original and actual grant amount was US$10\.5 million\. Borrower Contribution: The estimated Borrower contribution at appraisal was US$333\.52 million\. The actual Borrower contribution is US$289\.72 million\. Dates: The cumulative extension to the project closing date was four years, two years for each of the restructurings\. The first extension (12/06/2012) was to address implementation delays\. The second extension (12/23/2014) was to allow DPWH to provide urgent technical assistance to Local Government Units (LGUs) for rehabilitation of local infrastructure in Typhoon Yolanda/Haiyan affected areas\. Page 4 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) 3\. Relevance of Objectives & Design a\. Relevance of Objectives Original Objectives The relevance of the original PDO “to assist the Borrower in improving operation, organizational effectiveness and fiduciary control in the management and financing of the national road system, to enhance road user satisfaction in the project area and to improve efficiency in the use of financial resources in the road sector” is considered high as the most critical were the corruption issues which the project sought to address with improved governance\. According to the Country Partnership Strategy (CPS) (2015 to 2018), good governance remained a key focus for the WBG program in Philippines under the first Engagement Area 1: Transparent and Accountable Government and Outcome 1\.2 Strengthened Public Sector Institutions (CPS page 22)\. During preparation of the project, the Government of the Philippines designated poverty alleviation as well as improved income and wealth distribution as key goals\. Inadequate infrastructure, especially roads, was one of the constraints to investment and therefore growth (ICR para 4)\. The project objectives were also consistent with the Philippines Medium Term Development Plan (2011 to 2016) which prioritized the development of road infrastructure to facilitate economic decentralization, actions which were supported by the road improvement and asset preservation components of the project (ICR para 54)\. Revised Objectives The relevance of the revised PDO “to improve the condition of the national roads network and management effectiveness of DPWH at the national and local level” is rated substantial\. The sub-objective “improve the condition of the national roads network” is aligned with the third Engagement Area: Rapid, inclusive and sustained economic growth which focuses on improving connectivity in the urban areas and supporting the building of basic infrastructure (transport) and facilitating access to markets in rural areas\. According to the Country Partnership Strategy (CPS) (2015 to 2018), good governance remained a key focus for the WBG program in the Philippines and the sub-objective “management effectiveness of DPWH at the national and local level” is aligned with the first Engagement Area 1: Transparent and Accountable Government and Outcome 1\.2 Strengthened Public Sector Institutions (CPS page 22)\. Rating Revised Rating High Substantial Page 5 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) b\. Relevance of Design Relevance of Original Design The relevance of original design is rated modest\. The statement of the development objective “improving operation, organizational effectiveness and fiduciary control in the management and financing of the national road system, to enhance road user satisfaction in the project area and to improve efficiency in the use of financial resources in the road sector” was quite complex as it included several elements\. The project’s activities were appropriate to meet the PDO\. However, the project results framework was weak and did not indicate a clear causal chain between the activities financed by the project outputs and outcomes related to the attainment of the development objectives\. For example, the first component provided financing for national road improvement and asset preservation which is expected to improve the condition of road network\. However, there is no clear linkage to the objective of achieving "improved operation" of the road system\. The second component would provide technical assistance for institutional and capacity development that could improve organizational effectiveness and fiduciary control in the management and financing of the national road system\. The design included efforts to embed governance, transparency and anti-corruption measures in project components\. There were no activities to improve efficiency in the use of financial resources in the roads sector and no indicator to measure the achievement of this objective\. Relevance of Revised Design The relevance of revised design is also rated modest\. The second restructuring dropped the original objectives and added new set of complex objectives “to improve the condition of the national roads network and management effectiveness of the Department of Public Works and Highways (DPWH) at the national and local level\. The project objectives reflected the need to provide technical assistance to LGUs for reinstating infrastructure damaged in Typhoon Yolanda/Haiyan\. However, the ICR reports (para 56) that addressing these changing needs helped to maintain the projects relevance but diverted some attention away from the underlying institutional reforms\. The results framework was still weak\. The PDO indicator “roads in good and fair condition as a share of total classified roads” to measure the improved condition of the roads network was not attributable to project given that the roads rehabilitated and maintained under the project represented only two percent of DPWH’s maintenance budget, and therefore would not have any significant impact on the condition of the total classified road network\. The indicator to measure administrative efficiency was revised\. This was a good indicator to measure the improved management effectiveness of the Department of Public Works and Highways (DPWH) at the national level\. There were intermediate indicators to measure this objective (see section 10)\. There is no clear link between project outputs such as rationalization plan at the local level and the objective “improved management effectiveness at the local level”\. Also, there were no outcome indicators to measure this objective\. Rating Revised Rating Page 6 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) Modest Modest 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective To assist the Borrower in improving operation of the management and financing of the national road system\. Rationale Outputs • 295 kilometers of national roads were improved compared to the revised target of 280 kilometers (original target was 450 kilometers)\. Outcomes • There were improvements in DPWH’s asset management, about 69 percent of the annual DPWH road program was subject to technical and economic analysis compared to the target of 80 percent (ICR para 58)\. • The indicator on administrative efficiency was partially achieved, with the target for delivering a national competitively bid (NCB) package reduced from 12 to five months (target was six-months) (ICR para 57)\. With the achievement of output targets for roads rehabilitation, the condition or roads improved substantially\. As clarified by the project team, the revised PDO indicator (added at restructuring ) - the percentage of roads in" good and fair condition" improved from baseline of 55 percent to 77 percent, exceeding the project target of 60 percent\. Rating Substantial PHREVDELTBL PHINNERREVISEDTBL Objective 1 Revision 1 Revised Objective Improve the condition of the national roads network\. Revised Rationale Outputs • 295 kilometers of national roads were improved compared to the revised target of 280 kilometers (original target was 450 kilometers)\. Page 7 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) • 1,200 kilometers of non-rural roads were rehabilitated compared to the target of 1,500 kilometers\. •The target for Long-Term Performance Based Maintenance Contracts was met\. 680 kilometers of roads were maintained through Long-Term Performance Based Maintenance Contracts\. Outcomes With the achievement of output targets for roads rehabilitation, the condition or roads improved substantially\. As clarified by the project team, the revised PDO indicator - the percentage of roads in" good and fair condition" improved from baseline of 55 percent to 77 percent, exceeding the project target of 60 percent\. The ICR reports (para 75) that while the physical condition of some of the NRS improved over the duration of the project, other road sections may have deteriorated despite the increased budget which GoP allocated to maintenance\. The project team further explained that despite the Bank’s small contribution to civil works, the improved planning procedures, strengthened Road Board functions, increased maintenance funding, and improved management effectiveness of the DPWH have enabled this increase\. After finishing the work of paving of its entire national network, the DPWH shifted focus towards asset management, resulting in improved road condition\. The satisfactory perception of the NRS by external stakeholders (indicator 3) exceeded the target by 23 percent, with 74 percent of the external stakeholders having a satisfactory perception of NRS (target was 60%)\. Based on the evidence, the outcome is rated modest\. Revised Rating Substantial PHEFFICACYTBL Objective 2 Objective To assist the Borrower in improving organizational effectiveness in the management and financing of the national road system\. Rationale Outputs • National Roads design guidelines and standards were updated by DPWH and were in use at project closure\. •To improve financial management, 204 DPWH offices against the target of 203 started using Electronic New Government Accounting System (e-NGAS) and e-Budget\. •By December 2014, 203 DPWH offices (meeting the target) implemented Rationalization Plan, which was approved by the Department of Budget Management (DBM)\. • By project closure, 82 percent of the Annual Road and Bridge Asset Preservation Program of DPWH Page 8 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) was evaluated by technical and economic criteria through the use of DPWH planning applications (target was 80 percent)\. • Approximately 3,354 staff (compared to the target of 600) were trained to enhance project implementation capacity and road safety\. Specific areas of training included planning-related business procedures, organizational culture change, asset preservation, change management, e-procurement, IT applications, and road safety\. • To improve road fund performance, new road board secretariat policy and procedures were introduced to institute internal controls for approvals and release of funds\. Although, policies and procedures were introduced, but road board performance has remained questionable (ICR page viii)\. Outcomes • At project closing, 98 percent of DPWH's infrastructure projects compared to the target of 70 percent (baseline was 26 percent) were subjected to life cycle monitoring using improved information technology (IT) tools\. • The ICR reports (para 66) that the improved business processes developed under the project are fully integrated into DPWH’s operations at the national office level\. The extensive training and dissemination activities conducted as part of the project have ensured that tools such as the Multi Year Programming and Scheduling Application (MYPS) and the Project and Contract Management Application (PCMA) have become their new way of doing business\. The entirety of DPWH’s budget is now being subject to more rigorous planning, control and transparency\. • The project improved administrative efficiency (measured as “percentage of projects delivered with less than 15 percent excess to original cost and time”) substantially, with achievement of 50 percent compared to the baseline of 6 percent, less than the target of 70 percent\. The project slightly reduced the cost and time overruns through improved procurement and contract Management (see sections 5 and 11)\. All regional and central offices are implementing enhanced Project and Contract Management Application processes\. Rating Substantial PHREVDELTBL PHINNERREVISEDTBL Objective 2 Revision 1 Revised Objective Improve the management effectiveness of the Department of Public Works and Highways (DPWH) at the national level (new objective added)\. Page 9 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) Revised Rationale Outputs • National Roads design guidelines and standards were updated by DPWH and were in use at project closure\. •To improve financial management, 204 DPWH offices against the target of 203 started using Electronic New Government Accounting System (e-NGAS) and e-Budget\. •By December 2014, 203 DPWH offices (meeting the target) implemented Rationalization Plan, which was approved by the Department of Budget Management (DBM)\. •By project closure, 82 percent of the Annual Road and Bridge Asset Preservation Program of DPWH was evaluated by technical and economic criteria through the use of DPWH planning applications (target was 80 percent)\. • Approximately 3,354 staff (compared to the target of 600) were trained to enhance project implementation capacity and road safety\. Specific areas of training included planning-related business procedures, organizational culture change, asset preservation, change management, e-procurement, IT applications, and road safety\. • To improve road fund performance, new road board secretariat policy and procedures were introduced to institute internal controls for approvals and release of funds\. Although, policies and procedures were introduced, but road board performance has remained questionable (ICR page viii)\. • The department rationalization plan was rolled out to all 203 DPWH offices\. • The ICR reported that only 6 percent of Central and Regional Offices had operational Multi Year Programming and Scheduling (MYPS) against the target of 100 percent\. The project team clarified that the software is ready and already operations in the central office, however it was not rolled to the regions due to closure of the consulting services in December 2016\. Nevertheless, all the field offices of the DPWH can access and use this software through the PCMA which is already operational in DPWH regions and districts\. • About 50 percent of the local infrastructure subprojects that received technical assistance under the project complied with DPWH’s design and construction standards, less than the target of 80 percent (ICR para 68)\. Outcomes Page 10 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) • At project closing, 98 percent of DPWH's infrastructure projects compared to the target of 70 percent (baseline was 26 percent) were subjected to life cycle monitoring using improved information technology (IT) tools\. • The project slightly reduced the cost and time overruns through improved procurement and contract Management (see sections 5 and 11)\. All regional and central offices are implementing enhanced Project and Contract Management Application processes\. • The project improved administrative efficiency (measured as “percentage of projects delivered with less than 15 percent excess to original cost and time”) substantially, with achievement of 50 percent compared to the baseline of 6 percent, less than the target of 70 percent\. • The ICR reports (para 66) that the improved business processes developed under the project are fully integrated into DPWH’s operations at the national office level\. The extensive training and dissemination activities conducted as part of the project have ensured that tools such as the Multi Year Programming and Scheduling Application (MYPS) and the Project and Contract Management Application (PCMA) have become their new way of doing business\. The entirety of DPWH’s budget is now being subject to more rigorous planning, control and transparency\. Although the target for improved administrative efficiency were not met, at project closure half of the DPWH projects were “delivered with less than 15 percent excess to original cost and time” compared to the baseline of 6 percent\. As discussed above, other targets were met and improved business processes developed under the project are fully integrated into DPWH’s operations at the national office level\. The objective of improving the management effectiveness of the Department of Public Works and Highways (DPWH) at the national level is rated substantial\. Revised Rating Substantial PHEFFICACYTBL Objective 3 Objective To assist the Borrower in improving fiduciary control in the management and financing of the national road system\. Rationale Outputs Page 11 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) • To improve fiduciary control, the project introduced following measures: (i) an Independent Procurement Evaluator (IPE) who would evaluate bids in parallel with the United Project Management Office (UPMO); (ii) enhanced procurement controls and businesses process; (iii) adoption of the 2006 IBRD procurement guidelines; and (iv) independent oversight by a Civil Society Organization “Road Watch” (ICR par 47)\. •The Operating Procedures Manual for the Road Board was prepared and adopted (ICR Annex 10 page 55)\. • A number of New Road Board Secretariat policy and procedures were introduced in 2014 to institute internal controls for approvals and release of funds (ICR page viii)\. • The project increased cost recovery from road users through Motor Vehicle User Charges (MVUC) which consisted of driver licensing and vehicle registration fees\. The ICR reports (para 57) that the financing sustainability target of 60% was achieved\. Outcomes • The project did increase cost recovery from road users but it did not include any indicator to measure the efficiency of use of financial resources\. • Although policy and procedures have been introduced to improve internal controls for approvals and release of funds, the ICR reports that the road board performance remained questionable (ICR page viii)\. (The ICR does not discuss the policies and procedures introduced under this project)\. • The procurement reforms introduced under this project as well as the institutional improvements resulted in significant savings in the cost of civil works\. The transparency in DPWH’s improved systems reduced the opportunity for interference and resource leakage on civil works contracts\. By 2013, the Bank’s procurement review found that the average bid award prices were 20 to 25 percent lower than the engineer’s estimate (ICR para 29)\. Although there was no indicator the measure improved fiduciary control, the above evidence shows that the project was instrumental in improving fiduciary control as evidence by the reduction in average bid price by 20 to 25 percent\. Despite the introduction of improved internal controls for approvals and release of funds, the ICR reports that the road board performance remained questionable\. The achievement of this objective is therefore rated modest\. Rating Modest PHREVDELTBL Page 12 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) PHINNERREVISEDTBL Objective 3 Revision 1 Revised Objective Improve the management effectiveness of the Department of Public Works and Highways (DPWH) at the local level\. Revised Rationale Outputs • The project provided Technical Assistance to Local Government Units (LGUs)\. This allowed LGUs which had significant knowledge gap and capacity constraints to effectively funds for construction and rehabilitation of local infrastructure damaged due to Typhoon Yolanda\. • The department rationalization plan was rolled out to all 203 DPWH offices\. • Only 6 percent of Central and Regional Offices had operational Multi Year Programming and Scheduling (MYPS) against the target of 100 percent\. • The project team provided new evidence that all the 1,868 sub-projects that received the Bank’s technical assistance conformed with the DPWH’s prescribed standards\. Therefore, 100 percent of the local infrastructure subprojects that received technical assistance under the project complied with DPWH’s design and construction standards, surpassing the target of 80 percent\. Outcomes Although the ICR reported (para 69) that there was no clear link between these outputs and improved management effectiveness at the local level, the project team explained that the project established an effective framework for the DPWH to provide key knowledge and implementation support for reconstruction of local infrastructure by working in partnership with DILG (Department of Interior and Local Government) and LGUs, and by mobilizing private sector engineering capacities\. This achievement was recognized by recent policy work produced by the Bank (Philippines - Lessons learned from Yolanda: an assessment of the post-Yolanda short and medium-term recovery and rehabilitation interventions of the Government\. World Bank Policy Note\. 12 October 2017)\. Under this project, the DPWH played a key role beyond the national network and in implementing the Government of the Philippine’s (GOP’s) policy to “build back better” for reconstruction of local infrastructure by ensuring both the quality and pace of delivery of the reconstruction works\. The project introduced effective management of social and environmental issues even at the lowest level of infrastructure works, even though GOP used its own funds for construction\. A total of 1,868 projects received technical assistance under the project\. Revised Rating Modest PHREVISEDTBL Page 13 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) 5\. Efficiency Economic Efficiency: Ex-ante the economic rate of return (ERR) was 33 percent\. In 2012 (first restructuring), the ERR was estimated at 27 percent\. The ex-post ERR is 23\.4 percent and a ranged from 11\.5 percent to 35\.3 percent\. The analysis considered actual project costs and measured traffic volumes for selected road improvement sub-projects (ICR para 82)\. The procurement reforms introduced under this project as well as the institutional improvements resulted in significant savings in the cost of civil works\. The transparency in DPWH’s improved systems reduced the opportunity for interference and resource leakage on civil works contracts\. By 2013, the Bank’s procurement review found that the average bid award prices were 20 to 25 percent lower than the engineer’s estimate (ICR para 29)\. Administrative and operational efficiency: The project was significantly delayed by 4 years and underwent two restructurings including one level-1 restructuring when the project objectives were revised\. There were implementation delays which meant revisions of some designs of physical works\. The ICR reports (para 81) that implementation delays experienced under the project did detract from the project’s efficiency, as a prolonged time before undertaking physical works meant increased scope and less validity of detailed designs, with some even needing to be revisited\. This resulted in higher costs (despite the cost savings due to improved procurement practices) (ICR para 81) and a longer time to achieve benefits\. However, these increases were offset by increased traffic volumes on the roads considered, thus leading to enhanced net benefits\. The daily traffic was on average 8\.8 percent higher in 2016 compared with the projections made in 2012\. There were delays in the procurement of the consultancy service from the Institutional Development Fund (IDF) to develop a measurement plan and define baselines (ICR para 40) to improve Unified Project Management Office (UPMO) monitoring of the indicators\. This was excessively delayed and the grant expired before work could be undertaken\. The Bank also contributed to substantial delays due to the discontinuity of project staff (particularly team leaders) and repeated rounds of review for both works and consulting packages (ICR para 33)\. The implementation of Component B (institutional capacity development) was also delayed due to procurement difficulties\. Despite cost savings and an ex-post ERR of 23 percent (compared to ex-ante ERR of 33 percent), project efficiency is rated modest because of substantial implementation delays\. Efficiency Rating Modest Page 14 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) 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  33\.00 Not Applicable 0 ICR Estimate  23\.00 Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome Original Objectives: Relevance of the original objective is high and design is modest\. The achievement of the project objective to assist the Borrower in improving operation and fiduciary control in the management and financing of the national road system is rated substantial\. Likewise, the objective to improve organizational effectiveness is rated substantial\. However, the objective of improving fiduciary control in the management and financing of the national road system is rated modest\.The project’s efficiency is rated modest\. Therefore, the outcome rating is moderately satisfactory\. Revised Objectives: Relevance of the revised objectives is substantial and design is modest\. The achievement of the first PDO “improve the condition of the national roads network" and the second PDO “Improve the management effectiveness of the Department of Public Works and Highways (DPWH) at the national level” is rated substantial while the third PDO “Improve the management effectiveness of the Department of Public Works and Highways (DPWH) at the local level is rated modest\. The project’s operation’s efficiency is rated modest\. Therefore, the outcome rating is moderately satisfactory\. Overall Outcome Rating: The project rating under the original objectives is moderately satisfactory, and under the revised objectives is also moderately satisfactory\. Thus, a split evaluation calculation is not required as the overall rating is moderately satisfactory both pre and post restructuring\. a\. Outcome Rating Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating Financial Risk is rated modest as the GoP has increased spending for road maintenance (ICR para 95)\. In 2016, the GoP provided DPWH with PHP 8\.5 billion in funding for road maintenance compared to PHP 2\.5 billion in 2009, which shows the government commitment towards providing sufficient maintenance financing (ICR para 27)\. Page 15 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) Technical Risk is rated modest as although the project introduced the long-term performance based maintenance contracts (LTPBMC), the DPWH is unlikely to adopt the model more broadly without seeing evidence that this approach is more efficient than the traditional contracts\. Other donors such as the ADB and JICA have embraced this approach to road maintenance and JICA is implementing LTPBMCs on four sections of the NRS\. This along with the project sections could provide the required evidence for government to fully adopt the model more broadly (ICR para 50)\. Institutional Risk is rated modest as while DPWH has institutionalized business process improvements at its national office (ICR para 96), there is a modest risk that these practices might not be adopted at the regional and district level\. The ICR reports (para 96) that improving governance is a priority for the government and the regional and district offices and can be easily modelled like the successfully completed national office\. Despite the discontinuation of the NRIMP APL there is mutual interest from GoP and the Bank in working on a new transport sector operation\. The Bank can scale up the positive results delivered by the NRIMP APL, including to lower hierarchy provincial, municipal and barangay roads which are at lower levels than the NRS (ICR para 52)\. Moreover, DPWH has already committed to IT upgrades with its own funding, and has sought out donor support to continue development of the Project and Contract Management Application (PPCMA)\. DPWH has also institutionalized road condition monitoring and asset management across the entire network (ICR para 95)\. a\. Risk to Development Outcome Rating Modest 8\. Assessment of Bank Performance a\. Quality-at-Entry The NRIMP APL was designed around an institutional reform agenda through a three-phased approach\. The use of APL as the lending instrument was appropriate as it provided the Bank the means for a longer-term engagement in the roads sector in Philippines and the required timeframe to implement the institutional reforms\. An independent progress review of the APL triggers of NRIMP-1 concluded that the triggers and timeframe of NRIMP-1 were over-optimistic given the implementation capacity of DPWH (ICR para 100)\. Based on the recommendations of the independent review and the degree of difficulty in gaining legislative support for reforms, the Bank decided to proceed with NRIMP-2 but shifted the focus to administrative reforms, and to reschedule the ambitious legislative reforms to NRIMP-3 which did not materialize (ICR para 100)\. The design included efforts to embed governance, transparency and anti-corruption measures in project components\. NRIMP-2 used some of the tools developed under the earlier phase for selection and prioritization of investments\. Despite this, the project design was too complex\. The ICR reports (para 102) that the evidence of this complex design was the fact that despite a four-year extension, the project did not achieve the reform objectives of rolling-out all business process improvements to DPWH’s regional and district offices\. The scope of policy and institutional changes as well as civil works, and the time required to Page 16 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) implement each of these was simply too great\. The project had to go through two restructurings to scale back the scope and revise the project objective to make it more realistic\. The ICR notes (para 20) that although the project design took the lessons from previous projects into account, some of the same issues occurred during implementation\. These were slow procurement, slow disbursement and uneven progress with institutional reform\. The main weakness of the project preparation was that the original results framework was weak\. It consisted of an extensive and complex set of indicators which in some cases created measurement constraints (see section 10)\. Moreover, the Bank failed to engage DPWH in developing a measurable M&E framework (ICR para 102)\. This resulted in weak understanding and ownership by DPWH during implementation\. The few indicator targets which were measurable were very ambitious and required adjustment to reflect what could realistically be achieved\. Quality-at-Entry Rating Moderately Satisfactory b\. Quality of supervision The Bank supervision was flexible in responding to the changing needs during implementation such as responding to the damage caused by Typhoon Yolanda/Haiyan by supporting the LGUs recovery efforts\. The Bank was also responsive to the GoP’s request for support on road safety which is a significant issue in the Philippines\. However, these efforts detracted the Bank from focusing on the reforms underpinning the project (ICR para 109)\. There were several shortcomings in the Bank's supervision: • The ICR reports (paras 33 and 103) that the Bank provided inconsistent direction which caused delays\. While anticorruption measures were welcomed as they had a significant impact through improved transparency and governance, these measures contributed to extensive delays\. There were repeated rounds of review for both works and consulting packages and most often new or sometimes conflicting comments were raised at each round of review\. For instance, the Bank revisited some feasibility designs at final bid document stage causing substantial delays\. In some cases, it took up to 18 months for issue of a no objection letter (NOL)\. Also, there were particularly long delays in awarding of the long-term performance contracts due to inconsistent direction from the Bank over the approach to adopt\. The contracts were eventually awarded in March 2013, four years into the project (ICR para 33)\. It should be noted that the with the introduction of anti corruption measures, there had been no reemergence of corruption issues in this project\. • There were five task team leaders over the duration of the project and inadequate handover between successive task team leaders caused substantial delays (ICR para 104)\. The ICR reports that during the latter half of implementation, the task team leader staffing remained consistent and implementation improved\. The Project team informed IEG that this staff turnover is not uncommon for a project with a 9-year implementation period\. Moreover, there was a Manila based co-TTL who provided a key anchor role along with fiduciary and safeguard colleagues who remained continuously involved during the project implementation and ensured a smooth transition and full institutional memory\. Page 17 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) • The project team informed IEG that during supervision the resettlement issue for linked road improvement works raised and corresponding action by the Government was sought\. The Bank took extensive efforts to assist DPWH with correcting this noncompliance\. Timely actions by the DPWH however was affected by changes in field office leadership, including a significant change which saw the creation of a new administrative region and placing the supervision of the sub-project with delayed compensation under this new region\. However, this issue is resolved for most of the PAPs\. There are a few cases in which the payment is to be made after a court decision, and the DPWH has kept aside the required funds in escrow to be released to PAPs once the decision of the court is available which is consistent with the Bank’s policies\. • The quality of the aide-memoires, management letters, ISRs was adequate, with implementation issues and consequences of delays repeatedly raised in correspondence to GoP\. The ICR reported that the quality of the second restructuring paper was poor, with limited detail and inadequate justification for dropped or modified components (ICR para 107)\. For example, (a) while the scope of bridge and road improvements was reduced, this was not quantified in the restructuring paper; and (b) why the pilot commercialization of road management and public works service delivery at the district level was dropped from the project when GOP decided to implement the rationalization plan (ICR Annex 9, page 52)\. The project team clarified that there was no dropped or modified project component in the second restructuring\. A new Component C “Technical Assistance to Local Government Units (LGUs)” was added to the project during that restructuring, details of which are well documented in the restructuring period and mentioned in the IEG evaluation\. Quality of Supervision Rating Moderately Unsatisfactory Overall Bank Performance Rating Moderately Satisfactory 9\. Assessment of Borrower Performance a\. Government Performance • The ICR reports (para 24) that while the government was fully involved in the preparation of the project, repeated staff and structure changes in the government resulted in the loss of some of the reform champions within DPWH at the time of project effectiveness\. Nevertheless, during the mid-stages of the project implementation, a high level of commitment to project objectives emerged, resulting in a change to strong reform-minded leadership of DPWH (ICR para 27)\. •The ICR reports (para 112) that the government was not supportive of the Long-Term Performance Management Contract - LTPBMCs, where some politicians perceived the approach as a threat to their power at the provincial level, power which came from the allocation of shorter maintenance contracts in Page 18 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) line with the business as usual approach\. • There were delays in the processing of the restructuring of the project\. • The government increased the maintenance budget for DPWH from PHP 2\.5 billion in 2009 to PHP 8\.5 billion in 2016, showing its commitment for preserving the road sector assets (ICR para 27)\. Government Performance Rating Moderately Unsatisfactory b\. Implementing Agency Performance • The Department of Public Works and Highways (DPWH) was the implementing agency for the project\. There were excessive delays between the start of the procurement process and the award of the contracts\. While the increased procurement oversight and the delayed Bank reviews noted above contributed to this (both DPWH and the Bank sharing responsibility for these delay), the ICR reports (para 115) that DPWH could have done better at expediting procurements and reducing the time to award the contract\. Delays were noted with institutional capacity development (ICD) consultancies, which did not commence until midway through implementation (until November 2012) – indicating that DPWH gave them lower priority compared to the civil works component (ICR para 34)\. • The ICR reports (para 115) that financial management and safeguards were generally performed well, except that DPWH allowed linked road improvement works to proceed without compensation being paid, a clear non-compliance with Bank involuntary resettlement policy\. DPWH misunderstood the Bank’s involuntary resettlement policy which requires that compensation claims be paid before construction is allowed to begin, even for linked works that are not funded by the project\. Once this issue was identified, the Bank Team worked with ESSO to develop and implement an agreed upon action plan\. • There were some cases where DPWH failed to manage consultants effectively, for example the engineering process design improvements consultancy concluded without successful completion (ICR para 117)\. The project team clarified that in the consulting contract for preparing the design guidelines, after completing the main assignment the consultant left a small part unfinished, related to training\. This was because the required consultant experts were not available, and is a reflection on the consultant rather than the management performance of the DPWH\. The DPWH have shown contract management ability as evidenced by the successful conclusion of all other civil and technical services contracts\. • The project team informed IEG that the DPWH has established a high-level Reform Institutionalization and Management Support Systems (RIMSS) Steering Committee consisting of various Bureau Chiefs and senior management of the DPWH to decide on the institutional development priorities, and guide implementation and coordination of the institutional development agenda through use of both local and donor funds\. Page 19 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) Implementing Agency Performance Rating Moderately Satisfactory Overall Borrower Performance Rating Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization a\. M&E Design The original results framework consisted of an extensive and complex set of indicators which in some cases created measurement constraints\. The ICR notes (para 102) that the Bank failed to engage DPWH in developing a measurable M&E framework\. As a result, their understanding and ownership was less than desirable and monitoring difficulties were experienced\. The project included indicators to measure administrative efficiency, sustainability of financing, value for money and road user satisfaction\. While these indicators were fully aligned with the PDO, baselines were not clearly established in the PAD and estimates of target values were also incomplete (ICR para 37)\. DPWH did not have a clear plan for how these indicators were to be periodically measured, and as a result three of the four indicators were not fully measured prior to the second restructuring\. The PDO indicator “roads in good and fair condition as a share of total classified roads” was not attributable to project given that the roads rehabilitated and maintained under the project represented only two percent of DPWH’s maintenance budget, and therefore would not have any significant impact on the condition of the total classified road network\. The project included seventeen intermediate outcome indicators, three of these were for the physical improvements under Component A, with the remaining 14 measuring various outcomes and outputs relating to Component B\. These intermediate indicators were complex and DPWH had difficulty understanding them (ICR para 38)\. During the first and second restructurings of the project, there were significant modifications to the results framework\. These changes improved measurability and included revising indicators to reflect the evolving capacity of the DPWH\. The ICR reports (para 44) that some of the revised indicators were direct outputs of DPWH’s improved business processes\. For example, a new indicator was added to reflect the Multi Year Programming and Scheduling Application (MYPS) developed under the project, and its roll out to regional and district DPWH offices through setting targets related to the number of offices using the tools (ICR para 42)\. An output indicator on the length of road under long-term performance based maintenance contracts was added\. Indicators on procurement efficiency, timeliness of audits and cost and time over-run reductions were replaced with a single indicator on adoption of design standards by DPWH\. Given that NRIMP-1 suffered from corruption issues and procurement irregularities, dropping indicators measuring procurement efficiency, timeliness of audits and cost and time over-run reductions was not appropriate as the project lost the possibility to document potentially significant procurement issues\. Page 20 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) At the time of the second restructuring, “improving the management effectiveness of DPWH at local level” was added as a PDO\. However, only an output indicator was linked to it\. There was not outcome indicator to measure the achievement of this objective\. b\. M&E Implementation The Unified Project Management Office (UPMO) was responsible for the monitoring of project indicators\. However, UPMO struggled to establish linkages between project activities and the results framework\. To assist the UPMO, the Bank team secured a grant funding from the Institutional Development Fund (IDF) for a consultancy to develop a measurement plan and define baselines (ICR para 40)\. However, the procurement of the consultancy was excessively delayed and the grant expired before work could be undertaken\. To measure the project original indicators, DPWH collected data from road and other surveys\. Additional information covering a wide spectrum of agency performance and user opinions was collected on a twice- yearly basis by the new civil society organization (CSO) ‘Road Watch’ (Bantay Lansangan) who were funded by AusAID grant funds\. c\. M&E Utilization The ICR reports (para 43) that “six-monthly progress reports” were produced by the UPMO and that data was used for Bank aide-memoirs and implementation status and results reports (ISRs)\. The ICR notes (para 44) that DPWH has internalized the M&E practice of the project\. To improve transparency, DPWH published an annual performance governance scorecard (PGS) report on their website - which reports against criteria of social impact, stakeholder perception, processes, people and resource stewardship\. The Department of Budget and Management (DBM), and the National Economic and Development Authority (NEDA) used the DPWH M&E results to make informed changes as required (ICR para 44)\. M&E Quality Rating Modest 11\. Other Issues a\. Safeguards Appraisal The Project was assigned Environment Category B and the following safeguards policies were triggered: Environmental Assessment (OP/BP 4\.01), Involuntary Resettlement (OP/BP 4\.12), and Indigenous Peoples (OP/BP 1\.10)\. The ICR failed to document which policies were triggered\. Page 21 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) Under the first phase of National Road Improvement and Management Program (NRIMP-1), Environmental Impact Assessment Project Office was created\. The name was changed to Environmental and Social Safeguards Office (ESSO) in the middle of NRIMP-1\. According to the PAD (page 104), all road improvement subprojects to be financed under NRIMP-2 had been identified and would follow the Social and Environmental Management System (SEMS) terms and conditions with respect to environmental and social reviews\. Moreover, the Department of Public Works and Highways (DPWH) had prepared a comprehensive land acquisition, resettlement, rehabilitation and indigenous peoples’ policy (LARRIPP) framework, which was consistent with the Banks OP 4\.12 Involuntary Resettlement and OP 4\.10 Indigenous Peoples, and was satisfactory to the Bank (PAD page 105)\. Implementation The ICR reports (para 45) that the safeguards performance fluctuated from satisfactory at the beginning of the project to moderately unsatisfactory due to issues relating to involuntary resettlement\. These issues were (ICR paras 45- 46): • Delays in the implementation of the resettlement action plan (RAP); • Delays in the establishment of the institutional arrangements between the Unified Project Management Office (UPMO), the Environmental and Social Safeguard Office (ESSO) and the regional and district Department of Public Works and Highways (DPWH) offices for monitoring compliance with the safeguards; and • Late submission of reports with missing critical information\. The main safeguards issue was the non-payment of land acquisition claims for linked road works funded by the Government of Philippines (GoP)\. DPWH misunderstood the Bank’s involuntary resettlement policy which requires that compensation claims be paid before construction is allowed to begin, even for linked works that are not funded by the project\. Once this issue was identified, the Bank Team worked with ESSO to develop and implement an agreed upon action plan\. The ICR reports (para 46) that by project closure, the project affected persons (PAPs) at two locations were still not paid\. However, at the time of the writing of the ICR, all PAPs had been compensated at one location, while the payments for the second were in escrow awaiting the outcome of the court case\. b\. Fiduciary Compliance Procurement: The previous project (NRIMP-1) had identified corruption issues and the INT investigation found collusion amongst bidders which resulted in the debarment of eight contractors\. Therefore, the project design included a comprehensive range of anti-corruption measures such as: (i) an Independent Procurement Evaluator (IPE) who would evaluate bids in parallel with the United Project Management Office (UPMO); (ii) enhanced procurement controls and businesses process; (iii) adoption of the 2006 IBRD procurement guidelines; and (iv) independent oversight by a Civil Society Organization “Road Watch” (ICR par 47)\. Page 22 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) The ICR reports (para 47) that these measures increased transparency and contributed to a major reduction in civil works cost\. With the discontinuation of the oversight from IPE and Road Watch (after the procurement phase), there is a significant risk that governance issues may re-emerge as the working knowledge they possessed has been lost\. Financial Management: The ICR reports (para 48) that the financial management was satisfactory, and that it was aided by the systems developed and adopted as part of the project\. These included the revised versions of the Electronic New Government Accounting System (e-NGAS) and e-Budget\. The United Project Management Office (UPMO) maintained qualified and experienced FM staff, and followed adequate FM processes and procedures\. The interim financial reports (IFRs) were generally submitted on time or with moderate delays\. One shortcoming was that the semi-annual internal audits requirement of DPWH’s project accounts was not consistently complied with\. The ICR reports (para 47) that this was not just the issue with DPWH, but GoP wide issue\. External project audits were carried out annually, with some qualified opinions but no accountability issues were raised\. c\. Unintended impacts (Positive or Negative) The ICR (para 14) reports that other financing agencies including the Asian Development Bank (ADB) and the Japan International Cooperation Agency (JICA) have adopted an approach similar to NRIMP APL for road maintenance\. Their projects have also benefited from using the business processes and integrity frameworks established under the NRIMP APL\. d\. Other None\. 12\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Moderately Moderately Outcome --- Satisfactory Satisfactory Risk to Development Modest Modest --- Outcome Moderately Moderately Bank Performance --- Satisfactory Satisfactory Moderately Moderately Borrower Performance --- Satisfactory Satisfactory Quality of ICR Substantial --- Page 23 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) 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 Adapted from ICR (paras 119- 123) with some modification of language : • Commitment to addressing governance challenges can yield positive results: At the end of NRIMP-1, an INT investigation resulted in one of the largest number of contractor sanctions in the Bank’s history in Philippines\. The bold and ambitious approach of introducing oversight measures created islands of good governance around the project and served as a model which can be adopted in the preparation of new projects\. • For biggest reform impact, think big and tackle an entire agency: The reform efforts proposed under this project did not focus solely on the activities it was investing in, which represented only 1\.3 percent of DPWH’s budget; instead, it sought to tackle governance across DPWH, encompassing the entirety of its budget and activities\. • Staffing continuity at the Bank could have led to improved client support during implementation: The project implementation experienced five team leaders over the course of the eight years of the project, leading to changing perspectives and priorities on the Bank side, undermining the relationship between the Bank and the client\. Inadequate handover between successive TTLs was also considered a factor in the resettlement issues which emerged, as better safeguards oversight would have prevented linked works from proceeding without compensation being paid\. 14\. Assessment Recommended? No 15\. Comments on Quality of ICR The ICR is comprehensive and well written\. The quality of evidence presented is adequate and the analysis is clear\. It critically analyzed the Bank’s supervision efforts\. The lessons are well crafted\. The ICR does not report on the compliance with the environmental safeguard and Indigenous Peoples safeguards\. Page 24 of 25  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PH- Natl Rds Improv\. & Mgt Ph\.2 (P079935) a\. Quality of ICR Rating Substantial Page 25 of 25

REVIEW

P162071

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Resilience, Inclusion and Growth(P162071) Report Number : ICRR0021904 1\. Project Data Operation ID Operation Name P162071 Resilience, Inclusion and Growth Country Practice Area(Lead) Turkey Macroeconomics, Trade and Investment L/C/TF Number(s) Closing Date (Original) Total Financing (USD) IBRD-87810 29-Aug-2018 408,605,505\.00 Bank Approval Date Closing Date (Actual) 29-Aug-2017 29-Aug-2018 IBRD/IDA (USD) Co-financing (USD) Original Commitment 400,000,000\.00 0\.00 Revised Commitment 400,000,000\.00 0\.00 Actual 408,605,505\.00 0\.00 Prepared by Reviewed by ICR Review Coordinator Group Hjalte S\. A\. Sederlof Judyth L\. Twigg Malathi S\. Jayawickrama IEGEC (Unit 1) 2\. Project Objectives and Policy Areas a\. Objectives The Program Development Objective (PDO) of the Resilience, Inclusion and Growth Development Policy Financing (RIG-DPL) was to increase domestic savings and enhance fiscal transparency, support the economic inclusion of vulnerable groups, and reduce structural bottlenecks to sustainable growth (Program Document, PD, page 1)\. While Program documentation, including the ICR, is based on three objectives, combining “domestic savings” and “fiscal transparency” as one objective, IEG notes that the Program in fact had four objectives: (i) to increase domestic savings; (ii) to enhance fiscal transparency; (iii) to support economic inclusion of vulnerable Page 1 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Resilience, Inclusion and Growth(P162071) groups; and (iv) to reduce structural bottlenecks to sustainable growth\. Efficacy will be assessed on the basis of these objectives\. b\. Pillars/Policy Areas The PDO indicates three pillars for the operation\. However, the analysis will draw on four pillars, separating the first pillar into two pillars\. The four pillars of the operation are as follows: Pillar 1: increasing domestic savings\. This was to be achieved by introducing automatic enrollment into private pension schemes against the likelihood of a less generous public pension scheme in the future\. Pillar 2: enhancing fiscal transparency\. This was to be achieved by increasing the amount of fiscal information available in audit reports to enhance accountability and fiscal transparency in public financial management\. Pillar 3: supporting the economic inclusion of vulnerable groups\. This was to be achieved by expanding the rules for flexible employment, increasing access to childcare to facilitate women's entry into work, and facilitating the integration of foreigners into the labor market on a temporary basis\. Pillar 4: addressing structural bottlenecks to sustainable growth\. This was to be achieved by legislation encouraging innovation; facilitating access to credit for small and medium enterprises (SME); deregulation of network industries by liberalizing the railways sector; and supporting renewable energy investments\. c\. Comments on Program Cost, Financing, and Dates Program cost and financing\. The commitment under RIG-DPL was US$400 million equivalent\. US$408\.61 million was disbursed, the difference between the two numbers reflecting exchange rate changes\. Dates\. The RIG-DPL was approved on August 29, 2017, became effective on October 19, 2017, and closed on August 29, 2018\. 3\. Relevance of Objectives & Design a\. Relevance of Objectives The RIG-DPL’s objectives were relevant to the country situation: decelerating economic growth challenged by domestic and external economic conditions, and long-standing structural rigidities that are threatening gains in poverty reduction and shared prosperity\. The objectives were fully consistent with Turkey’s 10th development plan and are partly consistent with its new 11th development plan (2019-2023)\. The main inconsistencies in the latter relate to refugee employment and financial audits for all general budget Page 2 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Resilience, Inclusion and Growth(P162071) institutions, which no longer are listed as explicit priorities\. The objectives were consistent with an evolving Country Partnership Framework (CPF) for the 2017-2021 period\. The operation covered all three of the CPF's focus areas: in growth, with its emphasis on containing fiscal risk; in inclusion, with increased labor force participation of women and vulnerable groups; and in sustainability, with generation of renewable energy\. Rating Substantial b\. Relevance of Design There was a causal link between the actions supported by the operation and expected outcomes for all three objectives\. Under Pillar 1, private retirement savings accounts were to increase domestic savings and reduce dependence on external financing; and audited financial statements for all general budget institutions were to enhance transparency and encourage fiscal discipline\. Under Pillar 2, economic inclusion of vulnerable groups was to be increased by facilitating their entry into the job market through more flexible work arrangements; for women through easier access to childcare; and for external refugees through temporary work permits\. Under pillar 3, some structural bottlenecks to long-term growth were to be addressed through supply-side reforms that were expected to increase private sector productivity and investment (through easier access to credit, competition in the transport sector), and with an emphasis on environmental sustainability\. The results chain and the link between the three pillars and the nine prior actions were straightforward\. Intended outcomes as measured by the results indicators were monitorable\. The macroeconomic framework was deemed adequate for the operation\. The economy had proven resilient to crisis owing to strong fiscal discipline and a well-capitalized banking system\. Still, continued domestic and external imbalances made the country dependent on external financing, creating risks to growth\. The IMF’s Stand-by Arrangement for Turkey was successfully completed in 2008, and the latest Article IV consultation report published in 2017\. The report emphasized the need to move forward on the policy reform agenda, notably through policies aimed at increasing domestic savings and raising potential growth\. Rating Substantial 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Page 3 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Resilience, Inclusion and Growth(P162071) Objective To increase domestic savings Rationale The law on private pension savings was amended as a prior action to introduce auto-enrollment into the private pension system with an opt-out option\. The scheme was introduced in 2017 as a means of creating a sustainable and diversified pension system that would shield participants from any future reductions in the generosity of the current public pension pillar that might be required by any future deterioration in the fiscal situation\. As of January 2019, all employees of companies with more than five employees had become part of the system, which had more than 5 million participants, compared to a baseline of zero and a target of 2 million\. However, there has subsequently been a fall-off, as participants have opted out; according to the ICR, around two-thirds of the new enrollees do so\. This would indicate that the impact of the voluntary pension scheme on domestic savings in the short- to medium term may be less than anticipated\. Summary: While the introduction of the private pension scheme initially appears to have exceeded expectations, this may have been driven initially by the automatic enrollment of all eligible employees as participants, judging from the subsequent fall-off\. What will happen over the longer term is a function of the credibility that the scheme managers succeed in building\. Rating Modest PHREVDELTBL PHEFFICACYTBL Objective 2 Objective To enhance fiscal transparency Rationale To promote transparency in public spending and increase the accountability of public institutions (i\.e\. encourage fiscal discipline), the audited financial statements for 2015 of all general budget institutions were submitted to Parliament in October 2016 as a prior action\. As a consequence, individual financial statements now are published annually, not only for all general budget institutions (45 in 2018), but for a large number of other public institutions\. Summary: The fiscal transparency initiative did meet its immediate objective of transparency; it is still too early to determine its longer-term impact on fiscal discipline\. Page 4 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Resilience, Inclusion and Growth(P162071) Rating Substantial PHREVDELTBL PHEFFICACYTBL Objective 3 Objective To address structural bottlenecks to sustainable growth Rationale Amendments to labor market legislation were expected to facilitate labor market participation of women, youth, long-term unemployed, and foreign refugees (Syrians) under temporary protection, by supporting increased access to childcare (women), flexible employment (youth and long-term unemployed), and integration of refugees into the labor market\. As prior actions, the income tax law was amended to reduce the corporate tax paid by private nursery schools; labor legislation was amended to make contractual working arrangements more flexible; and work permits for foreigners under temporary protection (essentially Syrian workers) were introduced\. The tax incentives for childcare are operational and have been strengthened by exempting employers from income tax\. The prior action relating to flexible work contracts is not yet operational in the absence of accompanying bylaws on implementation arrangements\. Action on these bylaws is included as part of the country's new development plan\. Access to childcare increased as measured by net enrollment rates in childcare facilities, which rose from 35\.5 percent in 2016 to 38\.5 percent in 2018\. At the same time, the number of private pre-schools increased by some 13 percent over the same period\. Women’s labor force participation rose from 32\.5 percent in 2016 to 34\.2 percent in 2018, against an expected target of 34\.9 percent\. The increase in women’s labor force participation should not be seen only as due to increased access to childcare facilities, but is also likely to have been influenced by positive trends in the economy and the job market\. A survey conducted by the National Statistics Office in 2018 found that only 13 percent of women who work use a formal childcare service\. So far, the working arrangements for implementing flexi-work arrangements benefiting women (beyond the impact of childcare arrangements), youth, and long-term unemployed have not been put in place, and this particular action has yielded no results\. Page 5 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Resilience, Inclusion and Growth(P162071) The introduction of work permits for recent refugees (essentially Syrians under temporary protection) had been extended to some 22,000 refugees in 2018, meeting the target\. However, with some 430,000 refugees able to work, work permits cover only 5 percent of eligible refugees\. In summary, the operation had a modest, if positive, effect on women’s labor force participation as a function of easier access to childcare services\. Its efforts at flexi-work, not yet in force, had no effect on the intended beneficiaries of that program - women, youth and vulnerable groups\. The arrangements for job creation for immediate refugees are likely to have had a minor impact on the potential beneficiaries\. Rating Modest PHREVDELTBL PHEFFICACYTBL Objective 4 Objective To address structural bottlenecks to sustainable growth Rationale Legislation was introduced as prior actions, including: (i) modernizing the protection of intellectual property to encourage research and development and innovation; (ii) enabling the use of movable property as collateral for access to finance, especially for SMEs and startups; (iii) liberalizing railway transport by unbundling infrastructure and operations, supporting competition between inter-modal (road, rail) transport options; and (iv) introducing incentive mechanisms towards environmentally favorable production in the areas of energy efficiency and transport\. Strengthening the legal framework for the patent system has contributed to a rise in patent applications from 6,450 in 2016 to 8,600 in 2017, exceeding the target of 8,500 set for 2018, but declining to 7,300 in 2018\. According to the ICR, a more robust legal framework is likely to have contributed to the increase in patent applications, while the subsequent decline in patent applications was likely to have been influenced by factors such as lower perceived returns to patents\. A stronger indicator of the impact of new legislation might be observing longer term trends, which was not possible within the timespan of the operation\. The volume of credit supported by movable collateral increased from zero to Turkish Lira (TL) 50 billion in lira terms, with an additional US$8\.2 billion and euro 1 billion in foreign currency lending\. The ICR argues that all of it can be considered as an outcome of the reform\. The Doing Business survey improved its assessment of ease of credit in Turkey from a 2 in 2017 to 7 in 2019\. Page 6 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Resilience, Inclusion and Growth(P162071) With the liberalization of railway transport (the unbundling of the railway company), four private sector operators have signed framework contracts and have been licensed to use rolling stock on the national rail system\. These services are now operating\. The original target was at least one operator\. The national railway company is considering infrastructure development to allow further private rail services\. With regulations to support the establishment of renewable energy resource areas (zones), the first three areas are under development with the construction of new solar and wind farms expected to be completed in late 2019 or 2020\. The estimated value of the projects, which were based on auctions, is US$3\.4 billion\. When on-stream, they are estimated to have energy capacity of up to 3 GW\. The total installed renewable energy capacity that is being developed in these areas is 2,000 MW, which will be a significant addition to the existing renewable installed capacity of 12,000 MW (ICR, page 20)\. Rating Substantial PHREVDELTBL PHREVISEDTBL 5\. Outcome • Relevance of objectives and design were both rated substantial, with minor shortcomings in both areas\. Efficacy was rated modest for Objective 1, domestic savings, and Objective 3, economic inclusion; while Objective 2, fiscal transparency, and Objective 4, structural bottlenecks, were rated substantial\. These ratings reflect moderate shortcomings in the operation overall, producing an outcome rating of moderately satisfactory\. a\. Outcome Rating Moderately Satisfactory 6\. Rationale for Risk to Development Outcome Rating The reforms under the operation closely paralleled the government’s reform program, and the risk to the development outcomes should be modest\. However, in some cases distinctions need to be made\. Outcomes under Pillars 1 and 2 have so far consistently had government support, are policy priorities, and are therefore likely to be sustainable\. Performance under Pillar 3, notably in terms of job creation for women and immigrant refugees, has not been strong, and a certain degree of political uncertainty attaches to job creation for refugees: it was low under the operation, and understandings between the European Union and Turkey on refugees Page 7 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Resilience, Inclusion and Growth(P162071) remain tenuous\. Outcomes under Pillar 4 may have political backing, but in terms of credit, for instance, the volume of credit with movable collateral has risen beyond expectations and may well prove unsustainable in the medium term, leading to more stringent credit conditions for targeted borrowers\. a\. Risk to Development Outcome Rating Modest 7\. Assessment of Bank Performance a\. Quality-at-Entry The Bank’s intervention was strategically relevant, focusing on areas that were likely to reduce poverty and further shared prosperity destabilized by domestic and external events\. According to the ICR, its prior actions built on extensive prior technical analysis of the policy areas supported under the operation, as well as reforms that had been started under earlier DPLs, notably the Sustaining Growth DPL\. Lessons taken into account in the operation's design and signaled in the ICR included: the need for adequate institutional capacity; a basis in knowledge work and synergies with other Bank and stakeholder engagement in the country; and a good understanding of the links between policy and actions (as reflected in a results matrix where causality was clear)\. The approach, a single stand-alone DPO, was appropriate\. It addressed an immediate need to improve fiscal balance, and it responded to political volatility at the time, as the country came out of a recent (failed) coup attempt\. But it also introduced uncertainty regarding the longer-term sustainability of policy actions, albeit according to the ICR the government commitment to them was strong\. While arrangements for M&E allowed project progress to be monitored, some of the operation’s interventions raised challenges of attribution (see Section 9a)\. Quality-at-Entry Rating Moderately Satisfactory b\. Quality of supervision No formal supervision missions were undertaken during the implementation period\. Still, dialogue between the Bank team and government was able to continue and progress was monitored despite delays due to organizational changes across government, including a high turnover of staff as the country transitioned to a presidential system\. Quality of Supervision Rating Moderately Satisfactory Overall Bank Performance Rating Moderately Satisfactory 8\. Assessment of Borrower Performance Page 8 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Resilience, Inclusion and Growth(P162071) a\. Government Performance The government, through the Treasury, and later through the Ministry of Finance, oversaw preparation and implementation of the operation\. The ICR notes that the government's previous experience with DPOs, and strong links between the contents of this operation and the country's development strategy maintained momentum despite changes in government personnel without extensive disruptions\. Still, untimely fiscal and monetary policies and personnel changes did influence some of the intended outcomes of the reforms, as noted in Section 4\. Government Performance Rating Moderately Satisfactory b\. Implementing Agency Performance Not assessed\. Implementing Agency Performance Rating Not Rated Overall Borrower Performance Rating Moderately Satisfactory 9\. M&E Design, Implementation, & Utilization a\. M&E Design The policy and results matrix for the operation provided a sequence of prior actions that underpinned the policy changes\. Key indicators for systematic tracking of outcomes were identified in the matrix, including specifications of baselines and targets\. In most instances, the indicators were sufficient to measure results, albeit in some cases results were too broadly formulated to allow unique attribution (for instance, aggregate labor market outcomes); and in other cases, meaningful results were hard to attain over the short period of time – a year – that the operation covered\. b\. M&E Implementation The Treasury was responsible for coordinating data gathering and monitoring of the operation, notably results indicators, drawing on information from relevant ministries and agencies\. c\. M&E Utilization Page 9 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Resilience, Inclusion and Growth(P162071) The Treasury prepared quarterly evaluation reports and presented semi-annual progress reports to the government\. M&E Quality Rating Modest 10\. Other Issues a\. Environmental and Social Effects No safeguard policies were noted in the ICR\. b\. Fiduciary Compliance No fiduciary concerns were noted in the ICR\. c\. Unintended impacts (Positive or Negative) None noted\. d\. Other The operation helped promote the economic inclusion of women into the job market, albeit with modest results\. It also supported the burgeoning refugee crisis by offering work permits for foreigners under temporary protection, again with relatively narrow coverage\. 11\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Moderately Outcome Moderately Satisfactory --- Satisfactory Risk to Development Modest Modest --- Outcome Moderately Bank Performance Moderately Satisfactory --- Satisfactory Moderately Borrower Performance Moderately Satisfactory --- Satisfactory Page 10 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Resilience, Inclusion and Growth(P162071) 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 following lessons are drawn from the ICR: DPOs can be an effective means to support structural change when they are part of the planning process\. The operation was able to help initiate significant reforms over a wide range of subject areas despite a volatile political environment and an uncertain macroeconomy\. Program design should recognize macroeconomic risk\. Major changes in the political and institutional framework will test a program's strength, and a program should be designed with resilience to such factors in mind: for instance, linking the results framework closely to precise results of prior actions rather than broad aggregates, and assessing trade-offs between shorter and longer time horizons to allow outcomes to be more rigorously assessed\. 13\. Assessment Recommended? No 14\. Comments on Quality of ICR The ICR provided a good foundation for assessing performance on this operation\. The review drew a careful balance between the short-term effects of the policies being introduced and their often medium-term results perspective\. A more nuanced discussion of the usefulness of an M&E approach that is based on short-term results could have been a thought-provoking addition to the ICR, albeit perhaps a bit outside the strict framework of a core ICR\. a\. Quality of ICR Rating Substantial Page 11 of 12 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Resilience, Inclusion and Growth(P162071) Page 12 of 12

REVIEW

P008264

 Rural poverty alleviation pilot project Report No: ; Type: Report/Evaluation Memorandum ; Country: Albania; Region: Europe And Central Asia; Sector: Agriculture Adjustment; Major Sector: Agriculture; ProjectID: P008264 Albania: Rural Poverty Alleviation Pilot Project (Credit 2461- ALB) The Albania Rural Poverty Alleviation Pilot Project supported by Credit 2461-ALB for US$2\.4 million equivalent was approved in FY93\. The project was fully disbursed and closed as planned on June 30, 1995\. Cofinancing totaling US$3 million was provided by the European Union, Italy and France\. The Implementation Completion Report (ICR) was prepared by the Europe and Central Asia Regional Office\. The borrower's contribution is appended\. The cofinanciers were invited to contribute to the ICR, but did not\. In 1992 Albania faced a serious economic crisis\. The centrally planned economic system of government had collapsed, but had not yet been replaced by a functioning market system\. Small farmers lacked capital, inputs, credit and markets for their crops\. Rural poverty was acute\. It was against this background, and on the basis of a UNDP and French NGO financed pre-pilot phase, that an IDA pilot project was prepared quickly\. The main project objectives were to: (a) create employment (and hence generate income) for the rural population; (b) repair basic rural infrastructure; and (c) use small- scale credit to promote private sector activities and help create a rural market economy\. These objectives were to be achieved by creating a Rural Development Fund (RDF), testing approaches to rural public works rehabilitation and small- scale credit, local capacity building and appropriate technology transfer\. RDF was created as an autonomous government foundation in January 1993, but was later (September 1994) transformed into the Albanian Development Fund (ADF) to allow for expansion of activities in urban areas\. In addition to the original cofinanciers, other donors (Italy and France) provided funding to expand project activities\. This, coupled with appreciation of the US dollar against the SDR, caused project costs to rise to US$7\.5 million, 55 percent higher than the appraisal estimate\. More than 200 rural infrastructure rehabilitation projects were funded to the benefit of about 350,000 rural people, although the impact on income and employment was smaller than expected\. A highly effective small-scale credit mechanism was developed by establishing 100 village credit funds\. Average loan size was about US$400 and the repayment rate 100 percent in all but one village\. Lending terms were market oriented_originally 6 percent, later 10 percent_and positive in real terms\. Small-scale technology transfer to farmers and rural entrepreneurs encountered legal, institutional and political difficulties and was not successful\. This objective is being pursued in the follow-on project using a demand-driven approach, closely linked to the credit system\. Economic rates of return were not calculated at completion, or at appraisal\. The project's bottom-up approach, ADF's autonomous status and its access to large amounts of donor funding have created rivalries and competition between ADF and existing line agencies\. The rapid growth of ADF and greater government and donor interest in specific activities eroded the grassroots, demand-driven approach of the project\. The Operations Evaluation Department (OED) agrees with the ratings in the ICR\. Project outcome is rated as satisfactory, sustainability as likely and institutional development as substantial\. OED also agrees with the highly satisfactory rating for Bank performance in the ICR\. The emergency nature of this poverty-focused project required speed and innovation\. Piloting and participatory approaches were used, and Bank staff were closely involved with design and start-up\. Continuity in the task team enhanced supervision, which was intense: 16 missions in less than four years The main lessons are that: (i) learning by doing (prepilot, pilot, project) is an effective approach for project design while at the same time creating tangible and immediate results; (ii) the participation of beneficiaries is essential, e\.g\., in this project the involvement of future borrowers in the design of village credit programs contributed to their success; (iii) a fund approach allows for more flexibility in coordinating donor funding as well as helping to harmonize donor's objectives\. The ICR is complete and satisfactory, and adequately describes project experience and outcome\. A performance audit (OED Report 13819 dated December 27, 1994) preceded this ICR review and was undertaken to provide upstream feedback for the appraisal of the follow-up project\. The findings of this ICR review are identical to those of the audit\.

REVIEW

P075156

 ICRR 13433 Report Number : ICRR13433 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 08/11/2011 PROJ ID : P075156 Appraisal Actual Project Name : Integrated Water & US$M ): Project Costs (US$M): 20\.0 8\.00 Ecosystems Management Project Country : Albania Loan/ US$M): Loan /Credit (US$M): 4\.87 4\.00 Sector Board : ENV US$M): Cofinancing (US$M ): Sector (s): Sewerage (82%) Central government administration (10%) General water sanitation and flood protection sector (8%) Theme (s): Biodiversity (29% - P) Pollution management and environmental health (29% - P) Access to urban services and housing (28% - P) Environmental policies and institutions (14% - S) L/C Number : Board Approval Date : 03/25/2004 Partners involved : Closing Date : 12/31/2009 12/31/2009 Evaluator : Panel Reviewer : Group Manager : Group : George T\. K\. Pitman Ridley Nelson IEG ICR Review 1 IEGPS1 2\. Project Objectives and Components: a\. Objectives: The Global Environmental Objective (GEO) according to the Project Appraisal Document (PAD, page 2) was: "to improve the health and habitat conditions of globally significant marine and coastal ecosystems along the coastline of Albania in an integrated manner\. The objectives will be achieved through : (i) reduction of sewage pollution loads through the development and establishment of low cost water treatment technologies; Constructed Treatment Wetlands (CTWs) producing environmental incremental benefits; (ii) promoting the establishment and improve the management of the Kune Vain protected marshland; and (iii) improvement of the dialogue between public institutions and citizens through a public communication program as well as a program of dissemination and replication of project achievements \." The Project Development Objective (PDO, PAD page 2) was: "to improve the municipal wastewater services in the coastal cities of Dunes, Lezha and Saranda \." The PDO described in the GEF Trust Fund Grant Agreement (Schedule 2) is: "to improve municipal wastewater services in the Recipient's coastal areas \." This Review rates project achievements against the PAD's definition of the PDO as it is more specific, and subsequently assesses the extent to which the project contributed towards achievement of the GEOs \. 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): Sewage Pollution Reduction (planned total US$ 15\. 24 \.67 million; GEF 15 \.79 million, actual total estimated at US$ 24\. contributed US$ 3\.96 million as planned )\. The component consisted of two main parts : (i) the establishment of 92 ha of Constructed Treatment Wetlands (CTWs) and related facilities; and (ii) the construction of the sewage main collectors required to connect the current sewerage systems to the new treatment facilities \. The GEF Grant supported subcomponent (i)\. Environmental Management and Monitoring (planned total US$ 0\.70 million, actual total US$ 0\.70 million; GEF contributed US$ 0\.70 million as planned \.) The component was designed to assist the Ministry of Environment and the Ministry of Agriculture and Food in enhancing the management of Natural Reserves as well as to strengthen the protection of coastal areas \. Specifically the GEF Grant financed a program aimed to enforce an integrated and sustainable management of the Kune -Vain wetland and Kenalla lake Protected Areas \. Project activities aimed to integrate the conservation of the important tidal marshland with the sustainable management of regional tourism and area's natural resources, through an innovative management system \. This included (i) development of legislative framework for Kune-Vain Managed Area (KVMA) implementation; (ii) institutional strengthening for KVMA Management Board and Administration; (iii) development of the protected area Management Plan; (iv) implementation of the KVMA Management Plan starting with the identified priority measures; and (v) strengthening monitoring programs for water quality, biodiversity and socio -economic indicators within the protected areas and the coastal zones involved in the project \. Replication Promotion (planned total US$ 0\.20 million, actual US$ 0\.20 million; GEF contributed US$ 0\.20 million as planned )\. This component aimed to raise awareness in the three cities of Saranda, Durres, and Lezha, on the benefits of using Constructed Wetlands as biological wastewater treatments and promote its adoption in other areas of Albania or other countries of the Mediterranean region, where existing pollution loads are threatening coastal marine ecosystems and natural wetland systems critical for globally important biodiversity \. Specifically GEF financed a) environmental education activities for schools and local communities; b ) teacher’s training and programs in the fields of Ecology and Environmental Science; c ) a scheme for stakeholder participation in the management of the natural resources of Kune and Vaine; d ) coordination with the communication activities undertaken, within the framework of the Municipal Water Project, by the private operator and the municipalities, aimed at building consensus on the need to pay for water and sanitation services, and increase informed participation from consumers \. Project Management (planned US$ 0\.08 million, actual US$ 0\.08 million; GEF contributed US$ 0\.08 million as planned )\. This supported a Project Implementation Unit (PIU) within the Ministry of Territorial Adjustment and Tourism (MTAT) to coordinate, manage and monitor the activities under the project \. In addition the project used the World Bank Water PIU that was simultaneously implementing the Water Supply Urgent Rehabilitation Project and the Municipal Water and Wastewater Project \. The PIU had responsibility for: (i) procurement, financial management and disbursement related to the activities funded by the GEF grant; (ii) financial management reporting of overall project; (iii) monitoring-evaluation and reporting of overall project progress implementation; (iv) coordination with central ministries and their regional and local branches \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Costs : Appraised total cost was US$20\.00 million\. It was expected that investment in wastewater treatment plants (WWTPs) and rehabilitation of the sewerage collection network would cost US$ 15\.79 million, or 79% of total project costs\. However, delays caused by the need to redesign the WWTPs, allied with time need to secure additional financing in a time of significant US$ depreciation, increased the cost of civil works to an estimated US$27\.73 million (ICR page 29)\. As a result of cost increases of both the constructed treatment wetlands and of the conventional WWTPs, the planned CTWs were cancelled in Lezha and reduced by 56% in Durres and by 50% in Saranda\. At the time of the ICR the civil works component was not complete and total project costs are estimated to be US$28\.56 million - a 43% cost overrun\. Financing : The project leveraged financing from the European Investment Bank (EIB)\. Initially the EIB was to provide parallel finance with a Euro Loan worth US$ 5\.30 million equivalent\. However, by the time of Board approval the EIB increased its loan to US$11\.15 million equivalent\. The actual contribution from the EIB was US$ 17\.00 million equivalent primarily due to appreciation of the Euro against the US$ \.  The increased cost of the wastewater treatment plants fully utilized that part of the EIB financing allocated to rehabilitation of the sewerage system \. Following approval by the Albanian Ministry of Finance part of this shortfall in financing was covered by parallel financing from the European Union Instrument for Pre -Accession (EU IPA) funds in Durres and Lezhe\. Borrower Contribution : While the Borrower had planned to contribute US$ 3\.98 million, the actual contribution according to the ICR (page 19) was "indeterminate" at project closure\. However, the ICR states (page 29) that the Borrower will eventually contribute US$6\.19 million by completion of the civil works components expected in 2011-2012\. Dates: The project became effective in July 2004, three months after Board presentation \. In contrast, the subsequent detailed design and procurement of the main contract to build the three wastewater treatment plants proved time-consuming and construction did not start until April 2007\. Even then, WWTP design was found to be seriously deficient requiring some redesign and two addenda to the civil works contracts, the last of which was signed in February 2009 with an estimated completion date of September 29, 2010, almost one year beyond the planned closing date\. The estimate for the completion of the separate EU IPA -funded contracts works to upgrade and connect the sewerage system to the three WWTPs is sometime in 2012 (ICR page 14)\. Because the GEF Grant was fully disbursed by the planned date of project closing, and ongoing civil works will utilize independent cofinancing, the World Bank closed the project, as scheduled, at the end of December 2009\. 3\. Relevance of Objectives & Design: Objectives : Substantial \. Project objectives to improve municipal wastewater services were highly relevant at entry to the second pillar of the joint Bank-IFC CAS for Albania for FY06-09 which focused on improving public service delivery particularly in the social sectors, with outcomes including improved public infrastructure and access to safe water supply and sanitation\. The CAS Progress Report of 2008 reaffirmed their relevance\. The environmental objectives were highly relevant at appraisal \. The coastal marshlands of Albania constitute one of the more important ecosystems of the Region, as stated in GEF project “Conservation of Wetland and Coastal Ecosystems in the Mediterranean Region â€?\. The project is fully consistent with the Global Environment Facility (GEF) Operational Program No\.12 (Integrated Ecosystem Management ) with linkages to the Operational Programs No\.2 (Coastal, Marine, and Freshwater Ecosystems ); No\.9 (Integrated Land and Water Multiple Focal Area); and No\.10 (Contaminated-Based)\. After the collapse of the command economy in 1990 the area deteriorated rapidly\. Informal settlement and construction, uncontrolled hunting, logging, over -fishing, pollution, and beach tourism together with inappropriate management resulted in extensive destruction of habitats and withdrawal of wildlife \. In response, the Government adopted a Biodiversity Strategy and Action Plan in 2000 that included the Kune Vain marshland as one of the priority areas in the network of protected areas \. At the same time the Government approved a law on protected areas that supports a more advanced management concept based on long -term sustainability\. A signal of relevance was the upgrading of the National Environmental Agency in August 2002 to a Ministry of Environment, and an updated National Environmental Action Plan that was approved by the government in January 2002\. Even so, relevance of environmental objectives declined during implementation \. For example the Lezha Drainage and Irrigation Board (under the Ministry of Agriculture) utilized state funds to construct a breakwater that adversely affected the integrity of one of the wetlands being rehabilitated by the project \. In retrospect, it is concluded that the project was too ambitious in view of the scarce political support and environmental consciousness that prevails in Albania \. Thus relevance of environmental objectives was modest at project closure\. Design : Modest The IWEMP was originally to have been an integral part of the Municipal Water and Wastewater Project but the need to allow for slower-than-expected processing of the GEF Grant caused the World Bank to process the Municipal Water and Wastewater Project alone \. The construction of sewerage infrastructures to halt uncontrolled sewage discharge directly into the coastal lagoon systems was highly relevant to the removal of threats to the survival of globally important coastal marine ecosystem and tidal marshlands \. Augmenting wastewater treatment with the purifying capacity of artificial wetlands was a relevant concept that offered the opportunity to realize a low cost wastewater treatment systems that relied on natural processes and reduced the need for energy supply \. Mechanisms that occur in these ecosystems (sedimentation, adsorption, flocculation, precipitation and biological decomposition ) decrease the concentration of polluting substances flowing through the wetlands and reduce the impact of untreated wastewater of urban origin on the international waterways and coastal marshlands \. However, the combination of improved wastewater treatment and better managed coastal wetlands was too ambitious given the weakness of local institutions to address environmental issues in water sector reform \. In addition, the initial design of the wastewater treatment plants, done by a foreign consulting firm, proved to be deficient and suffered major revisions that lost time and required upward adjustments in the order of 40% for the  contract value of the main civil works contract \. This design fault caused a substantial reduction in the financing available for the CTWs\. Thus priority was given to direct and conventional treatment of municipal wastewater discharges\. 4\. Achievement of Objectives (Efficacy): Improve the municipal wastewater services in the coastal cities of Dunes, Lezha and Saranda \. Efficacy is rated Modest \. Physical works were not completed \. The WWTPs were not complete at project closure \. Construction did not start until April 2007, three years after Board presentation and was immediately slowed when the consequences of the seriously deficient design became apparent\. At the time of the ICR it was expected that "in the best of circumstances, the 3 WWTPs could be finished by March 2011" (ICR page 8)\. The Project Team confirmed in March 2011 that all WWTPs, including electromechanical equipment, were complete \. However, the Government is negotiating a 12 to 14 month postponement of their commissioning and start of the O&M period because the sewerage collection system is not yet connected to the plants \. Even then, the physical connection between the sewerage collection system and the WWTPs was not complete at the end of the project\. EIB financing, originally intended to finance these works, was instead used to pay for the additional costs of the wastewater treatment plants \. The Durres and Lezha investments have been tendered but no contract has been signed \. Consultants concluded that the designs of the respective investment packages needed to be modified to correct for deficiencies and it is not certain if this will lead to retendering \. As a result the ICR (page 8) notes: "the completion date for the investments could be the second half of 2011 in the case of Lezha, and late 2012 in the case of Durres\. The situation in Saranda is better since it is likely that KfW will finance the necessary works to intercept and bring the wastewater to the town wastewater treatment plant \." In March 2011, the Project Team updated these estimates : Durres WWTP interceptor in March 2012 (EU funded); Lezha WWTP interceptor in December 2011 (EU funded); and Saranda WWTP interceptor December 2011 (GoA funded)\. Paying for WWT is likely to be challenging \. Continued pollution prevention will depend on adequate funding of O&M costs \. The five-year management contract under the sister project for Durres, Lezha, and Saranda made only modest improvements to the operating performance of these utilities that manage both water supply and sanitation \. The financial working ratios (the ratio between cash operating costs without depreciation and cash operating revenue ) of the three utilities was 1\.33; 1\.34; and 0\.96, respectively in 2009\. The ICR concludes that, except for Saranda, the utilities lose operating cash and depend on operating subsidies from the central Government; given the difficult national budget situation these subsidies are hardly sustainable \. When the WWTPs become operational utility running costs will increase significantly and, unless more revenue is collected, then the financial situation of the utilities will deteriorate given current utility performance : The 2009 collection rates of billings for the three utilities were 0\.55; 0\.66; and 0\.76, respectively on water tariffs that do not cover utilities' costs \. The extraordinarily high non-revenue water levels for the three utilities are 71%, 54%, and 85% respectively and indicates that customers avoid paying for water supply \. To properly operate and maintain the new sewerage collection system and WWTPs will require a sewerage surcharge to existing tariffs and this is likely meet resistance from both consumers and municipalities as the increased combined water/sewerage tariff will be politically unpopular \. Continued and substantial subsidies from the central Government will be required to ensure that wastewater services meet required standards \. The Global Environmental Objective "to improve the health and habitat conditions of globally significant marine and coastal ecosystems along the coastline of Albania in an integrated manner " was partially achieved \. (i) Reduction of sewage pollution loads through the development and establishment of low cost Constructed CTWs ): Treatment Wetlands (CTWs): Because of project redesign during implementation, the planned CTW was cancelled in Lezha \. According to the Task Team, survey errors, adverse soil conditions and availability of clay necessitated costly changes in design that undermined the financial justification of the CTW \. In addition, the CTWs were reduced by 56% in Durres and by 50% in Saranda\. Consequently the residual CTWs will only pay a minor role in reducing sewage pollution loads to the marine environment because most of the reduction will be done through conventional sewage treatment\. The ICR is silent on the how much of the remaining CTWs were constructed and operational at the end of the project\. At Lezhe the outfall from the WWTP goes into a natural wetland and it is expected that the nutrient removal performance would be achieved in the natural wetlands \. Thus future function of two remaining CTWs will be to “polishâ€? the effluents that will be produced by the two conventional wastewater treatment plants in Durres and  Saranda\. It was agreed at the time of redesign that the GEF targets for the reduction of Biochemical Oxygen Demand (BOD), Nitrogen(N) and Potassium (K) would be retained\. While the the ICR provides no information on the status of these indicators, the Project Team state th at target reductions will be achieved in the treatment process that includes conventional biological treatment (CBT) followed by CTW\. The CBT for Durres includes an activated sludge plant while for Lezhe and Saranda aerated oxidation ponds have been selected \. It is expected that the reduction of BOD would be about 90% in the CBT with a further marginal reduction to take place in the CTW\. Thus, it should satisfy the requirements as specified by the performance indicator \. The reduction in N in the CBT will be limited to about 25% with a further reduction (although difficult to quantify) in the CTW\. Future monitoring and operational experience will be able to verify actual achievements \. ii) Promote the establishment and improve the management of the Kune Vain protected marshland (ii) \. The project aimed at supporting the recovery of the Kune Vain ecosystem by introducing integrated protected areas management\. A Management Plan for the Kune-Vain Managed Area according to international standards was finalized but has neither been approved nor implemented and awaits the decision of the Council of Ministers \. The Kune Vain Management Board was established and convened twice during the lifetime of the project \. The capacity to implement the plan is not fully in place \. According to the ICR (page 11) the Park Administration would have to be supplemented with at least one or two expert positions, and stronger political support would be needed from the line Ministries, as well as from local administrative bodies, to ensure its viability \. GEO biodiversity objectives for fauna and flora in Kune Vain Managed Area has been partly met : A basic monitoring system of the coastal areas and wetlands was partially established \. The project financed baseline inventories on mammals, birds, reptiles, amphibians, flora, phytoplankton of lagoon water bodies, mollusks, and seagrass \. Baseline conditions, as stipulated in the results framework, for birds, mammals, reptiles/amphibians, mollusks, flora, and phytoplankton have been established \. Additionally, a survey on sea turtles has been initiated along the beaches of Kune Vain and the Patoku -Lagoon\. It was intended to extract a small number of key parameters from each program to create a combined monitoring scheme for Kune Vain to be conducted by the Park Administration on a regular basis \. This has only been realized for a very few parameters, in particular the number of wintering /resting birds\. Baseline conditions of Posidonia seagrass meadows along the coast of Durres, Lezha, and Saranda - important and sensitive indicators of marine pollution - were established\. Since Posidonia is a long-term indicator with a very slow growth rate, it will be some years before the impact of the full operation of the WWTPs can be detected\. Only one end-of-project target was met: the natural but modest regeneration of estuarine forests \. Both in Kune forest and at some parts in Vain saplings of Mediterranean oak trees (Quercus robur ) were reported\. According to the ICR (page11) with good management these forests stand a chance of recovering \. However, the potential area of recovery is significantly reduced as a consequence of erosion and intrusion of sea water\. The aim to foster recovery of wintering and breeding bird populations was not achieved \. The number of wintering/resting water birds remained low around 1,500, and the number of typical wetland bird species breeding remained unchanged around 12\. While attempts to enforce regulations were made by the Park Administration, many stress factors prevail such as daily illegal hunting, ubiquity of fishing boats on all water bodies in combination with illegal hunting by fishermen, uncontrolled access for sports anglers, cars, beach tourists as well as the lack of strictly protected zones with zero access \. The poor quality of the habitats contributes to the lack of recovery : deforestation leaves almost no space for the re -establishment of breeding colonies for herons, and poor water quality may adversely affect the availability of food for birds \. Establishment of effective mechanisms to prevent illegal construction in the reserve area w as partly achieved: Throughout project implementation illegal construction remained a serious issue \. Repeated attempts to build inside of the reserve occurred \. The Park Administration succeeded in enforcing regulations and new illegal constructions were demolished by the construction police \. The ICR states that "mechanisms are mostly not effective enough to prevent the activities in a very early stage, or sufficient to enforce the rehabilitation of the occupied site \. So in every case the ruins, together with an area of filled up and destroyed wetland, remains\. It is expected that further attempts to construct in the area will be made, but it is uncertain to what extend the Park Administration is able to withstand the pressure from private investors \." The Project team confirmed as of March 2011 that "there is no information of any new construction activity \. However, it should be mentioned that the Kune -Vain Management Plan funded by the project is not yet adopted by the Council of Ministers - the plan was to be a specific decision of Council of Ministers by March 2010 - and there is anecdotical information of substantial pressure of different investors to develop tourism facilities within the area\." Construction adjacent to the reserve area also threatens its integrity \.  At the end of 2007 the Lezha Drainage and Irrigation Board (under the Ministry of Agriculture) utilized state funds to construct a breakwater in combination with dredging works at the river mouth \. The construction was unlicensed and neither the Park Administration nor the MEFWA were notified \. Parts of the marshlands were infilled with rocks and rubble to rehabilitate the access road for the construction and this interrupted an essential communication channel between Zaje Lagoon and Drini River \. Parts of the marshlands were filled with dredged material and a breakwater was built extending 200 m into the sea\.The MEFWA issued an environmental license after the completed construction and, following a protest from the World Bank team, the Ministry required an EIA\. However, mitigation measures as stipulated in the EIA and requested by the Bank have never been implemented \. The breakwater changed coastal flow patterns that speed up erosion \. The reported damage at the time of project completion was: removal of the littoral from Drini River mouth to Kune Island, exposing the Kune Lagoon to the sea with subsequent extensive ecological changes;erosion along the inner shoreline of Kune Lagoon; rapid withdrawal of the northern Drini River bank that separated the river from Kune Lagoon; erosion at the southwest corner of Kune Island; flooding of agricultural lands and settlements of Ishull Shengjin at high tide events (as documented in June 2009 and December 2009); and accelerated erosion along the beach area of Shengjin Bay that affected a a large area of tourism investment \. iii ) Improve the dialogue between public institutions and citizens through a public communication program as well (iii) as a program of dissemination and replication of project achievements \. The preparation of the Management Plan for the Kune -Vain Reserve was accompanied by extensive stakeholder consultations, workshops and information dissemination \. A documentary was produced and broadcast on Albanian TV, and special radio broadcasts were produced for children ’s education\. Students were brought to the reserve, and stakeholders participated in a study tour \. Education and outreach activities were not, however, established as part of the routine Park service \. There was no replication of (the few) project achievements\. 5\. Efficiency (not applicable to DPLs): The PAD conducted a standard incremental cost analysis following GEF guidelines to justify the project \. An economic assessment was not made \. Separately, as part of the sister project's PAD, it was estimated that the modernization and improvement of the management of water supply and wastewater treatment utilities and their facilities would produce a Net Present Value of US$ 5 million and a Financial Rate of Return of 15%\. At project closing the three utilities had improved their financial positions but did not hit the target of turning around to a self-financed operation, and to generate positive cash flow \. This outcome adversely affected the NPV which was negative\. The main component, supporting the reduction of sewage flows, was unfinished at the closing date because of design problems that significantly increased costs and caused significant reduction of the CTW component \. Consequently more than 95% of total project cost was directed at civil engineering and construction of the WWTPs \. To date these have involved only costs and has not yet produced benefits, and in the near future these costs are likely to increase significantly before the facilities can be fully commissioned \. Efficiency is rated negligible \. 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: Relevance of objectives was substantial \. Design was problematic and its relevance is rated modest \. While the project made modest progress towards the protection of coastal wetlands and GEF objectives, pollution continues because the wastewater treatment plants remain under construction \. Overall, efficacy is rated modest \. The final cost of the project is unknown but it will be significantly more than estimated at appraisal and, to date, there has been almost no return on the investment \. Efficiency is thus rated negligible \. a\. Outcome Rating : Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating: Further delays to completion are the most serious risk to the development outcome \. The three WWTPs will not be finished by the contractual completion date of September 29, 2010\. However, there is an additional risk they will not be finished, as now estimated, in early 2011\. There is uncertainty also about when the works to upgrade and connect the sewerage system to the three WWTP will be completed \. The present completion estimate for these important complementary works is some time in calendar year 2012\. The completion risk is compounded by the fact that there is at the present time no assured funding for Project Implementation Unit in the MPWTT since this component was previously financed by the GEF grant \. There is an effort underway to find alternative sources of financing of the PIU, but the outcome of this effort was uncertain at the time of the ICR \. The financial risks to ensuring sewage pollution reduction is high because there may not be sufficient funds to operate and maintain the sewerage infrastructure and the three WWTP \. The Management Plan for the Kune-Vain Managed Area has yet to be adopted and approved \. There are high risks to the sustainable management of the Kune Vain Protected reserve \. Infringements of the protected nature of the reserve continue\. There is erosion of the shoreline north of the breakwater on the edge of the reserve that threatens its integrity\. a\. Risk to Development Outcome Rating : High 8\. Assessment of Bank Performance: at -entry : Quality -at- While sufficient resources were devoted to preparing the project, design was overly ambitious particularly given the weak institutional capacity of the three participating utilities and of the Ministry of the Environment \. This led to subsequent significant redesign of the project as problems emerged \. This greatly increased costs and jeopardized achievement of environmental objectives in the short to medium -term\. Supervision : There were only two task team leaders \. There were at least two supervision missions annually and some components, such as the environmental component in Kune -Vain, were more frequently supervised during visits by highly specialized environmental consultants \. The Bank missions left a full record of their work in aide-memoires with early and clear warnings of the risks to orderly project implementation and to development outcome\. Given the problems design caused for the project and reduced borrower ownership, the Bank should have pursued restructuring \. Bank supervision missions strongly warned of the risk there would not be sufficient resources to connect the sewerage systems to the respective WWTP; and of the risk that the unauthorized construction of the breakwater at the mouth of the Drini river would have on the Kune Vain Managed reserve \. In the latter case the Bank threatened to suspend disbursements from the GEF grant if (i) an environmental impact assessment were not prepared, and (ii) further breakwater construction were carried out \. Both of these demands were honored, and the Bank did not have to pursue the option of suspending the GEF grant disbursements\. 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: Government : While initial ownership was high this dwindled as the project progressed and problems emerged \. The project suffered from lack of ownership from the Ministry of the Environment, Forestry and Water Administration (MEFWA) that was not helped by assigning responsibility for procurement of the environmental component 2 to the “Water PIUâ€? in the Ministry of Public Works, Transport and Telecommunications (MPWTT)\. The intention to have the environmental technical leadership exercised by the MEFWA never materialized\. Instead it fell on World Bank missions, with the Water PIU in the MPWTT, to supervise the implementation of the project that would have benefited from a strong involvement from the MEFWA \. MEFWA's low ownership was further demonstrated by its initial approval for construction of the Drini river breakwater without an EIA, and its subsequent lack of mitigating action to protect the Kune -Vain Managed Reserve when problems were known\. Implementing Agency : The PIU was effective at coordination and facilitating the formation of the Kune -Vain reserve area\. The MPWTT, responsible for the WWTPs, was not very effective in ensuring timely and adequate disbursement  to finance civil works construction and implementation was inefficient \. a\. Government Performance :Unsatisfactory b\. Implementing Agency Performance :Moderately Unsatisfactory c\. Overall Borrower Performance :Unsatisfactory 10\. M&E Design, Implementation, & Utilization: Design : The project design summary (Annex 1) presented a results framework that linked project objectives to key indicators\. Targets were also specified for the expected pollution reduction impact of the CTWs \. Many of the performance indicators for the sewage pollution reduction components lacked a baseline at Board presentation and the expectation was to create the baseline during implementation \. While the PAD presented a detailed description of the environmental and ecological issues and identified key flora and fauna, no specific monitorable indicators, except the Posidonia oceanica seagrass meadows, were described \. Implementation : It was not until the mid-term review in early 2008, four years after Board presentation, that baseline values for the performance indicators for wastewater treatment were established \. As the civil works were not complete there was no monitoring of effluent water quality \. The ICR is silent on routine measurements of inshore marine water quality\. Baseline conditions of Posidonia meadows were investigated, markers for future monitoring were placed on the seafloor, and biometric parameters were identified \. For the first time in Albania a method of quantifying epiphyte growth on Posidonia samples was applied and this will allow monitoring of the seagrass meadows response to the project's impact \. Monitoring and recording of the flora and fauna of the reserve areas was initiated but few results are presented in the ICR \. Overall, the main focus of attention during the project was monitoring of inputs and outputs \. Utilization : There was intense attention to monitoring of the indicators of civil works as this was used to revise the design and contacts\. There is negligible information presented in the ICR on the monitoring of the CTWs, their construction or impact\. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): Safeguards : Under OP 4\.01 Environmental Assessment the project was classified as Environmental Category “Bâ€?\. OP11\.3 Cultural Property was also invoked at appraisal \. In accordance with the Bank policy the Ministry of Territorial Adjustment and Tourism in collaboration with the Ministry of Environment carried out the Environmental Impact Assessment (EIA) of the project and this was finalized prior to appraisal \. It was reviewed and commented on by the ECA Safeguard Compliance Unit and changes this Unit requested were included \. It was expected that no new physical structures of significant size would be built and no major adverse environmental impacts would be present\. Any potential negative environmental impacts that might emerge were expected to be localized and be able to be mitigated\. Given the nature and location of the areas selected for the establishment of the CTWs no impact on cultural properties was expected and also the possibility of chance archeological finds during construction activities was assessed as unlikely \. Nevertheless, the Environmental Management Plan (EMP) and the construction contract (s) provided appropriate instructions for dealing with the above mentioned events \. The preparation of this project built first on the social assessment that was carried out for the Municipal Water and Wastewater Project and included focus group meetings and a stakeholders workshops \. The ICR reports no adverse environmental or cultural /archeological impacts as a result of the project \. Protection of the coastline adjacent to the project works was not part of the EMP even through civil works there adversely affected project wetlands \. The Lezha Drainage and Irrigation Board (under the Ministry of Agriculture) utilized state funds to construct a breakwater that adversely affected the integrity of one of the wetlands being rehabilitated by the project\. The construction was unlicensed and neither the Park Administration nor the MEFWA were notified\. Subsequently the MEFWA retroactively issued an environmental license following completion without an EIA being prepared \. Only after a protest from the World Bank was an EIA undertaken \. Even then mitigation measures stipulated in the EIA and requested by the Bank have never been implemented \. Throughout project implementation illegal construction remained a serious issue \. Repeated attempts to build inside of the reserve were discovered \. The Bank team was continuously in dialogue with the key stakeholders in the MEFWA and the Park Administration\. Subsequently, the Park Administration succeeded in enforcing regulations and new illegal constructions were demolished by the construction police \. Mechanisms are mostly  not effective enough to prevent the activities in a very early stage, or sufficient to enforce the rehabilitation of the occupied site\. So in every case the ruins, together with an area of filled up and destroyed wetland, remains \. It is expected that further attempts to construct in the area will be made, but it is uncertain to what extend the Park Administration is able to withstand the pressure from private investors \. There are unresolved inheritance issues related to illegal building prior to the project \. Around 42 illegal buildings of different size existed in Kune Vain prior to project entry \. The presence of these buildings has been a constant source of disturbance, pollution, illegal hunting and other unauthorized activities and they pose a significant challenge for future management of the reserve \. From the conservation point of view the project wanted to remove the illegal buildings and unauthorized human activity \. Eviction of temporary residents, however, requires a resettlement plan under the Bank's Involuntary Resettlement Policy, consideration of compensation and legal acknowledgement of the existence of the illegal buildings \. However, Albanian law does not allow legalization of buildings inside protected areas, nor does it foresee compensation for them in case of resettlement\. Consequently the project financed a due diligence social survey among all affected and presented solutions meeting bank safeguard requirements to the government as part of the management plan \. The Government and the Bank signed an amendment to the GEF Grant Agreement that, in the absence of the planned but delayed Kune-Vain Management Plan, no structure built prior to the Grant effectiveness date of July 27, 2004 would be demolished; that the Management Plan be subject to the Bank ’s no-objection to ensure that any adverse impact be mitigated; and that due process be followed if any resettlement did take place \. This amendment brought the project into compliance with the Bank ’s social safeguards\. Fiduciary : Procurement was subject to significant attention at appraisal and, according to the ICR, no problems arose except delays as a result of project modifications to civil works design \. While several audits were delayed, according to the Bank's Operations Portal all were approved without special opinions or issues\. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Risk to Development High High Outcome : Bank Performance : Moderately Moderately Design problems plagued the project Satisfactory Unsatisfactory but restructuring was not pursued \. Borrower Performance : 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: The following lessons are drawn from the ICR : Parallel financing arrangement carry risks for the Bank \. The role of the World Bank as a convener of financing from several sources (GEF, EIB, and the EU/IPA) is risky since, without its own sizable financing, it is more difficult for the Bank to adjust the financing to changed needs \. The decision of the World Bank not to extend the project closing date might have been prompted by the fact the GEF grant was fully committed by the closing date\. Extending the project closing date would have been hard to justify since the Bank would have used its own scarce operating budget to supervise investments financed by other financiers \. On the other hand, because the Bank is no longer involved in the project it cannot ensure that essential actions are taken to maximize the impact of its sunk financing \. Project objectives must be set realistically with due regard to the time needed to change behavior and culture \. It is unrealistic to expect that a country like Albania, with weak environmental support and understanding of the general population and many within the administration, will, within the limited period of a five-year project implementation period, accept and implement best practice of managed and protected nature reserves\.  There are high technical risks in designing infrastructure with insufficient data \. In countries where data and skills required to identify appropriate engineering solutions are missing or weak, significant contingencies should be set aside to allow for the uncertainty \. In this GEF operation the lending instrument and financing package were not well matched to the risks \. 14\. Assessment Recommended? Yes No Why? To check to completion of the WWTPs and the status of the remaining CTWs, the Kune Vain Reserve and the status of pollution reduction efforts \. 15\. Comments on Quality of ICR: Very through coverage of the implementation problems and achievement of the GEO indicators \. Very candid ratings\. Most attention is given to the design and procurement issues related to the WWTPs that account for 95% of project cost\. Even so, the physical progress towards CTWs is not discussed \. While there is an excellent discussion of the commercial viability of the Water and Wastewater Utilities in Annex 3 (and this is related to the GEO incremental cost analysis), almost none of this information is used in the main text to support assessment of progress towards objective 1\. There are no systematic reports of M&E related to biodiversity and ecological improvements brought about by the project\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P003947

 Small and medium industrial enterprise project Report No: ; Type: Report/Evaluation Memorandum ; Country: Indonesia; Region: East Asia And Pacific; Sector: Small Scale Enterprise; Major Sector: Industry; ProjectID: P003947 Indonesia: Small and Medium Industrial Enterprise Project (Loan 3041-IND) The Implementation Completion Report (ICR) for the Indonesia Small and Medium Industrial Enterprise Project (Loan 3041-IND, approved in FY89) was prepared by the East Asia Regional Office\. The loan was closed as planned on June 30, 1995\. Six million dollars was canceled\. The Borrower's comments are not included; nor are the comments of the cofinanciers, the Governments of Japan and Holland\. The Small and Medium Industrial Enterprise Project was a US$100 million loan implemented as the Government deregulated the banking sector and phased out of the more than 50 credit lines that supported various sectors\. The project was part of the Bank's strategy to foster a less fragmented, and unsubsidized supply of credit\. It also sought to contribute to a more conducive policy environment for entrepreneurs who would be supported with technical assistance by local consultants\. Consistent with the simultaneous enactment of the Government's financial liberalization program, the project sought to assure that small and medium industrial enterprises (SMEs) had access to market rate term finance rather than subsidized credit\. It also sought to engage private sector lenders in SME lending, while limiting public sector intermediary participation\. Finally, it sought to develop the domestic consulting industry to provide technical assistance to these smaller firms\. Shortly after implementation a rise in interest rates made the Bank funds available under the project attractive\. The attractiveness was caused by: (i) the sluggishness of the increases in interest rates dictated by a project- specific index used to adjust the cost of funds and (ii) the pressures of the general interest rate increases in a reforming financial system\. Participating banks used the funds essentially to refinance the borrowings of existing firms, rather than to assist new SME lending\. Lending rates were positive, but lower than market rates\. The firms assisted were significantly larger than most SMEs supported elsewhere by World Bank loans\. In addition, a significant portion of the loan was disbursed by public intermediaries that did not satisfy the loan's prudential covenants, nor did they recover repayments effectively\. In effect, the loan was allowed to disburse before the interest rate index could be fully adjusted or the covenants enforced\. The result was little incremental assistance to SMEs; little development of privately underwritten commercial lending for SMEs; and very limited development of the domestic consulting industry assistance to SMEs\. The ICR is of good quality\. It rates the project outcome as unsatisfactory, its sustainability as unlikely, and its institutional development as modest\. It rates Bank performance as unsatisfactory\. OED concurs with these ratings\. The main lesson learned is the need for much greater focusing and simplicity in project design\. Attempting to onlend through 13 participating intermediaries, use a new interest rate adjustment index, and help to develop both the local consulting industry and small firms, made for too much complexity\. No audit is planned\.

REVIEW

P110849

 ICRR 13800 Report Number : ICRR13800 IEG ICR Review Independent Evaluation Group 1\. Project Data : Date Posted : 10/11/2013 Country : Mexico Is this Review for a Programmatic Series? Yes No Series ID : First Project ID : P110849 Appraisal Actual Project Name : Mexico - Climate US$M ): Project Costs (US$M): US$M501,25 US$M501\.25 Change Development Policy Loan L/C Number : L7535 Loan /Credit (US$M): Loan/ US$M ): US$M501\.25 US$M501\.25 Sector Board : Environment US$M ): Cofinancing (US$M): Cofinanciers : Board Approval Date : 04/08/2008 Closing Date : 05/30/2011 05/30/2011 Sector (s): General water sanitation and flood protection sector (50%); Forestry (25%); General energy sector (25%) Theme (s): Environmental policies and institutions (50% - P); Climate change (50% - P) Evaluator : Panel Reviewer : ICR Review Group : Coordinator : John R\. Eriksson Robert Mark Lacey Soniya Carvalho IEGPS1 2\. Project Objectives and Components: a\. Objectives: The Program Development Objective as stated in the “Operation Descriptionâ€? (Section V) of the Program Document (PD) is "to recognize and support the government's efforts under its National Climate Change Strategy to mainstream climate change considerations in public policy " (p\.23)\. The objective stated in the PD Policy Matrix (Annex 3) is to "mainstream climate considerations in public policy " (p\.66)\. This is shorter than the formulation in Section V, but the substance is virtually identical \. A third definition at the beginning of the the main text of the PD states that the objective is to "to assist the GoM in integrating climate change considerations in public policy \." (p\.1) The Policy Matrix definition of the objective will be used for evaluation purposes since it is more succinct \. 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: At the time of loan approval, Mexico met the policy requirement of OP 8\.60 for a sound macroeconomic framework that had succeeded in moderating output volatility and creating economic growth \. As described in the table below, the Program Document (p\.28) stipulates five policy areas (called “Policy Action Areasâ€? in the PD and ICR) and “Expected Outcomesâ€? within 24 Months\. Monitoring indicators and achievements corresponding to these “outcomesâ€? are reported in section 4 below (most of the so-called “outcomesâ€? are more properly designated as outputs in section 4)\. Policy Areas Expected Outcomes within 24 months (“Policy Action Areasâ€? in the PD and ICR) Mexico defines its voluntary emission reduction commitments in the  (1) Mitigation context of its 2007-2012 National Development Plan and its 2030 planning framework, with major sectors contributing to the national emission reduction targets (2) Domestic Carbon Mexico acquires information about policy options to internalize the effect of Pricing GHG emissions (“internalizeâ€? through a market mechanism) (3) Adaptation A number of state governments prepared to confront climate change impacts A number of city governments prepared to confront climate change Impacts (4) Knowledge Base Improved information basis for assessing progress towards reducing climate vulnerabilities and contributions to GHG emissions\. Costs of specific mitigation measures available in priority sectors Mexico’s authorities able to make informed choices about policy measures (5) Institutional Improved coordination and accountability in climate change policy Strengthening implementation\. Climate change policy is further mainstreamed in sectoral policy and Investments d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The Loan was disbursed in one tranche on 12/09/2008, two weeks after effectiveness \. There was no Borrower contribution\. The operation closed on May 30, 2011 as scheduled\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: Modest \. The overall objective of the operation of ‘mainstreaming’ is not defined in the document, and describes a process rather than an outcome \. All operations are to be assessed against their outcomes \. Moreover, the overall DPL objective of 'mainstreaming' is not given an operational meaning that would provide monitoring of its achievement by objective, measurable criteria\. Consequently, the relevance of the overall objective is rated modest\. b\. Relevance of Design: Substantial Given the lack of a monitorable definition of 'mainstreaming' and the consequent lack of explicit linkages between this overall objective and the project's specific objectives and targets, we looked at key design features (the policy action areas) and their linkages with key associated outcome targets to figure out what to assess \. The two anticipated outcomes of the strategy are climate change mitigation (reduction in Greenhouse Gasses ) and adaptation (managing risks)\. The Operation Policy Matrix (ICR, pp\.4-5) seeks to align the Loan’s three prior actions and corresponding “outcome indicatorsâ€? with the program objective to “mainstream climate considerations in public policy \.â€? The targets set were however mainly at the level of outputs (in terms of actions) rather than intermediate outcomes – that the policies are actually being implemented and behavior has changed \. • The first prior action was the Mexican submission in 2007 of the Third National Communication to the UN Framework Convention on Climate Change \. This updated the 2002 inventory of Greenhouse Gas (GHG) emissions and submitted a number of climate change mitigation and adaptation studies \. The target was to provide a basis for designing national public policies on climate change in all sectors, and for formulating the National Climate Change Strategy and the Special Climate Change Program \. • The second prior action was the approval in 2007 of the National Climate Change Strategy by the Intersecretarial Commission on Climate Change \. The target was to incorporate in the National Development Plan Mexico’s voluntary commitment to reduce GHG emissions associated with economic growth \. The Strategy identified four “Policy Action Areasâ€? (i\.e\., Policy Areas) that were addressed by the Loan – Mitigation, Domestic Carbon Pricing, Adaptation, and Knowledge Base, as well as a fifth area added by the Loan, Institutional Strengthening \. Given the state of knowledge about climate change, knowledge building and institutional strengthening were seen as important in developing and refining policy, and carbon pricing was seen as the instrument of choice through the Clean Development Mechanism under the international Kyoto Protocol for reducing carbon emissions \. • The third prior action was initiation of sector programs for energy, environment and natural resources, including policy incentives to reduce the carbon -intensity of the Mexican economy \. The target was to initiate a process to reduce GHG emissions in the economic growth of key sectors and adopt measures to increase resilience to reduced emissions\. No date is provided for this prior action \. While the operation could have been strengthened by setting a clear and outcome-oriented objective, the actions supported by the DPL are highly relevant for taking climate considerations into account in public policy and are likely to contribute to climate change mitigation (reduction in Greenhouse Gasses) and adaptation (managing risks) in the longer run\. 4\. Achievement of Objectives (Efficacy): Since the objective of mainstreaming has not been defined in the documentation, IEG will base the efficacy discussion upon an interpretation of the overall objective being that to which output and outcome targets were achieved and in turn linked to policy action areas \. The Results Framework Matrix at the beginning of the ICR identifies eleven “Program Development Objective Indicatorsâ€? grouped under the five Policy Action Areas \. Most of these achievements were at the output level \. Baselines, targets and achievements were reported in the ICR for each Indicator \. As shown below, targets were for the most part attained and in some cases exceeded \. In each case, the baseline is 04/08/2008 and targets refer to achievement as of 05/30/2011\. However, baselines, targets, and /or achievements are vague or not defined for 4 of 11 indicators, which makes assessment of achievement problematic \. Climate change mitigation : Substantial Outputs Support implementation of critical steps required for the Government to collect, process, analyze and build consensus on the voluntary emission reduction targets it was committed to announce to the Parties to the UN Framework Convention on Climate Change \. • Mexico adopted the Special Climate Change Program (Target: to adopt the Program against baseline of "Program being defined") • Several studies were completed that defined sectoral contributions to climate change \. (Target: to define sectoral contributions to climate change against baseline of no studies )\. (Note: The extent to which “several studiesâ€? constitute “define sectoral contributions to climate change â€? is not explained\. “Severalâ€? is not a satisfactory definition of an achievement\.) • A quantitative study on the physical and economic impacts of climate change plus four complementary studies were completed (Target: "Quantitative Characterization of Physical and Economic Impacts of Climate Change" against baseline "no precise data available")\. • National emissions targets were defined through 2012 and longer term goals were set (Target: emissions to be set against baseline of no emissions set \. Longer term goals were not defined )\. • The Fourth National Communication was delivered to the Framework on December 14, 2009, and updated on April 20, 2010\. (Target: Fourth Communication to be submitted 05/30/2011 against baseline of Third Communication submitted as prior action ) Support carbon trading system development \. • A national carbon trading system was developed and a trading fund was established \. Outcomes • National carbon trading system functioning (Note: Twelve projects were registered with the Clean Development Mechanism between September 2008 and August 2009, resulting in Mexico ranking fifth among countries in terms of Certified Emission Reductions obtained (ICR, p\.14)\. • The Inter-secretarial Commission on Climate Change delivered its first progress report on August 28, 2009\. (Target: first report to be delivered on May 5, 2011 against baseline of the Special Climate Change Program not having been adopted as of April 28, 2008 ) • There was no baseline for, or measurement of the longer term outcome indicator of GHG reductions \. Adaptation : modest Ouputs Completed "multiple" studies describing the feasibility of priority mitigation actions \. (Target: mitigation activities defined for priority sectors against baseline of some studies to be carried out, but further definition is required since the baseline, target and degree of achievement are vague \.) Support creation of conditions for sub -national agents to prepare themselves to confront climate change impacts \. • Climate change action plans were completed or under preparation in 26 states (of a national total of 32 states, including the Federal District )\. Five states have completed and adopted their action plans (Federal District, Veracruz, Puebla, Nuevo León and Guanajuato) (Target: at least five states to commit to an action plan against a baseline of two states in the process of defining plans \.) • Ten cities completed action plans that were incorporated in their respective state action plans (Target: at least 10 cities among the most vulnerable were to be committed to a climate change plan against a baseline of only Mexico City having a climate change action plan )\. Outcomes There were no intermediate or longer term outcome indicators reported on for adaptation actions \. 5\. Efficiency (not applicable to DPLs): 6\. Outcome: The relevance of the overall objective is rated modest in view of its lack of monitorability\. Relevance of design is rated substantial, as the DPL supported actions are highly relevant to improve the country ’s performance in climate change mitigation and adaptation \. The efficacy of achieving targets contributing to GHG emission reduction is rated substantial, while for adaptation it is rated modest due to the lack of evidence of implementation of action plans or of changed behavior\. Outcome is rated Moderately Satisfactory \. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: Mexico is expected to be disproportionately affected by the impacts of climate change as a result of such phenomena as intensifying hurricanes, rising temperatures, and more variable precipitation \. The Government recognized the need for action and took steps that were intended to take fuller account of climate change considerations in public policy, including the National Climate Change Strategy, the Special Climate Change Program, and related institutional coordination mechanisms \. The global economic crisis affected Mexico most severely in 2009, several months after the Loan became effective, but this did not hinder the Government in pursuing policy actions under the Loan \. One factor that could impact sustainability is the change in administration that took place at the end of 2012, since both the National Development Plan and the Special Climate Change Program are for the 2009-2012 period\. But the magnitude of programs and projects that embrace climate change that are under way or designed and the institutionalization of the climate change adaptation and mitigation agenda at the Federal and State levels make it unlikely that a future administration would backtrack on what the Development Policy Loan supported \. Thus, from technical, political, economic, financial, government, and institutional perspectives it would appear that the risk to the actions that have been taken so far is negligible to low \. a\. Risk to Development Outcome Rating : Negligible to Low 8\. Assessment of Bank Performance: a\. Quality at entry: An analysis of the macroeconomic situation was undertaken prior to approval of the Loan \. The Loan was prepared in tandem with the program of knowledge provision and advisory services under the Memorandum of Understanding (MoU)\. The Loan and activities under the MoU played complementary roles in supporting the Government's climate change program\. However, the analytical activities supported by the MoU served to leverage a wider engagement across states and sectors \. At entry the DPL lacked a monitorable definition for its stated overall objective, to mainstream climate change considerations in public policy, which precluded an explicit linkage between the overall objective and the project's specific objectives and targets \. The Loan is part of a series of environment and climate change -related assistance the Bank provided Mexico over the eight-year period from 2004-2011, including 11 analytical and technical assistance activities, 10 investment project loans and 7 Development Policy Loans, including the Climate Change Loan \. The timing of preparation and approval of the latter Loan in 2008 permitted the Bank to engage with an incoming Mexican administration that had put climate change high on its agenda \. The Loan was designed, according to the Program Team, by a large team in 4 weeks\. The Team also indicated that the Loan attracted the attention of sectors that had not been focusing on environmental issues but became a catalyzing vehicle for garnering support for the Government ’s climate change agenda\. During preparation of this operation, the Bank team held several meetings with the Inter American Development Bank (IADB) to discuss cooperation on the costs of the planned climate change study \. The PD states that “collaboration with IADB and other donors will continue through the implementation of this DPL and continued policy dialogue with the Government of Mexico â€? (p\.19)\. Neither the PD nor ICR contain any other reference to other donors (except for a PD reference to the IMF )\. More information about other donor support for climate change in Mexico might have helped assess attribution of climate change policies and programs to this DPL \. at -Entry Rating : Quality -at- Moderately Satisfactory b\. Quality of supervision: The Bank conducted periodic missions throughout a two -year period, focused on progress towards results in accordance with the eleven monitoring indicators \. Bank implementation support was focused on working with the Government, in particular with and through the Ministry of Environment and Natural Resources in the delivery of knowledge services as inputs to expected results, e \.g\., the Mexico Low-Carbon Study, and preparation of plans for climate change at state level in Michoacan and Campeche that subsequently fed into the design of policies in programs at the national sectoral level \. Quality of Supervision Rating : Satisfactory Overall Bank Performance Rating : Moderately Satisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: The Government's commitment to climate change generally and to the DPL, was strong and consistent, according to the ICR (p\.18 - "unwavering")\. Despite constraints brought about by the economic crisis, budgetary allocations to the program were unaffected, and the Government, from the highest level provided strong support to the program\. The hosting of the 16th Committee of the Parties under the Kyoto Protocol (COP16), in end-2010, reinforced Mexico’s position and visibility as a leader in the field of climate change \. Government Performance Rating : Satisfactory b\. Implementing Agency Performance: The Environment and Natural Resources Ministry played a key role in the formulation of climate change policies and in implementing the Special Climate Change Program \. The Ministry was closely engaged in monitoring progress and providing assistance, with periodic corrections throughout the operation \. Implementing Agency Performance Rating : Satisfactory Overall Borrower Performance Rating : Satisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: The “Monitoring Indicatorsâ€? to be achieved in 24 months, as set out in a table in the Program Document (p\.28, Table 3), roughly parallel those in the ICR Results Framework as discussed in Section 4 above\. Some of the indicators have the same limitations as in the ICR; namely, lack of quantification or clear definition \. The same table shows “Expected Outcomes within 24 months\.â€? These are quite vague\. For example:, • “a number of state governments â€? • “a number of city governmentsâ€? • “authorities able to make informed choices â€? • “improved information basis for assessing progress â€? • “improved coordination and accountability â€? • “climate change policy is further mainstreamed \.â€? These “outcomesâ€? are all pertinent in varying degree to the program objective but it is impossible to assess their degree of achievement without greater clarity and precision \. Their usefulness as indicators is therefore limited \. b\. M&E Implementation: The Government and the Bank reviewed progress and the Ministry of Environment and Natural Resources collected data and provided updates to the monitoring indicators, as agreed at appraisal \. c\. M&E Utilization: No utilization of the M&E system is reported \. M&E Quality Rating : Negligible 11\. Other Issues a\. Safeguards: No safeguard policies were triggered \. b\. Fiduciary Compliance: No fiduciary issues were identified \. c\. Unintended Impacts (positive or negative): d\. Other: 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Relevance of the Program Objective is Satisfactory rated modest, and that of Design is substantial\. With regard to efficacy, no definition of “mainstreamingâ€? is provided and no evidence presented on which to base a judgment of the extent to which it has been achieved \. While Efficacy of the mitigation objective is substantial, Efficacy of the adaptation objective is rated modest\. Risk to Development Negligible to Low Negligible to Low Outcome : Bank Performance : Satisfactory Moderately A moderate shortcoming in preparation  Satisfactory was the lack of precision and measurability for the operation's development objective and the lack of any related indicators\. 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 first two lessons have been adapted from the ICR with some modification \. The third is from IEG\. 1\. A Memorandum of Understanding can provide an integrated and flexible approach for the provision of analytical support, technical assistance and training to complement climate change Development Policy Loans \. 2\. Recognizing that many actions, especially with respect to adaptation to climate change in a large and diverse country, are best addressed at the sub -national level, a national government can establish a broad framework and incentives to engage sub -national governments as well as mechanisms to strengthen the capacity of weaker ones \. 3\. A Development Policy Loan requires clearly defined objectives and a logical results framework \. In particular the main intended outcome – in this case “mainstreamingâ€? -- should be clearly defined and measurable \. All outcomes and outputs should be relevant to the Program Objective and have operational definitions with stated baselines and targets, so that achievement can be objectively assessed \. Any indicator that can be stated in quantitative terms should have its baseline, target and achievement expressed in those terms \. 14\. Assessment Recommended? Yes No Why? There have been several environment -related DPLs for Mexico\. Their total magnitude and relatively unique character would make them a strong candidate for a cluster PPAR \. 15\. Comments on Quality of ICR: The ICR is strongest in its presentation of evidence of achievements at the output level (including one at an intermediate outcome level), based on the 11 monitoring indicators, although there is insufficient information to assess fully the outputs of four of the indicators \. But more concrete evidence could have marshaled and been more systematically organized\. While the definition of the overall objective, “mainstreaming climate considerations in public policyâ€? can be inferred, the PD and ICR lack an operational definition and corresponding indicators of the operation ’s intended overall outcome\. There is also a lack of explicit linkage between the overall development objective and its specific objectives and targets There are four different places in the ICR where results information is found, spanning the Results Framework Analysis at the beginning to Annex 9 at the end\. These sections often contain different information \. Assertions tend to be stated with superlative adjectives, with little or no evidence to back them up \. Some assessments are quite sparse and would have benefitted from specific evidence and concrete examples (e\.g\. sections on Relevance of Design, Bank Performance, Borrower Performance, M&E )\. \. The terms used to describe results are inconsistent and confusing: the 11 performance indicators are variously called “Project Development Objective Indicators, â€? “Monitoring Indicatorsâ€? and “Expected Outcome Indicators\.â€? Moreover, the three performance measures for the three Prior Actions are also called “Outcome Indicators,â€? but after being presented in Table 1 (pp\.4-5), they do not subsequently reappear\. All further references to results are in terms of the 5 “Policy Action Areasâ€? and the 11 “PDO Objective Indicatorsâ€? (or “Monitoringâ€? or “Expected Outcomeâ€?)\. Section 5 of the ICR implies that “Policy Areasâ€? and “prior actionsâ€? are the same\. Other than this, the consistency of the ICR with guidelines is generally adequate \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P089326

 ICRR 13880 Report Number : ICRR13880 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 12/31/2013 Country : Kiribati Project ID : P089326 Appraisal Actual Project Name : Adaptation Program US$M ): Project Costs (US$M): 6\.58 7\.70 Phase II - Pilot Implementation Phase (KAP-II) L/C Number : Loan/ US$M ): Loan /Credit (US$M): 0\.00 0\.00 Sector Board : Agriculture and Rural US$M): Cofinancing (US$M ): 2\.46 4\.48 Development Cofinanciers : AusAID and NZAID Board Approval Date : 11/11/2008 (now called NZMFAT) Closing Date : 06/30/2009 06/30/2011 Sector (s): General public administration sector (45%); General agriculture fishing and forestry sector (26%); Central government administration (24%); Sub-national government administration (5%) Theme (s): Climate change (25% - P); Vulnerability assessment and monitoring (25% - P); Natural disaster management (24% - P); Other environment and natural resources management (13% - S); Participation and civic engagement (13% - S) Prepared by : Reviewed by : ICR Review Group : Coordinator : Richard C\. Worden Ridley Nelson Soniya Carvalho IEGPS1 2\. Project Objectives and Components: a\. Objectives: This was a stand-alone program supported by Global Environment Facility (GEF) trust funds\. There was no World Bank Group financing involved \. As stated in the Project Appraisal Document (p\. 5) and the GEF Trust Fund Grant Agreement (p\. 17), the project objectives were : “to develop and demonstrate the systematic diagnosis of climate-related problems and the design of cost-effective adaptation measures, while continuing the integration of climate risk awareness and responsiveness into economic and operational planning\.â€? The Global Environment Objective of the project, as stated in the PAD (p\. 5), was: “to assist the Government of Kiribati in enhancing its capacity to plan and implement adaptation measures to the climate-related issues facing the country, which will also reduce the detrimental impacts of climate change on the fragile atoll ecosystems of Kiribati\.â€? Project objectives remained unchanged although expected project outcomes were modified at restructuring in 2009\. 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: 08/27/2009 c\. Components: The Project had five components and expected outcomes associated with them : 1: Policy, planning and information (appraisal estimate: US$1\.17 million; actual cost: US$1\.28 million): This was to provide improved consultation, planning and coordination mechanisms to support climate change adaptation \. It supported three core elements of adaptation efforts in Kiribati : (a) awareness raising and consultation; (b) policy coordination and planning including technical assistance for mainstreaming and climate risk management, and; (c) generating scientific climate risk information \. 2: Land use, physical structures and ecosystems (appraisal estimate: US$2\.17 million; actual cost: US$1\.79 million): This was to support improved management of climate related hazards to coasts, public assets and ecosystems, contributing to reducing the vulnerability of the coastline, including key public assets and ecosystems, and shifting management practice to a more preventative, technically varied and sustainable approach \. 3: Freshwater resources (appraisal estimate: US$2\.16 million; actual cost: US$2\.95 million): This was aimed at improving sustainability of freshwater resources, and supporting the development and management of freshwater resources to reduce their vulnerability to climate variability and climate change \. 4: Capacity at island and community level (appraisal estimate: US$ 0\.55 million; actual cost: US$0\.10million): This aimed to improve capacity for climate change adaptation at the island, government and community level by providing technical assistance to the Ministry of Internal and Social Affairs(MISA) to include adaptation in the Outer Island socioeconomic development profiles and climate risk management training for local governments, and by financing a pilot program of small scale adaptation investments in select Outer Islands \. 5: Project Management (appraisal estimate: US$0\.39 million; actual cost: US$1\.58 million): This was to provide support to the Project Management Unit (PMU) to implement project activities, and manage the accounting, procurement, and other fiduciary responsibilities for the project \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost : Total project cost was US$7\.70 million, US$ 1\.12 million, or 17% more than estimated at appraisal (US$6\.58 million)\. This additional amount of financing was provided almost entirely by AusAID (US$ 1\.94 million) to increase support for the Freshwater Resources (US$ 0\.79 million) and Project Management (US$ 1\.19 million) as well as to make up for the shortfall of US$ 0\.90 million in the Borrower’s contribution\. The project was a stand-alone Global Environment Facility program supported by GEF trust funds \. There was no World Bank Group financing involved\. Financing : There were three sources of co -financing support for the project : (i) a GEF Trust Fund grant of US$1\.80 million, (ii) a US$ 3\.43 million grant from the Australian Agency for International Development (AusAID), far more than the estimated US$ 1\.49 million; and (iii) a US$ 1\.05 million grant from New Zealand Agency for International Development, which was US $70,000 more than estimated\. At project closing US$ 24,776 was cancelled\. Borrower Contribution : The Borrower contributed US$1\.42 million to the project\. This was 61 percent of the amount estimated of US$2\.32 million\. Dates: Dates Although the project’s proposed restructuring was endorsed by the GEF CEO on July 16, 2009 and approved by the Bank Board on August 27, 2009, it did not change the Project Development Objective, Key Outcome Indicators or their targets\. It focused the project’s activities on two key areas (freshwater resources and project management) and extended the project by two years \. The extension was granted due to the additional time and cost involved in getting to and from geographically isolated islands spread out across 3\.5 million square kilometers of the Pacific Ocean, shipping delays of materials and supplies, weak procurement capacity, foreign exchange loss, and higher labor and materials costs than estimated at appraisal \. The project closed on June 30, 2011\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: Substantial \. The project was a central element of the Bank ’s first Country Assistance Strategy (2011-2014) with the Government of Kiribati at the time of the project’s closure, and remains at the core of the Bank Group ’s strategy to help the country adapt to climate change impacts \. , The Government’s most recent development strategy (the new Kiribati Development Plan (2012-2015)) strongly endorses the perception of climate change as an existential threat to its survival\. However, the 38 percent shortfall in the Borrower’s actual contribution to the project and the 10-fold drop in its estimated contribution for the recently launched (KAP-III) follow-on project (only US$250,000 appear to indicate that the Government views slow on -set climate change adaptation as a donor responsibility and moral obligation, allowing it to focus its own resources on other more immediate challenges of economic and social development, such as health and education\. The three projects comprising the KAP program have all taken the ‘precautionary’ approach in selecting climate change adaptation interventions, focusing on ‘no regrets’ actions which are productive even if the impacts of climate change never materializes as expected \. While this has been useful in terms of focusing interventions on more immediate concerns rather than on potential impacts decades away, it has blurred the line between actions taken for climate risk management benefits with those associated with typical development challenges, such as maintenance and improvement of potable water and sanitation systems, solid waste management, and the operation and maintenance of public infrastructure \. b\. Relevance of Design: Modest \. The design of the project was not well conceived in terms of being able to achieve its stated objectives within the project timeframe\. Both the geographic and thematic breadth of the project had to be drastically reduced midway through implementation in November 2008 when it was realized that the scope of the project design and project implementation period were unrealistic and “overly ambitious with regard to both the range and technical complexity of activities, taking into account the implementation and management capacity of agencies in a small country such as Kiribatiâ€? (ICR, p\. 5)\. The sub-objectives in the results framework were not well -aligned with the final outcomes\. For example, how the mere “establishment of a lead agency to coordinate climate change adaptation strategies â€? would lead to achieving any one of the three project objectives, or how the “consistent use of best practice in the application of risk management, environmental assessment and options analysis to public infrastructure and CCA vulnerability reduction measuresâ€? was relevant to the “the design of cost-effective adaptation measures \.â€? Conversely, there were no objectives or measures of increased institutional capacity that would be strengthened as a result of the project's activities, even though this was identified as a key constraint and “critical riskâ€? to the project achieving its development objectives\. Only the “percentage of climate-affected [Ministry Operational Plans] MOP programs that reflect systematic climate risk management â€? was directly relevant to the objective of “the integration of [climate change adaptation] awareness and responsiveness into economic and operational planning \.â€? In addition, there was a lack of consistency about how those expected outcomes would be assessed and a lack of clarity in the causal chain between inputs like funding levels and activities or project components that would result in the desired outcomes\. Exogenous factors, such as the widely held view among the Government and local population that the costs to mitigate the impacts of climate change impacts should be borne entirely by donors representing those countries principally responsible for emitting carbon dioxide and methane gases and thereby causing climate change, were not accurately assessed or realistically incorporated into the project design or funding allocations \. These design flaws had serious implications later in terms of delays and problems encountered during project implementation\. 4\. Achievement of Objectives (Efficacy): The development objective was â€?to develop and demonstrate the systematic diagnosis of climate-related problems and the design of cost-effective adaptation measures, while continuing the integration of climate risk awareness and responsiveness into economic and operational planning \.â€? This objective has three elements : (i) to develop and demonstrate the systematic diagnosis of climate -related problems; (ii) to design cost-effective adaptation measures; and (iii) to continue the integration of climate risk awareness and responsiveness into economic and operation planning\. Achievement of these objectives is assessed below \. (i) Develop and demonstrate the systematic diagnosis of climate -related problems \. Rating : Substantial \. Outputs : Staff members of the Ministry of Environment Lands and Agricultural Development (MELAD) and the Ministry of Public Works and Utilities (MPWU) received training in the application of coastal protection tools and a Coastal Hazard and Risk Diagnosis and Planning approach for communities on South Tarawa that was supported by the project\. Subsequently, a Foreshore Management Committee, an inter -ministerial technical group, carried out and extended this work with little or no outside assistance from project staff or consultants \. Coral reef benthic communities and coastal ecosystem monitoring training and demonstration programs were instituted concomitantly in late 2007\. The Final Coral Reef Benthic Monitoring and Workshop Report developed a four-part “Roadmapâ€? of coral reef monitoring protocols \. The coastal ecosystem monitoring pilot activity was  carried out by an international consultant working with staff of the Minerals Unit of the Ministry of Fisheries and Marine Resources Development (MFMRD)\. Groundwater quality, quantity, and sustainable yield assessments were successfully conducted using electro-magnetic induction surveys and 20 high quality salinity meters, supplemented by a survey of over 560 shallow household water wells to assess their condition as sources of potable and secondary water supply \. This work provided the technical basis for establishing the sustainable extraction rates for the shallow groundwater aquifer lens underlying South Tarawa and the need for groundwater protection \. In addition, rain gauges were installed on Outer Islands (the number of which were not indicated ) and staff were trained in data collection methods\. The regulatory, permitting and enforcement activities to monitor and control beach mining activities were dropped following the Mid-Term Review since they had not even begun, and only one of four activities (that is, to develop island socio-economic and climate vulnerability risk profiles ) on six Outer Islands under Component 4 were carried out\. Outcomes : The Coastal Hazard and Risk Diagnosis and Planning tools developed by the project were used by the Foreshore Management Committee, led by MELAD and MPWU, were used to prepare an island -wide hazard risk assessment of South Tarawa \. Then later, without further technical assistance provided by the project, the Committee prepared village-specific assessments for all the villages on the island \. These assessments were used to create a “Risk Map for South Tarawaâ€? and were directly relevant to the formulation of the Shoreline Protection Guidelines, whose implementation has been stalled by the lack of funds to implement the guidelines \. There is no indication that monitoring of coral reef benthic organisms has been applied or used by Ministry staff since no regular monitoring reports have been released since the initial baseline report on coral reef conditions was completed (the Results Framework target was 8 such reports)\. Similarly, there is no apparent follow-up or result that has yet to come from preparing the six Outer Island Risk Profiles \. In terms of the effective results achieved by regulatory, permitting and enforcement activities, there is little evidence showing them to have had much, if any, impact \. For example, land-use controls overlaying critically important groundwater reserves at Bonriki and Buota have not been strictly enforced with a number of illegal squatters, economic activities such as sand mining and artisanal production, and even cemeteries, located within those recharge zones, which are critical for ensuring South Tarawa ’s drinking water supply to its rapidly growing population\. In sum, while tangible results have lagged far behind expectations and targets, the objective of “Developing and demonstrating the systematic diagnosis of climate -related problemsâ€? has been substantially achieved \. A few activities, such as the six Outer Island Risk Profiles, have clearly met the objective without resulting in tangible outcomes while others, such as the work by the Foreshore Management Committee, have resulted in some useful, demonstrable outcomes like the community -level assessments as part of an island -wide Risk Map for South Tarawa\. ii) Design cost -effective adaptation measures in Kiribati \. Rating : Modest (ii) Outputs : Rainwater collection and storage system pilots were implemented at four public building sites, incorporating innovative flush designs and overflow systems back into groundwater via soak pits \. The target for this Intermediate Outcome Indicator was 20, but the costs estimated at appraisal significantly underestimated the actual costs of installing these coastal civil works \. Only two household systems were installed in Bairiki, but the households require additional training and follow -up monitoring to ensure their proper use and maintenance \. Water resources assessments at 14 sites throughout South Tarawa and other Outer Islands were undertaken \. However, only one infiltration gallery was installed at a site in North Tarawa against a Results Framework target of five such water supply improvements installed \. Mangrove planting was a “softâ€? adaptation measure intended to protect Kiribati ’s coastlines and estuarine and marine resources with the intention of increasing their sustained replication by local communities \. Mangrove planting pilots were undertaken in two phases in 2010 by Environment Ministry (MELAD) staff on six islands\. Over 37,000 mangrove seedlings were planted on approximately 1,500 hectares, although survival rates ranged from 11% to 98% (Mangrove Activities Report: 2010, pp\. 15-16 and 25-27; ECD/MELAD)\. However, this work simply augmented what the ministry was already doing, which plants an average of 20,000 seedlings every year, and was dwarfed by the size of the need to plant several times this amount of mangroves just to protect the most  vulnerable areas of the islands \. In addition, no cost-effectiveness studies were conducted as part of this activity \. Outcomes : No further uptake of rainwater harvesting systems has occurred at either private residential, community, or government properties without project support and subsidies since their cost -effectiveness was not convincingly demonstrated\. Their replication is considered dubious given their high cost relative to other less hygienic options (i\.e\., contaminated shallow hand-dug wells)\. Thus, they did not achieve their intended outcome of demonstrating the design of a cost-effective climate change adaptation measure even though the use of traditional pit toilets and shallow wells are not hygienic \. Future water galleries were only implemented in one village, but are planned in at least three more communities during the third phase (2012-2016) of this three-project program of climate change adaptation projects, according to the ICR (p\. 26)\. Thus, it is inconclusive whether they achieved their purpose of demonstrating their utility as a cost-effective climate-change adaptation measure\. Finally, it is difficult to determine whether the ecosystem -based coastal protection activity undertaken on six Islands to plant mangroves has been sustainable \. The Mangroves Activities Report : 2010 prepared by MELAD (p\. 22) indicates that “Overall, the key driver behind mangrove promotion and conservation is community engagement and financial support, â€? but it fails to state whether or not mangroves planted with project support have been maintained and extended \. These efforts represent a very small fraction of the much larger need for more mangrove forests to protect vulnerable coastal areas from intensified storm surges and sea -level rise caused by climate change\. Given that this project activity only added to already on -going mangrove planting activities by MELAD, it had no appreciable demonstration effect and did not prove its cost -effectiveness as a climate change adaptation measure \. iii ) Continue the integration of climate risk awareness and responsiveness into economic and operational (iii) planning by the Recipient : Modest \. Outputs : The principal institution established to achieve the twin goals of increasing public awareness and responsiveness to the need to adapt to climate change impacts and to ensure the integration of climate change adaptation measures into the economic development and operational plans across Government ministries was the Office of the Presidency (the Office of TeBereti (OB))\. This was expected to happen in the first year of project implementation, but was delayed by resistance by the Environmental Ministry \. As a result, the OB wasn’t officially given the authority and responsibilities to act as the lead agency coordinating climate change adaptation and related strategies until 2009\. The two mechanisms that the OB intended to use to integrate climate change adaptation considerations into national economic and operational planning processes were : (i) community consultations to raise public awareness about the threats posed by climate change, and (ii) Ministry Operational Plans developed by key affected ministries (e\.g\., health, public works and utilities, environment, lands and agricultural development )\. The first mechanism to build “frameworks and processes for [public] participation and awarenessâ€? (Component 1\.1) were only modestly achieved\. Among its achievements: A Report on the Quality & Effectiveness of Existing Methods of Public Consultation in Kiribati and an Operational Manual for Consulting Citizens of Kiribati by Dr \. Christine Hogan was completed\. Radio, newsletters, and events related to building public awareness about climate change adaptation were discontinued as the outputs were “not directly linked to physical investments â€? (ICR, Annex 2, p\.25)\. A baseline survey of public attitudes toward climate change was undertaken, but follow -up semi-annual surveys were discontinued after 2007\. A bilingual glossary of climate change adaptation -related terms was produced, but the use of this output was characterized by the ICR as “limited\.â€? The focused behavior change campaign on coastal resilience and water resource management was dropped during implementation since it was “not linked to specific physical investments \.â€? Initial consultation with villages in North Tarawa in relation to proposed installment of infiltration water galleries was conducted to increase potable water supply \. With regard to the second mechanism of Ministry Operational Plans being the principal institutional planning vehicle for mainstreaming and linking CCA to national development priorities, there was no verifiable evidence provided in the ICR supporting the assertion that 60% of these ministerial plans have incorporated the results of  project activities and outputs \. Outcomes : Neither the recommendations of the review of project -sponsored public participation processes nor the processes set out in the Operational Manual for Public Consultations were thoroughly incorporated into community consultations for large civil works investments that occurred later in the project since consulting firms were not aware of these reports \. The results achieved from preparing those outputs were therefore limited \. The bi-lingual glossary of climate change adaptation related terms that was developed by the project has been surprisingly useful in increasing public awareness and responsiveness to climate change issues in Kiribati since it has now given them the words to better describe causes and effects in their native tongue \. The Office of the Presidency (OB) has not been able to effectively carry out its intended role of coordinating the integration of climate change considerations into ministerial operational plans (MOPs) and its role as the lead agency in such matters has recently been taken over by the Ministry of Finance and Economic Development (MFED), which has increasingly assumed this function as part of its role coordinating national economic development and operational plans across the Government \. With regard to the extent to which MOPs have incorporated climate change adaptation measures within them, it is nearly impossible for IEG to ascertain the 60% target cited in the ICR with any precision (due to the fact that MOPs are not publicly available documents )\. However, IEG did find evidence that the process is not functioning as envisioned\. A 2009 final report (Development of an Integrated CCA-based Risk Diagnostic and Response Process ) prepared under KAP-II stated (pp\. 18–19): “[There is] A lack of connection between the MOPs and the Kiribati National Development Strategy of 2008-2011 and the Climate Change Adaptation Strategy \. [There was] alignment between the previous National Development Strategy 2004-2007 and the MOPs that were established in 2004\. However, due to lack of implementation of the MOP reporting system, and of misalignment between the National Development Strategy and MOP objectives, this previous alignment does not now exist \.â€? iv ) Progress toward the Global Environment Objective : “to assist the Government of Kiribati in enhancing its (iv) capacity to plan and implement adaptation measures to the climate -related issues facing the country, which will also reduce the detrimental impacts of climate change on the fragile atoll ecosystems of Kiribati \.â€? The project had limited success in enhancing Kiribati ’s capacity to integrate climate change adaptation measures into its economic development and operational planning processes \. The Government still sees climate change adaptation as a responsibility of donors to fund given that they are perceived as being responsible for climate change impacts due to their greenhouse gas emissions into the atmosphere \. The “no-regretsâ€? measures that the project supported in order to gain greater political and public support for their activities also blurred the lines between those measures taken for their climate change adaptation value and those associated with typical development issues of water supply and sanitation systems, infrastructure improvements, and strengthening local institutions \. Thus, the project’s impact on enhancing the country ’s capacity to plan for and address climate change impacts was limited \. 5\. Efficiency: Modest \. Traditional measures of efficiency such as cost -benefit analysis were not undertaken during project preparation or at the end of project implementation given the long lead -times (decades) before the full effects of slow -onset climate change impacts are expected to be experienced in the second half of the century \. Only then could the cost-benefit ratio of actions taken now be determined with any precision \. Instead, the project adopted a “precautionaryâ€? climate change adaptation approach of only undertaking ‘no regrets’ adaptation interventions, such as planting coastal mangroves, conducting water resources assessments prior to installing freshwater supply water galleries, building seawalls to protect coastal infrastructure, and piloting the use of rooftop rainwater collection systems for community buildings and private houses \. While the adoption of the precautionary CCA approach was perceived as having resulted in very pragmatic, practical interventions being undertaken by the project, their cost -effectiveness was not clearly demonstrated nor were these project activities carried out in a particularly efficient manner (e\.g\., of the 14 water gallery site assessments undertaken, only one resulted in the actual construction of a water gallery, which is still not used by the local community /school due to bad odors and discoloration of the water )\. A qualitative incremental cost analysis of climate change impacts was undertaken prior to project appraisal (Cities, Seas, and Storms: Managing [Climate] Change in Pacific Island Economies; 2000) indicated that in the absence of adaptation, the impacts of current climate change scenarios in Kiribati could be severe, disrupting major economic and social sectors\. The expected economic benefits identified at appraisal included : maintenance of livelihoods otherwise threatened by climate change; avoidance of damage to coastal assets and ecosystems; avoidance of climate change and disaster-induced limits to economic growth; avoidance of public health costs, private sector productivity losses, and public sector investments due to insufficient and contaminated water supply \. The project was extended from three to five years for the reasons given in Section 2\.d, which were all evident at appraisal, and should have been taken into consideration more carefully in estimating the time and cost of carrying out those activities\. Other examples of inefficiency involved numerous instances of activities that were “discontinued or droppedâ€? after initial expenditures and effort had been made without having achieved any useful purpose or result \. Finally, the Project Management Unit (PMU) was unprepared for the task of managing a World Bank project, particularly with respect to its weak compliance with the Bank ’s procurement procedures, despite assertions to the contrary in the PAD (p\. 10) that such capacity had been developed under the previous climate change adaptation project (KAP-I)\. Apart from necessitating a high level of input from Bank staff based in the Sydney office, cost effectiveness was reduced by a quadrupling of project resources above the appraisal estimate (from US $0\.39 million to US $1\.58 million) for Component 5: Project Management\. 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 Relevance of Objectives was assessed as substantial due to the direct connection to the Government ’s latest three-year development strategy (KDP 2012-2015) and the Bank’s last CAS with Kiribati while the Relevance of Design was rated as modest due to the project ’s overly ambitious scope and unrealistically short duration \. Nor did the Results Framework align project inputs and activities well with expected outcomes and the three elements of the PDO\. The efficacy of the first project objective to systematically diagnose climate change impacts was rated as substantial, although it was noted in Section 4(i) that many of these project activities have not been sustained \. The efficacy of the second project objective to assess the cost -effectiveness of designs promoted by the project is rated as modest because their cost -effectiveness was not convincingly demonstrated, nor was there any appreciable up-take of those designs by communities in the absence of substantial project subsidies \. Achievement of the third objective to mainstream climate change adaptation into national preparedness planning processes is rated modest \. In the absence of traditional measures of cost -effectiveness, efficiency of project design and implementation is also rated as modest due to wasteful expenditures for many activities that were dropped or discontinued following project restructuring, or which were simply not utilized by the project \. Lengthy delays in implementation requiring a two -year extension of the project\. Altogether, these weaknesses reflected significant shortcomings in the project \. a\. Outcome Rating : Moderately Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating: There are a number of political and institutional risks to maintaining the limited accomplishments achieved by the project due to low stakeholder support among the local population for the need to urgently prepare for and aggressively adapt to climate change impacts \. The Government’s reluctance to dedicate its own resources to address the threat posed by climate change is due in part to the pressing need to address other, more immediate social problems to improve basic infrastructure, health delivery services, and educational opportunities for its rapidly growing population\. These factors threaten to undermine the project ’s outcomes, but are mitigated to a large extent by the increasingly significant investment that is programmed for Kiribati over the next several years by a coordinated program of donor assistance, such as the joint Asian Development Bank /World Bank Airport Modernization Project, the Tarawa Road Rehabilitation Project, and the ADB’s South Tarawa Water Supply Sector Improvement Project \. All of these projects (plus KAP-III) incorporate climate risk management as a core principle and should mitigate any inclination by the Government to back away from climate resilient investments as a core element of its national development strategy \. While the financial burden placed on the Government by the current climate change adaptation project (KAP-3) is much less than it was under this project (KAP-2), the political will needed to turn proposals into policies, and policies into plans and programs with dedicated resources remains an open question \. Thus, there remains a moderate likelihood that this risk will materialize, which would undermine project efforts to mainstream climate risk management considerations into Government planning, budgeting and programs, if it weren ’t offset by the significant increase in donor assistance \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: a\. Quality at entry: The project carried forward the design elements developed under the first KAP phase (KAP-I), it was consistent with the Bank’s Country Assistance Strategy, and incorporated activities from six of the top ten priority action areas identified in the UNDP-executed National Adaptation Programme of Action (NAPA), including the two most expensive ones (water resources management and upgraded coastal defenses and causeway restoration)\. As mentioned earlier in this review, the project team also adopted the very pragmatic ‘precautionary’ approach of climate change adaptation by focusing only on ‘no regrets’ interventions, and moved the Project Management Unit (PMU) within the Office of the President from the Environment Ministry, which resulted in resistance and delays, but moved it closer to the central coordination functions of the Government \. Exogenous factors, such as the widely held view among the Government and local population that the costs to mitigate the impacts of climate change impacts should be borne by donors representing countries responsible for emitting carbon dioxide and methane gases and thereby causing climate change, were not accurately assessed or adequately incorporated into the project design \. Despite a sense of “inequity and lack of justice â€? about cost-sharing arrangements held by local populations and the Government as expressed in several publications (N\. Teuatabo; Pilot Case Study: KAP and NAPA, p\. 12; January 19, 2005), the Bank did not adequately address the Government’s reluctance to commit its own resources to staff the newly created PMU within the Office of the President (OB) during the first three years of the project \.In addition, limited implementation capacity and inadequate resourcing of line ministries to manage the demands of project activities was not identified as a project risk at appraisal, nor was the lack of sufficient experience and capacity in the PMU to manage the complicated procurement arrangements for handling nearly 70 individual contracts and the Bank ’s demanding financial management requirements\. The limited degree of technical capacity in Kiribati ’s private sector was overestimated and was not identified as a risk during appraisal \. The combined effect of these shortcomings had significant impacts later during project implementation \. at -Entry Rating : Quality -at- Moderately Unsatisfactory b\. Quality of supervision: There was a lack of adequate supervision by the Bank during the first 21 months of the project (until the Second Joint Supervision Mission in April 2008), whose effects were exacerbated by an inexperienced PMU overwhelmed by the breadth and scope of project activities geographically and thematically \.For example, it was surprising that the establishment of the special unit that was supposed to be established within the Office of the nd President was not noticed by the Bank for 18 months (from project effectiveness in July 2006 until the 2 Supervision Mission in April 2008, an average mission spacing of ten months ) given that this project was seen as a “flagshipâ€? World Bank project, being the first to focus entirely on climate change adaptation in the Pacific regionâ€? (ICR, p\. 5), and despite the fact that its establishment was required within 12 months of effectiveness\. As the ICR states (p\. 17): “As a result of infrequent initial supervision, the full extent of capacity and implementation constraints that were limiting the acceptable implementation of the project – and the actions required to address those constraints - were only realized two years into the (initially) three year project\.â€? Relatively inconsequential changes were made to two of the three Outcome Indicators when the project was restructured in 2009, but a large number of intermediate outcome indicators were dropped \. Given that neither the project development nor the global environmental objectives had been changed and that the project was extended by two years, dropping these intermediate outcome indicators amounted to a significant shifting of the ‘goalposts’ in terms of assessing the project ’s performance\. In addition, Bank supervision and involvement increased noticeably following the project ’s restructuring in August 2009\. In attempting to get the project back on track, the Bank may have inadvertently intensified its supervision too much \. Government officials and project staff referred to it as ‘heavy-handed’ during IEG field interviews\. This caused morale and local initiative to falter, but restructuring the project did simplify and focus it on achieving tangible ‘hard’ outputs more in line with initial Results Framework targets\. However, in the rush to get things done , it cut back on ‘soft’ local capacity-building and training and community engagement activities that undercut local ‘ownership’ of project interventions that may have later sustained and extended them, such as installing rooftop rainwater collection systems, planting mangroves on outer islands, or converting coastal inundation hazard maps and guidelines into a national policy framework and program\. This very uneven approach to supervision was not constructive to achieving the goal of enhancing the Government’s capacity to plan and implement adaptation measures to the climate -related issues facing the country\. Quality of Supervision Rating : Moderately Unsatisfactory Overall Bank Performance Rating : Moderately Unsatisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: Initially, the government showed strong interest in the project, and agreed to locate the PMU within the Office of the President (OB)\. However, the Government did not meet its financial or operational obligations to the project, as agreed in the Grant Agreement \. Counterpart contributions lagged and the Government did not staff the PMU for the first 18 months of the project\. Nor did the National Policy Steering Committee meet its responsibility to provide strategic guidance to the project \. Even when the Government did comply with the Bank ’s insistence on staffing the position of Project Director in the OB, it did so by assigning those additional duties to the existing Secretary of the OB, a compromise arrangement that was largely cosmetic and ineffectual in terms of strengthening the PMU’s ability to promote the incorporation of climate change adaptation measures in Ministry Operational Plans or coordinating their insertion into four -year national development plans (i\.e\., the NDS 2008-2011 or KDP 2012-2015)\. More than any other factor, this severely impeded implementation progress \. Only 8\.5% of project funds had been disbursed nearly two years into a three -year project, according to the April 2008 joint supervision mission (pp\. 1-2), which rated progress with implementation as “unsatisfactory\.â€? Confirming this, an independent evaluation of the project conducted for the Government in 2011 stated that, “the project quickly fell behind schedule in commitments and disbursements \. This is not unusual in the Kiribati public sector, but it was a serious matter for the institutions funding KAP -II [that is, the GEF, AusAID, and MFAT], and when it came to their notice it had important consequences for the project \.â€? (T\. Hughes; Unfinished Business, p\. 8; May, 2011\.) Subsequently, the Government indicated to the Bank and the other project donors that it did not intend to establish a special unit within the Office of the President any longer, but in a compromise agreement, it assigned the additional duties of the Project Manager to the Secretary of the Cabinet supported by three additional technical staff members: two of them funded by donors and the third transferred from the Environment Ministry \. Government Performance Rating Moderately Unsatisfactory b\. Implementing Agency Performance: The implementing agency was comprised of two related, but distinct, entities : the PMU and the special unit created within the Office of the President \. Both were unprepared to carry out their mandate of managing the day-to-day operations of the project, while complying with the Bank ’s fiduciary requirements\. They were overwhelmed by the logistical and procurement challenges of the project ’s scope as well as its thematic and geographic breadth, and ill-prepared to handle the procurement and oversight of such a large number (69) of individual consultancies that “created a bottleneck preventing implementation of most physical investments â€? (ICR, p\. 7)\. This eventually led to 19 contracted tasks being either dropped or discontinued, and 14 more individual consultants’ contracts being rolled up into two large international ‘firm’ contracts (FS6 and FS7) to carry out the coastal works and freshwater resource tasks \. Following restructuring, the PMU functioned much better \. Its steady support and oversight of analytical work in the water and sanitation sectors was cited in a number of reports as having made an invaluable contribution to having the National Water Resources Policy and National Sanitation Policy adopted by the Cabinet in 2008 and 2010 respectively\. The PMU’s support of the Foreshore Management Committee ’s work in developing coastal inundation “hazard mapsâ€? not only for the island of South Tarawa (where half of Kiribati’s population lives) was critical to its success in independently conducting village -level climate risk assessments and developing ‘action plans’ of prioritized coping strategies in consultation with those communities \. These achievements all benefited from the PMU’s strong and steady support \. Implementing Agency Performance Rating : Moderately Satisfactory Overall Borrower Performance Rating : Moderately Unsatisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: The project development objectives were stated in a specific and measureable manner while the global environmental objective was more ambiguous \. The three Outcome Indicators and targets at the time of appraisal were designed specifically to measure project progress integrating climate risk diagnosis and cost -effective adaptation designs into climate -affected ministry operational plans and mainstream climate change adaptation considerations into national economic development planning processes \. Intermediate Outcome Indicators were logically linked to the three main Outcome Indicators, and logically linked to the corresponding project component \. The proposed data collection and analytical methods were appropriate for their purposes, the design for collecting baseline data was adequate in all of the major project areas, and institutional arrangements for collecting and analyzing data were clearly spelled out in the Results and Monitoring Framework \. However, there was no attempt made to distinguish attribution between project activities from other unrelated exogenous factors \. b\. M&E Implementation: Overall project monitoring and reporting was the responsibility of the special Unit in the Office of the President, while the day-to-day monitoring and evaluation activities were to be carried out by the PMU \. However, the ICR notes on page 8 that: “Data was not regularly collected by the PMU â€? due to low capacity to handle multiple project management demands and simultaneously implement the M&E program \. The monitoring of the second Outcome Indicator was problematic for two reasons \. First, Ministry Operational Plans (MOPs) are confidential Government documents and are not publicly accessible \. Therefore, it is not possible to verify whether the assertion in the ICR (Annex 3, p\. 37 and 40) that the target of 60 percent of climate-affected MOPs “reflect systematic climate risk management â€? was reached\. In fact, there is unambiguous evidence (presented in Section 4) to the contrary\. Secondly, the achievement of that second Outcome Indicator target was improperly measured as the percentage of KAP -II activities appearing in MOPs\. As the ICR itself notes on page 8, “Although KAP-II activities were reflected in MOPs from 2007 to 2010 [unverifiable], this does not necessarily mean that climate risk management was sustainably integrated as a priority in regular ministry work \. Success in this regard would have been better measured by how many additional climate risk -related initiatives were reflected in ministry planning, particularly those that utilized government funding sources \. Further, although MOPs are intended to link Ministry work to the Kiribati Development Plan and national budgeting process, in reality they are not generally closely followed\.â€? Thus, the measurement of the second Outcome Indicator was seriously flawed \. c\. M&E Utilization: The ICR’s treatment of how M&E data was used to direct the management of the KAP -2 Project, or to change its direction, is unclear and inadequate \. However, there was evidence that M&E data collected from the PMU and special unit within the Office of the President, as well as from initial Supervision Missions, was not promptly acted upon by project staff or the Bank ’s (and other donors’) staffs\. For example, the ICR states on page 9, “Because of limited data collection, the Results Management Framework was not utilized in most project progress reports, which although generally submitted, were not forward looking and results -orientated\.â€? Later during the restructuring of the project, there was no evidence indicated in the ICR that shifts in the project ’s direction or outcomes by project or Bank staff or managers could be attributed to M&E information that had been collected and analyzed \. M&E Quality Rating : Negligible 11\. Other Issues a\. Safeguards: Environmental : The project triggered the Bank ’s Environmental Assessment safeguard policy (OP 4\.01) and was screened as a Category B project, requiring only a partial Environmental Assessment \. However, a full Strategic Environmental Assessment (SEA) was undertaken to examine the environmental issues that were likely to occur as a result of small-scale construction of seawalls and other civil works projects \. An Environmental Policy Framework was also developed, and larger sub -projects, with potentially higher environmental impacts, were required to have Environmental Management Plans in place \. However, it was the cumulative effects of many, small coastal infrastructure developments (the vast majority of them being illegal and not associated with the project ) that are likely to cause the most important adverse impacts over time \. Therefore, the project undertook activities to help the Government develop an integrated coastal zone management policy and program to monitor and control coastal construction activities and impacts (both beneficial and adverse )\. While those impacts are continuing to occur, the project did not put in place policies or programs to redress this problem \. There was no mention of any incompliance issues associated with of either social or environmental safeguards \. Social: Social The project also triggered the Bank ’s Operational Policy (OP 4\.12) on Involuntary Resettlement since the project was expected to entail land acquisition for seawalls and freshwater abstraction galleries \. A Land Acquisition and Resettlement Policy Framework (RPF) was prepared and disclosed based on the Social Assessment that had been conducted under the preceding Kiribati Climate Change Adaptation Project (KAP-I)\. According to the ICR (p\. 9), there was only one instance in which OP 4\.12 was triggered to install a freshwater abstraction gallery at the Taborio Catholic School in North Tarawa that required the acquisition of land and the removal of coconut trees from the area immediately surrounding the gallery\. The proposed construction works at two sites in North Tarawa (Notoue and Tabonibara) were deferred to the follow-on project (KAP-3) due to complications and conflicts over compensation for land and livelihood restoration \. The ICR noted that social safeguard procedures were not followed initially in these negotiated processes, but that once a social safeguards specialist was brought in to work on the project after a two-year gap in coverage, all social safeguard procedures were followed in compliance with Bank policy \. b\. Fiduciary Compliance: The ICR (page 10) notes that the “recipient complied with Financial Management (FM) conditions outlined in the GEF grant agreement," and two supervision missions rated the FM performance as ‘satisfactory’ with no material issues and no follow up recommendations identified \.â€? Procurement issues bedeviled the project from the outset and were only partially resolved by restructuring the project to reduce its geographic and thematic scope, and to simplify contracting mechanisms \. The PMU was not staffed with a Procurement Officer and Assistant until 2008, and due to frequent staff turn -over, this was not sufficient to keep procurement issues from becoming a “bottleneckâ€? for project implementation\. An international Procurement Adviser was also seconded to the PMU following restructuring, but according to project staff in Tarawa this resulted in many more unnecessary delays and problems, such as those encountered in building the Tungaru Hospital ’s new water tower and tank\. c\. Unintended Impacts (positive or negative): None apparent\. d\. Other: None known\. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately Relevance of Objectives was Satisfactory Unsatisfactory substantial, but Design was rated ‘modest’ due to unrealistic expectations and overly ambitious scope\. Two of the three objectives were only modestly achieved\. And the efficiency of project implementation lagged badly and encountered numerous roadblocks \. See Sections 3, 4, and 6 for fuller explanation\. Risk to Development Moderate Moderate Outcome : Bank Performance : Moderately Moderately Initial appraisal work misjudged the Satisfactory Unsatisfactory Government's commitment to the project, and supervision was very uneven during implementation (overly inattentive initially, and then overly intrusive following the MTR)\. Borrower Performance : Moderately Moderately Lack of initial Government commitment Satisfactory Unsatisfactory to and incorporation of climate adaptation measures in national planning, budgeting, and programming processes\. Lack of experience among  PMU staff and limited authority hampered implementation\. 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: The Bank must ensure that the Borrower demonstrates strong leadership /ownership through its actions (not just words ), and that the Borrower has a clear understanding of its role and responsibilities \. The project performed poorly due in large part to a lack of Government commitment and ‘ownership’ of the project, as evidenced by the Government ’s failure to staff the special unit within the Office of the President and meet its financial obligations\. It appears that the Government was more interested in obtaining donor assistance than it was committed to making the tough decisions and devoting the requisite financial and human assets to adapt to climate change\. This reflected a profound misunderstanding between the Borrower and the donors about their respective roles and responsibilities to the agreement \. The Bank and other donors should have recognized this earlier and insisted on a tangible, demonstrated commitment from the Government before agreeing to continue the project following the Mid -Term Review, or to extend it into a third phase (recently launched)\. It ’s critical in climate change adaptation projects to address the difficult tasks of developing the It’ ‘software ’ of empowered local institutions and capacities rather than just focusing on infrastructure and civil works ‘hardware ’ because they demonstrate more tangible outputs and results \. The fundamental purpose of a disaster-preparedness project like this is to build the local institutional capacities of communities and governments to plan and implement climate change adaptation measures to meet the climate -related risks and threats they face\. Midway through the project, the Bank decided to shift its implementation approach by dropping almost all of the ‘soft’ attitude- and behavior-changing activities, such as community engagement and public consultations, in favor of concrete actions that would have quick and tangible results \. The result of this approach was that while many outputs were attained, few outcomes were achieved\. In aggressively pursuing its own agenda to meet its own internal needs to generate an impressive list of outputs, it lost the balance between ‘hard’ and ‘soft’ activities, and undermined the project ’s fundamental intent of empowering local ownership, strengthening institutions, and building local technical expertise \. No-regrets â€? climate change adaptation interventions can easily be ‘captured ’ by immediate local needs to “No- fix or improve infrastructure that have little to do with climate change instead of focusing on longer -term tasks to protect local populations and assets from those slow -onset climate impacts \. Most of the physical infrastructure civil works outputs of the project on South Tarawa were effectively ‘catch-up’ maintenance of essential infrastructure that were only marginally related to climate change adaptation \. The advantage of this “no-regretsâ€? approach (that is, interventions that would still be good investments even if climate change impacts do not occur as predicted ) is that it helped secure public and political support more easily than other adaptation investments with results that might be decades away \. The disadvantage is that it can lead to a situation of ‘learned dependency’ on external assistance instead of developing the self -reliance to prepare for the consequences of anticipated impacts \. Projects seeking to change people ’s attitudes and behaviors must first build a strong sense of shared ownership and partnership with governments, other donors, and affected communities about the nature of the problem, and then agree on an approach to address it \. Projects affecting many different economic sectors, Government ministries, and peoples ’ lives cannot impose a solution already decided on without their input, but must start from a shared view of the challenge faced and the best way to address it \. One-way public ‘consultations’ to inform communities about the problem and a pre -determined solution are not the same as community engagement \. True two-way communication and community engagement require shared decision-making processes that are followed up by project or Government technical support and resources to implement the agreed-upon mitigation or adaptive measures to address challenge \. When public consultations are not followed up by concrete actions, they result in empty promises, processes, and public apathy due to the perception of wasted time and effort \. Actions that are decided upon must be seen as being in the community’s own interest or benefit (rather than serving the project ’s own agenda)\. If not, then those  investments may be neglected, misused, abused, or vandalized by those same ‘beneficiaries,’ who often discontinue using those practices and behaviors once external funds are no longer available \. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR was candid in describing the problems encountered in the preparation and appraisal of the project, as well as during implementation, and the reasons behind the need to restructure the project \. The ICR was complete and consistent with OPCS’s ICR guidelines, particularly with regard to its focus on results and outcomes achieved, and the reasons why more lasting results were not achieved \. The evidence presented was objective and relevant \. The “Lessons learnedâ€? and “Key Factors Affecting Implementation and Outcomes â€? sections were exceptionally insightful \. However, some of the self-ratings were overly generous given the seriousness of the shortcomings described \. a\.Quality of ICR Rating : Exemplary

REVIEW

P116974

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AR 3rd Natl Communication UNFCCC (P116974) Report Number : ICRR0020187 1\. Project Data Project ID Project Name P116974 AR 3rd Natl Communication UNFCCC Country Practice Area(Lead) Argentina Environment & Natural Resources L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) TF-98640 31-May-2013 3,054,974\.00 Bank Approval Date Closing Date (Actual) 01-Feb-2011 30-Jun-2015 IBRD/IDA (USD) Grants (USD) Original Commitment 0\.00 2,439,209\.00 Revised Commitment 0\.00 1,397,396\.47 Actual 0\.00 1,397,396\.47 Sector(s) Public administration- Transportation(25%):Public administration- Energy and mining(25%):Public administration- Agriculture, fishing and forestry(25%):Public administration- Water, sanitation and flood protection(25%) Theme(s) Climate change(100%) Prepared by Reviewed by ICR Review Coordinator Group Ranga Rajan Krishnamani Victoria Alexeeva Christopher David Nelson IEGSD (Unit 4) 2\. Project Objectives and Components a\. Objectives This project was financed by the Global Environment Facility (GEF) Trust Fund\. The project development objective as stated in the GEF Grant Agreement (Schedule 1, page 5) and in the Project Appraisal Document (PAD, page ii) was: " To strengthen the information base and institutional capacity of the key members of the Steering Committee, in order to integrate climate change priorities into the Recipient’s development strategies and relevant sector programs by providing financial and technical support to prepare the Third National Communication (TNC)\."  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AR 3rd Natl Communication UNFCCC (P116974) b\. Were the project objectives/key associated outcome targets revised during implementation? No c\. Components Component 1\. Harnessing National Potential for Climate Change Mitigation\. Appraisal estimate US$0\.67 million\. Actual cost US$0\.57 million\. Activities included: (i) updating Argentina’s Green House Gasses (GHG) inventory for each emitting sector and strengthening technical capacity for modeling, analyzing and projecting GHG emissions\. (ii) undertaking studies on the potential for mitigation in the main GHG emitting sectors and identifying priority mitigation measures\. (iii) enhancing the capabilities for implementing mitigation measures, including developing Policies and Measures (P&Ms) for integrating climate change considerations in the country development strategy and specific sector programs\. Component 2\. Strengthening the National Adaptation Agenda\. Appraisal estimate US$1\.16 million: Actual cost US$0\.63 million\. This component provided technical assistance for assessing and identifying climate change impacts in the most vulnerable sectors\. Activities included, conducting socio-economic and climate change modeling scenarios and developing and implementing adaptation actions\. Component 3\. Institutional Strengthening, Capacity Building and Information Management\. Appraisal estimate US$1\.09 million\. Actual cost US$0\.33 million\. This component aimed at strengthening the institutional capacity of the project steering committee\. Activities included, providing support for defining the technical scope of activities to be carried for the Third National Communication (TNC), strengthening the institutional capacity of national, provincial and municipal governments to integrate climate change considerations in sector programs and strategies and preparing and disseminating the TNC\. Component 4\. Project Management\. Appraisal estimate US$0\.13 million\. Actual cost US$0\.22 million\. This component provided technical and operational assistance to the Project Implementation Unit (PIU)\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost\. Appraisal estimate US$3\.05 million\. Actual cost US$1\.75 million\. Actual costs were lower than the appraisal estimate, in view of the non-utilization of funds and reduced scope of project activities at completion\. Project Financing\. Appraisal estimate US$2\.44 million\. At closure, US$1\.40 million was disbursed\. Borrower Contribution\. Appraisal estimate 0\.61 million\. At closure, their contribution was less than planned, at US$0\.36 million\. Dates\. There were three project restructurings\. Following the first restructuring on 09/05/2011, the fiduciary management responsibility was consolidated\. The Secretariat of Environment and Sustainable Development (SAyDS) - was to be the implementing agency, unlike in the original plan, when technical and fiduciary functions were split between the implementing agency and the Chief of the Cabinet of Ministers (JGM)\. The second restructuring on 02/15/2013 extended the project closing date by 18 months (from 05/31/2013 to 11/13/2014), to make up for the delays in project effectiveness in the initial stages and implementation delays during project execution\. The third restructuring was on 12/19/2014\. This restructuring extended the project closing date by an additional seven and half months , from 11/13/2014 to 06/30/2015)\. This extension was approved for a combination of factors including, completing ongoing climate mitigation and adaptation studies, preparing a basic Biennial Update Report (BUR) to the UNFCC and conducting dissemination work related to capacity building\. The restructuring also reallocated funds between components and revised the results framework\. The targets for climate adaptation studies were reduced and studies pertaining to preparation of climate adaptation policies and measures was dropped\. The project closed about 25 months beyond schedule on 06/30/2015\. 3\. Relevance of Objectives & Design a\. Relevance of Objectives Despite uncertainties regarding the precise consequences of Carbon dioxide emissions, there is general consensus that climate change impacts will affect the functioning of key worldwide ecosystems\. Having ratified the United Nations Framework Convention on Climate Change (UNFCCC) in 1994, Argentina was required to periodically submit National Communications (NCs) to UNFCCC regarding the following\. (i)  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AR 3rd Natl Communication UNFCCC (P116974) National inventory of anthropogenic emissions by sources and removal by greenhouse gases using agreed methodologies\. (ii) A general description of the steps taken\. (iii) Other information relevant to UNFCCC objectives\. Argentina submitted the First FC in 1997 and the second in 2007\. According to the Second NC, significant vulnerabilities in Argentina for the period up to 2040 included: (i) reduction in the water level in the La Plata Basin\. (ii) increased water stress in northern and western parts of the country\. (iii) potential water crisis in selected areas\. (iv) intense precipitation and floods in some zones\. (v) glacier retreat with implications for hydro-power generation and agriculture\. (vi) increased vulnerability of coastal areas to sea level rise\. The project objectives of improving the information base for making policy decisions on climate related issues and designing climate change priorities that could be integrated with the development strategy and sector programs, were highly relevant for the government strategy at appraisal\. The project development objectives are relevant to the Bank strategy for Argentina\. At appraisal, the key objective of the growth pillar of the Country Partnership Strategy (CPS) for the 2010-2012 period highlighted the need for: (i) Infrastructure development with a focus on expanding access of the poor to basic services in vulnerable sectors (such as water supply and sanitation, urban and regional transport, reducing vulnerability to urban flooding and drainage problems, removing logistics and transport bottlenecks)\. (ii) Rural development and environmental management\. The project activities, aimed at generating relevant data for planning and strengthening the capacity for assessing climate change considerations in the vulnerable sectors, were consistent with the project development objectives\. The CPS for the fiscal years 2015-2018 identifies climate change as one of the key action areas and the third theme of the CPS highlights the need for reducing environmental risks and safeguarding natural resources\. The Bank’s regional climate change strategy identified adaptation to climate change impacts as a top priority in Latin America\. The project development objectives were in line with the GEF support to Enabling Activities (EA) under the GEF Climate Change Focal Area (CCFA)\. The GEF-4 programming document also emphasizes the need to help national communications develop strategic documents for identifying and implementing climate change programs and activities at the national level\. Rating High b\. Relevance of Design The statement of the project development objectives is clear and the causal link between project activities, outputs, and outcomes is logical\. Component one activities (such as, updating the GHG inventory and undertaking studies on the potential for mitigation in the main CHG sectors) in conjunction with component two activities (such as assessing climate change impacts and developing climate change and developing adaptation actions, policies and measures) can be expected to contribute to the project development objective of strengthening the information base for climate change agenda\. This in combination with Component three activities aimed at capacity building can be expected to contribute to improving the institutional capacity for integrating climate change priorities into development strategies and sector programs\. The results framework, however, lacked clarity and neither the original nor the revised framework provided a robust way for measuring capacity considerations which were needed for integrating climate change considerations in development strategy and sector programs\. The original two year implementation period was unrealistic, given that project activities could not be implemented simultaneously but required sequencing\. For instance, climate modeling studies were to precede adaptation studies and developing mitigation policies and measures was contingent on completion of the other two studies\. Rating Modest 4\. Achievement of Objectives (Efficacy) PHREVISEDTBL Objective 1 Objective  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AR 3rd Natl Communication UNFCCC (P116974) To strengthen the information base of the key members of the Steering Committee to prepare the Third National Communication (TNC)\. Rationale Outputs • Green House Gasses (GHG) inventories were developed for 2010 and 2012 as targeted, using the methodology used by the Intergovernmental Panel on Climate Change (IPCC)\. • The regional climate change scenarios and database with climate change scenarios were completed as targeted\. The database covered 11 indicators used for assessing climate change factors during two time periods: The near term (defined as expected conditions between 2011 and 2039) and the long term (defined as the period from 2075-2099)\. This information was made publicly available through the Internet\. • An analysis of GHGs emissions were completed for the following sectors (energy, industrial processes, agriculture, forestry and other land use and the waste sector, as targeted\. • Climate vulnerability assessments were completed as targeted for four geographical regions (Cordilleran, Patagonia, Central and Argentina Sea and Coastal Areas)\. The assessments included identification and preliminary prioritization of adaptation measures in key socioeconomic sectors\. • The inputs for the Biennial Update Report (BUR) of the Argentine Republic were completed at project closure, while the compilation of the actual BUR report was carried out during the second half of 2015 with ECLAC funding and submitted to UNFCCC during COP21\. • The project delivered inputs for preparing Argentina’s “Intended Nationally Determined Contribution” (INDC), a new UNFCCC initiative under the Warsaw Agreement (Conference of the parties (COPs 19) in late 2013, for preparing the first global arrangement in the climate change agenda\. • 18 sector specific studies on climate mitigation were completed\. This exceeded the original target of 11 but was slightly short of the revised target of 19, which was set as some tools were re-defined as separate outputs\. • 11 studies were completed (including a climate modeling study and studies on sector-specific impact, vulnerability and adaptation options), as compared to the original target of nine and revised target of four\. Outcomes • The Third National Communications was submitted by Argentina in December 2015\. According to the additional information provided by the Task Team Leader, this included an updated national GHG inventory, the identification of national mitigation potential, the development of climate change scenarios, the identification of the impact and vulnerability to climate change and adaption measures to face them; in most cases, mitigation measures were identified with cost-benefit analyses\. Rating Substantial PHREVISEDTBL Objective 2 Objective To strengthen the institutional capacity of the key members of the Steering Committee, in order to integrate climate change priorities into the country's development strategies and relevant sector programs by providing financial and technical support to prepare the Third National Communication (TNC)\. Rationale Outputs • Eight agencies reviewed and provided comments on each mitigation study, reviewed by the Steering Committee and Technical  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AR 3rd Natl Communication UNFCCC (P116974) Advisory Committee as targeted\. • Seven agencies reviewed and provided comments on each adaptation study reviewed by the Steering Committee and Technical Advisory Committee\. • Many activities aimed to expand dissemination and capacity building were not completed as targeted\. Outcomes A qualitative on line survey was conducted to collect information on the perceptions regarding the Third National Commitment of 81 individuals, including 43 from the Steering Committee (SC), 16 Technical Advisory Committee (TAC) and 22 Federal Council of Environment (COFEMA) members\. Based on a small share of responses in the perception of the increase in capacity (a total of 24 responses), about half of 10 SC members rated the increase in capacity as modest, and 33% -satisfactory, while 77% of nine COFEMA representatives and all five from TAC expressed satisfaction (ICR, p\.16; Annex 5)\. Overall, the ICR (p\.19) assesses the institutional capacity strengthening as substantial for the SAyDS and modest for the SC and TAC members and COFEMA focal points; as for other initial target groups such as teachers and municipal level decision-makers, capacity building was negligible\. Rating Modest 5\. Efficiency Economic and Financial Analysis A formal economic or financial analysis for the project was not conducted at appraisal or at completion, as the project financed mainly technical assistance, capacity building and awareness activities\. Administrative and Operational Issues There were administrative and operational inefficiencies\. The project which was approved in February 2011, became effective only in July 2012 on account of government delays\. These delays meant that the project which was originally envisaged for a 25 month implementation period, started 23 months after approval\. These delays further exacerbated by procurement delays for the critical climate modeling study\. Finally, despite a 25 month extension to the project closing date, a number of activities were dropped due to insufficient time\. At closure, around 43 percent of the GEF grant (including much of the financing intended for institutional strengthening and capacity building through dissemination and consultation with stakeholders) was not utilized\. 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  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AR 3rd Natl Communication UNFCCC (P116974) Relevance of objective is rated High and that of Design is Modest\. Efficacy, of the first objective, “to improve the information base of the key members of the steering Committee to prepare the Third National Communication” was rated as Substantial and efficacy of the second objective “To strengthen the institutional capacity of the key members of the steering committee” was rated Modest\. Efficiency was rated Modest due to administrative inefficiencies, which contributed to delays, and the scope of the project was reduced considerably during implementation\. a\. Outcome Rating Moderately Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating Government Commitment\. Having ratified the UNFCCC, Argentina is required to periodically submit National commitments and Biennial Update Reports (BUR2) to UNFCC\. According to the Task Team Leader, unlike the national commitments which did not stipulate a time line, BUR's are to be submitted once in every two years\. The Secretariat of Environment and Sustainable Development (SAyDS) began the process of preparing the BUR2 in August 2015 with support from the United Nations Development Program (UNDP) and since the UNFCC process is gaining traction and getting stronger national contributions across the globe, the risk to development outcome from Government Commitment is rated as Modest\. a\. Risk to Development Outcome Rating Modest 8\. Assessment of Bank Performance a\. Quality-at-Entry The project design was based on lessons from prior Bank financed GEF and carbon finance activities, analytical activities on climate change and from the preparation of Argentina’s Second National Communications to the UNFCCC\. Several risks were identified (including substantial risks associated with institutional and coordination risk, given that the mitigation and adaptation agenda involved a variety of sectors, institutions and policies, limited experience of the agency responsible for the implementing the project, possibility of cost-overruns and a relatively short implementation period and procurement risk)\. Several risk mitigation measures were incorporated and the overall project risk was rated as Modest at appraisal\. • The implementation period was short and as indicated in Section 3b, the design underestimated the time for implementation, since project activities could only be implemented in a sequenced fashion\. This in conjunction with other implementation delays resulted in reduced scope of project activities at closure\. • There were drawbacks in Monitoring and Evaluation (M&E) indicators\. The indicators chosen for the capacity building dimension of the project (which aimed at integrating climate change policies into the development strategy and sector programs were inappropriate\. • The project underestimated the commitment of the implementing agency\. The sense of ownership of the implementing agency was not strong and this was reflected through inadequacy of staffing during the first year of implementation\. The preparation team underestimated the issues associated with coordination\. Given that the 26 ministries/agencies were involved, the main implementing agency was not able to effectively secure coordination between the different agencies\. Quality-at-Entry Rating Moderately Unsatisfactory  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AR 3rd Natl Communication UNFCCC (P116974) b\. Quality of supervision Nine Implementation Status Reports (ISRs) were filed over a five year period\. During implementation, the supervision team restructured the project seven months after approval to reflect changes in Argentine regulations that created an opportunity to improve implementation arrangements through consolidating fiduciary responsibilities under the implementing agency\. • The supervision team was not able to proactively identify problems, given that it took nearly 18 months to make the project effective on account of government delays\. • The project closing date was extended by only 18 months initially in February 15, 2013, despite the slow pace of execution\. The project closing date was extended further by about seven and half months in November 13, 2014\. A longer initial extension could have helped in smoothing implementation\. • The revised indicators did not strengthen the results framework\. Quality of Supervision Rating Moderately Unsatisfactory Overall Bank Performance Rating Moderately Unsatisfactory 9\. Assessment of Borrower Performance a\. Government Performance The Government engagement and commitment was proactive and consistent in the final year of the project as demonstrated by the strong support provided by the Ministry of Economy and Public Finance and Chief of the Cabinet of Ministers (Jefatura de Gabinete de Ministros\. JGM)\. • The Government’s commitment, however, lacked strong political priority in the initial years of the project and this was reflected through the delays in making the project effective\. • Although the Government provided counterpart funding in kind, the counterpart funding was less than planned at appraisal\. • Some of the procurement and implementation delays were exacerbated by the weak monitoring and supervision by the government and the relevant government agencies were not proactively involved in resolving problems\. Government Performance Rating Unsatisfactory b\. Implementing Agency Performance The Secretariat of Environment and Sustainable Development (Secretaria de Ambiente y Desarrollo Sustentable – (SAyDS) was in charge of implementing the project\. The project implementation unit was in charge of coordinating activities with involved other ministries and government agencies\. The implementing agency provided the in kind administrative and logistical support during implementation\. Given the lack of time to complete the required reports and studies, the implementing agency found alternative source of funding (including from the Economic Commission for Latin America and the Caribbean (ECLAC), to complete and submit the Third National Commitment and the Biennial Update Report to UNFCCC)\. • There were procurement delays due to staffing issues in the Project Implementation Unit and the agency was not able to recruit a full time procurement specialist or coordinator with relevant experience on Bank-financed projects and political authority\. • The implementing agency representatives were not able to coordinate effectively between the 26 ministries and agencies\.  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AR 3rd Natl Communication UNFCCC (P116974) Implementing Agency Performance Rating Moderately Unsatisfactory Overall Borrower Performance Rating Unsatisfactory 10\. M&E Design, Implementation, & Utilization a\. M&E Design The original monitoring indicators were appropriate\. This included two GEO indicators relating to strengthening the information base through production of mitigation and adaptation studies and one GEO indicator for measuring the increased capacity of government institutions and other targeted stakeholders\. The original Intermediate indicators related to the aspects of the mitigation and adaptation studies (namely GHG intensity of the proposed mitigation and total cost-benefit of the proposed adaptation)\. b\. M&E Implementation A new GEF outcome indicator, submission of a Biennial Update Report (BUR) by Argentina’s Ministry of Foreign Affairs and Worship (MREC) to UNFCCC - was added\. The submission of a BUR was a new UNFCC requirement, established after the project was approved\. The original GEO indicator pertaining to monitoring capacity building activities through surveys of targeted stakeholders was dropped\. Neither the original nor the revised framework provided a robust way for measuring outcomes associated with capacity building dimension of the project\. c\. M&E Utilization The monitoring indicators mainly measured implementation progress\. M&E Quality Rating Modest 11\. Other Issues a\. Safeguards The project was classified as “Category C” for environmental assessment purposes\. No safeguard policies were triggered (PAD, page 23)\. The ICR does not report any environmental or safeguard issues during implementation\. b\. Fiduciary Compliance Financial Management The ICR (page 11) notes that there was compliance with Bank’s Financial Management requirements and the 2013 audit report was unqualified\. Procurement\. Procurement management was shifted to the implementing agency after project effectiveness to consolidate and streamline key project  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AR 3rd Natl Communication UNFCCC (P116974) management responsibilities within a single institution\. The implementing agency found it difficult to attracting a procurement specialist with proven experience with Bank procedures\. This resulted in procurement delays both in the initial years of the project and in the final half of 2014\. The ICR does not report any case of misprocurement\. c\. Unintended impacts (Positive or Negative) --- d\. Other --- 12\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Outcome Moderately Unsatisfactory Moderately Unsatisfactory --- Risk to Development Outcome Modest Modest --- Bank Performance Moderately Unsatisfactory Moderately Unsatisfactory --- Borrower Performance Unsatisfactory Unsatisfactory --- 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 draws the following main lessons from implementing this project\. 1 A careful assessment of the implementation period is required both during preparation and at restructuring\. In the case of this project, despite the slow pace of execution, the project closing date was extended by only 18 months during the second restructuring\. The project closing date was extended again by seven and half months\. 2 Long delay between project design and execution can result in high transactions costs\. A project that faced significant initial delays in getting operational may require working within a changed context, with new actors and/or circumstances\. This can cause high transaction costs and efficiency losses, in particular for a small operation\. 14\. Assessment Recommended? No  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AR 3rd Natl Communication UNFCCC (P116974) 15\. Comments on Quality of ICR The ICR is concise and well-written; it candidly discusses the problems encountered both in the initial years and during the rest of project implementation\. It also provides an in -depth critical analysis in the assessment of the project's efficacy\. The lessons are generic\. While there was no formal economic analysis of the project, the efficiency section of the ICR could have been substantiated with some qualitative evidence\. A more sparring use of acronyms could have helped in making it easy for the reader\. a\. Quality of ICR Rating Substantial

REVIEW

P000995

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 14815 IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GUINEA-BISSAU AGRICULTURAL SERVICES PROJECT (CREDIT 1799-GUB) JUNE 30, 1995 Agriculture and Envirorment Operations Division Western Africa Department Africa Region This document has a restricted distribution and may be used bv recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Current Unit = Guinean Peso (GP) US$1\.00 = GP 170 (appraisal) US$1\.00 = GP 16,000 (closing) US$1\.16 1 SDR (appraisal) US$1\.40 = 1 SDR (July 1994) WEIGHTS AND MEASURES (Metric) FISCAL YEAR OF BORROWER January 1 to December 31 ABBREVIATIONS AND ACRONYMS ALEMP Agricultural Land and Environmental Management Project ANAG Associa,co Nacional de Agricultores de Guine (National Farmers Association of Guinea-Bissau) DEPA Departamento de Pesquisa Agricola (Department of Agricultural Research) DGFC Direccao Geral de Floresta e Ca,a (Department of Forestry and Wildlife) DHSA Departamento de Hidraulica e Solos Agricolas (Dept\. of Hydraulics and Soil) EC European Commnunity FAO/CP United Nations Food and Agriculture Organization/Cooperative Program GAPLA Gabinete de Planifica,ao (Planning Department of MDRA) GGB Government of Guinea-Bissau ICR Implemetation Completion Report IDA International Monetary Fund INPA Instituto Nacional de Pesquisa Agricola (National Agricultural Research Institute) MAS MacDonald Agricultural Services MDRA Ministerio do Desenvolvimento Rural e da Agricultura (Ministry of Rural Development and Agriculture) MDRP Ministerio do Desenvolvimento Rural e das Pescas (Ministry of Rural Development and Fisheries - previous to present two ministries) MP Minist6rio das Pescas (Ministry of Fisheries) NGO Non-Governmental Organization PASA Projecto de Apoio ao Sector Agricola (Agricultural Services Project) PU Project Unit RVP Regional Vice Presidency SAP Structural Adjustment Program SAR Staff Appraisal Report SDR Special Drawing Rights  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GUINEA-BISSAU AGRICULTURAL SERVICES PROJECT (Credit 1799-GUB) Table of Contents Preface \. i Evaluation Summary \. ii PART I: PROJECT IMPLEMENTATION ASSESSMENT\. 1 A\. Project Objectives\. 1 B\. Achievement of Project Objectives \.1 C\. Implementaion Record and Major Factors Affecting the Project\. 3 D\. Project Sustainability\. 4 E\. Bank Performance\. 6 F\. Borrower Performance\. 7 G\. Assessment of Outcome\. 7 H\. Future Operation\. 7 I\. Key Lessons Leared\. 8 PART 11: STATISTICAL ANNEXES \.10 Table 1: Summary of Assessment \.10 Table 2: Related Bank Credit in Guine-Bissau \.11 Table 3: Project Timetable \. 11 Table 4: Credit and Grant Disbursement \.12 Table 5: Project Implementation \.12 Table 6A: Project Costs \.13 Table 6B: Project Financing \.13 Table 6C: Disbursement of Credit and Grant Proceeds \.13 Table 7: Economic Costs and Benefits \.14 Table 8: Studies \.15 Table 9: Status of Legal Covenants \.16 Table 10: Bank Resources - Staff Inputs (Staff Weeks) \.17 Table 11: Bank Resources - Missions \.17 APPENDICES: Appendix 1: February 1995 ICR Mission Aide-Memoire and Confirmation Letter Appendix 2: May 1995 1CR Mission Aide Memoire Appendix 3: Borrower's Contribution (Portuguese and English) Appendix 4: Map - IBRD No\. 24520 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\.   IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GUINEA-BISSAU AGRICULTURAL SERVICES PROJECT (Credit 1799-GUB) Preface This is the Implementation Completion Report (ICR) for the Agricultural Services Project in Guinea-Bissau, for which Credit 1799-GUB, in the amount of SDR 3\.2 million (US$ 3\.7 million) equivalent was approved on May 21, 1987, and made effective on June 22, 1988\. The Credit was closed on September 30, 1994, compared with the original closing date of December 31, 1991\. It was fully disbursed, and the last disbursement took place on July 11, 1994\. Cofinancing for this project was provided by the Netherlands in the form of an additional Guilder 5 million Grant (US$ 2\.5 million), administered by IDA\. The ICR was prepared by Mr\. Cheikh Sow and Mrs\. Catherine Cassagne, former and present Task Managers, Agriculture and Environment Division, Western Africa Department\. It was reviewed by Mr\. Randolph Harris, Division Chief, and Mr\. Jahangir Boroumand, Acting Operations Adviser\. The cofinancier did not provide written comments on the ICR\. Preparation of the ICR was begun during the Bank's final supervision mission of September 19, 1994\. It is based on the Report and Recommendation of the President, the mid-term review mission Aide-memoire and other material available in the project file, and the findings of two completion missions, respectively in February and May 1995\. The borrower contributed to the preparation of the ICR by preparing its own evaluation of the project's execution and achievements, commenting on the draft ICR\.   - ii - IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GUINEA-BISSAU AGRICULTURAL SERVICES PROJECT (Credit 1799-GUB) Evaluation Summary Introduction 1\. The Agricultural Services Project (PASA) constituted the Bank's first contribution to the development of the agricultural sector in Guinea-Bissau\. This relatively small country I had become independent in 1974 but, for about a decade, had followed political and development choices giving ve7 little attention to agriculture, although this sector was - and still is - the country's most important one In 1983, the Government defined for itself a market-oriented and agriculture-based development strategy - including fishery and forestry - and the Bank started playing a key role in supporting the various aspects of this strategy's implementation\. Between 1983 and 1986, the Bank had participated in seven other projects in the country totaling US$ 74\.0 million, mainly in the areas of infrastructure and technical assistance (to economic management, etc\.)\. PASA remained the only project on the Bank's agricultural portfolio while the staff of the Ministry of Rural Development and Agriculture (MDRA) was building up its implementation capacity, as well as its ability to plan and prepare new projects\. 2\. PASA originated from a 1983 FAO/CP review of the country's Agricultural Sector\. Project preparation was carried out by the Government of Guinea-Bissau through local working groups which were assisted by consultants\. An appraisal mission visited the country in November 1985 and negotiations were completed in Washington on November 6, 1986\. A Staff Appraisal Report was not prepared for the project\. Total Project costs were estimated at US$ 7\.0 million\. IDA was to finance SDR 3\.2 million (or about US$ 3\.7 million)\. The Dutch Government co-financed the project with Guilders 5 million (or US$ 2\.5 million)\. The GGB's contribution was estimated at US$ 0\.8 million equivalent\. It should be stressed that a great enthusiasm prevailed at the time PASA was designed and born, especially on the part of the Bank, as the project constituted the first major step to open horizons of development cooperation in the agricultural sector\. Project Objectives 3\. The original main Project objective was to build up, over a three-year period, the capacity within the Ministry of Rural Development and Fisheries (MDRP - now divided in two separate ministries: MDRA and MP) to: i) manage its human resources with particular attention to technical assistance; (ii) plan activities in the agricultural sector and coordinate external aid; (iii) fulfill its technical role in the different agriculture subsectors; and (iv) ensure monitoring of sectoral implementation and impact of the Government's Structural Adjustment Program (SAP) of 1987-88\. After the mid-term review, held in July 1991, these broad objectives were not changed, but, because of enormous delays and difficulties I surface: 36,125 km2; population: approx\. I million inhabitants today\. 2 The primary sector - agriculture, fisheries and forestry only, in Guinea-Bissau - contributes 50% to GDP, constitutes almost 100% of exports and 90% of employment\.  - iii - experienced until then in implementation, a narrowing of the project's scope was done through the adoption of a "planning by objectives" method\. A matrix was then established, outlining a dozen expected results and corresponding needed activities to be developed, in top priority fields\. 4\. Neither the initial broad objectives nor the expected results, following the mid-term review (also called "objectives") were, in fact, really appropriate\. The former because they were too general and corresponded more to means than to ends\. The latter because they were too narrow and, although measurable, were not enough linked to the development of the agricultural sector, on which the project was supposed to have a positive impact\. Implementation Experience and Results 5\. The proiect achieved part of its objectives as defined (whether in broad or reduced terms)\. The project has mainly succeeded in creating a real planning capacity within the MDRA, in the form of a unit - GAPLA - located out of the operational directorates and close to the Minister, composed of high level staff\. The MDRA has not, however, improved its management capacity\. The unfinished building for the MDRA offices, on one of Bissau's main streets, stands as very symbolic of the PASA's legacy\. The proiect's sustainabilitv is uncertain because most of the studies and recommendations it produced remain unimplemented and GAPLA, the most visible apparent success, is relatively disconnected from the rest of the MDRA and has very little impact on the ministry's management or on the way the agricultural sector evolves\. 6\. There was a significant difference between planned and actual distribution of costs\. Table 6C shows that almost 30% more than estimated at appraisal was spent on categories 2 (vehicles, equipment and furniture) and 3 (TA, training, studies and consultants)\. An important - but difficult to estimate with precision - part of these two categories constitutes operating costs\. The project was planned to be implemented in 4\.5 years, but, due to a very slow start - until mid-term review in July 1991 - it was eventually closed only in September 1994\. After the mid-term review, implementation progressed smoothly and on schedule\. 7\. Two key factors affected the achievement of the major objectives: (i) objectives were achieved when very clearly translated into concrete expected results and when detailed activities to achieve them were also very clearly defined\. This happened after and thanks to the mid-term review\. However, (ii) the major obstacle to the achievement of the project's development objectives (institutional strengthening) was the low rate of adoption and implementation of the proposals and recomnendations generated by the project\. For instance, a human resources management policy for the MDRA, with detailed operational recommendations, was elaborated - as a proposal - under the project, aimed at retaining qualified staff and increasing the degree of internalization of technical assistance - an important factor affecting the project's sustainability\. But such policy proposal was neither discussed nor considered for approval\. At least two successive documents proposing an agricultural policy were elaborated but none was adopted\. 8\. While certain elements of the Borrower's and the Bank's performance were satisfactory or highly satisfactory - notably at the technical levels of the MDRA staff in carrying out different project studies; and supervision, by the Bank, following the mid-term review - the performance of both the Bank and the Borrower can be considered deficient, overall\. On the Borrower's side, the decision levels were well below expectation\. In fact, although relatively well implemented, the project investments fell short of impact because their benefits/results were not used or built on\. On the Bank's side, the perfornance at  - iv - identification and preparation was poor, but it was better during supervision and at completion\. Partly because no plan for the project's operational phase was adopted, the squandering of project benefits was possible and indeed occurred\. Summary of Findings, Future Operation and Key Lessons Learned 9\. The overall project outcome is judged unsatisfactory, because, even if not precisely calculated, there is a large disproportion between project costs and benefits\. Also, an important part of such benefits have not been utilized exactly as planned (for instance, trained staff not back in the country, or not put in appropriate positions, or not utilized)\. The very good initial operation performance of the Ministry of Fisheries and ANAG (National Farmers Association), after implementation of their respective sub-components, is marginal to the PASA's main thrust and cannot change the overall judgement on the outcome\. 11\. Since a plan for the proiect's future operation had not been prepared 3, and because the project's sustainability - closely related to the destiny of the agricultural sector as a whole - was a major concern that motivated two completion missions, the Bank joined efforts with most of the other donors 4 to request that the Government prepare and adopt an agricultural sector development policy and a sound, priority focused, medium term public investment program for the sector\. The MDRA has agreed to lead the elaboration of these, based on a broad consultation of the beneficiaries and in articulation with all the major actors, including the other relevant ministries\. The policy would clearly address, inter alia, the respective roles of the public, private and non-profit (NGOs) institutions, a necessary clarification that would set the stage for possible future Bank assistance to MDRA\. Although it is difficult to define a possible new Bank project before such policy and PIP are ready and approved by the Government, it is possible to say that instead of yet another isolated "project", it would take the form of a direct and integrated support to the implementation of the above mentioned sectoral PIP, through further institutional strengthening of the existing line structures, building upon PASA's and other projects' results when relevant, in close articulation with the other donors\. 12\. Key lessons learned include, primno: the need for better project design and appraisal, adequately addressing the issues that constitute all other key lessons in this paragraph, but particularly: (i) the set up of realistic objectives - linked to the sector's development and addressing the farmers'needs; (ii) the incorporation of provisions aimed at putting all project results into operation; (iii) the set up of an efficient project monitoring (performance indicators), including the permanent monitoring of the impact on beneficiaries; secundo: the need for Borrower's ownership of the project, at all stages, rather than reliance on technical assistance or the Bank; tertio: the need, for the institution to be strengthened, to adopt, before the project starts, a human resources management policy that will facilitate the retention of project benefits; and the need to monitor such policy's implementation during the project's life; quarto: the need not to take for granted that the Borrower's teams are familiar with the Bank's methods and procedures, especially concerning accounting and procurement and thus plan for training in these fields; quinto: the need, for the Borrower, as part of the elaboration of its agricultural policy, to sharpen its agricultural research function and link between research, extension, and farmers\. 3 It was not a legal requirement but the Bank encouraged the Borrower to prepare one\. 4 The ICR of the PASA comes at a time when all the donors are expressing their concern about the imperiled sustainability of the projects they have financed in the agricultural sector of Guinea-Bissau\.   IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GUINEA-BISSAU AGRICULTURAL SERVICES PROJECT (Credit 1799-GUB) PART I: PROJECT IMPLEMENTATION ASSESSMENT A\. Project Objectives 1\. Project Objectives: The initial goal was to strengthen, over a period of three years, the capacities of the former Ministry of Rural Development and Fisheries [MDRP, which has now been divided into a Ministry of Rural Development and Agriculture (MDRA) and a Ministry of Fisheries (MP)] in the following areas: (i) planning and management of human resources, with particular emphasis on technical assistance; (ii) planning of interventions in the agricultural sector and coordination of external aid; (iii) fulfilling its technical role in the various agricultural sub-sectors\. This strengthening of capacities was intended to enable the MDRP to monitor, in a proactive manner, the reforms to be carried out in its sector in the framework of the Structural Adjustment Program for 1987-88\. 2\. The mid-term review, carried out in July 1991, having noted some promising project achievements after a slow and difficult start-up (especially the formulation, for the first time in Guinea- Bissau, of a coherent agricultural development strategy and the creation of an efficient system of data collection on fisheries), did not change the project's broad objectives\. Instead, project interventions were re-tailored to include a smaller number of means for achieving those ends\. The mid-term review mission recommended that project monitoring be improved through the application of the "planning by 5 objectives" method and it clearly defined and spelled out about 12 specific sub-components based on the agricultural development strategy 6 3\. Evaluation of Project Objectives: Concerning the project's broad initial objectives, it is now possible (with hindsight) to judge them rather general, and to see that they appeared more as means to an end, rather than true objectives in themselves\. Institution-building should be linked to monitorable indicators of sector performance\. In contrast, the objectives defined by the mid-term review mission had a narrower meaning of "anticipated result" -- indeed, a short-term result -- for each of the priority interventions recommended\. Here again, one falls some distance short of an overview of the sector's development as a whole\. In addition, it would undoubtedly have been better to consider acts of approval or implementation decisions as "expected results", instead of the studies, strategy papers and other reports which, in and of themselves (unimplemented), cannot be considered "results"\. B\. Achievement of Project Objectives 4\. Overall, the objectives as originally defined and as elaborated during the mid-term review mission were partially achieved\. Results were obtained that contributed in particular to a strengthened capacity for planning within the MDRA and MP, as well as to launch a commercial (autonomous) farmers organization (ANAG)\. The project's achievements are exhaustively listed in the attached Government contribution\. The following ones are noteworthy: 5 The total number of such sub-components is unclear as some appear as subsidiaries of others\. 6 Such strategy was however never formally adopted\.  - 2 - (a) A Human Resources Division (DRH), now within the Directorate for Administrative and Financial Services (DSAF), was created and its initial activities had the following results: an inventory of personnel and positions was done, redundant positions were eliminated, the payroll system was computerized; numerous managers and technicians were trained, especially in the areas of project development, management and monitoring (even though some of them did not return to the institution 7); a fairly detailed personnel management policy was formulated; the technical assistance received by the Ministry was assessed and followed by a marked improvement in the efficacy of this assistance, and a drastic reduction in the number of TA positions\. (b) A true planning capacity was set up within the Planning Department of MDRA (GAPLA) and its initial activities resulted in the following: personnel were trained in planning methodologies; the sector's public expenditures - in number of projects and their total value 8 - were analyzed and reduced; the under-financed sub-sectors (livestock, forestry) were identified and appropriate reallocation of funds were done; a number of studies were carried out\. (c) An effective statistical system was created and some basic studies and surveys were completed: agricultural census ; statistics on fishing and fruit sub-sectors (e\.g\., a study on mangoes and cashews, specifically requested and heeded; baseline study on commercial agriculture (ponteiros 9); these activities, although isolated, made it possible to strengthen the capacities of the division in charge of statistics within "GAPLA", as well as the data processing center of the Ministry of Fisheries\. (d) Dynamism was injected into commercial agriculture by the study on "ponteiros"; indeed, following this very detailed study, a national farmers association (ANAG) was created and workshops were held to inform farmers of commercial opportunities in neighboring countries and in Portugal\. (e) An initial agricultural development strategy was defined and numerous studies (some of which were mentioned above) were carried out on various topics\. After the mid-term review, these studies appear to have emerged strictly from the recommendations and priorities of the aforementioned strategy\. (f) The National Institute for Agricultural Research (INPA) was created and its initial activities produced a few promising results, especially with oil palms (introduction and adaptation of varieties), fruits (at the Quebo center)'° and corn\. 7 The seventh project accountant (after 6 had left) is however now responsible for the accounts and finances of the MDRA\. 8 However, there are presently some large projects in the field in the agricultural sector that do not appear in MDRA's accounts or in project lists drawn up by the Ministry of Plan\. 9 A 'ponteiro" is the private owner of a 'ponta", which is a large agricultural property\. 10 There is controversy, however, about the concrete results of this research, especially with regard to oil palms\. This activity should be monitored and the behavior of saplings distributed to farners observed\.  - 3 - (g) The project also partially achieved its fourth initial objective, as it helped monitor and implement the sectoral measures associated to the SAL; it however did so not for the first tranche but for the following ones\. A few results of the basic studies produced by the PASA were utilized in macro-economic policy by the ministries of Finance and Commerce\. C\. Implementation Record and Major Factors Affecting the Project 5\. Project start-up was very slow until July 1991, when the mid-term review mission was able to alleviate the main bottlenecks\. The project could not start because of the total inexperience of the existing institutions in project management, especially the ministry of agriculture for which, in addition, investing in the sector's development was a brand new challenge\. The project, the first of its kind in Guinea Bissau, was complex and assumed at least some prior knowledge of basic procurement methods and consultant recruitment procedures, knowledge which was in fact not there\. The technical assistance eventually contracted 1 by the Government to assist in project management did not substantially change this fact\. The mid-term review mission did much to remedy this situation by reducing the scope of the project, cutting it down to a dozen clearly defined and signposted activities and expected results\. However, a number of factors hampered smooth execution\. 6\. Factors that the Government could have influenced\. (a) Overall, a lack of commitment and sense of responsibility left too large a role for technical assistants, who in turn received inadequate guidance\. (b) There has been a quasi permanent unavailability of counterpart funds, even after the amendment of the Credit and Dutch Grant agreements in 1992, which enabled the two sources to finance up to 75% of recurrent costs and 95% of the local costs of civil works; the decline of the Guinean peso vis-a-vis the main hard currencies aggravated this problem; it should be reported that, before the above mentioned amendment of the Agreements, the Special Account of the project had shrunk to a minimum level and did not operate for more than a year\. (c) Failure to assign many of the persons trained under the project to positions and responsibilities corresponding to their newly-acquired skills 2 prevented the project benefits to multiply\. (d) There was an excessive turnover of personnel; some staff in key project positions changed too often, as they would leave civil service in search of better jobs (the accountant changed seven times)\. (e) Some of the ministerial units involved in the project had difficulties with understanding each other and cooperating with one another\. (f) There was an overall inadequate knowledge and ability in project management, and especially in disbursement procedures, accounting and procurement; this caused 11 The procurement process for this first contract, the signature of which was a condition of effectiveness, took almost a year\. 12 It proved extremely difficult to determine the exact percentage of personnel concemed by this\.  - 4 - considerable delays in project implementation, and also occasionnally resulted in procurement of inappropriate services (especially as regards technical assistance); this problem became less severe in the course of project implementation, but still persists because of staff turnover\. 7\. Factors related to the implementing agents\. Technical assistance was often ill-suited, in terms of skills and/or language (with some notable exceptions)\. 8\. Other factors\. A delay in disbursing the last tranche of the Dutch Grant also affected the project implementation\. D\. Project Sustainability 9\. The project sustainability is uncertain because most of the project's accomplishments - trained personnel, studies and policy proposals - were not followed by decisions and actions of implementation, a prerequisite to sustainability\. One striking example is the failure to implement the policy on human resource management, which provides for the recruitment, training and retention of personnel of the quality required and in the quantities needed\. Without such a policy applied, institution-building in Guinea Bissau's agricultural sector is just too daunting a challenge and any project in this field cannot have any visible long-term impact\. 10\. Instead of tackling the implementation of studies or taking advantage of accomplishments or investments already carried out, studies and training simply continued\. Thus, instead of the 200 man-months of training envisaged (including 50 trips abroad), there were 521 man- months (including 94 trips abroad); 20 studies were done instead of the 10 that had been planned\. Finally, although it is good to have used local consultants in place of the foreign technical assistance that had been originally envisaged, it is unfortunate that a good number of these consultants played roles that should have been filled by employees of the MDRA itself\.13 11\. In addition, there is nothing to guarantee that the relevant ministries -- MDRA and MP -- will be able to sustain the effort without supplemental help\. Only projects financed, one after the other, by the various donors are paying most of MDRA's recurrent costs, including salary supplements for civil 14\. MDRA's non-project work is negligible and the sector's program of public investment is little more than a list of different projects financed by different donors, without ties to the planning function\. The PASA has put certain tools in place, has trained people, developed policies, strategies and regulatory texts and action plans; but what still remains to be done is to apply all of that and get the system up and running\. 13 Fewer man-months of foreign technical assistance were used than had been foreseen, but considerably more local consultants were used (165 man-months rather than the 0 envisaged, not including services rendered by local firms - see Table 5)\. This was certainly all to the good for the local firms and consultants, but did not enhance the sustainability or impact of the project\. 4The fact that it is not possible to pay salary supplements with IDA funds undoubtedly contributed to the high turnover of most of the civil servants assigned to the project and to the excessive use of local consultants\. This is not a problem with the niles on the use of IDA funds\. but rather a basic problem , in Guinea-Bissau, of financial resources raising and national budget allocation\.  - 5 - 12\. The following sustainability assessments can be made, for some of the main results: (a) Civil works: The construction of MDRA's office is about 2/3 completed\. Counterpart funds have been inadequate and the devaluation of the local currency has exacerbated the situation\. (b) Human resources: Neither the database about MDRA personnel, nor the document containing detailed proposals for a personnel management policy, nor another containing a proposed method of evaluating employees of the MDRA has been used\. Only the computerized salary and payment system works (when paychecks are issued)\. (c) Support for statistics: The investments in equipment, material and some training yielded good results, at the MDRA as well as at the MP\. Regular figures are issued on the production and prices of main crops and specific studies are sometimes carried out\. However, the long term survival of these statistics systems and centers depends upon demand\. But, for the moment, these systems can only function with supplemental aid from donors, through projects, and it seems that the main "demanders" are other projects\. (d) Creation of ANAG: To the PASA's credit, this accomplishment, which cost very little, is undoubtedly the one that has had the greatest impact and whose sustainability is most obvious\. ANAG is a very dynamic, market oriented, autonomous, association and its operation costs are paid by members' dues, including of smallholders\. (e) Planning capacity of GAPLA: The sustainability of the investments devoted to GAPLA is compromised, since it is not used by MDRA for planning purposes, and because the things that it does plan are rarely implemented and then only when related to ad hoc projects taken over by other donors\. GAPLA is practically the only entity with credibility vis-a-vis donors and cooperative agencies 15 but this sparks institutional jealousy\. In the wake of the last institutional reorganization decreed by the Minister, GAPLA has found itself even more isolated\. (f) Creation of INPA and the results of research: An autonomous national agricultural research institute, INPA, was created in 1993\. The fruit research and development at Quebo and upland food crops research at Contuboel produced results, some of which have had an impact (some of the seedlings received by 300 farmers are in production; two varieties of corn were adapted with a 30% rate of adoption)\. But, overall, research has had a very limited impact and the benefits to farmers are not apparent\. Agronomic research in Guinea Bissau still needs to concentrate on the essentials and to specialize, and the newly created national extension service awaits assistance to start operating\. (g) Forestry activities: The project support of activities in forestry had very limited impact on raising of nursery plants in relation to reforestation, except in the case of oil 15 which tend to use GAPLA personnel for a number of other tasks such as project coordination\. Some members of GAPLA, understandably, take on second jobs in their off hours in order to supplement their salary which is barely adequate to buy one bag of rice per month\.  - 6 - palms\. A law on forestry, a forestry taxation system and a forestry policy remained as drafts\. (h) Fisheries: The present performance of the Ministry of Fisheries is another positive item on the list of sustainable investments of the PASA\. Although four of the 5 staff trained from the Center management had left the institution, one has now come back, attracted by the dynamism of the unit and a better remuneration\. With articulated assistance from other donors to the implementation of a comprehensive, integrated, sector policy and action program prepared by this ministry, that involves sound institutional reform, a better channeling and use of funds generated by the sector, and a more sustainable use of the fisheries resources, the few seeds left by the PASA contributed to an overall sustainable undertaking\. (i) Livestock Production: the two studies produced by the PASA have formed the bases for the preparation of livestock production projects on a pilot basis in two towns, Bissora and Gabu, representing Balanta and Fula production systems, respectively\. These await to be considered for support\. (j) Irrigation: the activities carried out by the PASA under this component, aimed at doubling the annual rice harvest (national survey that identified 30 bottom-lands suitable for irrigation; topographic surveys in some of the latter; pilot irrigation tests in one site near Gabu), had no impact except some land tenure conflicts\. E\. Bank Performance 13\. Three phases of the Bank performance may be distinguished: phase one, from identification to signature, including design, preparation and appraisal; phase two, corresponding to supervision from signature to mid-term review; and phase three, supervision from the mid-term review to completion\. During the first two phases, the Bank's performance can be characterized as deficient, overall\. The project was not thoroughly prepared or appraised\. The Bank then considered, with reason, that such an investment project was a key instrument to start implementing the - also Bank recommended - transition towards a market-oriented agriculture-based economy and, as such, was a necessary companion piece to the first SAL\. However, the Bank misjudged the conditions prevailing in the country at the time of project design, underestimated the need for Borrower ownership and, instead of genuinely helping the Government find an appropriate solution, insisted that expatriate technical assistants do the job that the Government lacked the experience to do\. It was even included in project design that a technical assistance firm would be delegated the project management and would start by further defining the project, a task that should have been done through adequate preparation and appraisal\. Even after the project became effective 16 and the technical assistance proved unable to solve the main problem, the Bank lacked the flexibility, adaptability and decisiveness needed to promote a project change\. However the Bank performance can be rated as satisfactory during and after the mid-term review mission, which stands out as having had a different, more lucid, approach\. From then on supervision became more helpful and a better dialogue with the Government was maintained until completion\. 16 A major reorganization of the Bank affected its perforriiance during 1987 and part of 1988, by delaying all on-going activities and diverting the staff's attention for about 6 months\.  -7 - F\. Borrower Performance 14\. Overall, the performance of the borrower can also be rated as deficient with nuances corresponding to the same above three phases\. It did not do much to assume ownership of the project, especially at design and preparation, and roughly until the mid-term review\. The borrower is responsible in particular for not having made the decisions necessary for the implementation of the PASA's policies, studies and recommendations, which accumulated without receiving any operational follow-up\. This attitude, aggravated at and after completion, is considered the main reason for the project's lack of sustainability\. The borrower's financial performance during and after implementation also stands out as particularly weak\. The two final audit reports (for the accounts closed on December 31, 1993; and September 30, 1994) are still overdue at the time of this report, despite repeated reminders in which the Government was informed it could jeopardize future lending to the sector\. However, the borrower's performance deserves better rating in implementation after the mid-term review, not only as a result of the review but also because the Government then decided to take ownership of the project, ended a number of inefficient expatriate consultants' contracts and carried out all activities jointly defined during the mid-term review mission\. G\. Assessment of Outcome 15\. The overall project outcome is unsatisfactory because the main objectives - of institutional building - were only partially achieved, a great deal of the benefits were diluted, the project sustainability is uncertain, but US$ 7\.5 million equivalent were spent\. Even if the costs and benefits were not precisely quantified, the project's cost-effectiveness can be judged as insufficient\. Furthermore, unless decisions are taken without delay to implement the studies, policies and other achievements of the PASA, an even larger part of its benefits could well vanish\. H\. Future Operation 16\. A plan for the project's future operation was not prepared, as it had not been legally agreed\. In the case of the PASA - or any other institution-building project - "operation" would mean the adequate utilization of trained staff and the approval and implementation of the studies and policies produced\. It is still possible however (within a reasonable time frame) that appropriate decisions be made by the Government and that the PASA's accomplishments be exploited for the development of the sector\. The elaboration process of the ICR was an instrument of dialogue with the Government to this end, but only a future observation (e\.g\., through an impact evaluation) may fully answer the question\. 17\. Since the discouraging results of the PASA added to those of most other rural sector projects 17 in Guinea-Bissau, the donor community'8 has approached the MDRA as a group\. As a result of the dialogue, the MDRA has agreed to lead a national participatory process to prepare an agricultural sector development policy and a sound, priority-focused, medium term public investment program (PIP) for the sector\. 9 The policy would be based on a broad consultation of the 17 According to many evaluation reports, such projects were especially those of an integrated type, very large sized and based on a particular geographic area; and essentially because they attempted to apply "imported" concepts, with a lack of participation of the beneficiaries\. 18 And especially the World Bank, EEC, the Swedish, French and Dutch cooperation's, UNDP, FAO, USAID and EFAD 19 The Bank informed the MDRA that such policy and PIP would serve the purpose of a plan for project operation\.  -8 - beneficiaries20 and would address basic crucial issues such as: land tenure policy; the respective roles of the public, private and non-profit sectors in agricultural services; the difference in approach needed for the adequate treatment of both subsistence and cash crops, small holders and ponteiros, and the three - agricultural, pastoral, forest - domains\. 18\. The precise content of future Bank support for the sector will be defined once the above policy and PIP are ready and approved by the Government\. It was originally envisaged that two different projects would be undertaken in the rural sector, after the PASA: one aimed at solving basic problems related to natural resource management, and another that would continue to support the agricultural sector institutions, covering a range of agricultural services and building on the results of the PASA\. It is presently envisaged that there would be a single, government-led investment program for which key donors would provide integrated support, and which would be implemented in accordance with common procedures, rather than as isolated "projects", as has been the case to date\. I\. Key Lessons Learned 19\. Better Project Design and Preparation\. (a) Realistic and precise development objectives must be defined, as a framework for the results anticipated for each activity or component, and tied to monitorable performance indicators - here, of the agricultural sector's development\. (b) The beneficiaries and/or the main target groups must be consulted and must participate in the project preparation; any contradiction between the opinions of the beneficiaries and/or target groups and those of the Government must be resolved before project appraisal; a consultation process allows to set objectives that correspond to actual needs and prevents from making a number of mistakes, such as, for instance, the failure to take account of land tenure issues (a lesson learned from the pilot irrigation project)\. (c) The project must constitute a logical whole with a high degree of internal coherence rather than be a disparate series of activities strung together; the pre-existence of a sectoral policy and detailed strategy is a significant asset\. (d) The required official decisions - to apply recommendations generated by the project, approve and implement strategies and policies developed under the project, etc\. - should be anticipated at appraisal\. If need be, legal covenants requiring such acts of approval should be included in the credit agreement as milestones in the implementation process\. Part of this need can be addressed by the preparation and adoption of a plan for the project's operation\. However, in the case of an institution- building project - as the PASA - operation is a continuous process throughout the project, not a chronological second phase after implementation\. (e) The project must include a simple but effective system of monitoring and evaluation, to be set up from the beginning and constantly used as a management tool; to be most effective, this system should be defined and set up in a participatory manner at 20 A comprehensive national survey is on-going, with FAO's support\.  -9 - appraisal; the system should be based on the sector performance indicators including indicators of the beneficiaries' satisfaction\. 20\. Borrower's Ownership\. (a) The Government must truly "own" the project from the beginning, and must react immediately to the slightest "slippage"; this responsibility should not be delegated to technical assistants or transferred to the Bank or other donor\. (b) Close attention should be given by the Borrower - who drafts them - and the Bank - who reviews them - to the terms of reference of technical assistants - whether expatriate or local - and to the monitoring of their performance\. Missions should preferably be of short duration (although the same specialist may have to intervene regularly) and targeted at specific technical issues (not project management)\. 21\. Better Monitoring of the Human Resources Capacity Building and Performance\. (a) It is important to also provide for the monitoring of the individual and collective performance of the human resources assigned to the project, including the project permanent staff, over and above the technical assistants\. (b) Care should be taken that the structure of salaries and other benefits of project personnel does not run counter to project sustainability; hence, base salaries of civil servants should be sufficiently attractive and consultants' salaries should not be vastly larger than theirs\. At the same time, it should be ascertained that personnel trained by the project will stay with the project or be assigned to posts for which they have been trained\. 22\. Upfront training in Important Aspects of Proiect Management and Bank Guidelines\. Accounting and financial management, as well as procurement and general project management capacity, must be duly internalized by the borrower's teams\. The World Bank should ensure that this happens and organize the required training seminars and arrange for the translation of relevant documents -- manuals and directives -- into Portuguese\. 23\. Sharpening the Research and Extension Linkages\. Agricultural research must be linked to field realities: on the one hand it must disseminate its results and, on the other hand it must be poised to listen to and observe farmers in order to provide feedback to research\. In a country like Guinea Bissau, it is advisable to limit agronomic research to the "applied" and "adaptive" categories\. Extension should be seen as a the necessary intermediary instrument between research and the farmers (a clearly missing link in the case of PASA)\.  - 10- PART II: STATISTICAL ANNEXES Table 1: Summary of Assessments A\. Achievement of Objectives Substantial Partial Negligible Not Applicable Macro policies x Sector policies x Financial objectives x Institutional development x Physical objectives x Poverty reduction x Gender issues x Other social objectives x Environment objectives x Public sector management x Private sector management x Other B\. Proiect Sustainability Likely Unlikely Uncertain x Highly C\. Bank Performance Satisfactory Satisfactory Deficient Identification x Preparation assistance x Appraisal x Supervision x Highly D\. Borrower Performance Satisfactory Satisfactory Deficient Preparation x Implementation x Covenant compliance x Operation x Highly Highly E\. Assessment of Outcome Satisfactory Satisfactory Unsatisfactory Satisfactory x  - I1 - Table 2: Related Bank Credits in Guinea-Bissau || Amount in Year of Credit No\. US$ millions Purpose Approval Status Credits under execution when PASA was appraised 1334-GUB 13\.1 Petroleum Exploration II 1983 Completed 1392-GUB 16\.0 Bissau Port 1983 Completed 1473-GUB 4\.0 Roads II 1984 Completed SF18-GUB 4\.0 Roads II 1985 Completed 1517-GUB 6\.0 First Technical Assistance 1985 Completed 1531-GUB 10\.0 Reconstruction Import 1985 Completed A014-GUB 5\.0 Suppl\. Recons\. Import 1986 Completed Credits approved after PASA 1935-GUB 7\.0 SDR Second Technical Assistance Project 1988 Completed 1914-GUB 3\.1 SDR Basic Education Development Project 1988 On-going 2019-GUB 18\.0 SDR Structural Adjustment Credit II 1989 On-going 2020-GUB 3\.85 SDR Infrastructure and Social Action Project 1989 Completed 2074-GUB 18\.5 SDR Infrastructure Rehabilitation Project 1990 On-going 2237-GUB 11\.3 SDR Energy Project 1992 On-going 2342-GUB 5\.2 SDR Economic Management Project 1992 On-going 2465-GUB 6\.4 SDR Social Sector Project 1993 On-going Table 3: Project Timetable Item | Date Planned Revised Date Actual Date Preparation Period Identification l 1983 Preparation l 1985 Appraisal Mission November 1985 l November 1985 Staff Appraisal Report N\.A\. Not prepared Credit Negotiations November 1986 _ November 3, 1986 Board Approval 1987 May 21, 1987 Credit Signature 1987 l May 22, 1987 Credit Effectiveness July 1987 l June 22, 1988 | Implementation Period Completion December 31, 1990 December 30, 1991 December 31, 1993 l _________________________ l ______________________ _ l D ecem ber 30, 1992 l Credit Closing December 31, 1991 December 31, 1992, September 30, 1994 l ____________________________ l __________________l____ _ D ecem ber_9br31, 1993 l No of Closing Extensions: 3  - 12 - Table 4: Credit and Grant Disbursement Cumulative Estimated and Actual Disbursements US$ Millions FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 Appraisal Estimate 0\.5 1\.8 3\.2 5\.3 7\.0 Actual 0\.0 0\.2 1\.9 3\.7 5\.3 6\.1 6\.8 7\.5 Actual as a % of Estimate 0% 3 % 25% 49% 70% 81% 90% 100% Date of Final Disbursement: April 30, 1994 Table 5: Project Implementation Appraisal PCR Indicators Estimate Estimate Technical Assistance Provided by MAS 228 Person-months 140 Person-months (MacDonald Agricultural Services) Technical Assistance Provided by EuroConsult 30 P/P 30 P/P (Irrigation Engineer) Technical Assistance Provided by Lahmeyer Int\. 30 P/P 6 P/P (Agricultural Planner) Foreign Independents Consultants (Long-Term) 0 P/P 87 P[P Foreign Independent Consultants (Short-Term) 10 P/P 17 P/P Local Technical Assistance/ Project Key Staff 0 94 P/P Local Technical Assistance/ Consultants 0 71 P/P No\. of Division Created 4 4 No\. of Fisheries Management Center Created 1 1 No\. of Staff Houses 4 0 No\. of Training Activities 200 P/P 521 P/P No\. of Bas-Fonds identified 30 30 No\. of Studies 10 20 No\. of Air tickets for training abroad 50 94 No\. of firms or suppliers of services 40 40 local + 50 foreign Publication of technical papers 5 Other Civil Works (rehabilitation & Reparation) 10 areas (for US$ 107 000) Aerial Photography and design material US$ 115,000 Material and Equipment for forestry guards 240 sets Vehicles for Bissau 2 + I minibus Vehicles 4x4 13 Trucks 2 Bicycles and motorcycles 325 b + 105 m No\. of other buildings constructed 21 1 0 1 21 Completed at more or less two thirds; an estimated US$ 400,000 would allow for its completion\.  - 13 - Table 6A: Project Costs (US$ Million) APPRAISAL ESTIMATE ACTUAL Local Costs Foreign Costs Total Costs Local Costs Foreign Costs Total Costs 0\.93 6\.07 7\.00 0\.30 7\.2 7\.50 (13\.3%) (86\.7%) (100%) (4%) (96%) (100%) Table 6B\. Project Financing (US$ Million) Estimated (Percent) Actual 1/ (Percent) Dutch Grant 2\.5 (36%) 2\.8 (37%) Government 0\.8 (1 I %) 0\.3 (4%) World Bank 3\.7 (53%) 4\.4 (59%) TOTAL 1 7\.0 (100%) 7\.5 (100%) Note: The Difference between estimated and actual financing is related to currency fluctuation\. 1/ At exchange rates of US$1\.4 = ISDR; US$0\.56 = 1 NLG (estimated)\. Table 6C: Disbursement of Credit and Grant Proceeds (US$ 000) Appraisal Estimate Revised Actual Category Item ll l___________________________________________ Amount ( Amount Amount 1/ (%) 1\. Civil Works and Construction 587 8% 812 676 11% 2\. Vehicles, Equipment & Furniture 1,045 15% 1,495 1,584 21% 3\. Techn\. Assist\., Training, Studies & Consultants 2,786 40% 4,081 4,500 61 % 4\. Operating Costs 230 3 % 270 322 3% 5\. Goods and Services 1,372 20% 178 230 3% 6\. Refunding of PPF 230 3% 114 119 2% 7\. Unallocated 751 11% 0 0 0% TOTAL 7,000 100% 6,952 7,431 100 % Note: The difference between estimated and actual disbursement is related to currency fluctuation\. 1/ At exchange rates of US$1\.4 = lSDR; US$0\.56 = I NLG (estimated)\.  - 14 - Table 7: Economic Costs and Benefits A\. Direct Benefits APPRAISAL INDICATORS ESTIMATE" ICR ESTIMATE (3 Years) (5 Years) Training of Ministry's Staff GAPLA 40% Forestry 5% Irrigation, Agriculture, Fruit production 25% Livestock 10% Fisheries 20% TOTAL (over US$ I million) 100% Impact on Fruit Production Pineapple 200,000 plants Banana 100,000 plants Palm Oil 1,000 plants Citrus 560 grafts Mangoes 15 varieties Impact on Forestry Palm Trees (No\. of Plants) 60,000 55,000 Tree nurseries 24 Impact on Irrigation Identification of Bas-fonds 50 30 Preparation of Pre-feasibility Studies 30 30 Impact on Agricultural Research Highland Crops Research 46 varieties Farming systems 144 trials Impact on the Local Economy Consultants, Perdiem, Buildings, etc\. 40% of project funds \. __ lor about $2\.8 million B\. Financial and Economic Impact Not Applicable 22 These indicators are not available in the President's Report\. 2 3 It is estimated that only 5,000 of these plants remained at the research station\. These in-vitro plants were imported without adequate training of the research staff to handle the plants\. This resulted in a loss of 97% of the plants\. The impact of the Embunhe's nursery for other plants was dismal because of lack of forestry action plan\. Trials were conducted on the following: 10 varieties of sorghum, 6 of millet, 8 of maize\. 6 of cassava, 6 of sweet potatoes, 10 of beans, and 6 of soybean\.  - 15 - Table 8: Studies Date Report or Study Title Consultants/Fi MDRA Department rms or Sponsors 11/88 Analysis of Agricultural Credit and Support to the INTRACO GAPLA Agricultural Sector 05/89 Reorganisarao de la Pesquisa Agro-Pecuaria en Guine C\. Kurtz; GAPLA Bissau J\. Ascenco 10/89 Aperfei,oamento Administrativo do MDRA M\. Timm GAPLA 02/90 Estudio sobre a Taxa,ao Florestal en Guine Bissau F\. Pascoa DGFC 04/90 Inventario Florestais de 2 conce,oes F\. Pascoa DGFC (Maudo Sano e FORBI) 01/90 Projet de Loi Forestiere (draft) R\. Costa DGFC 05/90 Strategia de Desenvolvimento Agraria L\. Peireira GAPLA (Versao Preliminar) 10/91 30 Avant-Projets Sommaires de Sites Hydro-agricole a Euroconsult DHSA I'Est 02/92 Etude du Plan Cerealier de Guinee Bissau IRAM CONACILSS (lere Phase) 06/92 Projet d'Etudes d'architecture et d'ingenierie pour le Projectae GAPLA siege du MDRA 07/92 Aspect Commerciaux de la Mangue C\. Schwartz GAPLA 09/92 Valorisation Agro-industrielle 1\. Miranda GAPLA C\. Nhate 10/92 Estudo sobre os Ponteiros (mangoes and cashew L\. Pereira GAPLA production) Via para a Modernisagao 11/92 Estudio sobre o credito e a organisa,ao Min\. Agric\. GAPLA associativa empressorial Portugal 11/92 Manuel d'Apiculture J\. Alcobia DEPA 11/92 Manuel sur les Agrumes DEPA DEPA/Vulgar\. 01/93 Revisao do Programa de Investimento Publico en M\. Andrade, GAPLA 0____9__ Agricultura N\. Diaz 06/93 Etudes Statistiques sur les Ponteiros, la fruticulture et la Division GAPLA campagne agricole 92/93 Statistique 07/93 Animal Production System GAPTEC DGP 07/93 Socio-economy of Animal Health GAPTEC DGP  - 16- Table 9: Status of Legal Covenants C\.A\. P\.R\. Covenants Status 1\. Loan Effectiveness 49 Establishment by the Borrower of a Project Unit within GAPLA, in the MDRP\. ________ ________ Complied wtth delay 50 An IDA approved contract would he signed with a international consulting firm to supply the resident technical assistants of the project\. 75 The Dutch Grant of Guilders 5 million for the project would become effective\. 2\. Funding 2\.02 b The Borrower shall open and maintain in dollars a special account in a commercial bank on terms and conditions acceptable to IDA\. Complied 3\.01 Borrower will implement project in conformity with administrative, financial, engineering and agricultural practices and provide prompt/adequate funds/resources required by the project\. Satisfactory 4\.01 The Borrower shall maintain records and accounts adequate to reflect the operations in accordance Partial compliance\. a with sound accounting principles\. Accountant in project has changed 7 times\. Most important problem has been lack of I_documentation\. 4\.01 The Borrower shall furnish IDA, as soon as possible, but in any case not later than 6 months after the Final reports for FY93 b (ii) end of each fiscal year, a certified copy of an audit report on the project accounts which would be and FY94 (at 09/94) still acceptable to IDA\. expected\. 3\. Procurement 3\.02 Procurement of credit financed goods, civil works and consultants to be govemed by IDA's accepted Satisfactory procedures \. r 77 All tedms of reference, qualification and contract must be submitted to IDA for approval\. Satisfactory 4\. Staffing _ 3\.03 a Borrower shall establish no later than 30/11/87 a Human Resources Division and employ a qualified Complied and experienced Guinean National to head the division\. l 3\.03 b Borrower shall maintain a Project Unit and a Human Resources Division, and provide them with Complied in general, not facilities, staff and other resources needed to discharge their responsibilities\. in financial area 3\.04 Borrower shall employ at all times GAPLA's Director and local counterpart staff to resident experts, with qualification and experience satisfactory to IDA\. Satisfactory 3\.05 Borrower shall fumish to IDA for its review and comments, not later than 6 months after the arrival of each expert, a work plan prepared by said expert including training of local counterparts\. Not satisfactory\. 5\. Special Conditions Borrower shall prepare and submit to IDA not later than 31112187: _ _ | 3\.06 a A forestry Development Plan\. Plan prepared 3\.06 b A research program for the assessment of the species best adapted to local conditions\. Not satisfactory 3\.06 c A program for in-service and overseas training for irrigation local staff\. Complied 3\.06 d A program for in-service and overseas training of forestry staff\. Satisfactory 3\.06 e The work plan and training program for GAPLA's Statistics Division\. Complied 6\. Other Conditions 3\.07 Not later than the 31 December of each year, the Borrower shall prepare and furnish to IDA for its Started to be implemented review and comments a summary analysis of all rural sector projects under execution and to be in 1992 executed the following year\. l 3\.08 The Borrower shall identify and propose to IDA the activities to be financed under the Special Fund\. In compliance in terms and conditions satisfactory to IDA\. 3\.09 Before undertaking the construction of the resident expert houses, the Borrower shall furnish to IDA After mid-term review it the design for approval\. was decided to build part of the MDRA offices instead, but such buildings were not completed  - 17 - Table 10: Bank Resources - Staff Inputs (Staff Weeks) FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 Preparation * Appraisal 26\.8 2\.4 Negotiations 7\.1 Supervision 0\.3 0\.8 10\.4 30\.1 25\.8 5\.0 17\.0 4\.5 9\.1 1 ICR _3\.7 16\.4 TOTAL * 27\.1 10\.4 10\.4 30\.1 25\.8 5\.0 17\.0 4\.5 12\.8 16\.4 Note: * Preparationlpre-appraisal was done by Govermnent-paid consultants\. Table 11: Bank Resources - Missions Stage of Date No\. of Days in Specializations Performance Rating Trend:' Type of Project Cycle Month/Year Persons Field Represented !' Rating Problems | Identification 1983 2 3 ax,c Appraisal!, 12/85 10 27 a\.b,c,d,e,f,g - Supervision 1 03/89 1 15 a I 1 T - Supervision 2 10/89 4 10 a,i,j I I Supervision 3 02/90 1 8 c 2 I 1 M,T Supervision 4 06/90 1 7 c 2 2 Supervision 5 10/90 1 2 c 2 2 Mid-Term Review 07/91 3 10 a,b,c 2 2 Supervision 6 03/92 1 7 c 2 1 _ __ Supervision 7 06/92 1 4 c 2 2 F,T Supervision 8 08/92 1 2 c 2 1 Supervision 9 11/92 1 7 c 2 Supervision 10 03/93 1 5 c 2 Supervision 11 08/93 _ 10 c 2 2 Supervision 12 12/93 1 21 c 2 _ 2 - Supervision 13 09/94 1 8 c 2 2 F ICR draft 02/95 3 7 a,b,c 2 2 | F,P ICR discussion 05/95 I 10 c/f 3 3 P 1/ a = Agriculturist; b = Financial Analyst; c = Agricultural Economist; d = Engineer; e = Credit Specialist: f: FFvironmental Specialist f = Training specialist; g = Marketing specialist; h = Roads Engineer; i = forester; j = Extentionist 2/ 1 = problem free or minor problems; 2 = moderate problems; 3 = major problems; 4 = critical situation 3/ 1 = improving; 2 = stationary; 3 = deteriorating 4/ F = Financial; M = Management; T = Technical P = Political; 0 = Other 51 Preparation/preappraisal was done by Govemment-paid consultants   Appendi\.x I Revublic of Guinea-Bissau Agricultural Services Support Project (Projecto deApoio ao Sector Agricola) PASA IDA Credit 1799-GUB Dutch Grant No\. 2457 GUB Implementation Completion Mission (February 1 - 8, 1995) Aide-Memoire A World Bank mission composed of Mme\./Messrs\. Cheikh Sow (Leader / Agricultural Economist), Chandra Pattanayak (Agronomist) and Lucie Tran (Operations Analyst), visited Guinea-Bissau from February 1 to 8, 1995 to jointly carry out along with Government Officials an Implementation Completion Mission of the Agricultural Services Support Project (PASA) financed by the World Bank / IDA, the Government of the Netherlands and the Government of Guinea-Bissau\. The objective of the mission was to undertake a complete assessment of PASA's achievements in reaching the goals set during project appraisal of 1986 and Mid-Term Review of 1991\. The mission's terms of reference is detailed in the Statement of mission objectives of January 25, 1995\. The mission would like take this opportunity to thank the Bank's Resident Mission and the Government of Guinea-Bissau for their assistance during the mission\. This aide-memoire summarizes the mission's findings which were discussed with Government officials (Messrs\. C\. Amarante, Director GAPLA; H\. Mendes, Directorate of Livestock; A\. Sani, Directorate of Forestry; and P\. Lopes Jr\., Human Resources Division, GAPLA) prior to mission's departure from the country\. Assessment of Overall Project's Performance PASA has experienced a slow start-up and ineffective implementation during the first three years of the project's life\. After the July 1991 Mid-Term Review (MTR), considerable accomplishments were recorded by the project\. The project has enhanced its capacity to analyze and plan the agricultural sector's activities\. PASA's Human Resources Division has completed an inventory of staff of the Ministry of Rural Development and Agriculture (MDRA) which has resulted in the elimination from MDRA's payroll of many ghost employees\. A wide variety of training activities were designed to upgrade the skills of MDRA's staff\. The project also assisted MDRA's Statistical Division in carrying out key data collection and studies in the agricultural sector\. Technical Departments of MDRA were also strengthened and their achievements are presented below\.  2 Human Resources Development and Training Despite some progress on the human resources aspect of the project, a lot remains to be done\. A Human Resources Division (HRD) has been created within GAPLA and more than US$700,000 were allocated to strengthen personnel management and training of MDRA staff\. With the objective of rationalizing staff strength in the MDRA, the HRD has prepared an inventory of staff, and action has been taken to correct redundancies\. A draft on personnel policy, including analysis of job profiles, evaluation of performance and terms of employment, has been finalized, but it should be discussed with the authorities\. While these developments are appreciable, there are several issues which have not yet been addressed: (i) the criteria for the selection of candidates for training; (ii) a master plan on human resources requirement; (iii) non-return of overseas trained staff, (iv) recruitment of Government staff as local consultants at significantly higher salaries than current Government salaries; and (v) the risk of reduced effectiveness of HRD if the proposed merger with the Administration and Finance Department takes effect\. Under the project, a variety of training activities have been carried out\. There were in-country training sessions on the planning and management of the projects, finance, and human resources along with data processing application in these three areas\. Furthermore, there were a number of training activities within and outside the country on technical subjects\. In particular, there were significant training activities after the Mid-Term Review in 1991\. There were 210 man-months of overseas training for 175 persons, 201 man-months of courses, offered in Bissau, to 470 persons and 110 man-months of short- term courses offered abroad to 80 persons\. However, there is no record to indicate that staff, having received a specialized training, continue to work in the same specialty after the training\. Agricultural Research and Extension The project has assisted the national agricultural research activity in several ways\. It supported the studies by three external consultants for three man-months on future plans for agricultural research and by one local consultant for two man-months on fruit crops research\. As a result of these studies, the autonomous national agricultural research institute, INPA, was created, succeeding the formcr DEPA of MDRA\. Furthermore, the project has supported DEPA/INPA's on-going effort on fruit research at Quebo and upland food crops research at Contubuel\. At Quebo, the assistance was for the supply of vehicles, tractor, and irrigation equipment, which amounted to one-third of the total investment on physical facility at Quebo\. The assistance at Contubuel was on laboratory equipment, generator and operational support for field trials\. Despite these and other assistance at both of these research centers, the benefits to the farmers during the project period was negligible\. There was the problem of general management at Quebo, and the leadership of external technical assistance was questionable\. The three technicians trained with the support of the project funds, upon return from training in Brazil, have not been posted at Quebo\. We realize that getting research results in the field takes time\. However, INPA should have developed a time-bound plan for transferring results to the farmers' fields\. The creation of INPA without the presence of a strong national extension system will be counterproductive\. DEPA's accomplishments were limited because it was involved in both research and extension\. Initiating a national extension system and linking it with INPA is a topmost priority\. To address this issue, the newly created Directorate of Rural Promotion and Extension should be strengthened\. INPA deserves support on short- and long-term training of research staff and on the introduction of improved germplasm of crop plants and livestock\.  3 Livestock studies The project supported two valuable studies on the livestock sector-- one on livestock production systems and the other on socioeconomic study of animal health\. External (25 man-months) and local (36 man-months) consultants were involved in the execution of these studies\. The reports of these studies have formed the bases for the preparation of livestock production projects on a pilot basis in two towns, Bissora and Gabu, representing Balanta and Fula production systems, respectively\. These development projects envisage actions integrating natural resources conservation, fodder and fuel production, farmer education on livestock health and production, farmer access to vaccines and improved fodder plant material and marketing of animal products\. This proposal for a pilot project has come at an opportune time, particularly after the recent creation of herders' associations in the regions\. We commend this approach and strongly recommend Bank support for implementation\. Forestry activities, The project support on activities in forestry had no impact in raising nursery plants in relation to reforestation, except in the case of oil palms\. Apart from this, a number of studies were taken up in relation to a draft law on forestry, forestry taxation system and forestry policy\. The nursery activity on oil palms, aimed at renewal of old palm groves in the northern area of the country, had shown a measurable progress\. The seeds of an improved variety, Tenera, was introduced from Cote d' Ivoire and the seedlings were raised in the nurseries in Embunhe, Cachungo and Bula\. Although this variety had not been tested in the country for its wide adaptation, initial performance of about 50,000 seedlings, supplied to commercial and smallholder farmers and grown under lowland conditions and recommended cultural practices, was satisfactory and there are indications that it will significantly outyield the local varieties\. T his positive performance, if found to be stable over time and space, will offer a great opportunity for its wide cultivation\. However, before such a venture is considered, a study should be initiated to seek answers to a series of questions: (i) the institution(s) that should host the research and development activities on oil palm, (ii) the total area, existing and potential, under this crop, (iii) the number of farmers that can benefit from this development, (iv) the potential for improvement in local oil extraction practices, and (v) the cost of production and its competitiveness with other edible oil in the domestic and global markets\. Irrigation Activities PASA benefited from institutional support of expatriate consultants (EUROCONSULTS) to develop small-scale irrigation schemes in the low-lands ("Bas-fonds") of the country\. This support, under the form of equipment and training for the Irrigation Department staff of MDRA, is of special relevance to the national goal of food security in view of its potential for establishing a second crop of rice under irrigation during the dry season\. It resulted in the identification and survey of 30 Bas-fonds sites for which hydrologic and pedologic surveys were carried out\. Topographic surveys were only carried out for a limited number of the Bas-fonds\. Under PASA, the Irrigation Department also conducted pilot irrigation tests in Gabu with water control, agronomic and socio-economic activities\. The impact of this project component was limited as staff sent on training overseas did not return and land tenure issues were not addressed\. The lesson learned here is that PASA could have a greater impact in this sub-sector if clear termns of reference and realistic objectives were prepared well in advance and agreed with Government\. The mission also observed that the Department has not yet developed a master plan for irrigation development\.  4 Civil Works PASA was initially to construct four houses for the long term technical assistance team\. In 1989, the Governnent requested to have instead office space for its staff\. The planning process of the construction of the buildings to house MDRA was long\. As a result, the buildings remain partially completed because funds ear-marked for this civil works were depleted\. The financing gap is about US$ 408,000\. The mission urged the Government to secure other sources of financing to complete the civil works\. This component is the least successful of the project as other funds are not yet available for complete the civil works\. and the buildings are unusable\. Outstanding Audits The mission discussed with the project management and the accounting unit the need to finalize and submit to the Bank the audit report for the year ending December 31, 1993 which has already been contracted to Coopers & Lybrand-Dieye, Senegal\. This report was due on June 31, 1994\. Coopers & Lybrand-Dieye has submitted the draft audit to the Borrower for comment, following which the report should be finalized as promptly as possible\. The mission stressed the importance of receiving the overdue audits to reduce the likelihood of delays in processing future Bank operations in the sector\. The mission also followed up on progress made in implementing the Bank's recommendations to correct defaults in the financial and accounting areas mentioned in the auditor's report for year ending December 31, 1992\. Agreement was also obtained from the Borrower to allow mission members to meet with Coopers & Lybrand-Dieye, Senegal, on the quality and substance of the audits submitted thus far\. Since the project was closed on September 30, 1994, and is fully disbursed, no funds remain under the project to fund the final audit on the project for the period January 1 to September 30, 1994\. This audit is due by March 31, 1995\. The mission obtained agreement this audit will be paid for by the Borrower\. Procurement The mission also met with GAPLA's procurement unit, which is staffed with three persons responsible for procurement from the preparation of bidding documents through to contract signature\. Various procurement matters were discussed to determine where the Borrower's needs can be better met and to determine the reasons for delay in the procurement of civil works, specifically the construction of the Ministry of Rural Development\. The mission found that the Borrower lacked updated documentation in some cases (standard bidding documents instead of sample bidding documents), others were not available (directives on selection of consultants), and some not in the language needed\. The documents needed will be sent to the project unit upon the mission's return to headquarters\. Some of the problems that the Borrower raised concerned lack of familiarity with procurement terminology in English and translation problems into French or Portuguese\. The Borrower also found that the Bank's directives were not clear on how to solve certain procurement problems, e\.g\., when bids from two different parties are scored the same points, and that others were not available, e\.g\., criteria for selection of goods and works, and consultants\. Delays in the construction of the Ministry was due to the lengthy preparation process for such works and to administrative and legal delays on both the part of the Borrower and the Bank\. These experiences have been valuable in helping to avoid similar occurrences in the future\. Further Bank procurement training, particularly the training of trainers would be useful for updating procurement information and discussing specific procurement issues relevant to the Borrower's needs\.  The World Bank 1818 H Street N\.W\. (202) 477-1234 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D\.C\. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U\.S\.A\. Cable Address: INDEVAS le 17 avril 1995 S\.E\. Dr\. Isaac Monteiro Ministre du developpement rural et de l'agriculture Bissau, Guinee-Bissau Objet: GUINEE-BISSAU:Projet d'appui au secteur agricole - PASA (Credit 1799-GUB et Don hollandais 2497-0-GUB) - Mission et rapport d'achivement du projet Monsieur le Ministre, Nous avons l'honneur de confirmer, par la presente, le contenu de l'Aide-memoire de la mission citee en objet, qui a sejourne en Guinee-Bissau du ler au 8 f6vrier\. Une copie de cet Aide-memoire se trouve en annexe\. En plus d'un rappel des principales conclusions et recommandations de cet Aide-m6moire, l'importance de l'objet suscite des remarques complementaires de notre part que vous voudrez bien trouver ci- dessous\. Nous attirons tout particulierement votre attention - derniers paragraphes de la presente - sur la necessite de poursuivre notre dialogue avec vous, de facon coordonn6e avec les autres bailleurs de fonds\. Aussi souhaitons-nous votre reponse rapide, notamment sur la mission que nous comptons envoyer a Bissau, au mois de mai prochain\. A l'heure ou~ le Gouvernement de la Guinee Bissau semble souhaiter poursuivre l'effort entrepris lors du PASA, qu'il considere globalement positif, la Banque mondiale s'inquiete, quant a elle, de l'impact effectif de ce projet sur le developpement du secteur agricole du pays\. Cet impact semble, justement, difficile a determiner\. Or il nous paraeit fondamental de s'en preoccuper avant d'&re en mesure de definir une quelconque operation suivante\. Dans l'ensemble, le PASA a finance une profusion d'etudes et d'activites diverses, voire disparates - y compris un batiment inacheve (et en tant que tel, inutile) pour le MDRA\. Mais en quoi la production, la productivit6 et/ou les rendements agricoles, le revenu global du secteur, celui des paysans et/ou leurs conditions de travail, ou un quelconque autre parametre susceptible de renseigner sur la sante de ce secteur (independamment de tout facteur de risque externe), se sont-ils ameliores, ou donnent-ils ne serait-ce que des signes precurseurs d'amelioration, en consequence du projet? Meme si, comme le souligne le Gouvernement RCA 248423\. L WUI 64145 uL FAX (202) 477-6391  S\.E\. Dr\. Isaac Monteiro -2- le 17 avnil 1995 dans son evaluation ', on peut discuter des criteres d'analyse, vous conviendrez que la question est importante\. Elle est, pour nous, en tout cas, au coeur du probleme qui se pose aujourd'hui, et ce dont devrait traiter le Rapport d'achevement du projet\. Nous vous prions de croire, d'ailleurs, qu'il ne s'agit pas de faire un quelconque proces\. Nous souhaitons plutot par IA tirer les le,ons qui s'imposent autant pour le Gouvernement que pour la Banque mondiale ou pour les autres bailleurs de fonds (notamment, en l'occurrence, les Pays Bas), afin que nous nous am6liorions tous\. C'est pour cela qu'il est tellement important que nous fassions cet exercice ensemble, comme cela a d'ailleurs commence, lors de la mission de fevrier\. Et il est, par exemple, tout aussi important de juger de l'execution du projet et de sa portee, que des documents initiaux qui etaient senses le definir\. Rappelons d'abord les principaux obiectifs de ce projet (dont l'accord de credit, signe en mai 1987, prevoyait la cl6ture en decembre 1990)\. Il s'agissait initialement de renforcer, sur une p6riode de trois ans, la capacite du Ministere du developpement rural et peches (MDRP, aujourd'hui scind6 en deux: le MDRA et le MP) A: (i) planifier et gerer ses ressources humaines, en portant une attention particuliere A l'assistance technique; (ii) planifier les activites du secteur agricole et coordonner l'aide externe; (iii) remplir son r6le technique dans les differents sous-secteurs agricoles\. Ce renforcement de capacite devait permettre au MDRP de suivre activement, pour son secteur, les reformes a operer dans le cadre du programme d'ajustement structurel (pour 1987-88)\. La revue A mi-parcours du projet, en juillet 1991, apres constat de quelques realisations prometteuses (notamment la formulation, pour la premi&e fois en Guinee Bissau, d'une strat6gie de developpement agricole coherente et la mise en place d'un systeme performant de collecte de donnees sur les peches), malgre un tres lent et difficile demarrage, n'a pas change les grands objectifs du projet\. Plutot, elle a recentre 1'action sur un nombre plus reduit de moyens d'y arriver, en definissant clairement, basees sur la strategie de developpement agricole, 10 A 12 sous-composantes A realiser\. De plus, la mission de revue A mi-parcours a preconise F'am6lioration du suivi du projet par l'application d'une methode dite de "planification par objectif'\. Sur les grands objectifs initiaux du projet, nous pouvons deja faire un premier commentaire: ils nous semblent assez vagues, tout en ressemblant plut6t a des moyens qu'A de veritables objectifs\. Le renforcement institutionnel, vous en conviendrez, n'est pas une fin en soi mais, justement, un moyen pour parvenir A des ameliorations en matiere de developpement, mesurables en termes de volumes et/ou de valeurs (meme s'ils sont d'ordre qualitatif et compte duiment tenu de possibles facteurs externes, tels que les alias climatiques ou autres)\. Nous aurions certainement moins de difficultes aujourd'hui si les objectifs avaient et mieux definis\. Sur les objectifs tels que definis par la mission de revue A mi-parcours, nous pensons qu'ils ont un sens plus etroit de "r6sultat attendu" - et ' Sintese do relatorio final de implementaqao do PASA elaborado pelo DORA/GAPLA - paragrafo 26  S\.E\. Dr\. Isaac Monteiro -3- le 17 avril 1995 ce, A court terme - pour chacune des activites recommandees\. Ici encore, on est loin de pouvoir apprecier le developpement du secteur dans son ensemble\. Pourtant, avec des objectifs tels que definis alors, aussi bien initialement que par la mission de revue A mi-parcours, et compte tenu du fait que ce departement ministeriel partait, pour ainsi dire, de rien, force nous est de constater que les objectifs ont et en partie atteints\. En effet, des resultats ont et obtenus qui vont dans le sens du renforcement de la capacite de planification et de gestion du MIDRA et du MP\. Nous retiendrons surtout les suivants: - la creation de la division des ressources humaines (DRH) et le resultat de ses premieres activites: inventaire du personnel et des postes et elimination des postes redondants; formation de nombreux cadres et techniciens, notamment en formulation, gestion et suivi de projets - bien qu'une partie d'entre eux ne soit pas revenue A l'institution; formulation d'une politique de gestion du personnel assez d6taillee; evaluation de l'assistance technique re,ue par le Ministere, suivie d'une am6lioration sensible de l'efficacite de cette assistance (et une reduction drastique du nombre des postes); - les premiers resultats de la planification sectorielle au sein de "GAPLA": personnel forme en planification; analyse et reduction des depenses publiques du secteur, en nombre de projets et en valeur totale; identification des sous-secteurs sous- finances (elevage, forets) et debut de re6quilibrage; - la mise en place et le debut du suivi d'un systeme performant de statistiques et la realisation de quelques enquetes et etudes de base: recensement agricole; statistiques des sous-secteurs de la peche et de la production fruitiere; 6tude de base sur l'agriculture commerciale (ponteiros); ces activites ont notamment permis de renforcer durablement la capacite de la division chargee de la statistique au sein de "GAPLA"; - le dynamisme specifiquement insuffle A l'agriculture commerciale par l'etude sur les ponteiros; en effet, suite A cette etude tres detaillee, une association des agriculteurs commerciaux (ANAG) s'est creee et des ateliers se sont tenus visant A informer les agriculteurs des opportunites commerciales dans les pays voisins et au Portugal; - I' elaboration d'une strategie de developpement agricole et la realisation de nombreuses etudes (dont certaines dejA mentionnees ci-dessus) sur divers sujets\. Apres la revue A mi-parcours, ces etudes ont decoule strictement des recommandations et priorites de la strategie ci-dessus; des projets pilote ont pu &re lances A la suite de certaine de ces etudes (toujours en application d - la strategie), notamment en matiere d'elevage;  S\.E\. Dr\. Isaac Monteiro -4- le 17 avril 1995 - le debut d'une activite de recherche agronomique apres la creation de l'INPA et quelques resultats prometteurs, notamment en matiere de palmier a huile (introduction et adaptation d'une variete) et culture fruitiere (au centre de Quebo)\. En resume, la capacite de planification, plus que celle de gestion, a ete renforcee, mais ceci de fa,on encore fiagile\. La question de la durabilite du projet est essentielle lorsqu'on s'interroge sur ses accomplissements\. Car, en realite, nous devons regretter que les acquis listes ci-dessus n'aient pas ete immediatement suivis de decisions et d'actions confirmant les directions prises ou appliquant les recommandations\. Citons la non mise en oeuvre de la politique de gestion des ressources humaines comme, A notre avis 1'element le plus determinant de l'impact du projet\. Sans l'application de cette politique, qui prevoit des mesures pour recruter, former et retenir du personnel en quantite et qualite necessaires et suffisantes, ce qui justement pose un enorme probleme aujourd'hui, nous ne pensons pas pouvoir parler serieusement de renforcement institutionnel\. De surcrolt, rien ne permet vraiment d'assurer que les departements ministeriels concernes pourront poursuivre l'effort entrepris sans appui supplementaire\. On a mis en place certains outils; on a fait des etudes de base, on a forme des gens, on a e1abore des politiques, strategies, textes legaux et plans d'action: a present, il faut mettre tout cela en application et faire fonctionner le systeme\. La capacite du MDRA et du MP a cela reste encore a demontrer\. La durabilite du projet, A notre avis, peut etre qualifi6e d'incertaine\. Pourquoi ces resultats mitiges et ce doute? A notre avis, la volonte politique d'operer des reformes fondamentales a fait defaut\. D'autre part, parmi les facteurs specifiquement lies a 1'execution elle-meme du projet, qui ont fait obstacle au bon d6roulement de celui-ci, nous retenons les suivants: Du fait plut6t du Gouvernement: - de facon g6nerale, un manque d'engagement et de prise de responsabilite qui a notamment laisse un trop large r6le A I'assistance technique, laquelle s'est retrouvee insuffisamment encadree; - la non disponibilite quasi permanente des fonds de contrepartie, m8me apres l'amendement des accords de credit et de don hollandais, en 1992, qui a permis que le credit et le don hollandais financent jusqu'A 75% des couits recurrents et 95% des couts locaux des travaux de genie civil; le declin du peso guineen par rappert aux principales devises a aggrave ce probleme; - le fait que qu'une partie non negligeable des ressources humaines formees par le projet n'aient pas ensuite ete affectees aux postes et r6les correspondant a leur capacites acquises;  S\.E\. Dr\. Isaac Monteiro -5- le 17 avril 1995 - la trop grande rotation du personnel, certains cadres affectes a differents postes cles au sein du projet ont change trop souvent (le comptable a change sept fois); - une connaissance et capacite insuffisantes en matiere de gestion de projets, et particulierement en matiere de procedures de deboursement, comptabilite et passation des marches; ceci a entrame d'une part des retards considerables dans la mise en oeuvre du projet et, d'autre part, que des contrats soient passes pour des biens et/ou services inadaptes (surtout en matiere d'assistance technique); Du fait plutot des agents d'execution: - une assistance technique souvent inadaptee, en termes de competence technique et/ou langue (avec de notables exceptions); Du fait, plutot\. de la Banque mondiale et de la cooperation hollandaise: - une mesestimation des realites du pays, un manque d'ecoute et un manque de flexibilite et d'adaptabilite a la fois pour concevoir et pour changer l'instrument (le projet), lors de sa definition et au long de sa mise en oeuvre, malgre des efforts certains pour cela, notamment lors de la revue a mi-parcours; - un retard, de la part de la cooperation hollandaise, a debourser la derniere tranche du don; En guise de conclusion sur la performance de l'emprunteur et de la Banque mondiale, nous dirions qu'elle pourrait 8tre qualifiee de deficiente, des deux c8tes\. Quant au jugement concernant le resultat ultime du projet, nous nous trouvons devant un probleme de fond qui pourrait 8tre exprime ainsi: si les decisions qui s'imposent sont prises sans dMlai et si, en consequence, les acquis du projet en matiere d'etudes et strategies peuvent entrer en application, alors, on pourrait juger le resultat satisfaisant\. Faute de ces decisions - et donc jusqu'a nouvel ordre - nous jugeons le resultat ultime du projet insatisfaisant\. En consequence, avant de pouvoir terminer le rapport d'achevement du projet et avant de lancer la preparation d'une autre operation, il nous semble important de poursuivre le dialogue, notamment dans le sens d'obtenir une reponse a la question posee dans le paragraphe precedent\. Dans la mesure oil, nous en avons conscience, cette reponse n'est pas simple et qu'elle pourrait meme exiger, en fait, la preparation d'un calendrier d'etapes et/ou d'un document concernant la phase operationnelle du projet (une fois les investissements realises), nous somnmes prets a organiser une mission au mois de mai prochain afin d'en discuter\. Nous en profiterions pour faire, avec vous et tous les autres bailleurs de fonds concemrs, une reconnaissance  S\.E\. Dr\. Isaac Mlonteiro -6- le 17 avnrl 1995 de la situation pour la preparation d'une eventuelle operation suivante, qui de%Tait batir sur les acquis du PASA et, en tout cas, tenir compte des legons apprises lors du PASA\. Par la mt,ne occasion, nous ferions le point ensemble, lors de cette mnission, sur le statut du Projet de zestion des terres agricoles et de l'environnement\. A ce sujet, nous devons vous informer qu'etant donnees les conditions actuelles - aussi bien de votre cote que du notre - \.et tout ce qui pr6cede, iI conviendrait de revoir ce projet a la lurniere des le,ons donnees par le PASA ainsi que de celles d'autres projets dans le secteur du developpement rural et de la gestion des ressources naturelles, finances par les autres bailleurs de fonds\. Encore une fois, une discussion de fond, avec vous et les autres bailleurs, est devenue imperative\. Nous comptons envoyer en mission a Bissau, Nh-ne Catherine Cassagne, notre nouveau responsable des questions rurales et de l'environnerrent pour votre pays, qui a succede a M\. Cheikh Sow\. Si vous n'avez pas d'objection > cela, la mission de Mime Cassagne se situera entre le 8 et le 20 mai prochain\. Par prochain courrier, nous vous enverrons ia proposition de rapport d'achevement de projet, arretee a ce jour\. En realite, la presente lettre vous en avancait le contenu, en grande partie\. Si vous souhaitez modifier votre propre synthese, suite a la presente lettre et au rapport, vous en avez bien sur encore la possibilit4\. Votre resume final sera annexe tel quel a la version finale du rapport d'achevement\. Etant donne le sujet de la presente, nous nous permettons d'en envoyer copie a S\.E\. M\. le Ministre des finances et a S\.E\. M\. le Ministre des peches, ainsi qu'a la cooperation hollandaise\. Dans I'attente de'votre reponse, que nous esperons aussi rapide que possible, nous vous prions d'agreer, Monsieur le Ministre, 1'expression de notre tres haute consi'deration\. Randolph L\. P\. Harris Chef de la Division de l'agriculture et de l'environnement Departement de l'Afrique de l'ouest Region Afrique Piece jointe  Appendix 2 Republic of Guinea-Bissau World Bank Mission Finalization of the Implementation Completion report for the Agricultural Services Project (PASA -- IDA Credit 1 799-GUB -- Grant from the Netherlands Government No\. 2457-GUB) Discussions on the future of Bank assistance to the agriculture sector development (Mav 8-17, 1995) Aide-memoire 1\. Mrs\. Catherine Cassagne, the new World Bank operations officer for agriculture and the environment in Guinea-Bissau, visited the country from May 8 to 17, 1995\. The mission worked with the pertinent government authorities to complete the implementation completion report (ICR) for PASA and to map out -- in conjunction with donors and the cooperation agencies in question -- the possibilities of future World Bank assistance to agriculture in Guinea-Bissau\. Officials representing the Netherlands Government, as a cofinancier of PASA, and the SNV in Bissau worked with the mission, although they could not accompany it throughout\. The GAPLA Credit and Savings Officer, Mr\. Amadu Dab6, participated in the mission virtually all of the time and provided support to it\. The mission would like to thank the individuals and entities it met with for their time and attention\. 2\. The mission took place after a series of events: (a) the PASA implementation completion mission led by Mr\. Cheikh Sow, from February 1-8, 1995, which discussed a draft ICR\. The MDRA prepared an evaluation from the Borrower's perspective, includinL, an executive summary, which will be an annex of the ICR; (b) the letter of April 17, 1995 from the World Bank to the Minister of Rural Development and Agriculture,' with a copy to the Minister of Finance and the Minister of Fisheries, formally approving -- and annexing -- the aide-m6moire from that mission, summarizing the ICR and announcing the present mission;2 (c) the letter of April 24 to the same Minister, cosigned by various donors and cooperation agencies (including the World Bank), to which IFAD subsequently subscribed, via letter of May 10 to the Minister\. 3\. As stated in the April 17 letter, the mission reiterated to the Minister of Rural Development and Agriculture and to the other parties the World Bank's concern as to the real sustainability of the investments made under PASA, i\.e\. the impact of the project, beyond the existence of a plethora of studies, training sessions, research activities and other operations financed under PASA\. The first draft of the ICR and the report by the Borrower do not sufficiently reflect this concern; nor do they propose any solution to the problem\. Nevertheless, that letter and the present mission specifically asked the authorities -- primarily the Minister of Rural Development and Agriculture -- about the fact that the results of PASA had not been followed up by the necessary decisionmaking that would have enabled PASA to have a positive impact on the agriculture sector\. As particularly illustrative examples of this situation the mission cited the non- 1 Sent by fax to the management unit of the economic management project\. 2 The World Bank has not received an answer to this letter\.  2 approval of the MDRA's human resource management policy, formulated with PASA support, as well as the relative isolation of GAPLA and its under-utilization, as the World Bank considered both these issues to be key to PASA's achievements\. 4\. GAPLA personnel commented that, in certain aspects, the major problem wvas a funding shortfall that was making the financing of operating costs difficult, which meant that systematic implementation of the studies and/or recommendations could not proceed as planned\. The mission recognized that such a problem was in fact apparent, but it considers that the country does have financial resources, including some generated by the agriculture sector itself\. Decisions would have to be made regarding their mobilization\. The mission further indicated to the Minister and GAPLA personnel -- and had the impression that they themselves concur with the idea -- that if a number of priorities could be identified (through the formulation of the agricultural policy and the PIP derived therefrom, which could be limited to a total amount compatible with the real investment and management capacity), the derived operating expenditures could also be estimated more accurately\. The Minister and the two MDRA directors general told the mission that the top priority of the MDRA was rice production\. 5\. The mission told the government authorities that the Bank's concern with PASA's impact seems to be shared by a number of other donors, who are disappointed with the negligible impact of the large projects\.3 Along with the MDRA, they too would all like to find a durable way of supporting sector development\. Hence the joint letter of April 24, referred to in 2(c) above\. As part of its mandate, the present mission was to seek the reaction of the Government to the letter, in conjunction with the other donors\. 6\. Before the ICR is finalized, and precisely because the issue of project sustainability and impact is still open, depending on the decisions taken by the Government, the April 17 letter proposed to the Minister that the MDRA commit itself through a brief "plan for the future operation of the project" (in fact mentioned, but not detailed, in the Borrower's own report)\. The mission explained to GAPLA staff that the plan4 would have to detail the phases, official/legal decisions and other necessary actions that would be part of a reasonable timetable to which the Borrower would commit in order to maximize the sustainability of PASA results\. The mission reiterated that while in fact the formulation of such a plan was not an obligation of the Borrower under the terms of the credit agreement, it was being requested now as a step in determining the form that future assistance would take\. 7\. In a meeting with the mission on May 12, the Minister of Rural Development and Agriculture did not indicate whether the Government was going to take the decisions referred to in para\. (3) above in the 3 PASA, however, was unlike so-called "large projects," which primarily aimed to increase production and were mostly field-based operations\. It is the opinion of those with whom the mission spoke that PASA could even have assisted in refocusing certain of such "large projects\." The mission feels that, even if for different reasons, there is a fundamental problem with the poor sustainability of most projects in the agriculture sector, including PASA\. 4 The formulation of a plan for the operational phase of the project (which follows the implementation phase), setting forth the program and means for "operationalizing" the investments made during implementation, is now a clause included in most World Bank credit agreements\. Such a plan must be prepared before implementation completion report, and must be mentioned in it\.  3 near future\. Nevertheless, the ICR must be finalized and this uncertainty taken into account\. Basically, the ICR will remain as it does at present, as discussed with GAPLA staff members, but reflecting only some of the findings of the mission during its interviews and field visits\. The Borrower's executive summary was amended by GAPLA staff and submitted to the mission before its departure\. The new executive summary will be annexed to the ICR without any changes\. 8\. The Minister, however gave assurances that both the donors and the MDRA shared the same concems, and that the formulation of an "agriculture policy statement" -- and a medium-term PIP derived therefrom for the sector -- to be prepared by the MDRA itself, in consultation with the other ministries and the beneficiaries, was regarded as an extremely important issue that had already been discussed with the other ministers\. He further indicated that, before the donors are approached, it is important to create viable institutional conditions and that, in any event, only small-scale projects could be sustainable under the present circumstances\. He mentioned that institutional reform was under way and that there were major challenges to be tackled in agricultural planning, which would take time\. He mentioned the difficulty of political decisionmaking, the inexperienced private sector, the problem of limited incentives for public employees and the challenge of mobilizing national resources, for example, via utilization of the Forestry Fund and other special funds\. In this regard, he said that the special funds would henceforth be overseen by the Ministry of Finance\. 9\. Both the Minister and the GAPLA Director gave assurances that the MDRA had already begun the policy formulation process, and had consulted the beneficiaries and decentralized parties in the sector, supported by FAO (regional master plans)\. The final results would be ready in January 1996, although preliminary findings would be presented in June 1995\. He also said that during the next rainy season (when no work in the interior can be done) consultations could take place with the parties concemed in Bissau, along with policy formulation and standardization with the other ministries (e\.g\. Finance, Trade) and that a first draft of the policy based on the studies already completed could be formulated in the coming months\.' 10\. The mission asked the MDRA to prepare a brief activities program with a timetable for the various steps in the formulation of the policy and the PIP, which could be submitted to the donors when they all met at the MDRA, at the invitation of the Minister, within a few weeks to a month (timing indicated by the Minister)\. The mission requested that the members of the next Bank mission (Messrs\. Fredriksen and Andrade, AF5CO, macroeconomic issues) also be invited to the meeting\. Only after that meeting and the submission of the activities program by the MDRA, and depending on its results, can a follow-up mission be scheduled to map out possible future assistance\. 11\. The mission reiterated the Bank's intention to continue the dialogue and assistance to the agriculture sector\. However, it said that this could be done only in conjunction with the other donors and in application of the above-mentioned agriculture policy statement -- and the resulting medium-term public 5 GAPLA staff also recalled that after the conference of MDRA technical specialists in 1993 a commission had been set up within the MDRA\. It was headed by the GAPLA and made responsible for the work involved in agricultural policy formulation\. Subsequently, task forces were established to study credit, training, extension and reorganization of the MDRA and produced reports containing recommendations\. It is the opinion of the mission that this is undoubtedly a positive effort, but thus far it has not had any real impact, and now needs to get off the drawing board\.  4 investment program for the sector, which had to mesh with and address the desires of farmers, the primary beneficiaries\. It also indicated that a future operation might not take the conventional structure of an isolated "project," but would provide support to the regular structure of the MDRA in implementing its PIP, which should consist not of unrelated projects but of regular budget lines for the previously identified priorities\. As such, the operation, which could be assisted by various coordinated donors, would be more of an overall credit to the sector, with clearcut modalities and rules for utilization\. The Minister and GAPLA seemed very interested in the idea, in principle, and eager to learn more about the possible practical modalities of such a new instrument\. The mission indicated that the Bank could finance a trip to countries that had already opted for such operations, or from one of those countries to Guinea-Bissau, to learn more about the new instrument\. The mission also said that it would speak with the other donors to stimulate their interest (some already are interested) so that joint efforts in this direction could begin\. 12\. As explained to the GAPLA Director, the mission reiterated that the World Bank would not require the PASA "operation plan" referred to in para\. 6 above, if the MDRA agrees to formulate the above- mentioned policy and medium-term PIP\. 13\. The mission also had a long discussion with the Minister of Fisheries and visited that Ministry's data processing center, since investments in the subsector had been made under PASA\. Despite the problems that also affected this component during project implementation and the fact that its efficiency (cost-benefit) could have been greater, it is clear that PASA investments in the subsector had a real and lasting impact, primarily in data collection and processing\. The pertinent details will be given in the ICR\. The Fisheries Minister also explained to the mission the goals towards which subsector institutions were working and gave it a copy of the 1995 activities program for the subsector that had been derived from the Government's medium-term program\. The Minister also asked the mission to transmit his request to Washington regarding the World Bank's consideration of possible support for investment in artisanal fishing, as an integral part of the agriculture sector\. In the discussion on the matter, it could be defined that there was a serious problem with the lack of credit for groups of artisanal fisherman, who are also small farmers\. 14\. The mission also visited ANAG and had a long discussion with the vice president, Antonio Nunes\. PASA investments in this area also had a very useful impact, which will be mentioned in the ICR\. Moreover, the mission was genuinely impressed with the dynamism demonstrated by ANAG, whose operations are funded by member dues\. 15\. Pending and other matters: The Minister of Rural Development and Agriculture assured the mission that the completion of the MDRA's new building (another PASA investment) was a matter of ongoing concem and a great challenge that it planned to overcome\. He asked if the World Bank intended to help\. The mission responded that the justification for such support would have to be reassessed, as part of a future operation's appraisal (which, once again, depends inter alia on the formulation of the agriculture policy and the medium-term PIP derived from it), but that it could not give a definitive answer as to the outcome of such reassessment\. Lastly, the Minister also said that the MDRA would continue to search for the funds needed to pay for the last two PASA audit reports (for 1993 and up to September 30, 1994)\. The mission recalled that the Borrower was responsible for having the audits performed by an independent firm and that non-performance of this obligation could constitute an obstacle to the approval of new projects in the sector\. Bissau, May 16, 1995 For the World Bank mission: Isl Catherine Cassagne, AF5AE  Appendix 3 MDRA/GAPLA - GABINETE DE PLANEAMIENTO AGRiCOLA PASA - PROJECTO DE APOIO AO SECTOR AGRICOLA (Financiameiito IDA - Banco Mundial e Governo Holandes) "SINTESE" ICR - Implementation Completion Report (Relatorio Final de Implementacao do Projecto Setembro 88 a Setembro 94) :\. : \. \. \. \. \. \. \., - i- -\. \.   ICR - Implementation Completion Report INDICE A - IN TRO D U CA O \.I B- OBJECTIVOS GLOBAIS ALCANCADOS PELO PASA\. INDICADORES DE REALIZACAO \. 1 C- GRAU DE REALIZACAO POR COMPONENTES DO PASA \.4\.4 a- Apoio global ao MDRA \. \. 5 b- Produ,ao animal \. 7 5- Florestas \.7 d- Irriga,co agricola \.8 e- Fruticultura e pesquisa agricola \.8 f- Pescas \.9 D- PAPEL DO BANCO MUNDIAL/IDA E DO MDRA - ALCANCES E LIMITANTES \.10 ( E- SUSTENTABILIDADE DO PROJECTO - IMPACTO NO FUTURO DAS ACTIVIDADES DO MRDA \. 1\. \. ANEXO: Assistencia t6cnica estrangeira c local \. \. 13   ICR - Imvlementation Comnletion Report A- INTRODUCAO 1\. Tendo por base os procedimentos estabelecidos pelo Banco Mundial, devera ser elaborado um ICR - Relat6rio Final de Implementacao de qualquer projecto financiado por essa instituicao multilateral, no momento em que se termina\. No caso presente do PASA - Projecto de Apoio ao Sector Agricola, e ap6s tres prorrogac6es verificadas em finais de 1991, de 1992 e de 1993, o encerramento oficial das suas actividades verificar-se-a a 30 de Setembro 1994\. 2\. A Metodologia seguida para a elaboracao foi a seguinte: - basear a infornacao nas realizacoes materiais e organizativas (outputs) do projecto atraves da listagem dos pagamentos (applications-pedidos de desembolso) efectuados e da discussao com os sectores/componentes beneficiarios das actividades do PASA\. 3\. 0 ICR solicitado pelo Banco Mundial pretende que se abordem os seguintes aspectos: - alcance dos objectivos do projecto; - sustentabilidade do projecto; - performance das prestac6es do Banco e do Governo GB/MDRA; - performance global do projecto; - plano para a operacao futura do projecto/impacto\. Tendo presentes esses t6picos, a estrutura do relat6rio que se passa imediatamente a apresentar assentara numa linha de analise com primazia para o particular, com uma forte componente interpretativa nao apenas baseada nos indicadores fisico-materiais alcancados, mas tambem (e fundamentalmente) no impacto verificado no sector beneficiario\. B- OBJECTIVOS GLOBAIS ALCANVADOS PELO PASA - INDICADORES DE REALIZACAO 4\. 0 obiectivo principal a alcancar pelo projecto, no periodo inicialmente previsto (3 anos), foi a criacao duma capacidade basica no MDRP (na altura) que Ihe permitisse: - gerir os recursos humanos do sector, particularmente a assistencia tecnica; - o planeamento das suas actividades e da coordenacao da ajuda externa; - melhorar o seu papel tdcnico nalguns subsectores (hidraulica agricola, florestas, fruticultura, pecuaria e pescas); - assegurar o acompanhamento e implementacao das medidas de ajustamento estrutural no sector agrario (especialmente no dominio do investimento publico/PIP)\. 5\. Para tal, o MDRP deveria, em primeiro lugar, ser apoiado na criagao duma divisao de Recursos Humanos no seio do GAPLA, para nao s6 gerir a assistencia tecnica (extema) como tambdm implementar medidas conducentes a uma melhor utilizacao e gestao do pessoal local\.  - 2 - 6\. 0 montante total previsto foi de 7\.0 milhoes de USD em moeda externa, cerca de 800 mil USD em moeda nacional (co-participacao governanental da GB), devendo ser distribuidos da seguinte forma: - Moeda externa: 8\.4 % construc6es civis (7\.0 milh6es USD) 15\.0 % veiculos/equipamentos 40\.0 % assist\. tec\./formacao/estudos 19\.3 % bens e servicos 3\.3 % despesas operacionais 14\.0 % PPF e imprevistos - Moeda nacional: 25 % construc6es civis (equiv\. 800 mil USD) 75 % despesas operacionais O escalonamento anual de desembolsos deveria ser 43 % no ano 1, 35,5 no ano 2 e 21,5 no ano 3\. Em termos de escalonamento anual dos desembolsos efectuados, a imagem e a seguinte: - ano 88: 3 % do total - ano 89: 18 % do total - ano 90: 32 % do total - ano 91: 25 % do total - ano 92: 12 % do total - ano 93: 3 % do total - ano 94: 7 % do total Estes indicadores sao de dificil comparacao com o previsto (3 anos), dado que o PASA foi prorrogado tres vezes (em finais de 91,92 e 93)\. No entanto, se compararmos os anos de realizacao 88 e 89 com o ano 1 previsto e os anos de realizacao 92 ate 94 com o ano 3 previsto, conclui-se que houve uma sobreestimacAo da capacidade de investimento nos primeiros anos do projecto, pois apenas se conseguiu realizar metade do investimento previsto no ano 1 do projecto (88 e 89), enquanto que no ano 2 (90 e 91) aumentou bastante o nivel de investimento real\. Esta imagem e prova evidente (tambem em outros projectos) que o "arranque" dos projectos publicos na GB e a fase mais dificil e aquela que tem apresentado maiores dificuldades comparativamente aos niveis programados\. Vejamos os indicadores: Anos reafizacao Ano previsto Desvio (+ ou -) 88 + 89:21 % 1:43 % - 22 % 90 + 91: 57 % 2: 35,5 % + 21,5 % 92+93:22% 3:21,5% +0,5% 7\. Relativamente as componentes, apresenta-se a seguir um quadro comparativo dos pesos percentuais programados e de facto realizados/desembolsados, assim como o desvio registado: Componente % total/previsto % total/real Desvio (+ ou -) GAPLA 39,7 % 45 % + 5,3 Agricultura: 9,8 % 21% + 11,2 DEPA/Frut\. 0,8 % 9 % + 8,2 DHAS/Hidraul\. 9,0 % 12 % + 3,0 Pecuaria/Prod\.Anim 6,0 % 6 % 0,0 Florestas: 16,0 % 11 % - 5,0 MDRA/Geral 9,0 % 7 % - 2,0 Pescas 19,5 % 9 % -10,5  - 3 - Daqui se concluiu, de imediato, que na sua grande maioria a distribuicao real do investimento foi bastante diferente do programado, fundamentalmente por tres grandes motivos: (i) pouco detalhe na fase da programacao, aspecto que nos parece ter sido relativamente intencional, dada a especificidade do sector agrfirio e a previsao de mudancas de politica nos anos seguintes a data da programagao e o arranque do projecto (86/87 em adiante); (ii) enfase dada a gestao por objectivo a partir da intensa reorientacao dada ao PASA ap6s meados de 1991, o que traduz no "fecho" dalgumas componentes (hidraulica, florestas e fruticultura), na "abertura" de novas frentes de trabalho (ponteiros, palmar, investigacao agricola) e no reforco/intensificacao dalgumas componentes (GAPLA/formacao, apoio ao MDRA em geral); (iii) a pr6pria caracteristica do projecto PASA - apoio institucional global ao MDRA, o que, a partida, pressupunha (no contexto da Guine-Bissau) alteracoes estruturais e uma certa instabilidade organizativa transitoria\. 8\. A estrutura do investimento e tambem apresentada num grande quadro comparativo, sendo neste caso de maior dificuldade uma anAlise comparativa directa, dada as diferentes classificag6es das despesas de investimento nos dois momentos\. De qualquer modo, e por aglutinacao de despesas afins, a imagem e a seguinte: PRESTADOR SERVICO QUANTIDADE % DO TOTAL Tecnicos Nacionais/total: 686 h\. mes 8,0 AT permanente 94 Consultorias 71 FormaSao/Per diem 521 Tecnicos indiv\. estrang\./total: 104 h\. mes 9,0 AT permanente 87 Consultorias 13 Formacao especifica 4 Empresas da GB-Total: 40 19,0 Empresas Estrangeiras- Total 50 59,0 Europa 40 Africa 5 USA/Brasil 5 Outros/diversos (GB) - 5,0 Duma primeira analise ressalta que uma das intenq6cs dos projectos financiados pelo Banco Mundial/IDA, que e a de estimular/incentivar o mercado local, foi alcan,ada, na medida em que cerca de 1/3 do valor total de servicos fornecidos ao PASA tiveram origem no mercado interno (8 % de tdcnicos + 24 % de empresas ou pequenos fornecedores), sem se considerar ainda a construqAo do novo edificio do MDRA que foi adjudicada a um cons6rcio local e sera realizada durante 1994 (o que elevaria o 1/3 para cerca de 40 % do total do PASA, indicador bastante significativo)\. E necessario atender ao pouco desenvolvido nivel do mercado guineense, o que ainda obrigou a que 2/3 dos servicos fossem de proveniencia externa (9 % de tecnicos individuais e 59 % de empresas de venda de servicos de AT e de equipamentos e materiais)\.  - 4 - 9\. Tendo presentes os objectivos principais tra,ados para o projecto PASA, e referidos suscintamente no ponto 4 deste capitulo B do relat6rio, tentamos uma apreciagao geral do seu grau de alcance: a) Houve de facto uma melhoria na gestao dos recursos humanos a partir do trabalho produzido com o investimento do PASA, tendo por base os segtuintes aspectos: * foi criada a Divisao de Recursos Humanos no GAPLA, Departamento ate entao inexistente no MDRA\. * foi realizado o inventArio/cadastro detalhado do pessoal do MDRA\. * o GAPLA, com base no projecto PASA, tem sido a entidade do MDRA que mais esforSos realizou na promoao e integraoao da assistencia tecnica nacional, tendo havido no quadro do PASA/PIR 12 tecnicos nacionais contratados nesses moldos a partir de 1991; * com o trabalho de revisao e melhor gestao do PIP agrario realizado no quadro do PASA, conseguiu- se racionalizar bastante a assistencia tecnica externa no MDRA (mais de 80 tecnicos em 1988 para os actuais 36 tecnicos); b) A funeao de planeamento e o inicio duma melhor coordena;1o da ajuda externa, aspectos muito ligados entre si dado o peso desta iltima no apoio ao investimento puiblico na GB, foram amplamente reforcados no quadro do PASA, podendo nesmo afirmar-se que foi esta uma das principais contribuic6es/outputs do projecto para o MDRA\. Esta constata,co fundamenta-se na realizac,o do seguinte: * refor,o do papel do GAPLA, passando a constituir una das principais Direcc,es-Gerais do MDRA, e criagao no seu seio duma equipa minima de t6cnicos nacionais com capacidades melhoradas na identificacao, seguimento e avalia,ao de projectos e outros aspectos de politica agrara; * realiza,io duma serie de estudoslreflex6es fundamentais para o processo de formulaVao e gestio duma politica sectorial agriria; * realiza;ao de ac,ces de formaSao na GB (4 cursos de 6 semanas/cada) sobre o planeamento e a gestao; * apesar da assistencia tecnica da DGFC ter sido de reconhecida utilidade pritica, nio parece ter havido um aproveitamento integral dos seus inputs por raz6es relacionadas com a organizaOao da DGFC e os seus metodos de gestao; * se, por um lado, as duas acq6es-piloto de implementaSao de pequenos regadios no leste da GB falharam, tambem e certo que se criou no seio do DEAS uma capacidade tecnica nacional de elaborac,o e seguimento de pequenas obras de engenharia hidrAulica/regadio para o leste do pais; C- GRAU DE REALIZA(CAO POR COMPONENTES DO PASA 10\. Se no capitulo B deste relat6rio foi dada uma ideia das realizac,es globais do PASA sob diferentes 6pticas (por anos, por componentes, por tipo de servi,os prestados, por tipos de investimentos), mas sempre numa perspectiva global e comparativamente As metas/planeamento definidos pelo projecto, aqui iremos concentrar a  - 5 - nossa analise na quantifica,ao das ac,ces materiais e organizativas realmente empreendidas\. A descri,co sera feita pelas componentes principais do PASA, ou melhor pelos subprojectos que desenvolveu, que foram os seguintes: a) Apoio global ao MDRA (GAPLA, Recursos Humanos/Formac,o, Estatisticas, Infraestruturas/Obras, Equipamento e apoio ao funcionamento, etc\.); b) Producao animal (estudos e accao-piloto); c) Florestas (legislaco/regulamentos/taxacao, inventarios parciais, viveiro/pesquisa, accao-piloto); d) Irrigacao agricola (levantamentos/estudos de pontos de regadio nos vales do leste da GB; 2 projectos- piloto de "pequenos vales"); e) Fruticultura (apoio ao Centro de Quebo) e pesquisa agricola aplicada; f) Pescas (sistema de recolha e tratamento estatistico sobre a ZEE, formacao)\. a) Apoio alobal ao MDRA: 11\. Neste grupo incluem-se os sub-projectos de: (i) apoio A criaco duma divisao de recursos humanos no GAPLA; (ii) programas de formacao; (iii) apoio ao planeamento agrArio em geral; (iv) apoio A estatistica agricola; (v) cria,co de infraestruturas fisicas/construc,es e apoio material ao MDRA\. No tocante ao dominio explicito em (i), realizou-se o seguinte: - foi criada a Divisao de Recursos Humanos do GAPLA; - equipou-se a Divisao de Recursos Humanos com mobiliario, equipamentos de escrit6rio, material informaitico; - realizou-se de 91 a 94 o inventario/cadastro do pessoal do MDRA, assim como a cria,ico dum software proprio para a gestao e processamento salarial por meios informaticos; - Elaboraram-se diversas normas sobre a admissao do pessoal, carreiras e perfis profissionais, e outras; 12\. No referente ao focado em (ii), a DRH serviu de pivot para o desenvolvimento duma serie de ac,6es de forma,ao de diversa indole, apesar de ter sido ao gestor do PASA (Director + Assessor Tecnico) que coube a tarefa de identificar e conceber as Areas de formacao, de modo a caberem/integrarem-se nos objectivos do PASA\. 13\. No tocante ao focado no item (iii), as acc6es de apoio ao planeamento agrario no global constituiram uma das areas centrais de actuacao deste projecto\. - Fornecida AT extema na ordem dos 99 h\.mes, assim como 36 h\.mes de AT/local; na realizacao dos estudos, foram garantidos 11 h\.mes/consultorias extemas e 27 h\.mes/consultorias nacionais; - Fomecidos diversos equipamentos e mobiliarios de escrit6rio e informaticos, feitas reparac,es e pequenas construcoes no actual edificio central do MDRA/GAPLA, equipado o GAPLA com veiculos diversos (4 ligeiros, 5 Jeeps); - Realizado um trabalho de analise/concepcAo que levou A elabora,ao do documento de base "estrategia do sector agricola" - versao preliminar\. (Maio/90); - Realizada duas revisoes-avalia,coes da situa,ao do PIP agrario;  - 6 - - Realizado um estudo-accao inovador no MDRA intitulado "vias para a modermizacao da agricultura na GB" - ponteiros (Out/92), assim como uma sdrie de tres col6quios sobre temas de interesse (marketing agricola, agro-industrializa,co e credito/gestAo agro-economica nas pontas), a par do apoio de tres viagens/miss6es comerciais de ponteiros a Portugal, Brasil e Cabo-Verde; - Reorganizada a estrutura e distribuicao de tarefas a nivel do GAPLA, incentivando uma maior racionalizacao institucional, o surgimento de novos quadros (pelo menos 4 tecnicos superiores), o melhoramento do PIP mediante a introducao e formacao num novo metodo de preparagao e de seguimento do mesmo; - Elaborado um projecto da nova lei organica do MDRA, que constitui a base de discussio com o Ministerio da Funcao Pubfica; - Criada e posta em funcionamento uma Celula de Contabilidade no GAPLA; - Apoiada a redac,ao/publicacao dum despacho normativo conjunto sobre as concess6es fundiarias, bem como a elaboracao dos criterios agro-econ6micos para a avaliacao dos pedidos de concessao de terras; Pode-se afirmar que foi nestes dominios que maior impacto terao tido as actividades exercidas pelo PASA, em particular ap6s a reorientacao dada ao projecto em meados de 91 e ap6s a afecta,co dum Assessor Tecnico Principal junto ao Director do GAPLA (e do PASA)\. 14\. Nos dominios referidos em (iv), estrategias agricolas, tambem inseridas no GAPLA, destacam-se as seguintes realizacoes: - Equipada a Divisao de Estatisticas do GAPLA, com algum mobiliario, equipamento de escritorio e material informatico; - Elaborados/publicados tres trabalhos especificos (revisao do censo 88/89 em 1992; primeiro censo dos ponteiros; primeiro censo fruticola - caju e manga); - Dado apoio concreto a realizacao do censo agricola feito em 88/89, bem como a inuimeras acc6es pontuais de recolha e tratamento estatistico; 15\. No referente aos aspectos focados como item (v) - apoio geral ao MDRA, incluem-se aqui as seguintes realiza,6es: - Varias repara,ces/obras para melhoria das instalacoes centrais do MDRA(Gabinete do Ministro, Sala de reuni6es do MDRA, DGA, DGFC, etc\.); - Fornecimento de diversos equipamentos e mobiliario de escrit6rio, pagamento de inuimeras despesas de funcionamento; - Feito o projecto de engenharia e arquitectura do novo edificio do MDRA (por uma firma local - PROJECTAE) e realizado o concurso para adjudicacao da referida obra (Abril a Junho/93); - Co-financiamento das accoes de formacao assinadas entre o MDRA e o Ministerio da Agricultura de Portugal; - Apoio ao Centro de Documentacao Agraria do MDRA com alguma formacao e pequenos meios materiais, assim como a Celula Nacional de Vulgarizacao Agraria (seminario no estrangeiro do Responsavel, mobiliario e equipamentos de escrit6rio)\.  -7- b) Producao Animal: 16\. Estas acc6es foram centradas e geridas directamente pela Direcc,o-Geral da Pecuaria, tendo compreendido directamente o seguinte: - Realiza,es de dois estudos pelo GAPTEC denominados "sistemas tradicionais de producao animal na GB" e "situacao s6cio-econ6mica da sanidade animal na GB" entre os meados de 90 e meados de 94; - Paralelamente aos trabalhos ligados aos estudos atras referidos, foi feito o seguimento da situa,ao pecuaria em 120 tabancas (numa primeira fase/90 e 91) e de 40 tabancas (numa segunda fase/92-94) nas regioes de Bafata, Gabu e Oio/Bissora; - Feitas diversas acc6es de formacao tecnica a equipa nacional do subprojecto (Director-Geral, VeterinArios, Zootecnicos), mediante deslocac6es ao estrangeiro (Portugal, essencialmente), e com realizac,o de seminarios tecnicos em Bissau; - Fornecidos varios equipamentos e material de escritorio a DGP; - Preparado um projecto-piloto para apresentacao ao financiamento pelo PlRlPrograma de Incentivos Rurais (fundo FIDA) decorrente dos estudos realizados; c) Florestas: 17\. As accoes neste sector tem duas fases bem marcadas: - a primeira, que decorre no inicio do PASA ate meados de 91, muito virada para o apoio global DGFC; - a segunda fase, de meados de 91 ate Setembro de 94, centrada numa accao-piloto de renovacao do palmar na zona norte do pais, decorrente duma identificacao feita na fase anterior\. Em sintese, as realizac6es descrevem-se a seguir: - Elaborada uma proposta de projecto de lei florestal, que viria mais tarde (92) a ser publicada no Boletim Oficial, - Elaborada uma proposta sobre a organica e regulamento interno da DGFC\., que se vem tentando aplicar; - Definido um programa que serviu de suporte a proposta apresentada pela DGFC sobre accoes a desencadear no dominio ambiental; - Realizado o inventario florestal de duas importantes concessoes de empresas madeireiras (Maudo San6 e FOLBI); - Efectuado o estudo que permitiu encontrar as bases tecnicas e econ6micas sobre a taxacao florestal; - Prestada assistencia tecnica entre 89 e 90 atraves de dois peritos (um engenheiro florestal/18 h\.m e um engenheiro florestal para a experimentac,o/viveiros florestal / h\.Km); - Feitos investimentos nos viveiros de Embunhe e de Canchungo (Paimar); - Adquiridos variadissimos equipamentos e materiais especificos para as florestas e fauna; - Importadas 60 mil sementes pre-germinadas de palmeira de azeite (Hibrido Tenera), postas em viveiro durante 18 meses, tendo sido distribuidas cerca de 55 mil plantas durante a epoca das chuvas de 93;  - 8 - - Realizadas poucas ac,es de forma,co em Bissau (guardas florestais e palmar), e varias no exterior do pais (Portugal, Costa de Marfim, Cabo Verde, Gambia, etc\.)\. 18\. As ac,6es nao tiveram impacto no dominio da produ,co de plantas em viveiros e consequentemente na accao de reflorestamento (salvo no palmar), assim como numa maior preparacao dos quadros medios e de base (guardas florestais), logo duma maior capacidade de intervenc,o da DGFC, por questoes essencialmente do foro institucional e organizacional do aparelho piTblico que preside ao sector, aspecto evidenciado na avalia,co feita ao PASA em meados de 91\. d) Irriiacio azricola: 19\. As ac,6es realizadas neste ambito centraram-se em duas vertentes: - apoio ao DHAS - Departamento de Hidraulica Agricola e Solos da DGA na capacita,ao para formar e gerir projectos de aproveitamento hidroagricola e pequenos vales no leste; - iniciar uma ac,ao-piloto a nivel do leste de constru,ao desses mesmos esquemas hidro-agricolas, a nivel de camponeses de duas tabancas da regiao de Gabu\. Concretamente realizou-se o seguinte: Foi prestada assistencia tecnica pela empresa Holandesa EUROCONSULT atraves de presenwa durante 30 homens/mes dum especialista em engenharia hidroagricola, que levou a criacao duma unidade de projectos e seguimento de projectos do tipo atras indicados (com pelo menos tres tecnicos capacitados para o efeito); - Elaborados os APS - ante-projectos sumarios de engenharia referentes a pontos de regadio com potencial e vantagens na sua elaboracao, identificados no leste do pais; - Fornecidos diversos equipamentos e materiais tecnicos (fotografias por satelite e aereas\. de desenho, topograficos, hidraulicos, de pedologia, geradores, etc\.); - Realizada alguma forma,io "on-the-job training" e virias acV6es de forma,ao no exterior (Portugal, Japao, Burkina Faso); - Iniciadas duas ac,es-piloto em duas tabancas da regiao de Bafata de construcao de pequenos esquemas hidroagricolas de aproveitamento de pequenos vales: - Garantido o financiamento de diversas despesas de funcionamento do DHAS\. e) Fruticultura e pesquisa a2ricola aplicada: 20\. Inicialmente esta componente nio foi muito detalhada, estando apenas definido que investimentos iriam ser feitos no Centro Fruticola de Quebo, a par doutros fundos baseados num projecto financiado por Portugal relativo ao mesmo centro\. Com o decorrer do tempo foram sendo encontradas e apoiadas outras iniciativas no dominio da fruticultura, e a partir da avalia,co feita em meados de 91, alargou-se a intervencao para o dominio da pesquisa agricola aplicada (tecnicas culturais e culturas de planalto)\. As acc,es realizadas foram: - Aplicados varios investimentos materiais no Centro Fruticola de Quebo; - Feitos varios investimentos materiais no Centro de Contuboel ligados aos sub-programas de tecnicas culturais e cultura de planalto;  - 9 - Financiada a formacIo no Brasil/lPA durante tres anos (91, 92, 93 e 94) de tres tecnicos medios do DEPA no dominio da fruticultura; - Importado e plantado (com grandes quebras de vingamento) em Quebo um grande numero de Vitroplantas; - Realizado um estudo de pormenor sobre a reorientacao da pesquisa agraria na GB mediante o recrutamento de 3 consultores externos (3 h\. mes) em 1989; - Elaborados dois manuais sobre citrinos (3\.000 mil exemplares) e apicultura (vArias centenas); - Obtidos alguns resultados decorrentes dos ensaios realizados em Contuboel nas campanhas agricolas 91/92 e 92/93 sobre tecnicas culturais de alguns cultivos, como o milho bacil (Zea mays), milho cabalo (sorgo), mandioca, feij3o\. 21\. Face ao volume e esforco feito neste dominio, particularmente no Centro de Quebo, a par do outro co- financianiento ai aplicado (Portugal), seria de esperar que ja se tivessem alcancado resultados mais concretos, nomeadamente a producao e venda de plantas fruteiras aos agricultores, o que ainda nao sucede na escala minimamente desejavel\. No tocante a pesquisa agricola aplicada, cujas ac,6es foram identificadas ap6s a revis3o do PASA em meados de 91, nao seria possivel em duas campanhas obter respostas tecnicas muito s6lidas, mas importa que o actual INPA (ex-DEPA) veja como prosseguir com esses dois pequenos programas de interesse reconhecido\. f) Pescas: 22\. Neste relat6rio n3o iremos entrar em detalhes na componente do PASA ligada as pescas, pelo desconhecimento tecnico-profissional que obviamente temos sobre a materia, dado o facto de sermos especialistas agrArios\. Em sintese, as accoes que sobressaem foram: - Montado no Ministdrio das Pescas um centro de recolha, tratamento e divulgacao de informaqgo estatistica sobre a actividade pesqueira industrial na GB; - Financiadas varias acc6es de forma,co no estrangeiro de varios quadros tdcnicos superiores e medios, bem como algumas accoes em Bissau (observadores, informraticos, etc\.), bem como materiais ligadas A formac3o; - Fornecida assistencia tecnica externa entre 89 e 91 na ordem dos 50 h/mes (3 especialistas) e 3 h\.mes de consultorias externas pontuais\. 0 PASA foi sem quaisquer duvidas um dos projectos publicos mais realizadores, n3o s6 dada a sua caracteristica de apoio institucional muito amplo, como tambem por uma grande flexibilidade na gest3o para ir identificando actividades A medida da sua evolu,co, apesar de que deveria ter sido mais concentrado no referente aos dominios de intervenc3o\. Vejamos os inumeros estudos de base importantes que foram realizados (mais de uma dezena), a quantidade enorme de aquisicoes materiais feitas (duas dezenas de viaturas, duas dezenas de computadores, uma dezena de grupos de moto-bombas, quase uma dezena de motores geradores, mais de tres centenas de bicicletas, mais de uma centena de motorizadas, centenas de milhares de plantas melhoradas, etc\.), o volume e as areas de formacao encetadas (mais de 500 homens/mes, nuimero bastante significativo), a assistencia tecnica garantida (cerca de 460 homens/mes, sendo 130 homens/mes de proveniencia nacional), o numero de empresas fornecedoras envolvidas (nove dezenas, sendo 40 nacionais), entre outros aspectos\.  - 10- Independentemente dos niveis de eficacia alcancados, dos erros certamente cometidos e de outros problemas, nao se podera negar o volume dos esforcos feitos pelo PASA e o seu impacto nas estruturas (centrais, em especial) do MDRA, constituindo um dos mais importantes esteios do seu funcionamento entre 88 e 94\. D - PAPEL DO BANCO MUNDIAL/IDA E DO MDRA - ALCANCES E LIMITANTES 23\. Obviamente que os papeis do Banco Mundial - fonte e coordenador da ajuda externa (64 % cr6dito concessional IDA e 36 % donativo Holanda), e do MDRA - beneficiario das acq6es do projecto e gestor operacional do mesmo, terao de ser diferentes, e e nessa 6ptica que deverao ser analisados\. Nos dois primeiros anos houve alguma fragilidade na atencao dada na aplicacao rigorosa desse aspecto, essencialmente por uma certa demora na afectacao das grandes tranches de HFL-Florins holandeses da Holanda junto do Banco Mundial, o que o levou a que pontualmente se tivesse aplicado o credito IDA em pagamentos que deveriam ter sido do ambito do donativo da Holanda\. Esta situacao melhorou bastante a partir de final de 91, por a partir dessa data praticamente nao se ter utilizado o credito IDA, estando o saldo existente praticamente cativo para o pagamento da construcao do novo edificio do MDRA\. 24\. Para alem do problema existente com uma certa demora no momento oportuno de "entrada" do donativo holandes no financiamento ao PASA, outro aspecto de gestao financeiro sucedeu e liga-se com o nao funcionamento da conta especial do projecto a partir de fins de 91, o que levou a sua pouca utilizacao, nomeadamente na cobertura das despesas mais operacionais, prejudicando obviamente a funcionabilidade do PASA\. A razao fundamental reside na incapacidade governamental da GB para contribuir com os fundos em PG nas despesas operacionais do PASA, o que impossibilitava o reconstitui,co da conta mediante justificativos da participacao da GB\. 25\. A grave quest3o salarial e das condicfes de vida para o pessoal da funcao puiblica na GB vao levar ao aceleramento do abandono do Estado dos melhores tecnicos, um nuimero bastante significativo deles beneficiarios de acq6es de formac,o e de transferencia de know-how no quadro do PASA e de outros projectos\. A partir de 1991, conseguiu-se que o Banco Mundial aprovasse o recrutamento de alguns tecnicos nacionais como consultores do PASA, com niveis salariais estimuladores (situados entre os 600 a 1\.300 USD/mes), bem como duma serie de postos basicos e medios\. Foi esta a finica forma de "reter" no MDRA/PASA esses tecnicos, e n3o vislumbramos outra maneira de solucionar o problema que nAo esta\. Os projectos terao sempre que recrutar/pagar assistencia tecnica local, "triada" por metodos transparentes (concursos) e promotora de qualidade tecnica, promovendo e selecionando os melhores\. Alem disso, as entidades beneficiirias terao que ser cada vez menos o aparelho puiblico, transferindo essa ajuda para entidades mais representativas do sector agrario (associac,es, empresas, entidades locais/regioes, ONGs, etc\.), e nos casos onde obrigatoriamente tenha que se apoiar o Estado, fazendo duma forma que autonomize entidades especificas (organismos para-estatais) e promova os melhores tecnicos\. E - SUSTENTABILIDADE DO PROJECTO - IMPACTO NO FUTURO DAS ACTIVIDADES DO MDRA 26\. Se bem que seja de dificil mensurac3o estimar o impacto de projectos do tipo do PASA, onde a componente apoio institucional e dominante, logo o estabelecimento de criterios do que sera um bom ou mau impacto serem muito dependentes do analista e do beneficiario, nao ha duvidas de que, pelo numero e grau de interveno,ces que o projecto desenvolveu, houve um impacto evidente nas estruturas centrais do MDRA cobertas\.  - I1 - Sem este projecto nao seria possivel a maioria das suas Direcq6es-Gerais, encabecadas pelo GAPLA, equiparem-se do ponto de vista material (viaturas, mobiliarios, equipamento de escrit6rio e de informatica, meios tecnicos, meios para funcionamento corrente), terem aumentado a sua capacidade tecnica (externa e nacional) prestada, desenvolverem enormemente acces de formacao e assimilacao de know-how pelos quadros nacionais\. Estes aspectos sao fundamentados pela longa e exaustiva listagem de apoios integrados pelo PASA\. 0 GAPLA, Direccao-Geral de planeamento Agrario, guanto a n6s entidade mais importante e gue mais proxima deve estar situado (hierarquicamente) iunta do Ministro do DRA, ainda nao encerra em si todas as fimnces que Ihe permitam coordenar todos os aspectos agro-econ6micos do MDRA\. E o caso dos aspectos ligados ao orcamento de funcionamento (OGE) estarem ainda muito dependentes da DGA e do DAF, e nao permitirem um equilibrio com o PIP - Investimento Publico\. 0 mesmo sucede no tocante a certos fundos especiais, tais como o Fundo Florestal, cuja gestao teri que ser alterada e melhorada\. 27\. Apesar desses imponderaveis, o impacto do PASA foi positivo em termos de fornecimento dum variadissimo conjunto de meios, que permitiu ao MDRA funcionar durante a vigencia do mesmo com um minimo de operacionalidade\. Foi tambem positivo pela abertura de novas frentes de trabalho no MDRA, algumas mesmo ineditas, tais como a ligacao com os ponteiros/agricultores privados, o forte impulso a formaqao de quadros e algumas areas- piloto (palmar, fruticultura, elaboracao de projectos de regadio, etc\.)\. Dotou o MDRA dalgumas analises tecnico-econ6micas fundamentais e decisivas para a conduco de acc6es nesses sectores, como foi o caso da pecuaria, ponteiros, investimento puiblico, reorganizagao da pesquisa agraria, entre outros\. Ajudou a criar e incentivou o papel dalgumas equipas tecnicas baseadas em j6vens profissionais nacionais de futuro, em particular no GAPLA, Pecuaria, Hidraulica Agricola, Florestas\. Pelo seu amplo dominio de intervenc6es, ajudou a criar uma visio integrada a nivel central do sector agririo, baseada no GAPLA, consubstanciada numa sdrie de estudos realizados e na formac,o diversa realizada, o que facilitou o contacto e as discuss6es com outros sectores governamentais (Ministerio das Financas, Piano, Banco Central, etc\.), e ao mesmo tempo levou a racionalizacao dos meios ligados ao investimento piublico (reducao do PIP, do numero de projectos em curso, do volume da assistencia tecnica, etc\.)\. 28\. Os aspectos imediatamente antes focados s3o alguns dos exemplos que poderao antever alguma sustentabilidade no futuro imediato das accoes do MDRA\. Isto nao invalida que nao existam alguns riscos e quest6es que o PASA nio conseguiu atacar e ultrapassar, seja porque nao caberia no seu anmbito, seja pelas suas pr6prias limitagoes\. Repetimos que a questAo institucional no seio do MDRA (e do aparelho publico da GB, em geral), constitui a principal limitante a melhores resultados/impactos de qualquer projecto\. Enquanto nao forem tomadas medidas de fundo sobre a racionaliza,ao do pessoal, clarificacao (na prAtica)das funcoes das diferentes Direccoes Gerais do MDRA e maior disciplina e rigor na gestao publica, a situacao gravosa dos actuais nivdis salariais dos tdcnicos do Estado, levarao inevitavelmente que os melhores irao abandonando o Estado a medida que forem encontrando situacoes socio-profissionais adequadas no mercado interno de trabalho, enquanto que permanecerao no MDRA os mais incapazes\. 29\. Em suma: o PASA, apesar duma fase inicial (88 a 90) com algum empolamento e exagero na assistencia tdcnica externa, assim como da inadequacao da qualidade e dos perfis da mesma nalguns sectores (planeamento, gestao global), conseguiu apos a oportuna avaliacao de medioprazo em Julho de 91 reorientar-se positivamente, passando a apresentar o seu melhor periodo em termos de performance, que decorre de finais de 91 a meados de 94\. Passou de facto a constituir um dos mais importantes projectos do PIP para o reforco e a melhoria da capacidade de gestao e planeamento agro-econ6mico do MDRA, assim como nalgumas areas tdcnicas pontuais\. Isso permitiu o surgimento duma sdrie de jovens quadros tdcnicos com perspectivas boas, assim como reforcou bastante o papel e o nivel de anAlise dos mais antigos, alguns dos quais vieram a assumir novas e importantes tarefas no aparelho puiblico governamental; paralelamente racionalizou-se a assistencia tdcnica externa, por uma elevacao da sua capacidade de analise tdcnica e concepgao no dominio do planeamento agro-econ6mico (assessoria), complementada com vdrias acq6es de formacao, quer no pais, quer no exterior, se bem que tinha havido uma certa dispersao nos dominios que abarcou\.  - 12 - 0 inventArio material feito, assim como o que ainda estA em falta mas jA assegurado (novo edificio do MDRA), foi correctamente gerido e aplicado, salvo pequenos erros normais neste tipo de situaq6es\. 0 processo de gestao administrativo-contabilistica podera ter sido mais eficiente, mas nunca foi um impedimento A realizaqao das accoes previstas no PASA, salvo os atrasos decorrentes das quest6es ligadas A conta especial (Banco Central da GB) e da incapacidade do Governo da GB na co-participacao financeira em moeda nacional\. Findo o Projecto, em Setembro de 94, nao se legam "elefantes brancos", nem se criaram situac6es criticas e conflituosas\. Antes pelo contrario; ha todo um manancial de trabatho tecnico realizado e de elevac,ao do know- how de vArios quadros tecnicos nacionais, que importa agora que o MDRA saiba continuar a utilizar e rentabilizar ainda mais, para o que urge uma profunda reforma organica e estrutural no seu seio, para a qual disp6e de varias propostas, dentre as quais algumas decorrentes deste projecto\. Bissau, Dezembro de 1994 Elaborado pela Direccao-Geral do Planeamento Agrario  - 13 - LISTA DE POSTOS/TEkCNICOS INDIVIDUAIS ESTRANGEIROS A) Permanentes: Homens/mes - Assessor Tecnico Principal/Planificador: 27 - Especialista Recursos Humanos: 36 - Contabilista: 24 Sub-Total 87 B) Consultores de curta duraclao: - Formac,ao administrativa/organizativa: 1 - Tecnicos ligados col6quios ponteiros (6): 2 - Especialista Agricultura: 1 - Especialista Pesquisa agraria/organizacao (3): 3 - Arquitectos/Projectistas (2): 3 - Comercializa,go/Procurement (PIR): 3 - Engenheiro silvicultor/inventArios - tributagao: 2 - Especialista Credito rural/s\. privado: 1 Sub-Total 16 AT externa fornecida por emoresas A) MAS - MacDonald Agriculture Services: Homens/mes - Coordenador equipa (2): 36 - Especialista Recursos Humanos: 18 - Planificador agricola: 6 - Assessor em florestas: 18 - Especialista viveiros/pesquisa florestal: 12 - Especialista em administraqao pescas: 24 - Bio-estatistico: 18 - Especialista radios/pescas: 8 Sub-Total 140 B) EUROCONSULT: - Especialista HidrAulica Agricola: 30 C) LAHMEYER International Ltd\.: - Planificador Agricola: 6  - 14 - LISTA/POSTOS DE TECNICOS NACIONAIS CONTRATADOS A) Permanentes: Homens/mes - Director Projecto PASA: 18 - Especialista Recursos Humanos: 30 - Contabilista: 18 - Engenheiro Agr6nomo Palmar: 16 - Engenheiro Hidraulica Agricola: 12 Sub-Total 94 B) Consultores de curta durafio: - Agr6nomo + Agro-economista/ponteiros: 16 - Tec\. superiores Zootecnia/veterinaria (3): 36 - Tecnicos col6quios ponteiros (6): 3 - Espec\. Fruticultura + Espec\. Organiz\. MDRA 3 - Tecnico superior sobre estrategia MDRA: 2 - Estatistico agricola: 2 - Formacao Agro-economia, Recursos Humanos, Avaliaco projectos, informAtica (4): 6 - Agro-economista/revisao PIP: 3 Sub-Total 71  MDRA/GAPLA - AGRICULTURAL PLANNING DEPARTMENT AGRICULTURAL SERVICES SUPPORT PROJECT (Financed by IDA/World Bank and the Netherlands Government) (translation from the original in Portuguese) SUMMARY ICR - Implementation Completion Report September 1988 - September 1994   ICR - Implementation Completion Report (ICR) Table of Contents A\. Introduction \.1 B\. Global Objectives Achieved by PASA - Indicators of Results \. 1 C\. Execution Rate of PASA Components \. 4 a) Global Support for MDRA \. 5 b) Livestock Production \. 6 C) Forestry \. 7 d) Irrigation \. 8 e) Fruit Growing and Applied Agricultural Research \. 8 f) Fisheries \. 9 D\. Roles of the World Bank/IDA and MDRA - Scope and Limits \. 9 E\. Project Sustainability\. Impact on MDRA's Future Activities \. 10 Annex: Foreign and Local Technical Assistance \.12   IMPLEMENTATION COMPLETION REPORT (ICR) A\. Introduction 1\. It is a requirement of the World Bank that an ICR (Implementation Completion Report) be prepared for all Bank-financed projects upon their completion\. This is the purpose of the present report and concerns the PASA (Agricultural Services Support Project) that, following three extensions at the end of 1991, 1992 and 1993, was officially closed on September 30, 1994\. 2\. The methodology adopted for preparation of the document was as follows: (a) the information was based on the project's material and organizational achievements (outputs), through the list of payments (disbursement applications) effected and discussion with the PASA beneficiary sectors/components\. 3\. The ICR requested by the World Bank is intended to cover the following aspects: (a) achievement of project objectives; (b) project sustainabiity; (c) performance of the Bank and of the Government through MDRA; (d) overall project performance; and (e) plan for future project operation/impact\. Bearing these aspects in mind, the structure of the report will be based on a line of analysis focusing on the details, with a strong interpretive component, based not only on the project's physical and material achievements but also (and fundamentally) on the impact on the beneficiary sector\. B\. Global Objectives Achieved by PASA - Indicators of Results 4\. The main obiective to be accomplished by the project within the period initially envisaged (three years) was the creation of basic caDacities at the then MDRP which would enable it: (a) to mnanage the sector's human resources, in particular technical assistance; (b) to plan its activities and coordinate external aid; (c) to improve its technical performance in certain subsectors (irrigation, forests, fruit growing, livestock and fishery); and (d) to ensure supervision and implementation of structural adjustment measures in the farm sector (especially in regard to public spending/PIP)\. 5\. To that end, the MDRP would first of all be given assistance in setting up a human resources division in GAPLA, not only to manage the technical assistance from external sources, but also to carry out measures conducive to more effective use and management of the local staff\. 6\. The total amount envisaged was US$7 million in foreign exchange plus roughly US$ 800,000 in local currency (counterpart funding from the Guinea-Bissau Government), broken down as follows: Foreign exchange: civil works 8\.4% vehicles and equipment 15\.0% tech\.assistance, training and studies 40\.0% goods and services 19\.3% operating costs 3\.3% PPF and contingencies 14\.0% Local currency civil works 25\.0% (US$800,000 equivalent) operating costs 75\.0%  - 2 - Annual disbursements were to be phased in the following manner: 43% in the first year; 35\.5% in the second; and 21\.5% in the third\. The actual annual disbursement figures are as follows: Year Percentage of the total amount 1988 3% 1989 18% 1990 32% 1991 25% 1992 12% 1993 2 % 1994 7% It is difficult to compare these indicators with the three-year time frame envisaged, inasmuch as PASA was granted three extensions (at year-end 1991, 1992 and 1993 respectively)\. But if we compare execution years 1988 and 1989 with the scheduled Year One and execution years 1992 to 1994 with the scheduled Year Three, it is clear that the investment capability during the initial years of the project has been overestimated, since only half of the outlay stated for Year One (1988 and 1989) actually took place, while the level of real spending rose considerably in Year Two (1990 and 1991)\. These figures are convincing evidence that, as has proved to be the case in other projects, the start-up is the most difficult phase of public sector projects in Guinea-Bissau\. It is also the stage where attainment of planned goals is most difficult, as may be seen from the following figures: Execution Years Scheduled Year Deviation (+ or -) 1988 + 89: 31% One: 43% -22\.0% 1990 + 91: 57% Two: 35\.5% + 21\.5% 1992 + 93: 22% Three: 21\.5% + 0\.5% 7\. In terms of components, the following table compares the estimated implementation percentages with those actually achieved and/or disbursed, along with the relevant deviation: Component Planned % of total Actual % of total Deviation (+ or -) GAPLA 39\.7 45 +5\.3 Agriculture 9\.8 21 +11\.2 DEPA/fruit 0\.8 9 +8\.2 DHAS/irrigation 9 12 +3 Livestock 6 6 0 Forestry 16 11 -5 MDRA/General 9 7 -2 Fishery 19\.5 9 -10\.5 The immediate conclusion to be drawn from the above figures is that, for the most part, the actual distribution of the investment differed greatly from the one projected, largely due to three factors: (a) lack of detail at the planning stage, which would seem to have been fairly intentional, given the specific features of the agriculture sector and the policy changes that were anticipated in the years following the planning and start-up of the project (1986/87 onward); (b) emphasis given to management by objectives, coinciding with the very significant reshaping of PASA from mid-1991 onwards; this was reflected in the closing of certain components (irrigation, forestry, and fruit  - 3 - crops), the launching of new activities (ponteiros, palm groves, agricultural research) and the strengthening/intensification of certain components (GAPLA/training, general support to the MDRA); and (c) the very nature of PASA, viz\. general institutional support to the MDRA, which from the start presupposed (in the Guinea-Bissau context) structural changes and some degree of temporary organizational instability\. 8\. The structure of the investment is also illustrated by a comparative table\. In this instance, however, a direct comparative analysis is more difficult due to the different categories of investment expenses during the two periods in question\. At any rate, a grouping of related outlays results in the following picture: SERVICE SUPPLIER VOLUME (man-months) % OF TOTAL Local Technical Staff (total) 686 8% Permanent TA 94 Advisory Services 71 Training/Per Diems 521 Individual Foreign TA (total) 104 9% Permanent TA 87 Advisory Services 13 Specific Training 4 GB Companies--TOTAL 40 19% Foreign Companies--Total 50 59% Europe 40 Africa 5 USA/Brazil 5 Others/Various (GB) 5% An initial examination makes it clear that one of the aims of projects financed by the World Bank and IDA-- i\.e\., to stimulate the local market-was attained, since roughly one third of the total value of the services provided for PASA came from the domestic market (8% of the technicians and 24% of the companies or small suppliers): and that figure does not take into account the contract for construction of the new MDRA building, which was awarded to a local consortium for execution in 1994\. This would raise the level of PASA input from one third to 40%, a rather impressive increase\. The undeveloped status of the Guinean market meant that two thirds of the services (9% for individual technicians and 59% for the companies supplying technical assistance, as well as equipment and materials) had to be secured from external sources\. 9\. Bearing in mind the principal objectives targeted for the PASA project (which were addressed briefly in paragraph 4 of this section B of the report), we shall attempt a general assessment of their degree of achievement: (a) The programs financed by PASA led to a perceptible improvement in the management of human resources, to wit: (i) MDRA had never had a human resources division, but one has now been created in GAPLA\. (ii) An inventory and detailed register of MDRA staff was prepared\. (iii) During the PASA project, GAPLA was the most active MDRA unit in promotion and delivery of local technical assistance\. Twelve local technicians were engaged under PASA/PIR, starting in 1991\.  - 4 - (iv) The review and improved management of the agriculture PIP as part of PASA resulted in significant rationalization of the external technical assistance services at MODRA (from over 80 technical staff in 1988 down to the present 36)\. (b) The planning function and the start of improved coordination of external aid--factors that are closely interrelated, given the importance of such aid in supporting the country's public spending--were greatly strengthened under PASA\. They can even be said to represent one of the project's chief contributions to the MDRA, in light of the following advances: (i) Strengthening of the role performed by GAPLA, which became one of the principal MDRA general directorates, plus the creation in that body of a skeleton team of local technicians with improved capacities in project identification, monitoring and evaluation as well as other elements of agricultural policy; (ii) The execution of a series of studies and reflections that were vital to the process of fornulating and implementing agricultural sector policy; (iii) The conduct of training activities in the country (four courses, each lasting six weeks) on planning and management; (iv) Although the technical assistance to DGFC was acknowledged to be useful, the various inputs do not appear to have been utilzed in their entirety due to factors relating to organization of the DGFC and its management methods; (v) While, on the one hand, the two pilot tests on the implementation of small-scale irrigation works in the eastern part of the country were not successful, it is equally true that domestic technical capacities were created at DHAS for the design and monitoring of small irrigation works in the east\. C\. Agreement of Implementation of PASA Components 10\. Section B of this report provided an idea of the overall results of PASA, viewed from different angles (by year; by component; by the type of service rendered; and by the type of expenditure), but always from a global perspective and in comparison with the goals and plans originally set for the project\. In this chapter, we shall concentrate on a quantification of the physical and organizational activities actually performed\. Our discussion here will be based on the major components of PASA--or, rather, on the subprojects that it carried out, which were the following: a) Global support for MDRA (GAPLA; Human Resources and Training; Statistics; Infrastructures and Works; Equipment and Operational Support, etc\.) b) Livestock production (studies and pilot action) c) Forests (legislation; regulations; taxation; nurseries and research; and pilot action) d) Crop irrigation (surveys; studies of irrigation sites in the valleys of eastern Guinea-Bissau; two "small valley" pilot projects) e) Fruit growing (support for the Quebo Center) and applied agricultural research f) Fisheries (statistical data collection and processing system on the ZEE; training activities)  -5- a) Global support for MDRA 11\. This group includes the following subprojects: (i) support for creation of a human resources division in GAPLA; (ii) training programs; (iii) support for general agricultural planning; (iv) support for agricultural statistics; and (v) creation of physical infrastructure and construction, plus material assistance for MDRA\. The following steps were taken with specific regard to item (i): * The GAPLA Human Resources Division was created; * The Human Resources Division was provided with office furniture and equipment, and data processing equipment; * An inventory/register of MDRA personnel was conducted from 1991 to 1994, and its own software, suitable for management and computerized payroll processing, was created; * A number of regulations were drafted on the recruitment of personnel, careers, professional profiles and other matters\. 12\. As to the items in point (ii), the DRH served as the pivot to develop a series of various types of training activities, despite the fact that it was the PASA manager (director and technical advisor) who was responsible for the identification and design of training areas, so that they would comply with and be included in the PASA objectives\. 13\. In item (iii), the activities in support of global agricultural planning represented one of the project's central areas\. * Extemal TA amounting to roughly 99 man-months was supplied, as well as 36 man-months of local TA\. In the conduct of studies, 11 man-months of external advisory services and 27 man-months of such services from local consultants were guaranteed; * Various items of office fumiture and office and data processing equipment were supplied\. Repairs were made and minor remodeling works carried out in the present main MDRA/GAPLA building\. Vehicles (5 jeeps and 4 scooters) were furnished for GAPLA; * Analysis/design work was carried out, which led to drafting a basic document, "strategy of the agricultural sector-preliminary version", in May 1990; * Two reviews and evaluations of the agricultural PIP situation were conducted; * An innovative MDRA study/action program entitled "Ways to Modernize Farming in Guinea-Bissau" was conducted for the benefit of the ponteiros in October 1992, along with a series of three conferences on topics of interest (marketing of farm products, agro-processing and credit/agroeconomic management in the pontas)\. Three trips/commercial missions were carried out by the ponteiros to Portugal, Brazil and Cape Verde; * The structure and distribution of tasks within GAPLA were reorganized, thus spurring greater institutional rationalization, the emergence of new staff (at least four high level technicians) and the improvement of the PIP through the introduction of and training in a new method for the preparation and monitoring of that prograrn;  - 6 - * The draft version of the new MDRA organizational law was prepared and was used as the basis for discussion with the Civil Service Ministry; * An accounting unit was set up and put into operation within GAPLA; * Assistance was furnished in the drafting and publication of a joint executive ruling on land concessions and in the elaboration of agroeconomic criteria for evaluating requests for land concessions; The greatest impact of the activities carried out by PASA can be said to have occurred in the above areas, particularly after the realignment of the project in mid-91 and the assignment of a chief technical advisor to the director of GAPLA (and of PASA)\. 14\. The following achievements were promninent in the areas cited in item (iv) above - agricultural strategies - which were also addressed by the GAPLA team: * The GAPLA Statistics Division was provided with office furniture and equipment, as well as data processing equipment; * Three specific works were compiled and published: a revised version of the 1988-89 agricultural census, in 1992; the first ponteiros census; and the first survey of fruit crops: cashew nuts and mangoes)\. * Specific aid was provided for conduct of the agricultural census in 1988-89, along with countless individual activities in the area of statistical compilation; 15\. The activities carried out under item (v) above - general support for the MDRA - led to the following achievements: * Repairs and some construction work to improve the central MDRA facilities (the office of the Minister, MDRA meeting room, DGA, DGFC etc\.); * Equipment and office furniture were provided and numerous operating expenses were paid; * The engineering design and architectural blueprints for the new MDRA building were ca-ied out by a local firm (PROJECTAE)\. The bidding process and contract award was held from April through June 1993; * Cofinancing agreements for training activities have been signed by the MDRA and the Portuguese Ministry of Agriculture; * Support was provided for the NMRA Agricultural Documentation Center in the form of training and materials, as well as the for the National Unit of Agricultural Extension (overseas study for the Unit's head, plus office furniture and equipment)\. b) Livestock Production 16\. The activities in the following list were centered on, and directly managed by, the Livestock DG: * The conduct, under contract, of two studies--entitled "Traditional Systems of Livestock Production in Guinea-Bissau" and "Socioeconomic Situation of Animal Health in Guinea-Bissau"--by GAPTEC between mid-1990 and mid-1994;  - 7 - * In parallel to above studies, the livestock situation of 120 villages (in a first phase, in 1990 and 1991) and that of another 40 (second phase, in 1992 and 1993) in the regions of Bafata, Gabu and Oio/Bissora was monitored; * Various technical training activities were conducted for the benefit of the subproject's national team (the director general, veterinarians and zootechnicians) through trips abroad--mainly in Portugal--and the holding of technical workshops in Bissau; * The equipment and office supplies provided for the DGP included two PCs and printers; * A pilot project to be presented for financing by the PIR (Rural Incentives Program) (IFAD funded) was prepared, based on the studies that had been conducted\. c) Forestry 17\. The activities in this sector were divided into two distinct stages\. The first--focusing on global support for the DGFC--ran from the start of PASA to mid-91 and underwent a number of changes\. The second, from mid-91 to September 1993, centered on a pilot activity for palm grove renewal in the northern part of the country, based on the identification made in the previous stage\. A summary description of the activities appears below: * A draft of the proposed forestry law was prepared and was later (1992) approved and published in the Official Gazette; * A draft of the DGFC organizational law and by-laws was prepared and is being discussed for application; * A program was drawn up to support the proposal submitted by the DGFC on action to be perfonned in regard to the protection of environment; * The forestry inventory of two important timber company concessions (Maudo San6 and FOLBI) was carried out; * A study was carried out that permitted the identification of the technical and economic bases for forestry taxation; * Between 1989 and 1990, technical assistance was provided by two experts (a forestry engineer for 18 man-months and another for field trials/tree nurseries for one month)\. * Investments were made at the Embunhe and Canchungo (palm grove) nurseries\. * A wide range of equipment and specific materials for forests and fauna was purchased; * oil palm (Hibrido tenera) seedlings were imported and planted in nurseries over 18 months\. Nearly 55,000 plants were distributed during the 1993 rainy season (July to September); * A few training activities (forest and palm-grove guards) were carried out in Bissau and a number of others outside the country (Portugal, CMte d'lvoire, Cape Verde, Gambia and elsewhere)\. 18\. The activities had no impact on the production of plants in nurseries or, consequently, on the reforestation activities (except in the case of palm groves) or on additional training at the intermediate and base levels (forest guards), even after the DGFC had increased its intervention capacity\. This was largely due to the institutional and  - 8 - organizational situation of the government agency responsible for the sector, as noted in the evaluation of PASA that was conducted in mid-1991\. d) Irrigation 19\. The activities conducted in this sphere were divided into two groups: support for the DHAS (the Irrigation Department of the DGA) in the form of training to prepare and manage projects which would utilize the water resources and small valleys in the eastern part of the country; and the start of a pilot operation build those irrigation systems in two villages of the Gabu region\. The following specific activities were performed: * Technical assistance was rendered by the Dutch company EUROCONSULT who provided a specialist in irrigated farm engineering for a total of 30 man-months\. This resulted in the creation of a project unit to monitor projects of the type indicated above (with at least three technicians trained for this purpose); • Preliminary engineering designs were prepared for those irrigation sites with potential and advantages that had been identified in the eastern part of the country; - Various items of equipment and technical material (satellite and aerial photographs, design, topography, hydraulics, soil surveys, generators, etc\.), were provided; - On-the-job training and other training activities were provided overseas (Portugal, Japan and Burkina- Faso); i In two villages of the Bafata region, work was started on a pair of pilot activities for the construction of small-scale irrigation structures to develop the existing small valleys; * Financing was guaranteed for various DHAS operating expenses\. e) Fruit Growing and Applied Agricultural Research 20\. This component was not spelled out in detail at the start\. The only stipulation was that investment should be made in the Quebo Fruit Center, along with other funding, based on a project financed by Portugal for the same center\. With the passage of time, other initiatives in the realm of fruit production appeared and were supported; and, based on the evaluation made in mid-1991, the component's scope was extended to include applied agricultural research (cultivation techniques and upland crops)\. The activities conducted were: * Investments in equipment for the Quebo Fruit Growing Center; * A numnber of other physical investments in the Contuboel Center, related to the cultivation techniques and upland crop subprograms; * Three years of training (1991, 1992 and 1993) in fruit growing, provided in Brazil/IPA for three mid- level technicians from DEPA; * The import of large quantities of vitroplants which were planted in Quebo; * Two manuals produced on citrus growing (3,000 copies) and bee-keeping (several hundred)\.  - 9 - * The trials of cultivation techniques held in Contuboel in crop years 1991-92 and 1992-93 with certain crops--such as "bacil" corn (Zea mays), "cabalo" corn (sorghum), cassava, and beans--produced some results\. 21\. Given the expenditures and efforts deployed in this area--especially at the Quebo Center--and the other cofinancing used for this purpose (Portugal), it was logical to expect that more concrete results would be forthcoming, namely in the production and sale of fruit plants to farmers\. This has not yet been the case, even in terms of minimum achievements\. As to the applied agricultural research activities, identified following the review of PASA in mid-1991, two years do not provide sufficient time to obtain solid technical answers\. But it is important that the present INPA (formerly the DEPA) find a way to continue these two small-scale programs of recognized value\. f) Fisheries 22\. We shall not enter into detail concerning the PASA component associated with fisheries in this report, due to our obvious lack of technical and professional expertise, since our field of specialization is agriculture\. Briefly stated, the most prominent activities were the following: * The establishment in the Fisheries Ministry of a center for gathering, processing and disseminating statistical data on industrial fishing in Guinea-Bissau\. * Various training courses overseas were attended by a number of upper and mid-level technical staff\. Others were held in Bissau (observers, computer specialists, etc\. and training materials were provided)\. * Between 1989 and 1991, roughly 50 man-months of external technical assistance were provided by three specialists, as well as three man-months of occasional external advisory services\. PASA was unquestionably one of the public projects that rated highest in terms of achievement, not only because of its broad institutional support, but also thanks to its very flexible management, which enabled PASA to identify activities as the project evolved, although it should have focused more closely on the areas targeted for intervention\. Suffice it to mention the many important basic studies that were conducted (more than ten); the enormous quantity of physical items acquired (two dozen vehicles, two dozen computers, a dozen groups of motorized pumps, almost a dozen generators, more than 300 bicycles, more than a hundred scooters, hundreds of thousands of improved plants, etc\.); the volume and areas of training introduced (five hundred man-months, an impressive figure); the number of supplier companies involved (90 of them, including 40 local operators), the technical assistance guaranteed (about 460 man/months, including 130 local man/months) among other inputs\. Irrespective of the problems encountered, the levels of efficacy achieved and the errors that were undoubtedly committed, the magnitude of efforts deployed by PASA and the project's impact on MDRA structures (in particular, the central units), assuredly constituted one of the mainstays of its operations between 1988 and 1994\. D\. Role of the World Bank/IDA and of the MDRA - Achievements and Limits 23\. It goes without saying that the role played by the World Bank as the source and coordinator of external aid (64% in the form of an IDA credit and 36% covered by a Dutch grant) must be different from that of MDRA, the beneficiary of the project as well as its operational manager, and it is from that standpoint that they will need to be analyzed\.  - 10- During the first two years, less than close attention was paid to this aspect [sic], basically because the delays affecting deposits of the NLG installments into the World Bank led to the IDA credit being used for certain payments that should have been made out of the Dutch grant\. This situation started to improve considerably at the end of 1991, when the IDA credit remained practically untouched, the existing balance being earmarked to pay for the construction of the new MDRA building\. 24\. In addition to the above-mentioned problem in terms of the delays affecting the Dutch grant, another problem occurred in the area of financial management: the project special account was not operational from the end of 1991, which led to it hardly being used at all, especially when operating expenditures were concerned, a fact that obviously jeopardized PASA's operating capacity\. The basic reason laid in the Government's inability to contribute counterpart funds in local currency to PASA's operating expenditures, which meant that there were no records of local contributions against which the account could be replenished\. 25\. The serious issue of wages and living conditions for government workers in Guinea-Bissau is going to result in more and more of the best technicians leaving the Government, including many who have received training and acquired know-how within the context of PASA and other projects\. In 1991, the World Bank began to approve and recruit a number of local technicians as PASA consultants, at incentive wage levels (US$600-1,300 per month) as well as a number of basic and middle-level posts\. This was the only way to "keep" those technicians at MDRA/PASA, and we see no other way of solving the problem\. The projects will always have to recruit/pay for local technical assistance, selected by transparent methods (competition) as a means of promoting technical quality\. In addition, the central govemment entities should no longer be the primary beneficiaries, but instead the assistance should be transferred to bodies that are more representative of the agricultural sector (associations, enterprises, local agencies/regions, NGOs, etc\.)\. Support to public central bodies would be kept to a l\.iinimum, only when required but action should be taken to mnake certain specific bodies as autonomous as possible (parastatals) and promote the best technicians\. E\. Project Sustainability\. Impact on MDRA's Future Activities 26\. While it is difficult to estimate the extent of the impact of projects of the PASA type, which are dominated by the institutional support component, since the establishment of criteria for a good or a bad impact are very dependent on both analyst and on the beneficiary, there is no doubt, from the number and extent of the interventions generated by the project, that there has been an obvious impact on the central MDRA services involved\. Without this project, it would not have been possible for most of its Directorates, starting with GAPLA, to obtain the necessary material resources (vehicles, furniture, office and computer equipment, technical resources, resources for day-to-day operations), expand their technical capabilities (external and local), or develop large-scale programs to train or transfer know-how to the local teams\. These are all aspects based in the long and exhaustive list of support activities addressed by the PASA\. GAPLA, the Agricultural Planning Directorate of MDRA\. in our view the most important agencv and the one that should be hierarchically closest to the Minister, still does not influence all the MDRA functions and agroeconomic aspects\. It is namely the case of those aspects related to the operating budget (OGE), still highly dependent on DGA and DAF, and not in balance with the Public Investment Program (PIP)\. The same occurs with certain special funds, such as the Forestry Fund, the management of which needs to be overhauled and improved\. * Translator's note: This sentence refers to proceeding paragraphs which have been omitted from the summarized version of the report\.  - 11- 27\. Despite these imponderables, the impact of PASA was positive in that it provided a very wide variety of resources, such that MDRA was able to function during the project period with at least a minimum level of effectiveness\. It was also positive in that it opened up new working areas at MDRA, some even unprecedented, such as the linkage with the ponteiros/private farmers, the strong boost for staff training, and certain pilot areas (palm growing, fruit- growing, preparation of irrigation projects\.)\. It provided MDRA with a number of basic technical and economic analyses that were decisive for the conduct of actions in such sectors as livestock, ponteiros, public investment, and reorganization of agricultural research, among others\. It helped to create and boost the role of certain technical teams comprised of promising young local professionals, in particular at GAPLA, and in the livestock, irrigation and forestry sectors\. Through its broad range of activities, it helped to create an overall vision of the agriculture sector at the central level (GAPLA), supported by a number of studies and a variety of training activities, facilitating contact and discussion with other government agencies (Ministry of Finance, Planning, Central Bank, etc\.) while also helping to streamline the resources earmarked for public investment (reductions in such areas as the PIP, ongoing projects, volume of technical assistance, etc\.)\. 28\. The aspects mentioned in the foregoing paragraph represent a few examnples presaging a certain degree of sustainability for MDRA's activities in the immediate future\. Nonetheless, there are still certain risks and issues that PASA has not yet succeeded in addressing or overcoming, either because they did not fall within its scope or because of its own limitations\. We would repeat that the institutional problems affecting MDRA (and indeed the country's entire civil service) have been the principal reason why no project has succeeded in achieving better results/impacts\. Until radical measures are taken to rationalize the personnel situation, clarify (in practice) the functions of the various departments in MDRA and bring greater discipline and rigor to public sector management, the serious situation regarding the salaries paid to government technicians will inevitably mean that the better ones will quit the public service as and when they find better opportunities in the private sector, while the less capable will remnain at MDRA\. 29\. ConcJusion\. Despite the problems with technical assistance in the initial phase (1988-1990), in terms of inflated numbers of experts and, in certain sectors (planning and overall management), inadequate quality and inappropriate profiles, PASA was relaunched in a more positive direction following the mid-term review of July 1991, achieving its best performance between the end of 1991 and mid-1994\. At the close of the project in September 1994, there were no 'white elephants" and no critical or controversial situations were noted\. Quite the contrary: a large volume of technical work had been done and the know-how of several local technical teams had been enhanced\. It is essential that MDRA be able to continue to use and streamline those resources even more; to this end, it needs to undergo radical organizational and structural reforms, and a number of proposals have been submitted along those lines, some of which emanate from this project\. Bissau, December 1994\. Prepared by the Directorate General of Agricultural Planning  - 12- External technical assistance - individual consultants (A) Fllb time MNan/months Chief technical adviser/planner 27 Human resources specialist 36 Accountant 24 Subtotal 87 (B) Short-tern consultants - Administrative/organizational training 1 - Technicians involved inponteiros discussions (6) 2 - Agricultural specialist 1 - Specialist in ag\. research/organization (3) 3 - Architects/designers (2) 3 - Marketing/procurement (PIR) 3 - Forestry engineer/inventory-taxation 2 - Rural credit/private sector specialist 1 Subtotal 17 Technical assistance - consultine finms (A) MAS - MacDonald Agriculture Service Man/months - Team coordinator (2) 36 - Human resource specialist 18 - Agricultural planner 6 - Forestry adviser 18 - Nursery/forestry research specialist 12 - Fisheries management specialist 24 - Biostatistics 18 - Radio/fishery specialist 8 Subtotal 140 (B) EUROCONSULT - Irrigation specialist 30 (C) LAYMEYER International Ltd\. - Agricultural planner 6  - 13- List of local technicians hired (A) Fol time Man/ID1thu - Director PASA project 18 - Human resources specialist 30 - Accountant 18 - Agronomist (palm trees) 16 - Irrigation engineer 12 Subtotal 94 (B) Short-tenn consultants - Agronomist + agroeconomist/ponteiros 16 - Senior technicians, animal husbandry/vet\. nmdicine 36 - Technicians, ponteiros discussions (6) 3 - Fruit-growing specialist + specialist MDRA organization 3 - Senior technician, MDRA strategy 2 - Agricultural statistics 2 - Training in agroeconomics, human resources, project evaluation, data processing (4) 6 - Agroeconomist/PIP overhaul 3 Subtotal 71   IBRD 24520 OCEAN SENEGAL Thie~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ coo bo bee prepor of render, Hnodi |Cor u tre8ccoE Fodo; _ oocrooc ,UINE IGSNU inero ueea of The Word Soi , ece"' b/' '"- + \ roaccC ATLANTICl SSATU :'jb'd P __6\.urS Grocp\.The~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Ed De\.ciot-bs\.ce ond lb\. ) boo I ~\ undee sfow, J C r S on~~~~~~~~~~ -bi -n~ do 5=ot reply,l no0r Jh ccc cocrocm,e ocDq O CEAN B-do _ - bo ANDm JOLAMAs of a eco o byi Tn hrW tnprplrd 5---Sk 7, tff C-7oni ndo t for th -e-tonie f LAC - BIbA GUINEA-BISSAU- \.f -d- -d I\.UNOO - -\. thn mhmol ust of Th\. World B-k_ BlWh\. s7~EFoC4 < \.~Th (r -this\. d\.undorttti\.pi \.sth\. Ah R -- h,d't ADM I N ISTRATIVE U NITS pn th\.s rg\.Wp do = ,\.p no imly on Ah G As sr d o E\. Chl\.b my7r ofd htwordbtru - th\.,_ _ oWU , sttu r\. gy hTitOrY oroyEtAP) Ei/Q X lg such bo-udon-s\. Ir\._ UN or B t5A 7 r\.( L 3Ji NCA P-LOT CENTERS AIRPORTS MAAURITAIINA , _VEU ROADS i REGION CAITALS SENEGAL ctNT OEhOcc,r j _ - \. t_S/ '\.ttnCOT REGION BOUNDARES THE A tLI INTERNATIONALBOUNDARIES GUINEA A R C H I P E L A G 0 SI' ' UERR A ___ ___ ___ __ ___ ____,\.___o _ ___ __ ___ ___ __ ___ ___ __ CITE mARCH 1993    \.;: : - ; - \. I - \. 7 ; i I d \. I - I i- I -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

REVIEW

P055814

 ICRR 12105 Report Number : ICRR12105 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 05/12/2005 PROJ ID : P055814 Appraisal Actual Project Name : Tn-Export Development Project Costs 40\.1 29\.64 US$M ) (US$M) Country : Tunisia Loan/ US$M ) 35 Loan /Credit (US$M) 27\.16 Sector (s): Board: PSD - Micro- and Cofinancing 5\.1 2\.48 SME finance (40%), US$M ) (US$M) Central government administration (38%), General industry and trade sector (21%), Other domestic and international trade (1%) L/C Number : L4475 Board Approval 99 FY ) (FY) Partners involved : Closing Date 03/31/2004 09/30/2004 Prepared by : Reviewed by : Group Manager : Group : Fareed M\. A\. Hassan Chad Leechor Laurie Effron OEDCR 2\. Project Objectives and Components a\. Objectives The overall objective was to enhance the ability of Tunisian private exporters to integrate into the global economy \. The project sought to foster export competitiveness of firms by mitigating some of the disadvantages they encounter such as insufficient knowledge of export markets, inadequate export financing, and export -related transaction costs \. b\. Components There were three components corresponding to the above -mentioned areas of targeted reform : (1) an Export Market Access Fund (EMAF) to cover up to 50 percent of the cost of consultant services to help enterprises, especially micro and small and medium enterprises (SMEs), to penetrate export markets (48 percent of project cost); (2) a Pre-shipment Export Finance Guarantee (PEFG) to encourage financial institutions to provide pre -shipment financing to SMEs and emerging exporters with viable export contracts (19 percent); and (3) support for trade facilitation to increase the efficiency of trading activity, with special emphasis on customs procedures and electronic documentation (33 percent)\. c\. Comments on Project Cost, Financing and Dates The adoption of the PEFG regulatory framework took more time than expected and delayed project effectiveness by three months\. The project closed 6 months later than planned\. 3\. Achievement of Relevant Objectives: Project performance in terms of targeted indicators (ICR tables 1, 2, and 3) is satisfactory, although the PEFG scheme performs below expectations \. (1) Export Market Access Fund\. The EMAF program enabled 595 enterprises to become new exporters or enter new markets, surpassing by 71 percent the performance target of 350 firms\. More than half of the firms assisted entered 57 new markets, 40 percent became new exporters, and 6 percent developed new export products (ICR table 1)\. However, the ICR does not provide information on actual export revenue generated by the EMAF program \. (2) Pre-shipment Export Finance Guarantee \. About US$35 million of additional exports was generated through the PEFG scheme, falling short of the planned US$ 223 million of exports (ICR table 2)\. The ICR listed a number of factors to explain the shortfall : weaknesses in PEFG management team, participating banks were relatively unfamiliar with lending without collateral, and the negative effect of September 11 events\. (3) Trade facilitation\. Indicators of customs performance improved, some dramatically \. Imported goods can now be cleared in an average of 3 days, compared with an average of 8 days at appraisal\. Customs clearance time is 10 minutes for a declaration not requiring controls, as opposed to 3 days in 2000\. Tunisie Trade Net (TTN) was created to operate an automated network, and developed end -user interfaces among key agencies involved \. Automation expedites trade document flows \. 4\. Significant Outcomes/Impacts:  The project led to the simplification and adoption of international standards for trade documentation \. The modernized customs are now more focused on trade facilitation than control \. The ICR provided a preliminary estimate of the time savings for clearance time (from an average of 8 to 3 days) that is roughly equivalent to 0\.2 percent of GDP\. According to the survey conducted for the project, the majority of the firms supported by the project considered prospects of sustaining their export development to be good or excellent \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): The net effect of the overall program in terms of penetration of export markets in relation to enterprises that have not benefited from such assistance is not provided; given that merchandise exports (by value) have increased dramatically during the project period (1999-2004), and that this coincided with a Free Trade Agreement with the EU, factors other than the project may have contributed to the increase in exports of the beneficiary firms \. The PEFG scheme has not fully achieved its outcome of acting as a catalyst to encourage financial institutions to provide financing to firms\. Lack of PEFG synergy with the EMAF program, where many of the EMAF clients did not benefit from the PEFG scheme until the last year of the project \. The project Appraisal Document did not make the case that the instruments chosen for increasing exports were appropriate to achieve their objectives \. Public sector cost-sharing of expenditures by private firms needs to be justified on the basis of additionality and externalities (the generation of public goods )\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev \.: High High Sustainability : Highly Likely Highly 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: The project shows that a robust set of performance indicators that is adhered to provides a firm basis for assessing project achievement \. Improvements in trade clearing can result when administrative /political commitment is combined with advances in information/communication technology and adoption of internationally recognized trade standards and codes \. 8\. Assessment Recommended? Yes No Why? Given that the export development program was supported with a follow -up project (i\.e\., Export Development Project II), it would be useful to evaluate the overall impact through a joint audit (PPAR) for both projects\. The PPAR would also offer an opportunity to learn lessons from and document such a good practice case (section 9)\. 9\. Comments on Quality of ICR: The ICR is satisfactory, providing a competent explanation of the project achievements and sufficient substantiation of these achievements through a set of performance indicators \. The use of project performance indicators should be considered best practice for these type of projects (e\.g\., trade financing, matching grants, and trade logistics/facilitation)\. The ICR would have been exemplary if participating firms had been compared with a control group of enterprises that did not benefit from the project \.

REVIEW

P105279

Document of The World Bank Report No: ICR00001833 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-44670) ON A CREDIT IN THE AMOUNT OF SDR 49\.1 MILLION (US$ 80 MILLION EQUIVALENT) TO THE REPUBLIC OF SENEGAL FOR AN ENERGY SECTOR RECOVERY DEVELOPMENT POLICY CREDIT June 29, 2011 Energy Group Sustainable Development Department Country Department AFCF1 Africa Region  CURRENCY EQUIVALENTS Currency Unit = FCFA FCFA505 = US$1 US$ 1\.29265 = EURO 1\.00 US$1\.50803 = SDR 1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank AFD Agence Française de éveloppement (French Development Agency) APL Adaptable Program Loan ASER Agence Sénégalaise d 'Electrification Rurale (Rural Electrification Agency of Senegal) BOAD Banque Ouest Africaine de Développement (West African Development Bank) BOO Build, Own, Operate CAS Country Assistance Strategy BOT Build, Operate, Transfer CFAA Country Financial Assessment CNH Comité National des Hydrocarbures (National Hydrocarbon Committee) CO2 Carbon Dioxyde COD Commercial Operations Date CPRSE Cellule de Préparation des Réformes du Secteur de l'Energie (Unit for the Preparation of Energy Sector Reforms) CQ Selection Based on Consultants' Qualifications CRSE Commission de Régulation du Secteur de l’Electricité (Electricity Regulatory Commission) DDI Direction de la Dette et de 1'Investissement (Debt and Investment Directorate of the Ministry of Finance) DE Direction de l'Energie (Energy Directorate) EIA Environmental Impact Assessment EMP Environmental Management Plan EPC Engineer, Procure and Construct EURIBOR Euro Interbank Offered Rate FMA Financial Management Assessment FSA Fuel Supply Agreement GEF Global Environment Fund GoS Government of Senegal HFO Heavy Fuel Oil ICB International Competitive Bidding IDA International Development Association IsDB Islamic Development Bank IFC International Finance Corporation IPP Independent Power Producer IS Interconnected System ISDS Integrated Safeguards Data Sheet KfW German Cooperation Agency LCS Least-Cost Selection MEM Ministére de 1'Energie et des Mines (Ministry of Energy and Mines) MW Megawatt NCB National Competitive Bidding OBA Output-Based Aid OMVS Organisation pour la Mise en Valeur du Fleuve Sénégal (Senegal River Basin Organization) PCU Project Coordination Unit PETROSEN Société des Pétroles du Sénégal (Senegal National Petroleum Company) PIC Public Information Center PPA Power Purchase Agreement PPP Public-Private Partnership PRG Partial Risk Guarantee PRGF Poverty Reduction Growth Facility PRSC Poverty Reduction Strategy Credit PRSP Poverty Reduction Strategy Paper QCBS Quality and Cost Based Selection RE Rural Electrification RPF Resettlement Policy Framework SA Special Account SAR Société Africaine de Rqffinage SENELEC Société Nationale d 'Electricité (National Power Utility of Senegal) SBD Standard Bidding Document SOE Statement of Expenditures SPC Special Purpose Company SPV Special Purpose Vehicle TA Technical Assistance WAPP West Africa Power Pool  SENEGAL ENERGY SECTOR RECOVERY DEVELOPMENT POLICY CREDIT 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 2\. Key Factors Affecting Implementation and Outcomes 3\. Assessment of Outcomes 4\. Assessment of Risk to Development Outcome 5\. Assessment of Bank and Borrower Performance 6\. Lessons Learned 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1 Bank Lending and Implementation Support/Supervision Processes Annex 2\. Beneficiary Survey Results Annex 3\. Stakeholder Workshop Report and Results Annex 4\. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 5\. Comments of Cofinanciers and Other Partners/Stakeholders Annex 6\. List of Supporting Documents A\. Basic Information Senegal Energy Sector Country: Senegal Program Name: Recovery Development Policy Credit Program ID: P105279 L/C/TF Number(s): IDA-44670 ICR Date: 01/25/2011 ICR Type: Core ICR THE REPUBLIC OF Lending Instrument: DPC Borrower: SENEGAL Original Total XDR 49\.1M Disbursed Amount: XDR 34\.4M Commitment: Revised Amount: XDR 34\.4M Implementing Agencies: Ministry of Energy, Ministry of Economy and Finance Co financiers and Other External Partners: The French Development Agency (AFD) was also supporting the program with Euros30 million of budgetary support\. B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 03/13/2007 Effectiveness: 09/05/2008 09/05/2008 Appraisal: 04/15/2008 Restructuring(s): Approval: 06/19/2008 Mid-term Review: Closing: 06/30/2010 12/31/2010 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Unsatisfactory Risk to Development Outcome: High Bank Performance: Moderately Unsatisfactory Borrower Performance: Unsatisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Unsatisfactory Government: Unsatisfactory Quality of Implementing Moderately Satisfactory Unsatisfactory Supervision: Agency/Agencies: Overall Bank Overall Borrower Moderately Unsatisfactory Unsatisfactory Performance: Performance: i C\.3 Quality at Entry and Implementation Performance Indicators 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 Yes None 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) Oil and gas 15 15 Power 50 50 Renewable energy 35 35 Theme Code (as % of total Bank financing) Other public sector governance 50 50 State enterprise/bank restructuring and privatization 50 50 E\. Bank Staff Positions At ICR At Approval Vice President: Obiageli K\. Ezekwesili Obiageli K\. Ezekwesili Acting Country Director: McDonald Benjamin Madani M\. Tall Acting Sector Manager: Anna Bjerde Subramanian V\. Iyer Program Team Leader: Stephan Garnier Michel E\. Layec ICR Team Leader: Stephan Garnier ICR Primary Author: Noureddine Bouzaher F\. Results Framework Analysis Program Development Objectives (from Project Appraisal Document) The primary objective of this operation is to ensure a sustained and sound long-term development of electricity services and supply of petroleum products for Senegal\. To achieve this objective, the operation comprises: (a) measures to allow the power utility (SENELEC) to restore by end of calendar year 2009 its financial equilibrium and to meet standard financial and credit worthiness ratios; and (b) policy measures aimed at ensuring that the electricity and the downstream hydrocarbon subsectors operate in an efficient and transparent way with adequate governance; and (c) measures to ensure a sustainable long term development of Senegal’s energy sector\. ii (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 SENELEC recapitalized over the 2007-2009 period to restore its financial Indicator 1 : equilibrium and meet standard financial ratios by end CY2009 (DSCR, Accounts receivable, Arrears to suppliers) DSCR: 1\.2 in 2009 Value end 2009 DSCR (2007) = 1\.0 and 1\.4 in 2011 (value 2010 not yet Accounts available) Value Accounts receivable receivable: < 95 DSCR: 0\.68 (quantitative or (2007) : 97 days days Accounts Qualitative) Arrears to receivable: 92 days Arrears to suppliers suppliers: < 100 in Arrears to (2007) : 117 days 2009 and <90 in suppliers: 184 days 2011 Date achieved 12/31/2007 12/30/2011 12/31/2009 Comments (incl\. % The financial situation deteriorated in 2010\. Target not achieved\. achievement) Electricity tariffs adjusted in 2008 to ensure SENELEC of full cost recovery Indicator 2 : and contribution to investment financing with no compensation from National Budget in 2009 and following years Compensation of 17 billion FCFA in Value Compensation by 2009\. Medium tariff (end Compensation still (quantitative or Government from 2007) : 107 to be determined Qualitative) 2009 = 0 for 2010 (waiting for the ongoing revision of the tariff formula) Date achieved 12/31/2007 12/30/2011 12/31/2009 Target not achieved\. The last tariff increase was on July 1st, 2009\. Compensation was therefore Comments necessary in 2009 and 2010\. (incl\. % No tariff increase is planned for 2011 and the Government has decided to achievement) compensate SENELEC through budget transfers\. The level of compensation for 2011 is expected to be above 60 billion FCFA\. Restructuring of SENELEC’s short-term debt into longer maturity debt (with Indicator 3 : commercial banks, the Treasury and through the refinancing to be provided by AFD) 50% of short term debt refinanced by Value No restructuring end 2009 (quantitative or Pending envisaged 100% of short Qualitative) term debt refinanced by end iii  2009 Date achieved 12/31/2007 12/30/2011 12/31/2010 Target not achieved\. Comments Debt restructuring was part of the package of measures decided by GOS and is (incl\. % still to be implemented\. This is still a pending action to be completed within achievement) the Takkal Plan\. Indicator 4 : Implementation by SENELEC of its Cost Reduction Program Cost Reduction : Around 8 billion Value CFA by end 2008 Cost reduction over (quantitative or No plan in place Around 16 billion the project only Qualitative) CFA by end 2009 around 3 billion Around 22 billion FCFA\. CFA by end 2010 Date achieved 12/31/2007 12/30/2011 12/31/2010 Comments Target not achieved\. (incl\. % First Cost Reduction Plan adopted in March 2008\. Only 3 Billion CFA of cost achievement) saving since 2008 (8 were expected in 2008 and 12 billion in 2009)\. SAR recapitalized over the 2008-2009 period to restore its financial Indicator 5 : equilibrium and meet standard financial ratios by end CY2009 Value Recapitalization (quantitative or No recapitalization Partially completed completed Qualitative) Date achieved 12/31/2007 12/30/2011 12/31/2010 Comments Target partially achieved\. (incl\. % Government has partially recapitalized SAR by selling 34% of its shares to a achievement) private partner\. Better reporting by SAR's and SENELEC's management to their Board and to Indicator 6 : GoS Completed for Value Committees in SENELEC (quantitative or No action in place place (no longer Qualitative) applicable) Date achieved 12/31/2007 12/30/2011 12/31/2010 Target partially achieved The two committees to assist the Board of Directors of SENELEC: (i) a Comments Finance and Internal Audit Committee, and (ii) an Investment Committee were (incl\. % created and the President of each committee appointed\. achievement) SAR: The new private partner owns 34% of SAR’s shares (Total still owns 20%), SAR has therefore become a privately held company and this indicator is no longer applicable to it\. Procurement: Adoption by SENELEC and SAR of the National Procurement Indicator 7 : Code NPC adopted by Value SENELEC (quantitative or Not adopted NPC adopted including a specific Qualitative) procedure for oil purchase\. Date achieved 12/31/2007 12/30/2011 12/31/2010 iv  Target partially achieved Comments Target completed for SENELEC\. (incl\. % SAR is now a privately held company and is using private procurement achievement) guidelines\. SENELEC's institutional reform\. Indicator 8 : Unbundling and adequate Private Participation PPP expected to be in place by mid- 2010\. Unbundling completed by end Reform not started but No PPP in place at 2009 Value Government has the end of the Private (quantitative or confirmed its choice in project\. Participation Qualitative) term of reform and PPP strategy in October 2007\. Unbundling on hold completed: Dec\. 2009 Private Sector in place: December 2009 Date achieved 12/31/2007 12/30/2011 12/31/2010 Target not achieved\. Despite major progress (with a separation of accounting between the three Comments business lines), the actual unbundling has been suspended by the Government (incl\. % to focus on the operational and financial recovery of SENELEC\. achievement) Preparation of the strategy for private participation and investments in the electricity sector has been postponed, since it first requires SENELEC’s recovery and unbundling\. Indicator 9 : Reinforcement of SENELEC and SAR Internal Audit Department Completion of an audit by Audits still independent ongoing at the end auditors of the of the project\. internal audit Value The scope of functions of (quantitative or No action SENELEC’s audit SENELEC and Qualitative) was extended and it SAR completed by audit was April 2009 completed in Action plan February 2011\. completed by end 2009 Date achieved 12/31/2007 12/30/2011 02/28/2011 Target not achieved\. Comments In October 2010, an operational and financial audit of the two companies has (incl\. % been commissioned by the new Minister of Energy\. At the end of the project, achievement) this audit was still ongoing\. The scope of SENELEC’s audit was extended and its audit was completed in February 2011\. Indicator 10 : Setting up of a Regulatory Agency for hydrocarbon subsector Value No Regulatory Agency Agency to be This Regulatory v (quantitative or responsible for Agency was not Qualitative) regulating the created import, refinery, storage, and distribution of petroleum products in the SENEGAL Republic’s territory created and operational by end April 2009 Date achieved 12/31/2007 12/30/2011 12/31/2010 Not achieved: The Government prepared a draft law to create a Hydrocarbon Regulatory Agency and was planning to present it to Parliament by end 2010\. The decrees for the establishment of the agency were also under preparation\. It is to be noted that a commission (Commission Nationale des Hydrocarbures, Comments CNH) already exists, under the Ministry of Energy\. Its current staff and 2010 (incl\. % resources could have been made available to the new agency\. achievement) However, the new Minister announced that it is now considering establishing a single regulatory agency for the energy sector (electricity and downstream hydrocarbon)\. This may require amending the 1998 electricity law that established CREE, the electricity sector regulatory agency\. Diversification strategy from oil products to coal and new and renewable Indicator 11 : energies and tapping into regional hydroelectricity potentials PPA signed for the Commissioning of 125 MW coal plant the 125 MW coal but its construction plant: Q4 2010 experienced delays\. Value PPA signed for (quantitative or Only Manantali Felou and Kaleta PPA signed for Qualitative) regional Felou\. hydroelectricity plants PPA not signed for Kaleta Date achieved 12/31/2007 12/30/2011 12/31/2010 Comments (incl\. % Target partially achieved with 2 out of 3 PPAs signed\. achievement) Master Plans: development of least cost development programs in generation, Indicator 12 : transmission and distribution Adoption by the Board of Directors of SENELEC of Value master plans for The two plans have (quantitative or No Master Plan in place electricity been completed in Qualitative) generation, 2010\. transmission and distribution, based on vi  recommendations of independent firms completed by April 2009 Date achieved 12/31/2007 12/30/2011 12/31/2010 Comments (incl\. % Target achieved\. achievement) Renewable energies: Adoption of a regulatory and incentive framework to Indicator 13 : promote development of a new and renewable energies Regulatory and incentive framework to Value promote Legislation only (quantitative or No legislation in place development of a partially in place\. Qualitative) new and renewable energies adopted by end 2009 Date achieved 12/31/2007 12/30/2011 12/31/2010 Target partially achieved Comments An orientation Law on Renewable Energy was prepared and adopted\. A (incl\. % consultant has been recruited (financed by AFD and GTZ) to prepare achievement) application decrees\. Work still in progress Energy efficiency: Development of a demand side management and energy Indicator 14 : efficiency programs Demand side Value management and DSM plan (quantitative or No program energy efficiency completed and Qualitative) programs adopted adopted by end 2009 Date achieved 12/31/2007 12/30/2011 12/31/2010 Target achieved Comments Consultant presented its conclusions in October 2009\. The plan was adopted in (incl\. % December\. achievement) A LBC program has already been launched and is being implemented since early 2010\. (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 : First tranche release Value First tranche First tranche (quantitative or No disbursement release by end released on Qualitative) 2009 September 27, 2008 Date achieved 12/31/2007 12/30/2011 12/31/2010 vii Comments (incl\. % Target achieved achievement) G\. Ratings of Program Performance in ISRs Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 12/19/2008 Satisfactory Satisfactory 54\.38 2 06/09/2009 Satisfactory Satisfactory 54\.38 Moderately 3 12/17/2009 Moderately Satisfactory 54\.38 Unsatisfactory Moderately 4 06/25/2010 Moderately Satisfactory 54\.38 Unsatisfactory H\. Restructuring (if any) Not Applicable viii 1\. Program Context, Development Objectives and Design 1\.1 Context at Appraisal 1\. In 2006, Senegal was viewed as one of the best economic performers in Sub- Saharan Africa\. This performance was characterized by a real Gross Domestic Product (GDP) growing at an average by about 5 percent annually since the devaluation of 1994, marking the first sustained increase in average per capita growth since independence in 1960\. Over the past decade, the Government has shown a capacity to generate economic growth and implement appropriate macroeconomic policies\. The Authorities maintained their focus on enhancing revenue mobilization and a tight control on current expenditures, while allowing for further increases in capital and pro-poor spending\. Supported by a well targeted fiscal stimulus and a moderate easing of monetary conditions by the Central Bank of West African States, the economy remained on a solid growth and low inflation trajectory\. Senegal benefited from significant capital inflows over the past decade and continues to attract the interest of many donors\. Furthermore, workers’ remittances have generated an important flow of resources, estimated at around US$900 million in 2006 1 which supported economic growth and social protection in Senegal\. 2\. In 2006 however, Senegal’s economic performance moved away from the historical trend, with a real GDP growing by 2\.3 percent and a significant increase in fiscal and external deficits which are largely explained by two main factors: (i) the surge in international oil prices and by financial difficulties in the real sector of the economy, particularly the electricity sector; and (ii) the significant increase in public wages and investments\. As a result, the fiscal deficit rose from 3\.0 percent of GDP in 2005 to 5\.8 percent in 2006, leading to the first accumulation of arrears vis-à-vis the private sector since 1997\. 3\. In 2006 and in the first months of 2007, Senegal suffered from a severe energy crisis evidenced by power shortages, low quality and high cost of energy services; increased dependence on expensive imported petroleum products, and deep financial problems in key government owned energy companies\. The situation of the energy sector has been worsening overtime and its inability to absorb a combination of factors, was at the root of the deterioration of the energy sector situation: (a) lack of timely investments for maintenance and expansion, especially in the power sector; (b) lack of attention to the growing financial problems of the sector; (c) delayed and partial adjustment of electricity tariffs and petroleum retail prices to reflect rapidly increasing costs; (d) poor management of the two main energy companies, SENELEC and SAR; and (e) political interference in decision-making and management of the utilities\. 1 This figure does not include non-official transfers\. 1 4\. In 2007 and 2008, the financial situation of SENELEC and SAR had become a huge concern for the Government\. The dramatic increase in international oil prices made things worse\. The energy crisis led to significant pressures on the national budget and on the fiscal position of Senegal\. Public resources that should have been allocated to the social sectors were redirected to the energy sector\. In the period 2005-2008, about US$350 million were transferred from the budget to the energy sector\. The energy crisis also had direct and measurable consequences on Senegal’s economic performance: the weak economic performance of 2006 (2\.3% GDP growth) was for a large part related to the problems of the energy sector\. 5\. This Development Policy Credit (DPC) of SDR 49\.1 million (US$80 Million equivalent) was designed to support the policy changes needed to restore the financial equilibrium of Senegal’s energy sector with particular emphasis on the electricity sub- sector as well as activities related to the importing, refining, storing and distributing petroleum products in Senegal\. Such policy changes were seen as critical for a sustained expansion of the energy sector both to support Senegal’s economic growth and meet the demands of the population for a stable and reliable energy supply\. This also required an improved performance and governance by the main energy companies especially SENELEC, the national power utility and SAR, the petroleum refinery company\. The government’s energy sector investment program and this operation enjoyed strong support from the donors’ community and the private sector\. The latter was particularly involved in power generation, through two independent power producers (IPPs)\. 6\. The Government recognized that: (i) a performing energy sector is essential for a successful implementation of its growth strategy and for freeing-up budgetary resources essential to the social sectors; (ii) a comprehensive strategy is required; and (iii) a sustained effort will be needed for the recovery of the energy sector\. 7\. To demonstrate its commitment the Government laid out a new vision and strategy described in the February 2008 Energy Sector Development Policy Letter\. It called for a two-pronged approach: (a) Accelerating investment both in urban and in rural areas to provide energy to the economy and the population, to increase the quality of the services, and to reduce costs\. Impressive actions had been underway since 2007 regarding investment in electricity generation, others were planned to increase access and the supply of petroleum products, bringing together private, public sector and donors expertise and financing; and (b) Improving the operational and financial performance of SENELEC and SAR, the two main companies in the energy sector, by financially restructuring them, controlling costs and establishing performance targets, increasing transparency and governance, and mobilizing private sector expertise and financing\. 8\. The government requested the Bank to work with other donors on critical issues of the energy sector such as financial restructuring, institutional reform, diversification of energy sources, etc, through policy advice and financing\. 9\. The funds provided under this DPC were to be disbursed in two tranches\. The first tranche of SDR 34\.4 million equivalent was to be disbursed upon effectiveness on 2 the basis of actions already taken by the Government\. The second tranche of SDR 14\.7 million equivalent was to be disbursed once the conditions of second tranche release, as discussed below, would be met\. 1\.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) 10\. The primary objective of this operation is to ensure a sustained and sound long- term development of electricity services and supply of petroleum products for Senegal\. To achieve this objective, the operation comprises: (a) measures to allow the power utility (SENELEC) to restore by end of calendar year 2009 its financial equilibrium and to meet standard financial and credit worthiness ratios; and (b) policy measures aimed at ensuring that the electricity and the downstream hydrocarbon subsectors operate in an efficient and transparent way with adequate governance; and (c) measures to ensure a sustainable long term development of Senegal’s energy sector\. 11\. The complete list of key indicators is given in section F: Results Framework Analysis above\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification 12\. The original project objective was not revised over the life of the project\. 1\.4 Original Policy Areas Supported by the Program (as approved) 13\. This operation covered three policy areas meant to prevent the recurrence of the financial crisis experienced by Senegal’s energy sector in 2006 and 2007\. The action plans in these three policy areas were expected to provide sustainability and irreversibility of reform\. They were also addressing fundamental issues of the sector (effectiveness of the Boards of Directors, quality of internal auditing, procurement processes, regulatory frameworks and institutional restructuring) and long term issues through the investment program\. 14\. The policy areas were: (i) Restoring the financial viability and sustainability of the electricity and downstream hydrocarbon sub-sectors; (ii) Improving the governance of these two sub-sectors; and (iii) Ensuring the long term development of the energy sector\. ï‚ Policy Area 1: Restoring the financial viability and sustainability of the electricity and downstream hydrocarbon sub-sectors\. Policy area 1 encompasses actions needed to restore and maintain the financial health of SENELEC and SAR over the medium to long term with the specific objectives of restoring SENELEC key financial ratios through recapitalization and refinancing, clearance of arrears, increasing working capital, and amortizing SAR accumulated debt\. Investment in electricity generation and unloading and storage facilities for petroleum products were seen as an essential part of the Government and companies’ strategies for financial viability\. 3 ï‚ Policy Area 2: Improving the governance of the electricity and hydrocarbon sub-sectors\. Policy area 2 encompasses measures aimed at improving the governance of SENELEC and SAR\. Key governance actions related to reporting, procurement, performance of the Boards of Directors, internal auditing and, sector organization and structure\. ï‚ Policy Area 3: Long Term Development of the Energy Sector\. To ensure a sustainable long term development of the power and hydrocarbon subsectors, the Government main policy goals were to: (a) increase energy security by diversifying energy sources; (b) develop a new legal and regulatory framework promoting increased private sector participation; (c) implement a demand side-management and energy efficiency program; and (d) increase coordination between the Government, its development partners and the private sector\. Timely implementation of priority investments in the electricity and hydrocarbon subsectors (in particularly storage facilities and sea-lines) was deemed essential for the development of Senegal’s energy sector\. 1\.5 Revised Policy Areas 15\. The policy areas were not revised during implementation\. 1\.6 Other significant changes 16\. The DPC second tranche release of SDR14\.7 Million was cancelled on December 28, 2010 not only because several key conditions for second tranche release were unlikely to be met even with an additional extension of the closing date, but also because the program had lost much of its relevance and potential impact towards achieving the viability and sustainability of the energy sector\. 17\. Following the first six month extension (from June 30, 2010 to December 31, 2010), the Government of Senegal did not seek to further extend the Credit closing date of December 31, 2010, and requested cancellation of the undisbursed funds, which were eventually recommitted to the Senegal - Tertiary Education Project approved in May 2011\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Program Performance (supported by a table derived from a policy matrix) Tranche # Amount Expected Actual Release Release SDR Million Release Date Date Tranche 1 34\.4 09/25/2008 09/25/2008 Select: (1) Regular Tranche 2 14\.7 Canceled Select: (3) Canceled Total 49\.1 4 18\. First tranche release: The first tranche release conditions outlined below were met at about the same time as credit effectiveness\. The effectiveness was declared on 09/05/2008 and the first tranche was released 20 days later\. Tranche 1 Status Policy Area 1: Restoring the financial viability and financial sustainability of the electricity and hydrocarbon sub-sectors 1\. Partial recapitalization of SENELEC through the transfer by the Government of Met SENEGAL to SENELEC of an amount equal to 65 billion FCFA (“2007 Recapitalization Amount”)\. 2\. Cosigned letter by State Minister, Minister of Economy and Finance and by Minister of Met Energy, confirming decision and commitments by the Government of SENEGAL to: (i) further recapitalize SENELEC through additional transfers to SENELEC of an amount equal to 37 billion FCFA in Fiscal Year 2008 (”2008 Recapitalization Amount”) and of an amount equal to 7 billion FCFA in Fiscal Year 2009 (”2009 Recapitalization Amount”) so as to enable SENELEC to: (A) achieve a debt-service coverage ratio of at least 1\.2 in Fiscal Year 2009, 1\.3 in Fiscal Year 2010 and 1\.4 in each Fiscal Year thereafter; (B) reduce its accounts receivable so that in Fiscal Year 2008 and at all times thereafter, they do not exceed 95 days; (C) reduce its arrears to its suppliers so that they do not exceed 100 days in Fiscal Year 2008, 95 days in Fiscal Year 2009 and 90 days at all times thereafter; (ii) make further transfers to SENELEC in Fiscal Year 2008 (in addition to the 2008 Recapitalization Amount) in amounts sufficient to enable SENELEC to earn an amount equal to its Maximum Authorized Revenue, as decided by CRSE during its Extraordinary Revision in Fiscal Year 2008 (“2008 Maximum Authorized Revenue Amount”); (iii) adjust SENELEC’s electricity tariffs so that its average electricity tariff is sufficient to enable it in Fiscal Year 2009 to produce revenues, without budgetary transfers from the Recipient, equal to its Maximum Authorized Revenue, as decided by CRSE during its Extraordinary Revision in Fiscal Year 2008 (“2009 Maximum Authorized Revenue Amount”); (iv) reschedule the existing arrears on SENELEC’s debt to the Recipient over 5 years, with no penalty interest; and (v) make a further transfer to SENELEC in Fiscal Year 2009 (in addition to the 2009 Recapitalization Amount), of an amount equal to 9 billion FCFA in the form of a subordinated shareholder loan, repayable commencing in Fiscal Year 2011\. 3\. Decision by the Recipient, following the decision by the Board of Directors of SAR, to Met recapitalize SAR by the end of Fiscal Year 2009 in accordance with the requirements of the OHADA Legislation\. Policy Area 2: Improving the governance of the electricity and hydrocarbon sub-sectors 4\. Establishment within SENELEC of the following two committees to assist its Board of Met Directors, adoption of their respective mandates and appointment of their respective presidents: (i) a Finance and Internal Audit Committee comprised, inter alia, of accounting and auditing professionals from the private sector, and (ii) an Investment Committee\. 5\. Preparation of a decree for the establishment of an agency to be responsible for Met regulating the import, refinery, storage, and distribution of petroleum products in the Recipient’s territory\. 5 19\. Second tranche release: The disbursement of the second tranche of the DPC required that the Bank be satisfied that: (a) the macroeconomic framework remains appropriate, (b) the implementation of the energy sector reform overall program is satisfactory; and (c) the critical actions of the overall program (“Second Tranche Conditions”) were implemented\. 20\. The Second Tranche Conditions covered the three policy areas and had been selected to ensure the completion of the recapitalization and refinancing of SENELEC and the electricity tariff adjustment process, putting in place transparent procurement rules for SENELEC and SAR in accordance with the National Procurement Code, strengthening the internal audit of these two companies, putting in place an efficient regulatory framework for the downstream hydrocarbon sub-sector, supporting new and renewable energies, and deciding on a least-cost investment program\. The detailed status of implementation at credit closing is given below: Tranche 2 Status Policy Area 1: Restoring the financial viability and financial sustainability of the electricity and hydrocarbon sub-sectors Further partial recapitalization of SENELEC Met: Following the disbursement of the DPO first through the transfer by the Recipient to tranche, the government transferred the 2008 SENELEC of the 2008 Recapitalization Amount\. Recapitalization Amount of CFAF 37 billion to SENELEC in full\. Adjustment of SENELEC’s electricity tariffs Met with delay: While the Government authorized and/or transfer by the Recipient of budgetary an average electricity tariff increase of 17% and resources adequate to have enabled SENELEC to transferred CFAF 37 billion of budgetary resources generate revenues in Fiscal Year 2008 equal to the to SENELEC in 2008, the budgetary resources 2008 Maximum Authorized Revenue Amount\. shortfall of CFAF 36 billion required for SENELEC to achieve its Maximum Authorized Revenue Amount ) was not transferred by the Government to SENELEC in 2008 but was accounted by SENELEC in its 2009 accounts (through a cross debt settlement agreement in May 2010) Adjustment of SENELEC’s electricity tariffs so Not met: SENELEC did not achieve a minimum that its average electricity tariff would be DSCR of 1\.2 nor did it produce revenues equal to sufficient to enable it to: (i) achieve a debt-service its 2009 MAR without budgetary allocation from coverage ratio (DSCR) of at least 1\.2 in Fiscal the Recipient\. Year 2009; and (ii) produce revenues equal to its The Recipient decided to transfer budgetary 2009 Maximum Authorized Revenue (MAR) resources to SENELEC to meet its 2009 MAR\. The without budgetary allocations from the Recipient\. required amount for 2009 was not transferred by the Government to SENELEC in 2009 but in 2010 through another cross-debt settlement\. (i) Completion of a study to: (A) simulate the Partially met: impacts of the planned new electricity tariff Studies completed and received by the Bank\. An structure for SENELEC, together with action plan still needs to be completed recommended proposed tariff levels; and (B) assess the environmental and social impacts of the reduction of butane subsidies, together with recommended measures to mitigate any such 6 adverse impacts; and (ii) development of an action plan for the implementation of these recommendations\. Policy Area 2: Improving the governance of the electricity and hydrocarbon sub-sectors Adoption by SENELEC and SAR of procurement Partially met: procedures designed to ensure the economic, Met for SENELEC but not met efficient and transparent procurement of goods for SAR\. SAR became a private entity, using and services by each, consistent with the private procurement practices, so the need for Recipient’s Public Procurement Code\. consistency with the public procurement code was superseded\. Not met (i) Separation of SENELEC’s activities into the (i) Despite major progress (with a separation of following three distinct business lines each with accounting between the three business lines), the separate accounting: (A) electricity generation; actual unbundling has been suspended by the (B) electricity transmission and systems planning; Government to focus on the operational and and operations and (C) electricity distribution; and financial recovery of SENELEC as is\. (ii) Adoption by the Recipient of a strategy, (ii) Preparation of the strategy for private consistent with the Program, to facilitate participation and investments in the electricity participation by the private sector in the energy sector has been postponed, since it first requires sector\. SENELEC’s recovery and unbundling\. Completion of an audit by independent auditors of Not met: Audits were still ongoing at the end of the internal audit functions of SENELEC and the project, scope of SENELEC’s audit was SAR, together with recommendations by the extended and it was completed in February 2011\. auditors for the strengthening of these functions, and development of an action plan for the implementation of such recommendations\. Creation of an agency to be responsible for Not met: The Government has prepared a draft law regulating the import, refinery, storage, and to create a Hydrocarbon Regulatory Agency and distribution of petroleum products in the was planning to present it to Parliament by end Recipient’s territory, and staffing and provision of 2010\. The decrees for the establishment of the financial and other resources required for it to agency were also under preparation\. It is to be carry out its regulatory functions\. noted that a Commission Nationale des Hydrocarbures, CNH) which existed at appraisal, under the Ministry of Energy, carried out some regulatory functions such as monitoring the pricing level and structure\. It had a limited interaction with the industry and did not comprehensively cover many areas of the downstream petroleum sector such as the import, transport, handling, storage and distribution of petroleum products\. In addition, its powers of enforcement were very limited\. The Government recently announced that it is now considering establishing a single regulatory agency for the energy sector (electricity and downstream hydrocarbon)\. This may require amending the 1998 electricity law that established CREE, the electricity sector regulatory commission\. Policy Area 3: Ensuring the long term development of the energy sector Adoption by the Board of Directors of SENELEC Partially met: Final reports for both studies have 7  of master plans for electricity generation, been received by SENELEC in September 2010 but transmission and distribution, based on the have not yet been adopted by SENELEC’s Board\. recommendations of independent consultants On the other hand, the investments in generation, transmission and distribution of the master plans have been incorporated into a new government recovery plan for the sector: (“Plan Takkal”)\. Adoption by the Board of Directors of SAR of an Partially met: but context has evolved\. An investment program, based on an updated investment program for SAR has already been technical, economic, financial and environmental prepared, and approved by SAR’s Board\. However, feasibility study of SAR’s investment program, neither this investment program nor its prepared by SAR in conjunction with its technical corresponding adoption by SAR Board was sent to assistant, supported by qualified consultants\. the Bank\. After the arrival of the new private partner which now owns 34% of SAR’s shares (Total still owns 20%), SAR has become a privately held company\. The new partner’s share is likely to increase by end 2011 to 51% after the approval by SAR’s board of a study on the extension and modernization program of the refinery, including the financing of such program\. (i) Submission to the Recipient’s Parliament of a Partially met: regulatory framework designed to facilitate and (i) A law has been approved by Parliament in June promote the development of new and renewable 2010\. A consultant has been recruited to draft its energy sources; and implementation decrees\. Work still in progress\. (ii) Adoption by the Recipient of an action plan (ii) A consultant financed by AFD/GTZ has acceptable to the Association designed to increase completed a study, and the recommendations are energy efficiency and improve demand-side currently being discussed by the various management of energy resources\. stakeholders\. A prioritized action plan remains to be prepared\. 21\. The five conditions precedent to the release of the first tranche were met and the tranche was released on September 25, 2008\. Out of the 11 conditions attached to the release of the second tranche, only two were met, five were met only partially and four were not met at all\. Some of the conditionalities were loosely linked to the achievement of the project development objective, such as the unbundling of SENELEC meant to promote private sector participation, but were premature in view of the situation of the sector\. The adoption by the Board of SENELEC of the master plans for the production, transport and distribution carried more form than substance\. This applies equally to the same condition on the refinery company (SAR)\. The creation of a regulatory agency for hydrocarbons was not at it turned out a pressing need and the Bank should have either postponed the issue for another day or examined other alternatives such as the creation of a multi-sector regulatory agency combining electricity and hydrocarbons (which the government did after delaying the creation of an agency solely dedicated to hydrocarbons) or beefed up the existing Commission Nationale des Hydrocarbures, etc\. 22\. As mentioned in section 1\.6 above, the GoS requested in its letter dated December 28, 2010, the cancellation of the DPC second tranche for the amount of SDR 14\.7 million (US$ 24 million)\. The cancellation was proposed because a number of key conditions for second tranche release could not be met before the closing date of December 31, 2010, or even during a reasonable extension of the later (e\.g\. six months), if it were to be granted\. 8 2\.2 Major Factors Affecting Implementation: 23\. The following factors had a major impact on the implementation of the project, prevented the fulfillment of the conditions for second tranche release and the achievement of the objectives of the project\. 1\. The increase in the price of fuel: The energy crisis of 2008, with a barrel at U$147 in July 2008, was exceptional in its severity\. Fuel price increases had a detrimental effect on SENELEC’s recovery efforts and made difficult financial transfers by the government to the electricity sub-sector\. In addition, the international food and financial shocks over 2007-08 slowed the economy down through lower remittances, foreign direct investment and tourism, boosted the price level, and resulted in a significant deterioration of Senegal’s external and fiscal positions, and thus of the Government’s ability to provide timely allocations for SENELEC to meet its MAR\. 2\. Weakened government commitment: The government was very active in the preparation of this operation, and remained generally quite focused on the attainment of the project development objective\. However, the Government’s commitment was dampened by its inability to implement a number of reforms such as the increase of SENELEC’s revenues through tariff adjustment and restoring SENELEC’s financial viability; complete the unbundling of SENELEC; strengthen the Governance of sector institutions; etc\. One of the program’s main goals, which was to fully restore SENELEC’s financial viability without subsidy from the national budget from 2009, had not been reached for a number of reasons including: the dramatic surge in oil prices in 2008 which sharply increased electricity production costs; the sharp increase in budget compensations required of the government to bridge the tariff deficit in 2007-2009; and the limitations in residential consumer affordability, due to the spike in oil prices and the impacts in Senegal of the international financial crisis\. As a result, despite some tariff adjustments between 2007 and 2009 (including at one time a tariff decrease when fuel prices declined early in 2009), the authorities were unable to set a tariff benchmarked to SENELEC’s costs and performance and tried to address SENELEC’s financial problems through significant budgetary transfers and limited tariff increases, but this approach soon proved its limits\. The repeated large government budget transfers to the energy sector were not sustainable as these were having negative consequences on availability of funds for the social sectors and on the country’s fiscal position\. At the same time, increasing electricity tariffs when those tariffs are considered high by regional standards was not easy in a difficult social context where consumers were becoming more and more vocal and when SENELEC’s services quality was declining\. This was compounded by SENELEC’s inability to mobilize debt or capital financing to cover its operational deficit\. 9 3\. Lower priority for unbundling: The unbundling of SENELEC that was foreseen under the DPO had lost its urgency compared to the urgent need to durably restore the quality of electricity supply, while further private participation in the electricity sector (beyond the three existing IPPs) was not a reasonable prospect until the operational and financial position of the energy sector improved and tariff levels actually reflected the costs of the service\. 4\. The changes of ownership of SAR: The DPC's specific governance conditions for the formerly government-owned refining company (SAR) had been overtaken by events with the change in ownership of SAR, to majority private shareholding\. This however did not eliminate the need for appropriate regulation in the downstream hydrocarbon sector\. The related objective of creating an independent Regulatory Agency for the hydrocarbon sector was not met as the government: (i) did not see it as a pressing issue because the existing Commission Nationale des Hydrocarbures (CNH) was already taking regulatory decisions in the hydrocarbons sector in matters related to pricing for example though its purview could be extended to other areas; and (ii) the government wished to have more time to examine the opportunity of having a single regulatory commission for petroleum products and electricity and therefore saving on scarce managerial and regulatory talent\. The change in SAR’s ownership led Government to reconsider its approach on regulatory issues for hydrocarbons\. 5\. Delays in coming into stream of new generating capacity: Lack of realism on the part of SENELEC and the Ministry of Energy concerning the coming into stream of new generation capacity, which would have changed the prospects of the sector in terms of greater capacity and lower cost through sizeable natural gas and coal-fired power plants, significantly affected SENELEC’s financial position and projections for financial self-sustainability\. The new target date for cheaper coal-fired power to come on-stream is now 2014\. 6\. Weak governance environment: During the implementation of the project, there were tensions between the Ministry of Finance designated as implementing agency and the Ministry of Energy which was charged with carrying out major elements of the program\. There was also interference of the Ministry of Energy into the day-to-day operation and management of SENELEC\. SENELEC – whose role was central in these reforms - was not empowered to take position as or to be responsible for some of the actions that had a direct impact on its financial viability, such as of the purchase of fuel, which was directly managed by the Minister of Energy\. 7\. Inadequate tariff formula: The formula for SENELEC’s revenue control that prevailed, between 2005 and 2009, was inadequate to ensure SENELEC’s financial viability on a yearly basis insofar as the formula took into account future, lower production costs in setting current prices\. However, with the 10  second revision of the tariff methodology, concluded in May 2010, the authorities decided to maintain the same approached (i\.e\. a price cap averaged over five years)2\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: 24\. M&E Design: The policy matrix, designed in consultation with several stakeholders including the IMF, gave an accurate picture of Senegal’s electricity and petroleum products sub-sectors, measures accomplished or to be taken, benchmarks yet to be reached as well as program outputs linked to the operation\. The key indicators were relevant and designed to measure periodically the progress made towards the attainment of the PDO\. 25\. M&E Implementation and Use: The policy matrix and the corresponding sections of the legal agreements were an essential M&E tool for the government\. The Bank team had always had access to all data it needed from the Ministry of Economy and Finance, the Ministry of Energy and SENELEC to monitor key program indicators\. There were occasional delays in obtaining data but the ministries and SENELEC’s data systems were adequate for the purposes of M&E\. Bank supervision of the operation by the Bank’s team based in Dakar with support as needed from Washington was close\. The team was focused on the progress towards the satisfaction of conditions precedent to the release of the credit tranches and the achievement of the program development objective\. However the team spent a major part of its time on issues related to SENELEC because it was simply the largest issue of the energy sector and also because SAR became a majority privately owned company\. The ISRs and aide memoires were comprehensive and allowed both the government and the Bank to follow up the operation’s progress and agree on actions to be taken\. 2\.4 Expected Next Phase/Follow-up Operation (if any): 26\. Despite the decision to cancel the second tranche of the DPL, the sector policy dialogue remained strong between the government, the Bank and other donors (including the IMF)\. At the Government’s request the Bank team first considered the recommitment of the undisbursed funds to the Senegal – Fifth Poverty Reduction Support Credit (PRSC V), subject to the following three key conditions: (1) adoption by the Recipient of an emergency plan acceptable to the Association designed to remove bottlenecks in the electricity sector and improve SENELEC’s financial situation, (2) Signed letter from the independent regulatory agency (a) stating that SENELEC’s request to establish a new 2 In February 2011, the Minister of State informed the Bank of the important decisions taken with regard to changes to SENELEC’s concession contract and to the tariff setting formula\. With regard to the contract, the duration of the tariff conditions has been reduced from 5 to 3 years, and the compensation will be paid quarterly rather than on a yearly basis\. On the formula side, the main issues were: dropping the “smoothing” and undertaking a review of sales and inflation indices on a yearly basis; reducing the period considered in determining the composite index of inflation, etc\. 11 tariff formula is receivable, and (b) indicating the schedule for the establishment of such formula, and (3) changes to SENELEC’s tariff structure or adjustment of SENELEC’s electricity tariffs to (a) produce additional revenues and (b) increase energy efficiency / improve demand-side management of energy resources\. 27\. Despite significant progress in reaching the three conditions, it was politically impossible for the Government to comply with the third condition without significant restoration in the quality of service\. The Bank decided not to recommit the undisbursed funds under the PRSC V, but rather recommitted them under the Senegal – Tertiary Education Project approved in May 2011, while continuing the engagement in the energy sector through a new proposed SIL\. 28\. The appointment in October 2010 of a new Minister for the energy sector has brought a new impetus, vision and direction for energy sector recovery and reform\. With support from international and national firms, the new Minister mandated the preparation of a major restructuring and recovery plan for the whole energy sector, based on a 360 degree diagnostic and audit\. 29\. The Bank team advised the government and its team of consultants in the preparation of the 2010-2014 electricity emergency plan (Plan Takkal) aimed at (a) removing the electricity supply bottlenecks by ensuring additional power capacity prior to the commissioning of a coal-fired power plant scheduled for 2014/2015 and enhancing demand side management and energy efficiency; and (b) addressing SENELEC’s cash- flow and financing constraints\. The Bank has found the program relevant to address the issues of the electricity sector in Senegal and decided to support it through a new investment operation, which is being prepared for Board presentation in FY12\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation (to current country and global priorities, and Bank assistance strategy) 30\. With the continuing crisis of the energy sector, the reforms at the heart of the DPC remain very much relevant today, nonetheless program priorities, means and timing to meet the objective have changed\. That is why the dialogue on the energy sector reform is expected to continue under the new energy operation now under preparation\. The development objective of the DPC is therefore still in line with the country’s priorities\. It is also in line with the Bank’s Country Assistance Strategy (CAS) 2007- 2010 and particularly its Pillar I: accelerated growth/wealth creation\. Strengthening GDP growth to an annual rate of 7 percent, which is about 2 percent higher than the historical average, is perceived by Senegal as one of its prerequisites for reaching the MDGs\. WBG support in the energy sector was especially directed to achieve the following outcomes: (i) promoting a competitive investment climate; (ii) building and maintaining basic infrastructure for growth; (iii) promoting good governance; and (iv) financial viability of sector institutions\. 12 31\. Soundness of background analysis\. The background analysis for this DPC was quite extensive, and based inter alia on the work of the authorities in preparing their Letter of Development Policy (February 2008), various consultants’ reports and on the findings and recommendations of a number of Bank reports, particularly the PRSP and the CAS\. The program for this operation was defined in close collaboration with other donors such the French Development Agency (AFD), which was also supporting the program with Euros30 million of budgetary support with the same conditions and triggers, and with the International Monetary Fund, which was particularly preoccupied by the public finance risks posed by the energy sector\. 32\. Assessment of the operation’s design\. The project failed to take into account the Bank’s recommendations regarding good practice principles for the application of conditionality in DPC such as: (i) reinforcing ownership of the Ministry of Energy and SENELEC; (ii) customizing the accountability framework and modalities of Bank support to country circumstances and in particular the balancing of the conditionalities and financing between tranches; (iii) choosing only actions critical for achieving results as conditions for disbursement; and (v) choosing the right instruments to effect the changes on the financial situation of SENELEC\. 33\. The energy sector reform program was managed by the Ministry of Energy, and involved a Government team comprised of senior staff from the Ministry of Energy, the Prime Minister’s office, the Ministry of Economy and Finance, the Ministry of Budget as well as the managing directors of the key energy companies\. Many donors, the World Bank Group, AFD, African Development Bank, GTZ, KFW, Islamic Development Bank and BOAD, participated in the initial discussions to develop a consensus on the design of the reform program\. Other donors and financiers, notably IFC, PROPARCO, European Investment Bank, China, and the private sector were also involved in the financing of the investment program for the energy sector\. The specific reform measures supported by the DPC are those set in the Letter of Sector Development Policy approved by the Council of Ministers and forwarded to the Bank by the government in February 2008\. Nevertheless, the Ministry of Energy, and SENELEC, had little sense of ownership of the program as the official implementing agency was the Ministry of Economy and Finance\. They in effect had little handle on issues affecting them such as budgetary transfers to SENELEC or electricity tariffs\. 3\.2 Achievement of Program Development Objectives (including brief discussion of causal linkages between policy actions supported by operations and outcomes) 34\. The primary objective of this operation which was to ensure a sustained and sound long-term development of electricity services and supply of petroleum products for Senegal was not met\. As can be seen in the Results Framework Analysis in Section F of the data sheet, out of 14 key project development indicators only two were met\. They concern the completion of the generation, transport and distribution master plans and the development of a demand side management and energy efficiency programs\. Seven, almost all related to SENELEC’s financial situation and governance, were not met and 13 five were only met partially, due in part to the fact that during the program certain requirements no longer applied to SAR as a private company\. 35\. One of the program’s main goals, which was to fully restore SENELEC’s financial viability without subsidy from national budget from 2009, was not reached for a number of reasons including: the dramatic and unforeseen surge in oil prices in 2008, which sharply increased SENELEC’s operating costs; the fiscal crisis, which resulted in government delays in budgetary transfers; and various disruptions in fuel supply to SENELEC in 2009 and 2010\. In addition, despite tariff adjustments (including at one time a tariff decrease) between 2007 and 20093, the authorities have been unable to set a tariff benchmarked to SENELEC’s costs and performance because of the costly generation mix heavily dominated by diesel generators and of customer affordability constraints\. Furthermore, the tariff methodology (i\.e\. a price cap averaged over five years) did not ensure the financial viability of SENELEC\. This is compounded by SENELEC’s inability to mobilize financing for its operational deficit, and by institutional shortcomings in terms of managing for efficiency\. 36\. The project failed to ensure sustainability and some elements of the program such as the unbundling of SENELEC, while still necessary, became less urgent\. The DPC was over ambitious in believing that the sector could be transformed in about two years\. Even if one were to exclude the effect of the unexpected rise in fuel prices, it would have been difficult to reach the program’s objectives within such a short timeframe\. The tranching of the disbursement and conditionalities were not balanced and this may have had an impact on incentives to push for the fulfillment of the conditionalities for release of the second tranche\. The first tranche with 70% of the financing had only five relatively easy to meet conditions\. The second tranche, on the other hand, was only supported by 30% of the financing but was loaded with eleven conditions which were difficult to satisfy, and for which ownership declined in light of the evolving context (fuel price surge, SAR privatization, critical energy shortfalls, etc\.)\. 37\. The quality and reliability of electricity services in fact worsened significantly during the implementation of the program\. even though the GoS and SENELEC have taken important actions toward achieving the objectives of the program, including: i/ diversifying the energy mix to lower generation costs, with a coal power plant to be commissioned in 2014/15, additional hydropower (OMVS FELOU to be commissioned in 2013 and GOUINA in 2015/16) and the contemplated conversion of some generation units (GTI’s IPP, SENELEC’s TAG 2) to natural gas; ii/ increasing private participation in the sector with majority private participation in the oil refinery (SAR); iii/ initiating the reform towards unbundling of SENELEC’s activities with the completion of the separate accounting for business lines; iv/ implementing legal and regulatory measures to ensure the long term development of the energy sector, such as the renewable energy law, and 3 With the current energy mix, Senegal has one of the highest electricity tariffs in West Africa\. 14 enhancing the powers of the Commission Nationale des Hydrocarbures to regulate the import, refining, storage and distribution of petroleum products\. 3\.4 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs) Rating: Unsatisfactory 38\. The unsatisfactory rating is justified by the fact that, in spite of the Government’s and SENELEC’s efforts, the program’s main goal, which was to fully restore SENELEC’s financial viability without subsidy from national budget from 2009, was not reached\. The Development Objective of the project was and remains very relevant and fully in line with the country’s priorities to establish a sustainable energy sector and contain and eventually stop the deleterious impacts of the sector on growth prospects and public finance\. However, the program set to reach it was over ambitious and the instruments, such as budgetary transfers that the Government relied on in the end were unsustainable\. 39\. SENELEC’s situation remains precarious, mainly because of (i) a volatile external environment (global economic crisis and fuel crisis); (ii) the difficult transition from a predominantly hydrocarbon based power system to a more diversified one to mitigate shocks of future oil price increases; and (iii) the difficulties in attracting private interest in the sector until SENELEC’s financial position is strengthened to a point at which it can reliably pay for privately generated electricity\. Several actions under the DPC operation were postponed such as the unbundling of SENELEC and the establishment of a regulatory agency for petroleum products\. 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 40\. Senegal’s overriding economic challenge is to raise growth and reduce poverty\. In this context, the reduction of the sector’s burden on public finances could have had a positive impact on poverty reduction by making more resources available for social services to low-income populations\. The DPC however failed to reduce the energy sector’s burden on public finances as SENELEC is still in need of government support to operate\. 41\. Furthermore, the objective of cost-reflective energy prices, as supported under the DPC, had potential negative social impacts\. With respect to electricity prices, the Government has indicated that further adjustments to electricity prices will not be applied to the social tranche (less than 40kWh/month)\. In addition, to mitigate the effects of energy price increases, a demand side management and energy efficiency program have been launched to reduce electricity costs and provide households and other consumers of energy services with options to reduce their energy expenditures, including a program of efficient (CFL) lamps\. The tariff structure has been revised to introduce progressivity in tariff blocks to encourage energy saving and provide a lifeline tariff for poor households\. 15 (b) Institutional Change/Strengthening 42\. The Program was instrumental in strengthening the governance of the electricity sector, especially through the establishment of two committees on finance and internal audit to support SENELEC’s Board of Directors and in completing the accounting separation within SENELEC\. An in-depth audit of SENELEC was completed after the closing of the operation\. The regulatory agency for petroleum products was not established as the government preferred to evaluate alternative options, notably to create a single regulatory agency for electricity and petroleum products\. Streamlining procurement procedures at SENELEC was problematic in light of an established practice to purchase fuel on a sole source basis through the Ministry\. Fuel procurement is now the responsibility of SAR\. In the hydrocarbon sector, SAR became a private company during the implementation period\. (c) Other Unintended Outcomes and Impacts (positive or negative, if any) 43\. The project did not have unintended outcomes or impacts, except that the increased budgetary transfers to SENELEC in light of the fuel spike may have contributed to changes in public expenditure allocations that are difficult to attribute to the operation\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not applicable 4\. Assessment of Risk to Development Outcome Rating: High 44\. The closing of the DPC operation did not do away with the concerns that led to it in the first place namely, the inability of SENELEC to operate without government support, and the burden of the energy sector on public finances at the expense of other socially important needs\. 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: Moderately Unsatisfactory 45\. The Bank team in cooperation with AFD, other donors, the IMF and the GoS designed a program based on a large and robust body of analytical work on the electricity and petroleum product sub-sectors\. The DPC operation was however ambitious and difficult to carry out over a two-year implementation period even if one did not factor in the unexpected and unpredictable spike in fuel prices\. There were too many conditions (indeed they increased as a result of the internal review process during preparation) and 16 their distribution between the tranches was not balanced\. The program was expecting a too rapid financial recovery in an internationally difficult context and a too ambitious reform path for SENELEC, not having sufficiently taken into account the rigidities in the energy sector in Senegal such as government attitude towards a tariff increase\. At the same time, Government ownership as reflected in the Letter of Sector Policy appeared strong during the design phase\. (b) Quality of Supervision (including M&E arrangements) Rating: Moderately Satisfactory 46\. A very dedicated and focused project team made for good supervision\. The ISRs and aide memoires were comprehensive and made project follow up easy\. All issues were reviewed during the supervision missions to ensure that the appropriate actions were taken to meet the disbursement conditions of the two tranches (i\.e\. the Bank was instrumental regarding the tariff increases and tariff compensation from state budget)\. Unfortunately, the second tranche was not disbursed for the reasons explained earlier\. Problems and difficulties experienced during implementation were promptly brought to the attention of management and to the GoS\. The Bank team communicated widely, including at the highest level of government, to draw attention to the problems of the sector through aide memoires, management letters, presentation and meetings\. Finally, the supervision was intense4 and continuous as it was carried out by the team based in Dakar with support as needed from Bank’s HQ in Washington\. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Unsatisfactory 47\. The rating of Moderately Unsatisfactory reflects the shortcomings in the design of the DPC operation\. Its PDO was in line with country’s priorities and its indicators, though too many, served in following the achievement of the operation objectives\. The supervision team was based in Dakar and the dialogue with the GoS, SENELEC and SAR was very close and sustained\. The team also closely liaised with other donors such as the AFD and with the IMF\. 5\.2 Borrower Performance (a) Government Performance Rating: Unsatisfactory 48\. The GoS was very involved in the DPC operation during its preparation and implementation\. However, the level of attention it has given to the sector and commitment to DPC actions fluctuated from strong to weak and strong again near closing\. The weak commitment revealed itself when it came to adjusting tariffs, taking 4 Formal supervision mission were carried out every three to four months (most of them jointly with AFD) 17 timely action to resolve implementation and policy issues, and enhancing the governance of sector entities\. The government found itself in a bind between continuing budgetary transfers to the energy sector it could not sustain and increasing already high tariffs that would hurt consumers while not being able to bring on-stream the cost-reducing changes in energy generation mix quickly enough\. The consumers were particularly vocal concerning the quality of service and tariffs\. There was also the issue of insufficient coordination and disagreements between the Ministry of Finance and the Ministry of Energy regarding sector reform and SENELEC’s recovery\. In the end, conditions for the second tranche release were not met and the tranche was not released\. (b) Implementing Agency or Agencies Performance Rating: Unsatisfactory 49\. Although the Ministry of Economy and Finance was laudably able to provide to SENELEC the tariff compensations in a difficult budgetary context (though with delay), the implementing agency was the Ministry of Economy and Finance and therefore part of the government\. As such, the rating of the government applies to it as well\. (c) Justification of Rating for Overall Borrower Performance Rating: Unsatisfactory 50\. The rating is justified by the fact that most of the conditions prior to the release of the second tranche of the DPC were not met\. As a consequence, the PDO was not achieved and SENELEC and the sector remain in crisis\. 6\. Lessons Learned 51\. Importance of dialogue and coordination with government and donors/partners: The quality of the dialogue was high and the team was pro-active in the advice given to the authorities before and during the implementation of the program\. This operation is also a good example of coordination and dialogue with other donors, particularly the AFD, but also with the IMF because of the macroeconomic implications of the situation in the energy sector\. 52\. Field based staff and dialogue: Another lesson learned is that the rapidly changing circumstances of the sector required an intensive and continuous dialogue which was possible because of the presence of the Bank’s energy team in the field office in Dakar\. 53\. Need for more pro-activity: Although tight in an implementation period of just over two years, the DPC second tranche should perhaps have been cancelled earlier or the funds reallocated to a new energy operation sooner when it became clear there was little chance that the conditions for the release of the tranche will be met before the closing date, however the team opted to respond favorably to the Ministry of Economy and Finance’s request to remain engaged in the sector and extended the closing date by six months\. 18 54\. Choosing the right instrument: While it can be argued that the DPL is useful instrument for reform, it is clear that a two tranches DPL is not flexible, the number of conditions (5 for the first tranche and 11for the second tranche) was excessive5 and the distribution between the tranches was not balanced with 70% disbursed upfront and most of the difficult conditions back loaded\. A series of DPL’s with limited objectives and financing may bring more flexibility and be more suited to country and sector circumstances than a single complex operation\. 55\. Focus on underlying causes and design simple and feasible solutions to address them\. Some key conditions based on specific targets have created an excessive focus on monitoring of financial indicators and targets rather than on the underlying causes for SENELEC’s poor financial performance\. Examples are SENELEC’s recapitalization over the 2007-2009 period to restore its financial equilibrium and meet standard financial ratios by end of calendar year 2009 such as the debt service coverage ratio, days of accounts receivable and arrears to suppliers\. This objective was not ultimately met\. If a part is met (e\.g\. DSCR) the other is off track (e\.g\. days of accounts receivable), etc\. It was not clear how SENELEC was supposed to reach these multiple targets without major changes in its cost structure, especially following the surge in fuel prices\. 56\. Need for timely supporting investments: The reform program should have been more modest and focused and perhaps supported by an investment component that would have supported the achievement of some key pre-conditions\. For instance, an investment operation that would help diversify the energy mix to lower generation costs would have contributed to reaching the development objectives of the program\. 57\. Realism in the pace of reform and managing expectations: As has been shown through the implementation of this program, although the temptation is to do many things as fast as possible, this temptation should be resisted and one should be realistic about what can be achieved and at what pace, given country and sector circumstances\. 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) 5 The team proposed a limited number of conditions but during the review process a number of additional conditions were added\. 19  Annex 1 Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Michel Layec Lead Energy Specialist (TTL) AFTEG Stephan Garnier Power Engineer AFTEG Iradj A\. Alikhani AFCTZ Mourad Belguedj Consultant SEGOM Fabrice Karl Bertholet Sr Financial Analyst AFTEG Sidi Mohamed Boubacar Lead Operations Officer MNC03 Renee M\. Desclaux Senior Finance Officer CTRFC Kwawu Mensan Gaba Lead Energy Specialist SASDE Bertrand Loiseau Senior Economist ENVCF Sunil W\. Mathrani Senior Energy Specialist AFTEG Awa Seck Senior Economist AFTEG Seynabou Thiaw Seye Program Assistant AFCF1 Boris Enrique Utria Country Operations Adviser LCC5C Supervision Stephan Garnier Sr Power Engineer (TTL) AFTEG Fabrice Karl Bertholet Sr Financial Analyst AFTEG Moez Cherif Sr Energy Econ\. AFTEG Saidou Diop Sr Financial Management Specia AFTFM Philippe J-P\. Durand Program Coordinator AFTEG Thanh Lu Ha Senior Program Assistant AFTEG Fatouma Toure Ibrahima Wane Senior Financial Specialist AFTEG Michel E\. Layec Lead Energy Economist LCSEG Seynabou Thiaw Seye Program Assistant AFCF1 (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 FY07 23\.95 FY08 337\.58 Total: 361\.53 Supervision/ICR Total: 20  Annex 2\. Beneficiary Survey Results Not applicable (Core ICR) 21  Annex 3\. Stakeholder Workshop Report and Results Not applicable (Core ICR) 22  Annex 4\. Summary of Borrower's ICR and/or Comments on Draft ICR TRANSLATION OF THE FRENCH ORIGINAL OF THE BORROWER CONTRIBUTION (AVAILABLE IN PROJECT FILE) ------------------------------- Republic of Senegal One people, One Goal, One Faith -------------- Ministry of International Cooperation, Air Transport, Infrastructure and Energy ---------------- Support Project to the Development Policy for the Recovery of the Energy Sector in Senegal Dakar, March 15, 2011 Implementation Completion Report Contribution of the Borrower I\. Introduction The World Bank has put at the disposal of Senegal an IDA credit of SDR49\.1 million or US$80 million to finance the changes in public policies and contribute to the restoration of the financial equilibrium of the energy sector in Senegal with particular emphasis on the electricity sector and the activities linked to the importation refining, storage and distribution of petroleum products\. This support as well as a number of public and/or private projects, either ongoing or under preparation, are essential to the sustained expansion of the energy sector\. The investment program of the energy sector (and this operation) has the support of a relatively important group of donors\. The private sector is also very much involved in important activities\. The closing date of the Financing Agreement of the Project was December 31, 2010\. The financing was divided into two tranches: A tranche to be disbursed at project effectiveness and a second to be disbursed when conditions for its disbursement are met\. The distribution of the financing is shown below: Amount in SDR Million First Tranche 34\.4 Second Tranche 14\.7 Total 49\.1 23 II\. Objectives of the project The main objective of this operation is to ensure a reliable and sustained long term development of the generation and distribution of electricity, as well as the supply of petroleum products to the Senegalese economy\. To reach this central objective, the operation comprises two specific components: a) A financial aid component to the government of Senegal to help SENELEC reach a financial equilibrium, meet certain financial ratios and become credit worthy at the end of calendar year 2009 at the latest; b) A component of sector policy measures meant to develop an efficient and transparent development and operation of the electricity and downstream petroleum sectors along with investments and suitable governance\. The program of support to the recovery of the energy sector in Senegal was aimed at the financial viability, the improvement of the governance and the long term enhancement of the electricity and hydrocarbons sub-sectors\. The program fits neatly in the economic and social program of the government and its strategy for poverty reduction\. The implementation of a reform program for the energy sector with a focus on electricity and hydrocarbons constitute a key element of the government’s strategy\. III\. Results and Impacts of the Project A disbursement of 70% of the Credit (24 billion FCFA) for the Energy Sector Recovery Project was dedicated to an injection of equity by the government into SENELEC\. This was an addition to a transfer from the government budget of 65 billion FCFA\. The second tranche for budgetary support of 14\.700\.049,12 SDRs was to be disbursed with the fulfillment of the following conditions: Condition Status Responsibility Remarks 1\. Equity injection into SENELEC of 37 billion Satisfied SENELEC FCFA 2\. Ensure to SENELEC a revenue equal to the Satisfied with Electricity maximum authorized revenue (MAR) in 2008 through delay Regulatory an adjustment of tariffs and/or a budgetary transfer Commission (ERC) SENELEC 3\. Effectiveness of a tariff allowing SENELEC to Not satisfied ERC, SENELEC, In 2009, the government gave a reach its MAR without government support and debt Ministry subsidy to SENELEC to limit the service coverage ratio (DSCR) of 1\.2 tariff hike\. The DSCR was not reached\. 4\. Studies The report was prepared by a a) Study of the Impact of the new tariff structure Satisfied Ministry committee put in place by and the SENELEC’s 2008 tariff increase ministerial decision, presided over by ERC and included the Ministry of Energy, the Ministry of Finance and SENELEC\. 24  Waiting observations from the b) Social and environmental assessment of the Satisfied WB impact of the removal of the subsidy on butane gas\. c) Develop an action plan for the implementation of the recommendations of theses studies 5\. Adoption by SENELEC and SAR of the public Satisfied by SENELEC, SAR Feasibility for SAR is in question procurement code SENELEC given its new status but not by SAR 6\. Unbundling of SENELEC’s generation, transport Ministry 1\.Finalize the accounting and distribution into three separate entities and separation (Group 1) adoption by the government of a strategy for private 2\.delay the implementation of the sector participation reform (studies on private sector participation) 7\. Independent audits of SENELEC’s and SAR’s Not satisfied SAR, SENELEC Feasibility for SAR is in question internal audit functions and the implementation of the given its new status\. To be taken recommendations to strengthen these functions into account for the audits already ordered by the government\. 8\. Establishment of an agency sufficiently endowed Not satisfied Ministry The text is being re-examined by in human and financial resources to regulate the the new authorities import, refining, storage and distribution of petroleum products all over Senegal\. 9\. Adoption by SENELEC’s Board of Directors of SENELEC, Validation subject to prior the conclusions of the Master Plans for generation, Chairman of approval of the authorities transport and distribution\. SENELEC’s Board 10\. Approval by SAR’s Board of Directors of the Not satisfied SAR investment program based on the update of the technical, economic, financial and environmental feasibility studies, in coordination with the technical assistant\. 11\. Draft law sent to the National Assembly on the Satisfied Ministry in charge The law has been adopted by new regulation for the development of renewable of renewable energy Parliament and promulgated\. energy The implementation legislation is being prepared\. 12\. Adoption by the government of the action plan Satisfied Ministry of Energy The action plan has been for demand management and energy efficiency prepared by a working group put in place by ministerial decision\. It was presided over by the Ministry of Finance and included all the stakeholders\. Its adoption happened during a workshop presided by the Prime Minister\. IV\. Difficulties and weaknesses of the project Given the international financial context, several factors, particularly the increase of the price of oil in 2008 and the financial crisis, had a significant impact on the activities of the sector and consequently on the disbursement of the second tranche of the Credit\. In effect, the financial ratios required of SENELEC were not achievable with the worsening of the international environment\. The indicators for SENELEC’s operation and recovery were too severe\. Moreover, the financial model used to calculate the financial ratios have been modified in 2009 to correct certain problems identified\. 25 We note that the quality of the electricity supply and the difficult financial situation of SENELEC continue to hamper in a significant manner the economic growth of Senegal and to pose serious budgetary risks to the government\. Therefore, the recovery of the energy sector project approved in 2007 has in part lost its relevance and its potential impact on the viability and sustainability of the sector\. 26  Annex 5\. Comments of Cofinanciers and Other Partners/Stakeholders Not yet received\. 27  Annex 6\. List of Supporting Documents - Project Concept Note and Project Appraisal Document - Aide-Memoires - Memo of extension of closing date - TAKKAL Plan (version 3\.0) 28

REVIEW

P004850

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 25614 IMPLEMENTATION COMPLETION REPORT (IDA-35110; TF-29167; TF-29443; TF-50047; TF-50356; TF-50261; TF-50260; TF-50357; TF-50690) ON A CREDIT IN THE AMOUNT OF SDR 197\.2 MILLION (US$ 250 MILLION EQUIVALENT) TO THE SOCIALIST REPUBLIC OF VIETNAM FOR A POVERTY REDUCTION\.SUPPORT CREDIT June 27, 2003 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 as of June 2003) Currency Unit = Vietnamese Dong 1 VND = US$ 0\.0000645 US$ 1 = VND 15,499 FISCAL YEAR January December ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank AFTA ASEAN Free Trade Area AMC Asset Management Company ASEAN Association of South East Asian Nations BIDV Bank for Investment and Development of Vietnam CAS Country Assistance Strategy CFAA Country Financial Accountability Assessment CG Consultative Group IAS International Accounting Standards GC General Corporation JSB Joint-Stock Bank ICBV Industrial and Commercial Bank of Vietnam LDP Letter of Development Policy MOF Ministry of Finance MOLISA Ministry of Labor, Invalids, and Social Affairs MPI Ministry of Planning and Investment NGO Non-Governmental Organization NPL Non-Performing Loans PER Public Expenditure Review PRGF Poverty Reduction and Growth Facility PRSC Poverty Reduction Support Credit PRSP Poverty Reduction Strategy Paper QR Quantitative Restrictions SBV State Bank of Vietnam SDSD Socioeconomic Development Strategy Document SME Small and Medium Enterprise SOCB State Owned Commercial Bank SOE State Owned Enterprise VBARD Vietnam Bank for Agriculture and Rural Development VCB Vietnam Commercial Bank Vice President: Jemal-ud-din Kassum, EAPVP Country Director Klaus Rohland\. EACVF Chief Economist and Sector Manager Homi Kharas, EASPR Task Team Leader/Task Manager: Kazi Mahbub-al Matin, EACTF  VIETNAM VIETNAM - POVERTY REDUC\.SUPPORT CREDIT CONTENTS Page No\. 1\. Project Data 1 2\. Principal Performance Ratings 2 3\. Assessment of Development Objective and Design, and of Quality at Entry 2 4\. Achievement of Objective and Outputs 9 5\. Major Factors Affecting Implementation and Outcome 20 6\. Sustainability 21 7\. Bank and Borrower Performance 22 8\. Lessons Learned 23 9\. Partner Comments 25 10\. Additional Information Annex 1\. Key Performance Indicators/Log Frame Matrix 32 Annex 2\. Project Costs and Financing 32 Annex 3\. Economic Costs and Benefits 32 Annex 4\. Bank Inputs 33 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 7  Project ID: P004850 Project Name: VIETNAM - POVERTY REDUC\.SUPPORT CREDIT Team Leader: Kazi Mahbub-Al Matin TL Unit: EASPR ICR Type: Core ICR Report Date: June 30, 2003 1\. Project Data Name: VIETNAM - POVERTY REDUC\.SUPPORT L/C/TF Number: IDA-35110; TF-29167; CREDIT TF-29443; TF-50047; TF-50356; TF-50261; TF-50260; TF-50357; TF-50690 Country/Department: VIETNAM Region: East Asia and Pacific Region Sector/subsector: Central government administration (32%); Banking (32%); General industry and trade sector (26%); General information and communications sector (5%); General energy sector (5%) Theme: State enterprise/bank restructuring and privatization (P); Standards and financial reporting (S); Social risk coping (S); Regulation and competition policy (S); Trade facilitation and market access (S) KEY DATES Original Revised/Actual PCD: 03/05/1997 Effective: 10/03/2001 10/03/2001 Appraisal: 01/08/2001 MTR: Approval: 06/05/2001 Closing: 12/31/2001 12/31/2002 Borrower/Implementing Agency: SOC\.REP\. OF VIETNAM/STATE BANK OF VIETNAM Other Partners: Cofinancing partners: Denmark, the Netherlands, Sweden and the United Kingdom STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Jemal-ud-din Kassum Country Director: Klaus Rohland Andrew Steer Sector Manager: Homi Kharas Homi Kharas Team Leader at ICR: Kazi Mahbub-Al Matin Kazi Matin ICR Primary Author: Thang-Long Ton 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:HL Institutional Development Impact:SU 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: 3\.1\.1\. Background\. Vietnam initiated a program of economic renovation or "doi moi" in the late 1980s\. The "doi moi" generated a decade of rapid growth and exceptional poverty reduction\. All social indicators improved until 1997 making Vietnam a positive outlier in its per capita income class\. But this program stalled around the mid-1990s\. With slowing reforms, there were signs of a growth slowdown; the East Asian crisis accentuated the structural weaknesses and lowered GDP growth sharply during the 1998-2000 period\. 3\.1\.2\. At the same time, however, the government wanted to restore the momentum of growth quickly in order to ensure continued reductions in poverty\. Investment and savings would need to be raised and the employment-intensity of investment increased in order to secure growth in employment, given the large annual additions to the labor force\. It was explicitly recognized that economy-wide reforms were needed to harness the dynamism of the Vietnamese enterprises: reforms in banking and state-owned enterprises (SOEs), in trade policy, and in creating a favorable environment for private sector development were needed\. 3\.1\.3\. The Bank's 1998 Country Assistance Strategy (CAS) anticipated this need and laid out a program to support the formulation and implementation of economic reforms as well as of human and infrastructure investment aimed at rural growth and poverty reduction\. Technical assistance was to be provided to the government to design the reform program and to minimize social disruption, drawing on experience of other countries\. The CAS also envisaged a series of adjustment credits to support the implementation of the program of reforms developed and adopted by the government\. This was reaffirmed in the CAS Progress Report in May 2000\. 3\.1\.4\. However, when the new lending instrument of Poverty Reduction Support Credit (PRSC) was introduced in late 2000 to support implementation of a country's poverty reduction strategy, Vietnam was finalizing an Interim Poverty-Reduction Strategy Paper (I-PRSP) with a multi-year reform program; at the same time, it completed the ten-year Socioeconomic Development Strategy Document (SDSD) in early 2001\. The World Bank decided to support the implementation of the I-PRSP reform program with a PRSC which was approved by the Board in June 2001\. 1 It was expected that this first PRSC would be followed by a full PRSP in 2002 and a series of PRSCs providing continued and predictable financial assistance to the government to achieve its poverty reduction objectives\. Subsequently, the Comprehensive Poverty Reduction and Growth Strategy (CPRGS ­ PRSP equivalent in Vietnam) was completed in September 2002 and the second planned PRSC was approved by the Board on June 24, 2003\. 3\.1\.5\. Objectives\. The objective of the three-year reform program in the I-PRSP supported by PRSC 1 was to return Vietnam to higher growth and faster poverty reduction than during the previous three years, i\.e\., 1998-2000\. This was to be done through reforms in five key areas: - 2 -  trade policy, private sector, banking, state enterprise sector and public expenditure management\. 3\.1\.6\. This objective was consistent with the government's view of dominant constraints to faster poverty reduction in Vietnam as well as the World Bank's own assessment 2of the country's policy and institutional framework\. That assessment showed that Vietnam performed better than the average of IDA countries with respect to macroeconomic management and policies for social inclusion and equity, but did poorly with respect to structural policies and public sector management\. In fact, its performance on all social indicators was significantly better than other countries in its income class\. 3\.1\.7\. It was expected that trade reforms and further liberalization of the domestic and foreign private sector would increase competition for all enterprises and promote private firm growth\. With reforms enhancing transparency and accountability of SOEs, it was also expected that there would be greater incentive for management to respond to greater competition with improved efficiency in the use of resources\. Similar reforms and restructuring of banking system were expected to reduce policy and directed lending and increasingly harden the budget-constraints for SOEs\. The resulting increase in efficiency of SOEs and growth in private enterprises would generate greater employment, higher growth and poverty reduction\. Improved management of public spending would ensure that increased revenue was better used to enhance poor people's access to basic services\. 3\.1\.8\. As a result of these changes in policies and increased efficiency, the following key outcomes were expected from a series of PRSCs, of which the recently-implemented PRSC was the first one: Key Outcomes Envisaged by End of PRSC Program Period Areas and Indicators End-period-Outcomes* 1\. Overall: a) GDP growth rate a) 7% (up from 5\.5%) b) Poverty Incidence b) 25% (down from 37 in 1997/98) 2\. Private Sector: a) Total private investment a) 11% of GDP (up from 8%) b) Foreign investment b) 3\.5% of GDP (up from 2%) c) Private SMEs c) 30,000 new firms 3\. Banking System a) All commercial banks a) Compliance with banking regulations b) Share of credit to private sector b) 60-65% (up from 55%) 4\. State-Owned-Enterprises: a) SOE-sector performance data a) Available annually b) SOE sector b) Higher share of profitable SOEs c) SOE equitizations, sales, liquidations* c) Around 1800 SOEs 5\. Openness a) Export/GDP ratio a) 50% of GDP (up from 47%) - 3 -  b) Share of manufactured/processed products in total b) 40-45% of exports (up from 37%) exports 6\. Public Expenditure: a) Budgetary data a) Timely, consistent, comprehensive data from treasury's public financial management system\. b) Equity for provinces' social spending b) Poor provinces' per capita social-sector spending will reach `current' national average\. 7\. Social Sector a) Net primary enrollment rate* a) 93% (up from 91%) b) Net secondary enrollment rate* b) 73% percent (up from 70%) c) Infant mortality rate per 1000 c) 23 (down from 26) d) Under-five mortality rate per 1000 d) 34 (down from 37) e) Child malnutrition (stunting incidence)* e) 29% (down from 34% in 1997/98) Note: * Outcomes from the government's sectoral strategies\. Footnotes for Section 3 1\. The PRSC 1 was originally planned as the second Structural Adjustment Credit (SAC 2), an integral part of the package of programmatic SACs designed to help the Vietnamese government to carry out its policy and structural reform program as was reaffirmed in the CAS Progress Report in May 2000\. The planned second SAC eventually took the PRSC form during the transition to the new lending instrument\. 2\. Country Policy and Institutional Assessment (CPIA) is done annually for all borrowers of the Bank Group\. 3\.2 Revised Objective: 3\.2\.1\. None 3\.3 Original Components: 3\.3\.1\. The first PRSC supported macroeconomic stability and economy-wide reforms in five areas: trade policy, private sector, SOE sector, banking and public expenditure management\. The following were the objectives of each: 3\.3\.2\. Maintaining Macroeconomic Stability\. Given Vietnam's sustained good macroeconomic performance, the task was to maintain it in the future, so that growth can follow the implementation of reforms\. For this purpose, it was expected that fiscal deficit would be maintained at levels that require no bank financing and domestic credit growth would be restrained to a rate that would keep inflation down\. This meant that the current IMF's Poverty Reduction and Growth Facility (PRGF) would be implemented as agreed and the program would remain on track\. 3\.3\.3\. Opening up Trade\. The objective of trade reforms were to promote increased competition for domestic producers, larger export markets and easier access to imports by the private sector\. For this purpose, PRSC 1 supported the granting of trading rights to all firms registered in Vietnam, the removal of quantitative import restrictions multilaterally on 17 groups - 4 -  of items (leaving quantitative restrictions -- QRs -- only on sugar and petroleum) and the elimination of rice export quotas\. Signing and ratification of the United States Bilateral Trade Agreement (USBTA) was also accomplished over this period, which committed Vietnam to a phased liberalization of services sectors over several years\. Also the publication of the roadmap of a phased reduction of tariffs on imports from ASEAN, with the first two years reductions undertaken during the PRSC program, exposed SOEs to more competition as well\. 3\.3\.4\. Improving Climate for Private Sector Development\. The goal for this component was to ease entry and operation of domestic private firms and to strengthen their access to land-use rights and credits, as well as to encourage growth of foreign investment\. The implementation of the Enterprise Law and the removal of nearly 195 licensing requirements would make it easier for domestic private businesses to register their firms and begin operation\. Revisions to Land Law, the issuance of securities regulations and the establishment of registries in Hanoi and Ho Chi Minh City would allow land-use rights to be used as equity and as collateral, making it easier for private firms to operate\. 3\.3\.5\. The revision of the Foreign Investment Law would permit foreign investors to set up export-oriented enterprises through automatic registration, simplify the process for modifying corporate structures of existing foreign-invested enterprises (i\.e\., for expansion, or for conversion to wholly foreign-owned companies), lift restrictions on access to foreign exchange and allow mortgages of land-use rights of foreign-invested enterprises by all banks in Vietnam\. (The two mega-projects in energy ­ the Nam Con Son private gas development and pipeline project of $1,400 million and the Phu My 2\.2 build-operate-transfer private undertaking of $400 million were subsequently made possible in 2001 by this revision, which allowed government guarantees for such projects\.) 3\.3\.6\. SOE Reforms\. This was meant to hive off some SOEs to private ownership through equitization, while increasing the transparency, accountability and efficiency of the SOEs remaining in government ownership\. However, the government felt that privatizing the large SOEs before developing a robust domestic private sector would lead to a takeover of the modern sector by foreign firms\. Thus the SOE reform program sought to impose market discipline on wholly-owned SOEs through general measures like trade reforms, private firm promotion, harder budget constraints coming from both budget and banks, greater transparency of information on SOE performance and increased accountability of management for performance\. 3\.3\.7\. The specific SOE measures were aimed at altering incentives through changes in ownership and included the following: (i) major equitizations (65 percent shares are to be sold to non-state shareholders and no dominant state shareholding); (ii) minor equitizations (shares sold to non-state shareholders and dominant state shareholding with enterprises operating under the Enterprise Law); (iii) outright sales; (iv) liquidation; and (v) restructuring according to a time-bound action plans\. This restructuring related to large wholly SOEs; when exposed to general measures of competition and hard-budget constraints they would want to restructure, using initially some funding that would permit them to use external expertise for such restructuring\. Vinatex, Vinacafe and Seaprodex were the three large state-owned general corporations that volunteered for such restructuring using external consultants, a response to the - 5 -  heightened competition that was expected\. 3\.3\.8\. Banking Reforms\. The objective of banking reforms was to enhance transparency, accountability of management and efficiency of banks\. This was to be done by establishing a better legal regulatory and supervisory regime, improving transparency by encouraging regular auditing of banks and restructuring of joint stock banks (JSBs) and state-owned-commercial banks (SOCBs)\. The restructuring of JSBs were carried out rapidly to reduce the number of JSBs and to strengthen those that continued\. The legal and regulatory regime was also to be improved successfully, bringing loan-loss provisioning and other prudential rules in line with regional and international standards\. Progress in strengthening supervision was very limited, however, since institutional strengthening took time\. 3\.3\.9\. The four large SOCBs were to prepare detailed restructuring plans and received direct technical assistance grants to support their implementation\. Among the measures included were annual auditing of the banks using internationally reputed auditors and international accounting standards as well as sharing the findings with all senior level decision-makers in the Vietnamese government\. They also planned to phase out policy and non-commercial directed lending; in the transition, SOCBs would be able to seek and receive Ministry of Finance (MOF) guarantees if they were expected to continue some policy lending, so that bank managers would not be responsible for those loans' performance\. The capitalization of these SOCBs were to be phased and conditional; this would ensure that SOCBs would conduct restrained and prudent lending until restructuring and re-capitalization are completed after three-years, as well as maintaining management's incentive to continue restructuring according to agreed plans\. Again, like in SOEs, if management was unable to minimize non-performing loans (NPLs) and restore profitability they would have to be accountable for that performance\. 3\.3\.10\. Public Expenditure Management\. The government came a long way in improving public expenditure management\. It sought to enhance transparency by publishing annually budget plan and outturn since 2000, with increasingly more detailed breakdown\. Commune budgets were expected to be posted publicly in the commune offices\. The joint government-donor public expenditure review, with its matrix of recommended measures, has been used as the basis for continuing action\. Measures to ensure comprehensive, consistent, proper and timely classification of budgetary information and availability of budget line items information and re-balancing of capital and recurrent expenditures were to be undertaken\. The Treasury was to be made the key source of government accounts and is being strengthened\. 3\.3\.11\. Mitigating Social Costs of Reform Program\. SOE and trade reforms would enhance employment and output over the medium term, but would also lead to significant job losses in the short term; and for that mitigating measures were part and parcel of PRSC 1\. Based on reasonably rigorous estimates, labor redundancy was not expected to exceed 100,000 in any particular year\. In order to assist displaced workers, a social safety net fund was established with rules that ensured gender-neutrality and age-neutrality in respect of benefits from this fund\. 3\.3\.12 Poverty alleviation impact\. The program supported by PRSC 1 was expected to have a favorable impact on the incomes of the poor from three sources\. First, higher household income - 6 -  for the poor would come from expanding employment opportunities and rising rates of return of various activities\. including agriculture and non-farm activities\. Second, increased consumption of lower prices of goods and services would be generated by increased competition\. Third, expanded provisions of health and education services for the poor would be realized through higher revenues, better targeting and improved public expenditure management\. 3\.4 Revised Components: 3\.4\.1\. No revisions were made to the above components\. 3\.5 Quality at Entry: 3\.5\.1 The "quality of entry" of the operation is satisfactory\. 3\.5\.2 This Credit supported reforms that were developed by the government deliberately and purposefully over a long period of time\. Donors, including the Bank, provided technical support to expose policymakers to international experience with similar reforms as well as for the analysis of Vietnam's own specific situation\. A lot of effort was also made by all parties to develop mitigating measures to offset the transitional impact on employment\. In addition, the government conducted several rounds of consensus-building workshops and seminars not only within government agencies in Hanoi and Ho Chi Minh City but also across the country\. 3\.5\.3 This was reflected in the government's I-PRSP which laid out a clearly articulated multi-year reform program\. The rationale for reforms and the direction of changes were also articulated in the ten-year Socioeconomic Development Strategy Document\. The government's CPRGS, which was finalized in September 2002, reiterated the same reform program a year later, and proposed policy changes in respect of social sectors and rural development\. 3\.5\.4\. Strong government ownership was also evident from the numerous important reform measures that were implemented between 1999-2000, much before the Bank approved PRSC 1 in June 2001 (see Box 1)\. Box 1\. Upfront Actions prior to Board Approval of PRSC 1 - 7 -  A\. The environment for the private sector was enhanced with Approval of the Enterprise Law; Removal of business licenses in 145 different trades, industries and services to facilitate entry by private firms; Revision of the Foreign Investment Law that would permit, among other things, automatic registration of export oriented investments and government guarantees for large projects\. B\. The SOE sector\. Equitization was completed for 408 SOEs\. C\. In the banking sector, the government implemented the following: Separation of policy lending from commercial lending with the establishment of the National Development Support Fund and a separate bank for social policy lending to phase out policy lending from SOCBs; Actions undertaken to strengthened JSBs with closure, merger and under special control of the SBV; and A comprehensive SOCB restructuring plan for Vietcombank, one of the four large SOCBs, for implementation under the program\. D\. In the trade sector, the authorities Adoption of the AFTA roadmap on tariff reduction; Liberalization of trading rights for all domestic enterprises and expanded trading rights of foreign-invested enterprises; and Removal of quantitative restrictions from 8 product groups while a timetable for further QRs removal was adopted\. E\. In the public sector management, Completion of a public expenditure review and finalization of a detailed timetable for the implementation of its recommendations over the following two years; and Initiation of an integrated public financial management project (approved by the Board in May 2003) to address the key weaknesses identified by the PER and the now completed CFAA\. 3\.5\.5 The government's reform program, supported by PRSC 1, was discussed jointly with the IMF\. In fact, in Vietnam, tripartite (government, World Bank and IMF) policy meetings were common as were joint missions; the latter were facilitated by the presence of most of the Bank's PRSC team in Hanoi\. There was thus complete coordination and collaboration in supporting the government's reform program and developing Bank and IMF financial assistance\. In fact the discussion with the government on its Memorandum of Financial and Economic Program to the IMF and its Letter of Development Policy (LDP) to the Bank were done at the same time in the same room in Hanoi, going in parallel through both documents with the IMF team, the World Bank team and the government delegation\. There were also joint reports with the IMF as well as joint meetings on the I-PRSP\. 3\.5\.6 In addition, donors have been supporting reforms in the areas cited above for a long time through technical assistance\. There were donor-government-NGO working groups in the areas of SOE reform, banking reform, public expenditure management reform, trade policy as well as private sector and these groups were mobilizing grant financing for supporting the analytical work - 8 -  and workshops for formulating the reform program\. While four bilateral donors co-financed the PRSC, most of them continued to provide millions of dollars in technical assistance grants to support implementation of the program\. 3\.5\.7 The Credit clearly recognized the high-risk high-return nature of the operation\. Major risks to the operation were accurately assessed and clearly highlighted in the preparation of the program\. These ranged from possible erosion of existing political support for the reform program to resistance that could develop from the losers in the reform program or the possible insufficient and inequitable distribution of gains from reforms\. Weak institutional and human capacity could also pose challenge to the pace of implementation\. There was the risk of insufficient higher level of coordination and inappropriate sequencing of individual components of the package\. Other risks highlighted included significant rise in costs of recapitalization of SOCBs, though credit ceilings in the IMF program were expected to mitigate them\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective: 4\.1\.1 Overall, the outcome of the program in terms of achieving its objectives is assessed as satisfactory\. All five areas of the reform program, as elaborated in the policy matrix of the LDP, were implemented satisfactorily, though the SOE reforms took longer and there were some slippages\. In terms of the 12 actions for the second tranche release, Vietnam succeeded in completing all except one, which was partially completed for factors beyond its control (discussed further in details below) as PRSC 1 closed\. 3 Actions supported by PRSC 1 were all completed on time, without requiring any extension of the closing date\. The impact was positive: private investment and exports rose, GDP growth was higher, and the pace of poverty reduction increased\. 4\.1\.2 Implementation was a major challenge, but Vietnam met it quite well given donors' technical assistance and the strong technical support provided by the Bank team in Hanoi\. This was the first time that the government was implementing a program across at least five different ministries in a time-bound manner\. In fact, the relatively decentralized nature of SOE reform spread across hundreds of SOEs that are overseen by a score of different provinces and a half-dozen ministries was even more demanding\. The Steering Committee headed by the First Deputy Prime Minister and a Secretariat headed by a Deputy Governor of the State Bank of Vietnam (SBV) helped ensure the removal of bottlenecks, whenever they were brought to their attention ­ but this was possible in part because of the consensus and ownership that were built before adopting the program of reforms\. 4\.1\.3 The table below summarizes the achievements and outcomes of the reform program supported by PRSC 1\. Key Development Outcomes: Envisioned as of 2001 and Actual Areas and Indicators Expected outcomes at the Progress as of 2002 end of 2004 * - 9 -  Overall a) GDP growth rate a) 7 % (up from 5\.5%) a) 6% b) Poverty Incidence b) 25% (down from 37% in 1997/98) b) 32% (1997); 29% (prel 2002) Private Sector a) Total private investment a) 11% of GDP (up from 8%) a) 9% of GDP b) Foreign investment b) 3\.5% of GDP (up from 2%) b) 3\.2% of GDP c) Private SMEs c) 30,000 new firms c) 50,000 new firms Banking System a) All commercial banks a) Compliance with banking a) 12 non-compliant JSBs closed b) Share of credit to private sector regulations b) 60% b) 60-65% (up from 55%) State-Owned-Enterprises a) SOE-sector performance data a) Available annually a) Data not available yet b) SOE sector b) Higher share of profitable SOEs b) Same as above c) SOE equitizations, sales, liquidations c) Around 1800 SOEs c) 408, as of October 2002 * Openness a) Export/GDP ratio a) 50% of GDP (up from 47%) a) 48% of GDP b) Share of manufactured/processed b) 40-45% of exports (up from 37%) b) 48% of exports products in total exports Public Expenditure: a) Budgetary data a) Timely, consistent, comprehensive a) Data availability has improved; data from treasury's public tender for consultants to design a financial comprehensive FMIS system is management system\. ongoing\. b) Equity for provinces' social b) Provincial PER to evaluate spending b) Poor provinces' per capita outcomes to be initiated in early social-sector spending will reach 2003\. `current' national average\. Social Sectors a) Net primary school enrollment rate a) 93% (up from 91%) Numbers will be available in 2003 as b) Net secondary school enrollment b) 73% (up from 70%) Vietnam Living Standards Survey rate c) 23 (down from 26) 2002, led by GSO with UNDP & c) Infant mortality rate per 1000 d) 34 (down from 37) WB TA, is ongoing\. d) Under-five mortality rate per 1000 e) 29% (down from 34% in 1997/98) e) Child malnutrition (stunting incidence) Footnote for Section 4\.1 3\. This action which called for the preparation of detailed restructuring plans for the three GCs has been subsequently completed in June 2003 and their adoption is expected in the third quarter of 2003\. 4\.2 Outputs by components: 4\.2\.1\. Macroeconomic Policy Framework\. Vietnam maintained an appropriate macroeconomic policy framework during the 2001-03 period\. Real GDP growth rate averaged around 6 percent in 2001 and 2002, despite the adverse external environment that constrained export growth to only an annual average of 7 percent over those two years\. This was driven by a recovery in private investment, especially in domestic investment, and a continuing rise in domestic consumption\. The strong track record on price stability was continued\. After hovering around 1 percent for three years (1999-2001), inflation rose to 4 percent for 2002, in part due to the strengthening of world rice prices and in part due to rising domestic prices of construction materials\. Fiscal and monetary policies continued to be prudent, with overall fiscal deficit - 10 -  narrowing to 2\.5 percent of GDP in 2002, and being financed mainly from concessional external resources\. Domestic credit grew by about 22 percent with growth of credit to SOEs constrained to 12 percent\. 4\.2\.2\. The IMF's PRGF program has been on track\. The first two IMF reviews were completed successfully, while the third one was delayed due to a lack of agreement on safeguard measures\. 4 Bank and Fund staff have been working together closely and the IMF staff have indicated that both the macro framework and the structural reforms under PRGF are satisfactory\. The Fund mission that visited Hanoi most recently in June 2003 confirmed the adequacy of the current macroeconomic framework and that the PRGF program is indeed on track\. 4\.2\.3\. Private Sector Development\. Most of the actions envisaged in the program were implemented and the overall climate for private sector development improved significantly\. In addition, the National Assembly approved changes to the Constitution, acknowledging private sector a key sector of the economy and recognizing the rights of enterprises and entrepreneurs to determine their forms of business and to operate in sectors not prohibited\. The Fifth Party Plenum in March 2002 endorsed the private sector as an important contributor to employment creation, income generation and budget revenues, called on the leaders to encourage the private sector and issued a resolution proposing policies to facilitate private sector development\. 4\.2\.4\. The private sector currently leads the growth process in Vietnam\. Manufacturing thrives, with the private domestic and the foreign-invested sectors recording annual output growth rates of 19 and 15 percent respectively, while the state sector achievements were more modest at 12 percent in year-on-year output growth\. This records a gradual but unmistakable transition to a market economy, with many SOEs now facing increasing competitive pressures and harder budget constraints\. The formal private sector now employs one million people, which represents almost two thirds of employment in SOEs\. 4\.2\.5\. Private domestic and foreign investment levels are underway towards reaching the proposed outcome\. Total private investment, which is programmed to reach 11 percent of GDP by 2004, now stands at 9 percent of GDP\. Foreign direct investment has increased to 3\.2 percent of GDP (programmed to attain 3\.5 percent by 2004), up from 2 percent of GDP in 2000\. Over the past five years, the implementation of foreign direct investment has been relatively stable, while commitments and approvals of new foreign investment projects have fluctuated significantly\. In the same period, the overall share of foreign capital actually flowing into the country under implemented projects has been rising\. 4\.2\.6\. Specifically over this period, 51 business licenses affecting private entry and operation were removed or modified and a decree outlining support for private SME-development was issued\. The secured transactions registration agency was made operational in both Hanoi and Ho Chi Minh City to facilitate execution of mortgages permitted under the Securities regulations eighteen months ago\. Steps have also been taken to gradually phase out dual pricing for foreign and domestic entities\. 4\.2\.7\. The resulting improvement in the business climate has been reflected in the growth of - 11 -  domestic private firms\. New registrations rose from 3000 a year in 1997-99 period to 12,000 in 2000 to 18,000 in 2001 and to 20,000 in 2002\. Also in trade the role of private (domestic and foreign) firms grew rapidly: in non-oil exports it rose from 45 percent in 1999 to 60 percent in 2002 and in non-oil imports it went from 47 percent to 60 percent over the same period\. Domestic firms raised their share too: from 18 percent to 27 percent in non-oil exports and from 15 percent to 22 percent in non-oil imports\. 4\.2\.8\. Exports have also performed remarkably well despite a very adverse global environment\. Annual growth rate has averaged 7 percent a year over 2001-02, which is commendable\. This has not only raised the GDP share of exports but also the share of manufactures in total exports\. The phenomenal increase in exports to the United States in 2002 as a result of the USBTA is quite remarkable, despite Chinese competition\. 4\.2\.9\. SOE Reforms\. Vietnam has been implementing a comprehensive SOE reform plan comprising enterprise-specific measures to divest small and medium enterprises from the SOE sector and general measures to promote greater transparency, competition and financial accountability for the SOEs remaining in government hands\. Despite implementation difficulties, overall progress in carrying out this component of the program has been satisfactory\. 4\.2\.10\. The enterprise-specific measures proved to be the most difficult to implement in a time-bound manner\. Improvements in the legal framework for enterprise measures ­ in respect of the redesigned social safety net and the more streamlined equitization process ­ were satisfactorily completed\. To date, equitizations, sales and liquidations of 408 SOEs have been completed accounting for 2\.5 percent of SOE debt and around 5 percent of SOE employment, in line with what was planned for the three-year program\. In addition, diagnostic audits of 17 SOEs have been done and 13 others are being completed\. On the general measures, satisfactory liberalization of trade, promotion of private sector development (as indicated above) and banking reform have contributed to increased competition and greater financial accountability\. 4\.2\.11\. The impact of this equitization was clearly favorable even if its quantitative significance was small\. A survey of around 700 equitized SOEs in 2002 shows that they performed remarkably better after equitization\. On average, sales grew by 20 percent a year and value-added by 26 percent a year, implying considerable increase in efficiency of input use; employment rose at 4 percent a year and wages grew at 12 percent a year, suggesting that most of the benefits of equitization went to workers\. Total profits of the sampled equitized SOEs grew nearly five fold\. 4\.2\.12\. Financial Sector\. In early 2001, the implementation of a comprehensive multi-year banking reform program aimed at improving regulation and supervision, enhancing transparency and accountability of banks, improving the financial health of the banking system and creating incentives for banks to operate on a more commercially-oriented basis\. Overall progress in carrying out reforms has been satisfactory\. 4\.2\.13\. Specifically, regulations were issued regarding rules for loan classification and loan-loss provisioning and the four large SOCBs completed international accounting standard financial audits for 2000 and signed contracts for and/or initiated similar audits for the year 2001\. The - 12 -  decree establishing a policy bank that would provide loans at subsidized rates to vulnerable groups has been issued, taking this activity away from the four SOCBs\. Progress in the introduction of international accounting standards for the banking system has been slower than expected, though a plan has been drawn up\. The first year of restructuring of the JSBs and the SOCBs has been completed successfully\. On strengthening supervision, implementation of a CAMEL system has been delayed but an implementation plan has been developed and a revised manual for strengthening on-site supervision has been completed\. 4\.2\.14\. Trade\. Vietnam has removed QRs, reduced tariffs under the Asian Free Trade Area (AFTA) agreement, and raised private participation in exports\. QRs on cement, clinker, paper, liquor, floor tiles, construction glass, steel and vegetable oil were eliminated multilaterally, without raising tariffs, except for vegetable oil\. As a result, the coverage of QRs fell from 20 percent of imports and 22 percent of production at the beginning of the period to 13 percent and 4 percent respectively at the end of it\. Implementation of the first-year tariff reductions under AFTA has been broadly on track, with the average tariff on imports from ASEAN countries falling to 11 percent\. On the export side, private participation in rice and garments has continued to rise\. Export quotas, which currently only exist for garment exports to Europe (imposed by the European Union), were being partially auctioned and partially licensed automatically, the latter on a first-come-first-serve basis\. This auctioning and automatic licensing had the effect of increasing private participation in garment exports\. 4\.2\.15\. Public Expenditure Management\. The first of the three-year program of this component was implemented satisfactorily\. The budget plan and final accounts, including greater sectoral details, were published and placed on MOF website\. The Treasury was designated as the main agency responsible for comprehensive public accounts\. Preparations to install a comprehensive budgetary management information system in the Treasury are underway\. An inventory of the off-budget accounts has been made, including a detailed statement for the Development Assistance Fund (DAF); a review of "norms" for recurrent budget allocations has been completed, and recurrent budget implications of the public investment program have been estimated\. The process for developing a medium-term sector expenditure program has been initiated\. The government has just initiated a project to establish a public financial management information system to supplement the reforms implemented so far, and has committed to continue this course of action over the next several years\. 4\.2\.16\. Poverty Alleviation and Social Sectors\. Considerable progress has been made in the social areas\. The proportion of people with per capita expenditures under the total poverty line has dropped dramatically from 58 percent in 1993, to 37 percent in 1998, and to an estimated 29 percent in 2002, according to preliminary survey results\. Gains in poverty reduction have been widespread\. Poverty has declined in all seven regions of Vietnam, though the rate of decline and incidence of poverty vary greatly across regions\. Yet poverty remains widespread and deep\. Further integration with the world economy could increase the gap between urban and rural areas, as well as between skilled and unskilled\. The effective delivery of social services to the poor is key to sustain further poverty reduction\. 4\.2\.17\. The coverage of basic education expanded dramatically in the 1990s\. Net enrollment rates - 13 -  for primary schools increased from 87 percent in 1993 to 91 percent in 1998\. Gains were even more impressive at the lower-secondary level (from 30 percent to 62 percent), and especially at the upper-secondary level (where they quadrupled)\. Expansion in enrolments has been characterized by equal access for boys and girls\. While the enrolment statistics are encouraging, disparities in enrolment between the Kinh majority and ethnic minorities are a source of concern\. Regional disparities are sizeable as well, especially in terms of student performance\. This is a cause for concern and suggests that Vietnam has a big task ahead to improve quality of education\. Improving the quality of the teaching and learning is necessary to build a strong foundation for universal lower secondary education, targeted for 2010\. 4\.2\.18\. Child mortality and maternal mortality have fallen to levels typically observed in countries whose income per capita is two to three times higher\. Malnutrition among children, although still high by international standards, fell considerably during the second half of the 1990s\. If the pace were to be maintained, Vietnam could cut the 1990 malnutrition rate by half as of 2015\. On the other hand, there is a growing however,inequality in health outcomes between the poor and the better off\. FurthermoreReliance on out-of-pocket payments is noticeably high by international standards, putting a heavy burden on the poor\. Self-treatment has become more common, potentially escalating the level of antibiotic resistance among the population\. Coping with a developing HIV/AIDS epidemic is a major challenge as well\. Specific Conditionality Actions Undertaken under PRSC 1 4\.2\.19\. This section reviews the upfront actions prior to Board presentation and the status of twelve specific actions that were required to be completed prior to the release of the second tranche, as listed in Schedule 2 to the DCA and referred to in Section 2\.02 (d) of the DCA\. 4\.2\.20\. Upfront actions\. Prior to the Board presentation, the government had created an enabling environment for the private sector with a series of specific measures while undertaking steps for structural reforms in the sectors covering SOEs, banking, trade, and public expenditure management\. 4\.2\.21\. The environment for the private sector was enhanced with the approval of the Enterprise Law and the removal of business licenses in 145 different trades, industries and services to facilitate entry by private firms\. The Foreign Investment Law was revised that would permit, among other things, automatic registration of export oriented investments and government guarantees for large projects\. 4\.2\.22\. The SOE sector\. Equitization was completed for more than 408 SOEs and a comprehensive five-year SOE reform program was adopted with annual targets for three years concerning the enterprise-specific measures covering one third of all SOEs\. 4\.2\.23\. In the banking sector, the government carried out the separation of policy lending from commercial lending with the establishment of the National Development Support Fund and a separate bank for social policy lending to phase out policy lending from SOCBs\. Actions were - 14 -  undertaken to strengthen JSBs with closure, merger and under SBV special control\. A comprehensive SOCB restructuring plan for Vietcombank, one of the four large SOCBs, has been adopted\. 4\.2\.24\. In the trade sector, the authorities adopted the AFTA roadmap on tariff reduction, liberalized trading rights for all domestic enterprises and expanded trading rights of foreign-invested enterprises\. In addition, quantitative restrictions were removed from the 8 product groups while a timetable for further QRs removal was adopted\. 4\.2\.25\. In the public sector management, a Public Expenditure Review (PER) was completed and detailed timetable for the implementation of its recommendations over the following two years was finalized\. Preparation was initiated for the implementation of a Public Financial Management Reform Project (approved by the Board in May 2003) to address the key weaknesses identified by the PER and the now completed Country Financial Accountability Assessment (CFAA)\. 4\.2\.26\. Second Tranche Release Actions\. The government implemented the following actions to fulfill the commitment for the second tranche release\. 4\.2\.27\. Removed or modified business licenses of at least 50 trades, industries and services, so that entry in those sub-sectors is eased: completed\. Between May 2001 and July 2002, 51 such licenses and licensing requirements were removed and 10 were modified\. Following the removal of 145 business licenses and licensing requirements before May 2001 in various industries, trades, and service, a detailed review of the remaining business licenses was carried out during 2001 and early 2002, with a view to rationalizing the overall business licensing regime\. 5 4\.2\.28\. Streamlined the equitization process to expand capital and security markets, to remove existing ceilings on shareholdings by individuals and legal entities in equitized state-owned enterprises (SOEs), to improve transparency of the process, and to move responsibility for issuing, selling and registering shares out of individual SOE's management: completed\. The process of equitization has been further streamlined through Decree No\. 64 in June 2002 (No\. 64/2002/ND-CP) and its implementing regulations\. 6 4\.2\.29\. Completed major equitization (i\.e\., selling more than 65 percent of shares to non-State shareholders and having no dominant or special State shares), sale under Decree No\. 103-1999-ND-CP of September 10, 1999 on Transfer, Sale, Management Contract and Lease of State Enterprises, or liquidation of at least 200 SOEs, with the equitized and sold SOEs operating and existing under the Enterprise Law: completed\. A total of 208 SOEs have completed major equitizations (selling more than 65 percent shares), outright sales or liquidations, and those sold and equitized are operating under the Enterprise Law\. 7 Of the outright sales under Decree No\. 103, 52 SOEs were transferred to employees for no consideration (sale at zero price)\. These transfers of an entire SOE permitted rapid divestment of enterprises out of government hands, a key objective of SOE reform, though generating no proceeds for the Treasury\. 4\.2\.30\. Completed minor equitization (i\.e\., sales of shares with the State having dominant or special shares) of at least 200 SOEs, with the equitized SOEs operating and existing under the Enterprise Law: completed\. Minor equitization of 200 SOEs have been done\. 8 - 15 -  4\.2\.31\. Adopted detailed restructuring plans for Seaprodex, Vinatex and Vinacafe General Corporations (GCs), including a timetable of specific actions to be taken to improve corporate governance and competitiveness of key SOEs in these GCs (de-regulation of entry into SOE subsectors, new corporate governance mechanisms for the GCs, equitization or sale of non-core assets, liquidation of non-viable operations, installation of appropriate accounting and management information system) and specific operational targets for cost-reduction and revenue growth: a waiver was requested and approved at the project closed\. Key implementation steps were delayed, as every stage of the process proved to be more complex and time-consuming than envisaged\. 9 The additional efforts and time spent were critical to maintain the integrity of the process and support for the restructuring\. The international consulting firm to help GCs to develop detailed restructuring plans was selected and work began in early January 2003\. The Vietnamese authorities are fully committed to the multi-year SOE-reform program as cited in the CPRGS, including the restructuring of the three GCs, and the completion of the restructuring plans in June 2003 did not adversely affect the implementation of the overall program supported by the PRSC series or any of its components\. For these reasons, a waiver was granted for this action on a no-objection basis\. Detailed restructuring plans for the three GCs have been subsequently completed in June 2003 and the adoption is expected in the third quarter of 2003\. 4\.2\.32\. Modified the design of the fund established to finance the social safety net for state-owned enterprises workers, put the fund as modified into operation with dedicated staff in adequate numbers and completed a review and written report on the disbursement performance of the fund: completed\. The redesigned Social Safety Net Fund was established in June 2002 under Decree No\. 41 and its implementing regulations, providing compensation package more generous than under the Labor Code for the period of intensive reform, in order to encourage voluntary redundancy\. It will also cover, on the same terms, involuntary redundancy from equitizations, sales, liquidations and the restructuring of SOEs\. The package has a substantial lump-sum component so as to minimize age or gender biases in compensation\. This Fund has been staffed and training completed for the staff of the Fund as well as of Ministry of Labor and Social Welfare (MOLISA), of MOF, and of selected SOEs\. A consulting unit has been set up by MOF to support SOEs in developing proposals for accessing resources from this Fund\. Twenty four SOEs have submitted proposals\. Eleven of these proposals have been processed, with total disbursement of VND 10 billion (or US$ 0\.7 million equivalent)\. Annual reviews of the disbursement performance are being planned\. 4\.2\.33\. Removed Quantitative Restrictions vis-à-vis all countries, from all tariff lines for clinker and paper, replacing them with tariffs where necessary and appropriate: completed\. Removal of quantitative restrictions on imports from all countries proceeded faster than envisaged under the p rogram, including clinker and paper, construction glass, steel, vegetable oil, floor tiles and liquor\. Tariffs for these products have been left unchanged, except for clinker where it has been lowered, and for vegetable oil where it has been increased from 40 to 50 percent\. 4\.2\.34\. Adopted restructuring plans for four state-owned commercial banks (Vietnam Commercial Bank (VCB), Vietnam Bank for Agriculture and Rural Development (VBARD), Bank for Investment and Development of Vietnam (BIDV) and Industrial and Commercial Bank of Vietnam (ICBV) in accordance with the key principles of State Bank of Vietnam's State-owned Commercial Bank restructuring - 16 -  framework, and achieved the first year milestones of said restructuring plan: completed\. The four large SOCBs adopted restructuring plans in accordance with the key principles of the SBV's SOCB restructuring framework and broadly achieved the first year milestones in the following four areas: (i) completed international standard audits for the year 2000, using international auditing firms, signed contracts for doing similar audits for the year 2001 and begun to address audit-qualifications; (ii) established loan work-out units and asset management subsidiaries for resolving troubled loans; (iii) collectively resolved the target amount of 1\.4 trillion Dong of NPLs in the first year; (iv) several steps taken to establish a credit risk management committee and an independent audit committee\. 10 \. 4\.2\.35\. Closed nine joint-stock banks (JSBs) under State Bank of Vietnam intervention and ensured compliance of all remaining JSBs with existing regulations: completed\. Licenses of 12 JSBs were revoked as of September 30, 2002, of which 9 were revoked since April 2001\. The total number of JSBs currently in operation stand at 36, of which 34 meet the existing capital requirements\. The remaining two are under SBV special control\. Thus all 36 remaining JSBs comply with existing regulations\. 4\.2\.36\. Amended Decision No\. 284/2000/QD-NHNN1 of August 25, 2000 Issuing Regulation on Lending to Clients of Credit Institutions to bring criteria for loan-classification by banks in accordance with international practice, and initiated implementation of revised criteria for classification of non-performing loans as well as for their provisioning: completed\. Decision No\. 1627/2001/QD-NHNN amending Decision No\. 284/2000/QD-NHNN1 of August 25, 2000 was issued on December 31, 2001, bringing the criteria of loan-classification by banks in line with international practice\. 11 4\.2\.37\. Completed audits of financial statements for the 2000 fiscal year of VCB, VBARD, BIDV, and ICBV in accordance with international auditing and accounting standards by international auditors acceptable to the Association and furnished said audits to the Association: completed\. The financial audits for the year 2000 for all four SOCBs have been completed in accordance with international accounting and auditing standards and the agreed terms of reference\. The Bank has found these consistent with the agreed terms of reference\. 4\.2\.38 Improved transparency and reliability of national budgetary information by designating the Borrower's State Treasury as the agency responsible for a comprehensive management information system for government expenditures and by publishing sectoral breakdowns of at least 75 percent of total government spending: completed\. MOF designated the State Treasury as the agency responsible for a comprehensive management information system for government expenditures and this has been incorporated in the revisions of the Budget Law submitted to the National Assembly\. The Bank is supporting the Treasury in establishing a comprehensive and automated management information system through a project that is under preparation\. MOF has continued to improve transparency of the national budget in various ways, including publication of the budget in July 2002, which covers final accounts for 2000 and the budget plan for 2002, with more detailed budgetary data for 2000, including sector by sector information, covering about 79\.5 percent of total spending\. 12 The 2000 accounts and 2002 budget are available on the MOF website\. Footnote for Section 4\. - 17 -  4\. The safeguard policy issue related to the requirement of central banks to prepare financial statements in accordance with an established accounting framework, such as IAS, have these statements audited independently, in accordance with international standards; and publish these statements\. The IMF and the government are working on possible approaches to compliance with the safeguard policy\. 5\. The review sought to identify those licenses that were redundant and thus removable, and those that were necessary to protect consumers, or to ensure adequate quality, or to prevent environmental degradation and so on, but could be modified so that they were not required to be obtained before entry\. 6\. This Decree, which replaces the earlier one (Decree No\. 44), has removed previous ceilings on shareholdings by individuals and entities in equitized enterprises, improved transparency of the process by requiring advertisement of the sale 30 days in advance, and moved responsibility for such sale to financial intermediaries, instead of the individual SOEs\. 7\. Equitizations, sales, and liquidations of 408 SOEs were processed over the period covered by PRSC 1\. 8\. For 113 of these enterprises, the government sold a higher number of shares than required to meet the criterion of minor equitizations\. This significantly higher sale of shares in SOEs was fully consistent with the objective of the overall SOE reform component in general and of the aim of "minor" equitizations specifically\. One of the objectives of such equitizations was to create conditions where the SOEs "could sell more shares either directly or through the stock market"\. 9\. The process of obtaining needed information on the operation of the three GCs ­ Vinatex, Vinacafe and Seaprodex ­ for preparing the terms of reference in conjunction with the National Steering Committee on Enterprise Reform and Development (NSCERD), the GCs, the donors and the Bank, the lining up of adequate bilateral grant funding, the signing of the grant agreement, and the selection of consultants through the international competitive bidding process, all have taken considerable time in part for reasons outside the Borrower's control\. 10\. On the credit risk committee, SOCBs have enhanced staff and management awareness of credit-risk issues by creating risk-management centers and risk-prevention centers in the SOCBs; developed a work plan to revise credit processes and credit manual in conjunction with SBV; lined up technical assistance grants to support this activity and commensurate training and submitted formal SOCB proposals for establishing credit committees to SBV for approval\. On the second issue of creating a fully empowered audit committee supported by independent internal control and audit functions and reporting directly to Board of Directors, SBV has indicated that the Law on Credit Institutions will have to be changed to accommodate this type of committee\. It anticipates that this type of committee cannot be established before 2004\. In the meanwhile, the SOCBs plan to strengthen the capacity and effectiveness of the existing system where the Supervisory Board is responsible for the financial statements of SOCBs and internal control departments report directly to management and to the Supervisory Board\. 11 Implementation of this decision has been initiated in two ways\. First, guidelines were issued in February and July 2002, requiring all banks to re-classify all loans, including policy loans, using the new criteria and complete this as end-December 2002\. Second, the SOCBs have developed a provisioning plan and begun to provision in 2002\. The SOCBs, in conjunction with SBV, have adopted an interim phased plan to provision fully for NPLs using the estimates from the international standard audits for year 2000\. This plan envisages provisioning, using own resources, by end of 2004 and 2005 for different banks\. Actual provisioning was done in 2002\. 12\. Total spending excludes amortization of public debt\. 4\.3 Net Present Value/Economic rate of return: 4\.3\.1\. Not applicable\. 4\.4 Financial rate of return: 4\.4\.1\. Not applicable\. 4\.5 Institutional development impact: 4\.5\.1\. Within the sectors supported by PRSC 1, the institutional development impact was recorded in a clear and sustained manner in several areas\. First, the legal framework for the entry and operation of private firms in its various forms was strengthened (the new Enterprise Law and - 18 -  the revised Foreign Investment Law), especially by the adoption of the principle that if some area was not expressly forbidden by law, it was allowed for private activity\. Also the vigorous implementation and monitoring of implementation of the Enterprise Law across most provinces, and reporting of that to a Party Committee, helped to ensure that the national law is implemented in the provinces, or at least not breached nor ignored\. Secondly, the revised Land Law permitting land-use titles held by private individuals and firms as collateral or equity, the secured transactions decree and foreign investment law permitting mortgages by banks, and the establishment of the registration agency in both Hanoi and Ho Chi Minh City made private transactions in land-use rights more feasible, removing another hurdle in the operation of the private firms\. 4\.5\.2\. Third, major steps were taken to "level the playing field" for SOEs by (a) exposing them to increased financial and market discipline as well as to rules of reporting financial information, indicating that normal business operations applied to SOEs; (b) making transactions like equitization of shares and outright sales of SOEs to private individuals more commonplace and acceptable than it had ever been; (c) requiring higher levels of transparency through regular reporting of financial information on performance to higher policy-making levels; and (d) making management of SOEs accountable under the law for performance of their enterprises\. These changes in institutional underpinnings of SOE-operations are more likely to promote changes in behavior of SOEs and their management and workers, even if equitization process may not become easier given its decentralized nature, or SOEs lobbying for privileges for special circumstances will not stop completely right away\. 4\.5\.3\. Fourth, a similar process of "leveling the playing field" for SOCBs, at par with JSBs, and joint-ventures, was initiated under the program\. Management of SOCBs is now being made responsible for non-performing loans and profitability\. They were being asked to move towards commercial banking and away from policy and directed lending, given the new mechanisms of independent annual audits using international accounting standards (IAS) and sharing of these with higher decision-making levels, regular provisioning against distressed loans and thus management exposure to scrutiny of budgetary funding of provisioning, requirement of MOF guarantees for policy or directed loans, and greater accountability of management for SOCB's performance\. This has already generated pressures for relaxing central restrictions on staffing and remuneration and giving more autonomy to SOCB management as well as for reducing requests for directed lending ­ but it will depend on how senior leadership enforces this system as to whether it changes behavior of SOCB management as expected\. 4\.5\.4\. Fifth, the signing of international trade agreements (AFTA, USBTA), the publication of the annual roadmap of tariff reductions for ASEAN imports, the continuing implementation of USBTA and the removal of all QRs except on sugar and petroleum, have put Vietnam firmly on the track of an open trade and investment regime in goods and services sector over the medium-term\. Withdrawal from these commitments is highly costly and unlikely\. Also, a large internal constituency has been created who has benefited from easier access to imports and from rapid growth in exports, and who will want continuation of this open regime\. In addition, there are now external pressures on the leadership to prevent Vietnam from falling behind ­ now that China has joined WTO and Cambodia expects to do so later this year\. - 19 -  4\.5\.5\. Sixth, efficiency and transparency of public expenditure management have been strengthened and forces sustaining its continued improvement are in train\. Over the last four years, MOF and sector ministries have understood the importance of a sound public expenditure management and reporting system to respond to the increasingly assertive National Assembly\. Also, donors and foreign investors are asking for a higher standard of management and transparency in use of public resources\. The process of doing public expenditure reviews -- central and provincial ­ and then attempting to correct identified weaknesses, have shown MOF and sector ministries the advantages of strengthening these systems, given the scrutiny and their accountability\. Many more actions are being taken that go beyond the PRSC program, including the recently approved government project on a public financial management information system and debt-management system, all done at record pace\. 4\.5\.6\. Overall, the program supported by PRSC 1 initiated a series of institutional processes as well as institutional changes that are likely to open up the economy further and more permanently and contribute to strengthening the management of public resources on a longer-term basis while developing Vietnam's domestic private sector\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of government or implementing agency: 5\.1\.1\. The reform program supported under PRSC 1 sought to stimulate and promote investment, exports, GDP growth and poverty reduction\. However, the global environment for exports and foreign investment were beyond the control of the government and the implementing agency\. This environment worsened in 2001 and only modestly recovered in 2002, at the very time that the reforms were expected to help\. Clearly the resulting outcome and impact in terms of Vietnam's export growth and foreign investment flows were less than it would have been if the global environment had not deteriorate or had improved\. In fact, in respect of agricultural exports, large increases in export volume were accompanied by deterioration of world prices\. Not withstanding these adverse effects in the global environment, the average export earnings growth of 7 percent and foreign investment of 3\.2 percent of GDP were quite impressive under these conditions\. 5\.1\.2\. Other factors not under the government control during the period of implementation included the legacy of weak administrative capacity that influenced the pace and sequence of various measures envisaged in the program\. The close monitoring by the government's PRSC Steering Committee headed by the First Deputy Prime Minister helped to overcome those weaknesses\. So did technical assistance from donors and the support from Bank staff in Hanoi\. 5\.2 Factors generally subject to government control: 5\.2\.1\. Most of the measures supported by PRSC 1 were within the government control, and directly monitored by the PRSC Steering Committee, under the Prime Minister's direction and headed by the First Deputy Prime Minister, and the PRSC Secretariat for the day-today matters\. As the program is strongly owned by the government, achievements and fulfillments of the committed actions were timely and effectively carried out with the exception of one action concerning the restructuring plans for the three large GCs for which a waiver was granted\. The - 20 -  technical and quarterly monitoring at the senior level in the government helped to overcome some challenges due to weak administrative capacity\. 5\.3 Factors generally subject to implementing agency control: 5\.3\.1 SBV is the principal implementing agency for PRSC 1, under a high-level inter-ministerial coordination committee\. SBV was the Chair of the Secretariat Group which oversaw the day-to-day implementation of the program\. SBV coordinated with MOF, Ministry of Planning and Investment (MPI), Ministry of Trade (MOT), and related ministries and agencies involved in PRSC 1\. The series of specific actions were generally under the control of the implementing ministries\. The PRSC Secretariat coordinated and monitored the implementation of the reform program among the ministries and agencies with reports on accomplishments, problems, and adjustments\. The Secretariat also worked closely with Bank staff during the implementation of the program and followed up on the specified conditions with relevant agencies and ministries to meet the conditionality for Board presentation and to insure the implementation of measures to fulfill the conditions for the second tranche release\. 5\.4 Costs and financing: 5\.4\.1\. The credit was in the amount of US$250 million equivalent, $100 million equivalent of which was disbursed as the first tranche at effectiveness\. The second tranche of $150 million was disbursed just prior to the closing date\. The service charge on the credit was the standard IDA rate of 0\.75 percent\. The credit term is 40 years with a grace period of 10 years\. Four donors, Denmark, the Netherlands, Sweden, and the United Kingdom, cofinanced the PRSC 1 operation with the total contribution of US$47\.5 million equivalent\. 6\. Sustainability 6\.1 Rationale for sustainability rating: 6\.1\.1\. The program supported by PRSC 1 was grounded firmly in the solid commitment of the government to carry out the reforms\. Thus, the implementation of the program cited in the LDP was done in a timely manner\. The government achieved all the actions for Board presentation and for the second tranche release (with the exception of one for which the waiver was approved)\. 6\.1\.2\. In fact, the Government developed a well-designed reform program in the CPRGS that not only reiterated the reform areas supported by PRSC 1, but also added other areas\. On that basis, a second PRSC was approved by the Bank Board in June 2003, based on another year of reform measures implemented and completed\. This is strong evidence of the continued commitment to the reform program that was supported by PRSC 1\. The sustainability of the program supported by the first PRSC is thus rated highly likely\. 6\.2 Transition arrangement to regular operations: 6\.2\.1 As mentioned earlier, PRSC 1 is the first of a series of PRSCs designed to support the - 21 -  government's program as outlined in the CPRGS\. The approval of the second PRSC (PRSC 2) by the Bank Board in June 2003 marks the continuation of Bank support to Vietnam under the PRSC series\. In addition, the Public Financial Management Reform Credit, approved in May 2003, will further advance the reform agenda in respect of public financial management that was supported by PRSC 1\. 7\. Bank and Borrower Performance Bank 7\.1 Lending: 7\.1\.1\. The Bank has maintained a strong and fruitful relationship with its counterparts in Vietnam from all levels and played an important supporting role in the implementation of the reform program of the client country\. It has carried out an extensive economic dialogue with the authorities for several years and championed the gradual but unwavering approach to reform of the government\. The Bank through its strong country office presence under the direction of an active Country Director has provided an effective voice to advocate for the series of PRSCs through its lending policies outlined in the CAS to assist the government with its poverty reduction strategy and sustained growth with equity\. 7\.2 Supervision: 7\.2\.1\. The Bank supervised the project on the ground with resident staff\. Bank staff helped the officials responsible for the program to implement the conditions called for in PRSC 1, both prior to Board presentation and those for the second tranche release\. The presence of an engaged Country Director, a persuasive Lead Economist and a team of dedicated national staff insured the smooth and eventually successful supervision of the operation\. 7\.3 Overall Bank performance: 7\.3\.1\. The Bank has satisfactorily and effectively played a supportive role to the country through its continuing economic dialogue with the authorities and responded timely to their request for help to implement the country's reform program, along with other donor agencies\. The Bank provided timely and effective assistance to the country\. 7\.3\.2\. The nature and magnitude of the reform program called for support from several development partners under the Consultative Group framework chaired by the Bank\. Given the thin capacity in the government agencies, it was crucial for the Bank to coordinate its activities closely with other development partners\. This aspect of program implementation was handled well by Bank staff and this helped minimize overlap and prevented competing demands from straining the authorities' capacity\. This form of effective cooperation was supported and reflected in the cofinancing of PRSC 1 by four donors, Denmark, the Netherlands, Sweden and the United Kingdom\. - 22 -  Borrower 7\.4 Preparation: 7\.4\.1\. The government of the Socialist Republic of Vietnam played an active role in the preparation of the Credit through the PRSC Steering Committee under the direction of the First Deputy Prime Minister and the sense of program ownership was very strong among the government officials of all levels\. 7\.5 Government implementation performance: 7\.5\.1\. The government implementation of the program was effective and satisfactory, reflecting the strong ownership of the program by the senior officials responsible for the overall macroeconomic policy who in turn provided the firm direction for the rank-and file officials to implement the program, despite some challenges due to limited administrative capacity\. 7\.6 Implementing Agency: 7\.6\.1\. The PRSC Steering Committee maintained a continuing economic dialogue with Bank staff\. It coordinated and monitored the program under the direction of the First Deputy Prime Minister, and helped carry out most of the policy actions called for in PRSC 1 before Board presentation and also for the second tranche release\. SBV provided an effective anchor for the implementation of the program and was proactive in meeting the requirements called for by the Credit\. 7\.7 Overall Borrower performance: 7\.7\.1\. The government overall performance was considered satisfactory\. The preparation and implementation of the PRSC 1 was effected under the solid leadership of the Prime Minister, the firm direction of the First Deputy Prime Minister, and the experienced SBV staff with almost a decade of experience working with international financial institutions\. 8\. Lessons Learned 8\.1\. The major lessons from the PRSC 1 are: A stable political environment is helpful for successful implementation of macroeconomic and structural reforms\. The risk of erosion of political support was minimized and reversals due to political changes became less likely\. Broad-based consensus and strong government commitment permit timely implementation\. The process of consensus building that was undertaken by the government before adopting the multi-year reform program, and the presence of capable and committed - 23 -  senior-level policymakers ensure that resistance to reform from various quarters could be overcome\. In Vietnam, the commitment of the Prime Minister and his Deputies and Ministers and SBV Governor was key to overcoming some of the emerging difficulties in implementation, especially in SOE and trade reform as well as in JSB restructuring\. Availability of technical assistance grants from donors and strong Bank team support are extremely useful in low-income countries with weak technical working level capacity\. This is particularly true of process reforms of the sort undertaken in SOE and banking reforms which need a lot of handholding of these institutions, especially since knowledge about them is limited in the country\. Donor-government-NGO working groups, providing support to implementation urgently and when needed, are extremely useful and effective\. Without such technical assistance, improvements in SOE and SOCB performance would be difficult to generate\. Close working relations between the Bank and government counterparts improve the quality of Bank assistance\. Continuity of Bank staff working on Vietnam contributed to a fruitful policy dialogue between the Bank and the authorities\. Effective donor coordination is crucial in a transitional economy\. Capacity to implement structural reforms can easily be overwhelmed by the relatively large number of donors\. It is therefore critical that donors coordinate their activities closely and minimize duplication of efforts that over stretches government capacity\. This aspect was handled well in both the design and implementation of the PRSC 1 in Vietnam\. 9\. Partner Comments (a) Borrower/implementing agency: 9\.1 Borrower/implementing agency: State Bank of Vietnam\. - 24 -  Borrower/Implementing Agency Assessment - 25 -  - 26 -  (b) Cofinanciers: 9\.2\. Cofinanciers: There were four cofinanciers: Denmark, the Netherlands, Sweden, and the UK\. They played a particularly important role in (i) providing grant financing as a complement to IDA's funds, (ii) supporting technical assistance for the detailed implementation of the reform; and (iii) engaging in and supporting the policy dialogues\. Their support has brought to the fore the important social dimension of reform with crucial technical assistance in the preparation of reform\. Below are the comments from the Cofinanciers: Comments from the United Kingdom, Department for International Development Mr, John Burton I have had a quick read and am generally very happy with the report\. I particularly welcome the references to the co-financiers 3\.5\.3, 5\.4\.2 and especially 9\.2\. I would add that the involvement of co-financiers increases the incentive for the government to participate in the PRSC negotiations through the leverage the Bank gets, it increases the credibility of the PRSC as an instrument, and it reduces transactions costs on the government relative to the alternative of the donors doing other things in Vietnam with these funds\. I particularly welcomed the footnote 7 on page 16 explaining why a waiver was needed on the 3 General Corporations restructuring\. This is an area that we have been closely involved in (funding the TA)\. I have commented in relation to other documents on the reasons for this delay, as some of the documents absolved the government from any responsibility to a greater extent than I would have done since I think the contracting process was quite slow (though Bank procedures would no doubt be blamed in part for that)\. However I think footnote 7 gives a very balanced evaluation\. Is there a mistake on the poverty rate which is quoted at 32% in the table on page 10 and 29% in para 4\.2\.16? The report does not really address the question that I get asked a lot internally which is what difference does the PRSC really make if the - 27 -  government is committed to the reforms anyway, and the resources are so small relative to government's own expenditure so are important neither as an incentive nor as a source of finance for development\. In other words, as the Danish Ambassador asked at the CG meeting, Vietnam may be doing well, but what difference do the donors make to this if anything? My answer is that a\. the government welcomes the expertise and dialogue that the Bank and donors provide, so are not particularly motivated by the money, and b\. reformers in government welcome such an instrument as it strengthens their hand to force the pace of reform\. There may also be a value to the government in having a PRSC in the signal this sends to the private sector and donors ie these relatively meagre resources leverage a lot of other resources\. But this is only plausible speculation on my part and I would have welcomed an assessment of the additionality and incentive value of the PRSC from the Bank\. I thought the lessons learned section was not as enlightening as I would have hoped, though it is always difficult to find really sound lessons in this type of exercise\. I think that focusing on the very specific is more useful than the "big picture" lessons of the type proposed here\. On lesson 1 I don't think this can be proven from this evaluation since we would have to see whether countries that did not have a stable political environment were able to undertake macro and structural reforms\. Sometimes a bit of instability in the politics can actually be a catalyst for reforms in ossified systems (economists in India for example love a crisis as it is the only time they get any economic reform)\. Even in Vietnam alone we don't know whether political instability would have led to more or less progress - we only know that there was political stability and progress wasn't bad\. On lesson 2, I am not sure that this lesson is particularly applicable to transition economies any more than it is to other aid dependent economies\. Lesson 3 is pretty much part of the current donor theology, as is Lesson 4\. Lesson 5 seems to be an oddity since actually the Bank have decided not to have 2 tranche operations from now on and the two tranche structure of PRSC 1 was in fact a major mill-stone round all our necks since it ties the disbursement in 2002 to conditions that were written in 2000 when we did not know what would be happening in 2002\. Much better to do the conditions on an annual basis so that they are relevant to current circumstances, or even better not to have conditions at all and reward progress based on what has actually been achieved\. I would have thought that there might be more specific lessons on the details of the conditions and the various reform programmes themselves - e\.g\. was it appropriate to focus on the number of equitisations rather than the total value of assets transferred?; did the design of the conditions take sufficient account of the availability of accurate information? Is there no lesson to be learned from the condition that required a waiver\. I think that the lesson is to determine accurate timelines, based on experience, for the delivery of TA and follow up action by government to inform the design of lending operations with this type of condition\. John Comments from the Netherlands Mr\. Frans Makken Dear all, - 28 -  With apologies for my late reply\. Rakesh thanks for reminding me\. I have read the comments by John Burton and they look, as usual, very good and I support them wholeheartedly\. Rakesh asked me for some personal impressions, which I am providing in addition to John's excellent comments\. Brief personal impressions with regard to the conduct of PRSC I: - we were particularly glad to be able to participate in this important credit, as it covers relevant bottlenecks in the system\. Through an exceptional decision by Dutch Parliament we could co-finance an on-budget grant whilst the budget process itself is not transparent\. This was possible not only because PRSC addresses exactly those issues that are hindering transparence but it also facilitates ongoing reforms and creates an enabling environment for private sector reform; - communication by the Bank was insufficient during the process; co-financiers were not involved in a very special way; often debriefings for supervision missions were announced at a very late stage whilst co-financiers were not informed that such a mission was underway\. Debriefings were usually for the donor community at large\. Also, involvement in the formulation of conditionality was rather limited\. These aspects have been greatly improved in the course of PRSC II; - there has been much uncertainty about the moment that the credit could be disbursed\. Particularly the role of certain board members (USA en IMF) were apparently not well anticipated and required time-consuming discussions for waivers that might or might not be accepted\. For the Netherlands these uncertainties are problematic, since too late disbursement normally leads to complete loss of the money: loss to Vietnam and loss to ODA in general since at such a short notice no alternative use can be sought\. In PRSC II also these problems have been addressed in a satisfactorily manner, whilst accepting that such uncertainties can never fully be eradicated\. Kind regards, Frans Makken Comments from Sweden, Sweden International Development Agency Mr\. Karl-Anders Larsson Mr\. Larsson shares most of the comments from Mr\. Burton and Makken\. (c) Other partners (NGOs/private sector): 10\. Additional Information - 29 -  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate Please see the policy Matrix in Annex __ Output Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate 1End of project - 30 -  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 IDA 250\.00 250\.00 100 Cofinanciers 47\.53 47\.53 100 Total Baseline Cost 297\.53 297\.53 Total Project Costs 297\.53 297\.53 Total Financing Required 297\.53 297\.53 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\. Budget 250\.00 47\.53 250\.00 47\.53 100\.0 100\.0 - 31 -  Annex 3\. Economic Costs and Benefits Not applicable - 32 -  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 March 1997 10 5 Economists, 2 FMS, 1 SOE experts, 1 lawyer,1 social security expert March 1999 3 2 SOE experts; 1 Economist From mid-1999, 5 5 Economits preparation work was done by field-based staff led by the Lead Economist Appraisal/Negotiation Appraisal and 9 6 Economists, 3 FMS S S negotiations were done by field-based staff led by the Lead Economist Supervision Supervision was done from the field by the field Lead Economist and other field economists September 2002 2 2 FMS S S October 2002 1 1 FMS S S January 2003 2 2 FMX S S ICR No Mission 1 Economist S S (b) Staff: Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks US$ ('000) Identification/Preparation 328 )1,149\.5 Appraisal/Negotiation 85 ) Supervision 413 297\.3 ICR 9 30\.0 - 33 -  Total 422 1,476\.8 - 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 ANNEX 7\.doc - 37 -  - 38 -

REVIEW

P081406

 ICRR 13139 Report Number : ICRR13139 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 08/28/2009 PROJ ID : P081406 Appraisal Actual Project Name : Electricity Market US$M ): Project Costs (US$M): 113\.6 134\.9 Project Country : Romania Loan/ US$M ): Loan /Credit (US$M): 82\.0 94\.5 Sector Board : EMT Cofinancing (US$M ): US$M): 1\.2 1\.2 Sector (s): Power (100%) Theme (s): Regional integration (50% - P) Regulation and competition policy (50% - P) L/C Number : L7181 Board Approval Date : 06/12/2003 Partners involved : European Closing Date : 06/30/2008 12/31/2008 Commission PHARE Evaluator : Panel Reviewer : Group Manager : Group : Robert Mark Lacey Roy Gilbert Monika Huppi IEGSG 2\. Project Objectives and Components: a\. Objectives: The objective of the project, as per the Loan Agreement and the PAD, was to develop a well-functioning wholesale electricity market through: (a) putting in place a transparent and predictable commercial and regulatory framework and a power exchange that will facilitate electricity trading within a competitive national, regional, and eventually European market; and (b) improving the efficiency and reliability of the transmission system in order to support trading and supply electricity at least cost to consumers\. 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 consisted of two components, one Investment and the other Technical Assistance (TA)\. The Investment Component (US$87\.6 million at appraisal, US$72\.3 million at closure) consisted of the rehabilitation of two transmission substations (Fundeni and Iernut) and related engineering and supervision costs\. The TA component (US$9\.0 million at appraisal, US$11\.7 million at closure) financed (i) the design and implementation of the regulatory framework for the new electricity trading platform to be implemented by the regulatory authority, ANRE (US$1\.2 million at appraisal and the same at closure); (ii) design, pilot testing and implementation of the new trading platform through the power exchange operated by OPCOM, Romania's power market operator and a subsidiary of the transmission company, Transelectrica (US$5\.4 million at appraisal, US$7\.0 million at closure); and (iii) institutional strengthening of Transelectrica (US$2\.4 million at appraisal, US$3\.6 million at closure)\. Two activities were added to utilize cost savings realized in the original Investment Component: (i) the upgrading of the Gutinas-Bacau-Roman Nord-Suceava transmission system from 220 kV to 400 kV by rehabilitating the substations (US$ 35\.4 million;) and (ii) technical assistance to develop OPCOM's capabilities to provide market services to the regional electricity market in South East Europe\. To accommodate these changes, the Loan Agreement was amended in August, 2006\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost\. The project financing was denominated in euros\. The higher dollar cost reflects the depreciation of the US dollar against the euro\. In euros, the total project cost (including the added investments and TA) was €95\.7 million, close to the €96\.2 million at appraisal\.Using ICB in accordance with Bank procedures, the Borrower (Transelectrica) was able to rehabilitate the Fundeni and Iernut substations at a cost of €23\.8 million (30%) less than the appraisal estimate\. Financing\. Of the total financing requirement, Transelectrica increased its contribution by almost €4 million (equivalent to US$8\.8 million), while the Bank Loan was under-utilized by €2\.7 million\. Dates\. While the project’s original components were fully completed ahead of the closing date of June 30,2008, the latter was extended until December 31, 2008, in order to accommodate the new sub-components\. 3\. Relevance of Objectives & Design: Both project objectives and design were highly relevant\. A well functioning wholesale electricity market is an integral dimension of the Romanian Government's strategic goals, both for the wider economy (attracting foreign investment and enhancing competitiveness) and for the power sector (market liberalization and a larger private sector role in order to increase the quality, reliability and cost effectiveness of electricity supply)\. Market liberalization was also an important precondition for Romania’s access to the European Union (achieved in January, 2007)\. The objectives were fully consistent with the Bank's then strategic priorities for Romania (as stated in the 2001-2004 CAS), including enterprise privatization, restructuring and deregulation of the energy sector, and assisting with the country's accession to the European Union\. Project design was fully appropriate for the achievement of the objectives\. The components addressed the core requirements for a well functioning wholesale electricity market\. Although implementation arrangements were complex, involving three executing agencies (Transelectrica, ANRE and OPCOM), they were apposite for achieving the project's objective: the agencies, which were also the project's direct beneficiaries, had every incentive for facilitating both preparation and implementation\. 4\. Achievement of Objectives (Efficacy): The intended development objective – a well functioning wholesale electricity market – has been fully attained, and efficacy is rated as high \. The OPCOM Power Exchange is liquid and active, and trading reached 25% of Romania’s total electricity supply for 2008 against an appraisal target of 15% by project closure\. This result is due in large measure to the project\. The investments it helped to finance ensured an efficient and reliable transmission system\. Project TA strengthened the capacity of OPCOM, which is now a fully fledged market operator, and has the capacity to offer services to the South East European region\. Project TA provided to ANRE helped it to establish a credible, multi-year tariff regime for transmission and distribution, another crucial underpinning for a well-functioning wholesale market\. This regime includes a state-of-the-art revenue cap system for transmission, for which project TA was critically important\. Together with institutional strengthening to Transelectrica, also provided under the project, the system has led to a considerable improvement in the transmission company’s financial situation, and it was listed on the Bucharest Stock Exchange in 2006\. 5\. Efficiency (not applicable to DPLs): Project efficiency is high \. Economic and financial rates of return ERR and FRR were analyzed for Transelectrica on a time-slice (2003-2007) basis, using the company’s own data\. Both exceeded what had been anticipated at appraisal\. The figures below refer to the ERR\. The ICR estimate of the FRR is 12% compared to an appraisal estimate of 4\.3%\. 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 9\.7% 100% ICR estimate Yes 16\.6% 100% * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: Efficacy, efficiency and relevance are all high and outcome is rated as Highly Satisfactory\. a\. Outcome Rating : Highly Satisfactory 7\. Rationale for Risk to Development Outcome Rating: The risk is considered moderate for three reasons\. First, although Transelectrica is a considerably stronger institution, both financially and otherwise, than before the project, its situation is still somewhat insecure\. Should the company’s ability to sustain an efficient and reliable transmission system be weakened, then this would undermine the achievements of the project since such a system is an essential precondition for a well functioning electricity wholesale market\. In particular, Transelectrica experiences and expects increasing challenges, difficulties and delays in its projects involving land acquisition\. These did not affect this project since land acquisition was minor, but the risk they pose to the soundness of the company's position is considered moderate Second, while ANRE is also stronger and the regulatory framework – which was renewed for another five years in 2008 – is backstopped by a Bank partial risk guarantee, the regulatory authority faces some political pressures on tariff adjustments and has lost some key staff\. It is also vulnerable to policy changes\. For example, consolidation of the generating companies into a smaller number of entities was under consideration between 2005 and 2008\. In October 2008, the Government issued an Ordinance bringing several establishments in generation and distribution under a large holding company\. Although this was reversed by the new Government which came into office in 2009, there is a moderate risk that any future developments of this kind may undermine regulatory independence and hence impact negatively on the functioning of the wholesale market\. Third, while the chances that OPCOM would be unable to sustain its recent good performance in operating the electricity market are in themselves very low, the entity is subject to the regulatory risks, and the risk to power market operations is therefore also moderate\. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: Quality at entry was Satisfactory \. The Bank mobilized a strong team with all necessary skills and including several staff with experience in the energy, financial management and environmental sectors in Romania\. The team was able to draw on the Bank's strong comparative advantage in competitive power market development\. There were good working relationships and effective coordination with a wide range of government departments and power sector agencies\. The Bank responded rapidly to the government's request for the project and designed it to optimize the possibilities of achieving its objective\. The Borrower (Transelectrica) and other implementing agencies were carefully chosen and the project was prepared jointly by them and the Bank\. Supervision was Satisfactory \. A strong team was also mobilized for supervision, and there was considerable continuity from those responsible for preparation\. The team was well managed and there was little turnover\. Supervision was intense (at least five missions per year throughout the life of the project), and there was constant follow-up from the field office to which task management was transferred in July, 2005\. The team responded quickly, efficiently and imaginatively to procurement issues as they arose and also to the Borrower’s request for cost saving reallocation\. It was also constantly involved in the broader, and continually challenging, dialogue surrounding Romania’s ongoing power sector reform\. at -Entry :Satisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Satisfactory c\. Overall Bank Performance :Satisfactory 9\. Assessment of Borrower Performance: The Borrower was Transelectrica with a sovereign guarantee\. The Government, driven by Romania's desire for accession to the EU, demonstrated strong commitment to energy sector reform\. It provided appropriate strategic direction for the reform program in general and for the project in particular\. The three project implementing agencies were products of the Government's energy sector reforms\. The Government also established and participated in an Electricity Marketing Coordination Committee\. However, as noted in Section 7 above, the Government in office between 2005 and 2008 established a holding company which would have threatened the functioning of the power market, although the measure was reversed by its successor\. The Borrower and the other two implementing agencies performed well\. Transelectrica greatly facilitated project preparation by contracting consultants in advance, from its own resources, to prepare feasibility studies of, and assist with tender documents for, the rehabilitation of the substations\. It also implemented a high quality project on schedule and below cost\. ANRE elaborated and put in place the new regulatory framework for the power market, and OPCOM prepared, launched, and is successfully operating the Power Exchange as well as being a player in the regional market\. The only small shortcoming concerns Transelectra’s failure to comply fully with its financial covenants (see Section 11 below)\. a\. Government Performance :Satisfactory b\. Implementing Agency Performance :Highly Satisfactory c\. Overall Borrower Performance :Satisfactory 10\. M&E Design, Implementation, & Utilization: M&E design, implementation and utilization are rated as modest \. The PDO was clearly stated, and three main output indicators were developed in the PAD to monitor its achievement – (i) utilization of the power market (market established, a set of long term contracts registered with OPCOM and an increasing percentage of total power supply traded through the market, reaching at least 15% by project closure); (ii) Transelectrica and the distribution companies are providing, respectively, common carrier transmission services and distribution use-of-system services under revenue-cap and price-cap regulation; and (iii) the substations rehabilitated under the project are operational, and their performance meets design parameters, so that supply interruptions and curtailments are avoided\. While these indicators are appropriate, they are insufficient\. In particular, indications of the transparency and predictability of regulation would have been expected, as well as gauges of the reliability and efficiency of the transmission system as a whole rather than the rehabilitated substations only\. Both these are critical to a well functioning power market\. Except for a statement that Transelectrica’s internal data are kept current and were used for the economic and financial evaluation of the project, there is little discussion in the ICR of the extent to which even the indicators that were developed continue to be used by the client and to what purpose\. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): Environment: The project was classified as category B for environmental impact purposes\. Environmental Management Plans (EMP) were completed in accordance with Bank requirements for all project financed transmission works\. Stakeholders participated in public consultations concerning project financed investments in accordance with Romanian law, and the consultations were documented in the EMPs\. The EMPs were made publicly available in draft form prior to the consultations\. Resettlement: There were no resettlement or social issues associated with the project\. Fiduciary: Auditing and financial reporting were timely and complete\. Although the project led to a major improvement in Transelectrica’s financial situation, several fiduciary issues arose\. There was a minor non-compliance with the covenanted minimum current ratio in 2006 (it was 1\.21 instead of 1\.3)\. More seriously, audits of 2007 reported corporate accountability issues and non-compliance with accounts receivable and self-financing covenants under an earlier Bank project\. The self-financing shortfall was slight (29% against a targeted 30%), but bill collection remains a challenge\. Receivables, at over three months, are well in excess of the covenanted two months maximum\. Procurement was carried out in accordance with Bank guidelines\. Unintended Outcomes: Thanks to cost savings on the original investment component, the project was expanded to include the upgrading of the Gutinas-Bacau-Roman Nord-Suceava transmission system and the further development of OPCOM's capacity to provide services to the South East European market\. Despite these additions, the project closed within the appraisal cost estimates denominated in euros\. In response to corruption allegations in some of the public generating companies' bilateral contracts, the Government instructed OPCOM to develop a centralized market auction for bilateral contracts\. Since 2005, this is an integral part of the Power Exchange, and since 2006 use of the auction platform for new contracts by the five largest public sector generators is mandatory\. During implementation, Transelectrica decided to adopt the Bank’s approach for dealing with environmental assessments and impacts through EMPs for all its transmission substation projects\. 12\. Ratings : 12\. ICR IEG Review Reason for Disagreement /Comments Outcome : Highly Satisfactory Highly Satisfactory Risk to Development Moderate Moderate Outcome : Bank Performance : Satisfactory Satisfactory Borrower Performance : Highly Satisfactory Satisfactory Government performance was  good, but revealed some minor policy shortcomings\. 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\. This project succeeded in a complex undertaking involving three implementing agencies, as well as the Government, because several key pre-conditions were fulfilled: (i) the Government was powerfully committed to the reform program (in this case, by its desire for accession to the EU); (ii) there was a coherent government strategy (agreed by the Bank) for the development of the power sector, including a road map leading to the achievement of critical benchmarks; (iii) the staff in the implementing agencies were competent, well-trained and committed; (iv) there was close and effective coordination between the three agencies and between them and the Government; (v) all external agencies involved in the power sector (in this case, the Bank, the EC and some bilateral partners worked together in a well coordinated manner; (vi) the implementing agencies were supported in their work by highly qualified consultants with hands-on experience; (vii) the Bank was able to field an experienced team which drew on its global experience, competitive edge, and consequent value added in the development of power markets; and (viii) there was continuity in the core composition of the Bank team\. 2\. Project preparation was of a very high quality, and several tasks, frequently left to the implementation stage, were completed before Board approval or effectiveness\. This greatly facilitated rapid and efficient project execution\. 3\. Procurement, carried out by Transelectrica under Bank ICB guidelines, was competently organized and managed so as to ensure maximum competition among bidders\. This helped to ensure high quality responses at prices well below appraisal estimates\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR is clear, well written and concise\. It reflects the authors' familiarity, not only with Romania, but also with the technical, economic and institutional dimensions, as well as the inherent complexity, of power market development\. There are, nonetheless, some shortcomings\. More detail would have been welcome on how the cost savings were achieved, and in particular on how Transelectrica's procurement procedures were organized\. There is very little coverage of how the PDOs fitted in with Bank strategic priorities for Romania as per the CAS\. A more critical discussion of M&E indicators and their utilization would have been useful\. a\.Quality of ICR Rating : Satisfactory

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Document of The World Bank FOR OFFICIAL USE ONLY Report No\.: 17606 IMPLEMENTATION COMPLETION REPORT INDONESIA POWER TRANSMISSION PROJECT (LOAN 3349-IND) March 30, 1998 Energy and Mining Sector Unit East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Currency Unit = Indonesian Rupiah (Rp) US$ 1\.00 = Rp 8,000 Rp 1,000 = US$ 0\.125 WEIGHTS AND MEASURES 1 metric ton (t) = 1\.00 kilograms (kg) 1 liter (1) = 0\.0063 barrels (bbi) 1 kilometer (km) = 0\.6215 miles (mi) 1 kilovolt (kV) = 1,000 volts (V) 1 Megavolt-ampere (MVA) = 1,000 kilovolt-amperes (kVa) 1 Megawatt (MW) = 1,000 kilowatts (kW) 1 Gigawatt hour (GWh) 1 million kilowatt hours (kWh) FISCAL YEAR OF BORROWER April 1 - March 31 FISCAL YEAR OF IMPLEMENTING AGENCY January 1 - December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank GOI Government of Indonesia DSC Debt Service Coverage EIRR Economic Internal Rate of Return ICCF Industrial Consumers Connection Fund IDC Interest During Construction IMF Intemational Monetary Fund PLN State Electrcitv Corporation [PT PLN (Persero)] ROR Rate of Return Regional Vice President: Jean-Michel Severino, EAP Country Director: Dennis De Tray, EACIF Sector Manager: Yoshihiko Sumi, EASEG Task Manager: Yuling Zhou, EASEG  FOR OFFICIAL USE ONLY Table of Contents Preface \.i Evaluation Summary \. ii Part I Project Implementation Assessment A\. Statement/Evaluation of Objectives \. B\. Achievement of Objectives \.2 C\. Major Factors Affecting the Project \.7 D\. Project Sustainability \.8 E\. Bank Performance \.9 F\. Borrower Performance \.9 G\. Assessment of Outcome \.0 H\. Future Operations \.10 I\. Key Lessons Learned \.10 Part II Statistical Tables Table 1: Summary of Assessments \.13 Table 2: Related Bank Loans/Credits \.14 Table 3: Project Timetable \.17 Table 4: Loan Disbursements \.17 Table 5: Key Indicators for Project Implementation \.18 Table 6: Key Indicators for Project Operation \.18 Table 7: Studies included in the Project \.19 Table 8A: Project Costs \.20 Table 8B: Project Financing \.21 Table 9: Economic Costs & Benefits (EIRR) \.21 Table 10: Status of Legal Covenants \.22 Table 11: Compliance with Operational Manual Statements \.23 Table 12: Bank Resources: Staff Inputs \.23 Table 13: Bank Resources: Missions \.24 Annexes Annex 1\. Mission's Aide Memoire \.25 Annex 2\. Operations Plan \.29 Annex 3\. Borrower's Evaluation Report \.31 Annex 4\. Ex-post Calculation of Economic Internal Rate of Return \.34 Annex 5\. PLN's Key Financial Indicators \.36 Map: IBRD No\. 22597 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\.  i IMPLEMENTATION COMPLETION REPORT INDONESIA POWER TRANSMISSION PROJECT (LOAN NO\. 3349-IND) PREFACE This is the Implementation Completion Report (ICR) for the Power Transmission Project in Indonesia, for which Loan No\. 3349-IND, in the amount of US$ 275 million equivalent was approved on June 19, 1991 and made effective on November 4, 1991\. The loan closing date was extended by nine months, to September 30, 1997 (original closing date was December 31, 1996)\. A partial loan proceeds cancellation in the amount of US$ 103\.4 million was made in November 1994\. The loan account was closed in March 1998, with an undisbursed balance of US$ 8\.9 million canceled\. The ICR was prepared by Yuling Zhou, Operations Officer, and Kurt Schenk, Power Specialist", EASEG, and endorsed by Yoshihiko Sumi, Sector Manager, EASEG, and Dennis De Tray, Country Director, EACIF\. Preparation of this ICR was begun in August 1997 prior to the Bank's ICR mission to Indonesia in November 1997\. It is based on materials in the project file, and on information and comments provided by the implementing agency, PT PLN (Persero)\. The aide memoire of the ICR mission is attached as Annex A\. The borrower's own evaluation report is attached as Annex C\.  ii INDONESIA POWER TRANSMISSION PROJECT (LOAN NO\. 3349-IND) EVALUATION SUMMARY Introduction 1\. Bank involvement in the electricity subsector in Indonesia began in 1968\. For the first two decades, the focus was first on the creation of a national electric utility (which occurred in 1972) and then on system expansion\. By the time of the late eighties, attention was lbeginning to shift more to sectoral efficiency\. The Power Transmission Project supported not only the traditional objective of system development by financing PLN's transmission network expansion needs, but also the institutional development objective through technical assistance\. The total amount of the loan was US$ 275\.0 nmillion\. The loan was signed on August 8, 1991, and became effective on November 4, 1991\. The loan closing date was extended by nine months to September 30, 1997\. Project Objectives 2\. The overall objective of the project was to expand, strengthen and upgrade the transmission facilities for the Java-Bali system to supply electricity to new consumers and to meet increases in electricity demand arising from existing and new consumers\. To support this overall objective, the project had three specific objectives: (i) Physical objective: to ensure that investments in power transmission facilities proceed at an appropriate level to supply electricity to new consumers and to meet increase in electricity demand in Java, by strengthening and upgrading the Java-Bali transmission system\. (ii) Institutional objective: to improve PLN's capability in long-term planning of transmission systems, by providing technical assistance in long-term development of the transmission system in Java-Bali\. (iii) Financial objective: to promote measures for strengthening PLN's financial position by establishing an institutional mechanism to review and advise the Government on all price adjustments in the energy sector\.  iii 3\. The objectives remained unchanged for the duration of the project\. They were important, clear and, for the most part, realistic\. Implementation Experience and Results 4\. The project's outcome was satisfactory\. It was successful in substantially achieving physical and institutional objectives\. These achievements would seem to be likely sustainable\. Physical program targets were generally met, though not on time in some cases\. The technical assistance components were in general successful\. The re- estimated economic internal rate of return (EIRR) is 17\.7 percent, slightly above the SAR's estimate of 17 percent\. 5\. The actual cost of the project (excluding Interest During Construction -- IDC) was US$ 240\.0 million, compared to the appraisal estimate of US$ 355\.9 million\. The main cost difference was on the transmission investment component, where much-lower-than- expected contract prices were obtained after bidding\. This cost savings resulted in a large cancellation of the loan in the amount of US$ 103\.4 million in December 1994 upon the request of the Borrower\. The remaining undisbursed balance of about US$ 8\.9 million was canceled in March 1998 when the loan account was closed\. 6\. Project implementation experienced a delay of about one and a half years compared to the SAR estimate of time for physical completion in March 1996\. This delay was mainly caused by procurement delays and difficulties in acquisition of land for transmission substations and obtaining of right of ways for transmission lines\. 7\. Both the Bank's and the Borrower's performance under the project has generally been satisfactory\. Summary of Findings, Future Operations, and Key Lessons Learned 8\. The outcome of the project is satisfactory\. The project met most of its physical, institutional objectives and the benefits from the project are likely to be sustainable\. 9\. It is expected that the project will be operated as planned\. The physical components have been taken over by PLN's various operational departments, become an integrated part of PLN's operations and will be productive for many years\. Results and recommendations from the technical assistance have already been or are being incorporated into PLN's planning practices\. The Bank will continue to monitor the project's operation through its on-going lending and institutional development programs and policy dialogue with GOI/PLN\. Operational plans to ensure the sustainability of the outcome achieved under the project were discussed with PLN during the ICR mission and are attached to this ICR\. 10\. Several specific key lessons, which have operational implications for the design of future power sector projects, can be drawn from this project:  iv (a) Establishment of a central Project Management Unit (PMU) at PLN head office could have benefited the overall project coordination and accountability\. (b) Cumbersome procurement processes are a leading cause of project impleimentation delays: PLN's procurement process results in a lengthy procurement cycle adding delays and unnecessary costs to projects that it undertakes\. Speedier procurement processing and more efficient inventory management and materials handling are key to increasing the efficiency of its investment program\. (c) Action on land acquisition should be taken early on during project preparation stage: To ensure smooth project implementation, land acquisition should be completed before the project implementation starts, or a realistic and concrete time-bound action plan should be developed and followed through with close monitoring from both the Bank and the implementing agency\. (d) Performance targets: While the output targets were satisfactorily achieved, the project did not have any outcome or impact indicators to measure the performance of PLN's power transmission system in Java\. Explicit performance monitoring has since built in the Bank's most recent transmission project, the Second Power Transmission and Distribution Project, which includes broader outcorne targets, such as transmission losses and outages, in addition to the conventional output or construction targets\. (e) Focus on organization rather than just on studies or planning: The project's focus on institutional development solely through a system planning study can in hindsight be viewed as overly narrow\. The importance of broader organizational issues for transmission performance was recognized under the recent Second Power Transmission and Distribution Project which is supporting the establishment of an "investment center" within PLN to have overall -- responsibility for PLN's transmission planning, construction and operation in Java\. This arrangement is expected to lead to major improvement in PLN's transmission development coordination and performance\. (f) More attention should be given on accurate cost estimate: A large portion of the loan (about 40%) was canceled\. Given that the physical construction activities have been basically completed, the substantial cancellations do raise questions on the accuracy of cost estimates\. While international competitive bidding may have resulted in lower-than-expected contract prices, over conservative cost estimate may have been the main reason for the cancellations\. More attention should therefore be given in future projects on the accuracy of cost estimate and on application of contingencies\. Furthermore, project descriptions in the legal agreements should be more flexible to allow utilization of cost savings towards meeting the broad project objectives\.  POWER TRANSMISSION PROJECT (LOAN 3349-IND) PART I\. PROJECT IMPLEMENTATION ASSESSMENT A\. STATEMENT/EVALUATION OF OBJECTIVES 1\. The main objective of the project was to meet the increasing electricity demand in the Java island of Indonesia by strengthening and upgrading the Java-Bali transmission system\. The project had three main objectives: (I) Physical objective: to ensure that investments in power transmission facilities proceed at an appropriate level to supply electricity to new consumers and to meet increases in electricity demand in Java, by strengthening and upgrading the Java-Bali transmission system: (a) by extending about 41 existing substations of 150 kV and 70 kV, ;including addition of transforming capacity of about 1,870 MVA; (b) by constructing about 18 new substations of 150 kV, including transforming capacity of about 1,150 MVA; (c) by installing reactive power compensation equipment of about 350 MVAR in about 29 substations; (d) by acquiring about two mobile substations of 150/20 kV, with total capacity of about 40 MVA; (e) by reconductoring about 6 route-km of 70 kV and about 51 route-km of 150 kV transmission lines; (f) by constructing about 241 route-km of 150 kV transmission lines, including about 14 km of underground lines; (g) by constructing new substations and transmission lines for supplying new industrial consumers at 150 kV; and (h) by establishing a special fund -- the Industrial Consumers Connection Fund (ICCF) to finance the construction of new transmission facilities for supplying industrial consumers\.  - 2 - (i) by providing technical assistance in engineering, design and construction supervision of substations and transmission lines included in the project\. (2) Institutional objective: to improve PLN's capability in long-term planning of transmission systems, by providing technical assistance in long-term development of the transmission system in Java-Bali\. (3) Financial objective: to promote measures for strengthening PLN's financial position\. 2\. The objectives remained unchanged for the duration of the project\. They were important, clear and, for the most part, realistic\. 3\.- Financial covenants: The Loan Agreement included financial covenants\. Of these, the most important ones were to achieve annually an eight per cent rate of return on PLN's Java operations and to achieve break-even on PLN's outside-Java operations beginning FY1991/92\. In 1994, both covenants were replaced under Loan 3761-IND (Sumatera and Kalimantan Power Project) by a single eight percent rate-of-return covenant for PLN's entire operation in Indonesia\. B\. ACHIIEVEMENT OF OBJECTIVES Overall Project Objective 4\. Overall objective: The overall objective of the project was to expand, strengthen and upgrade the transmission facilities for the Java-Bali system to supply electricity to new consumers and to meet increases in electricity demand arising from existing and new consumers\. With the successful completion of the physical investment components of the project, this overall objective has been substantially achieved\. 5\. Internal rate of return: For practical purposes, it is impossible to separate out the benefits attributable to the individual power projects that form a part of a least-cost investment plan\. Project justification was therefore based in the SAR on PLN's entire investment program for Java for the time period, 1990/91-1994/95, of which the project's investment component was envisaged to be a part\. This delivered a forecast economic internal rate of return (EIRR) of 17 percent\. This EIRR has been recalculated using updated data for the period 1990/91-1996/97 which, due to implementation delays, is the period the project ended up covering\. The re-estimated EIRR is 17\.7 percent\. The detailed ex-post EIRR calculation is presented in Annex D\. In addition, the project was also to provide technical assistance to PLN in identification and construction of new power plants, including (i) engineering, design and construction supervision of Units 5, 6, and 7 of the Suralaya coal-fired power plant in West Java; and (ii) site selection and feasibilitv study for a new thermal power plant in West Java\.  -3 - Review of Physical Objectives 6\. Extension of Existing Substations: A total of 52 existing substations of 150 kV and 70 kV were extended by adding new equipment and increasing transforming capacity\. This has exceeded the SAR target of 41 substations\. The transforming capacity added was 1,740 MVA, which fell a little short of the SAR target of 1,870 MVA\. 7\. Construction of New Substations: A total of 19 new substations of 150 kV were built with a total transforming capacity of 1,270 MVA\. They included 2 mobile substations of 150/20 kV with a total capacity of 40 MVA\. This meets the original SAR targets\. 8\. Reactive Power Compensation Equipment: Reactive power compensation equipment (capacitors) of 350 MVAR was installed in 40 substations in Java\. The original SAR targets have been met\. 9\. Transmiission Lines: A total of 297\.5 route-km of 150 kV transmission lines (including some underground lines) was planned to be constructed in 19 locations in Java\. This length was based on a rough estimate after preliminary survey\. Due to cancellation of three planned transmission lines during project implementation, the actual transmission lines constructed accounted for 182 route-km (including 12 km 150 kV underground cables)\. 10\. Industrial Consumers Connection Fund (ICCF): The project was also to support establishment of a special fund -- the Industrial Consumers Connection Fund (ICCF) -- of about US$20 million to finance construction of new transmission facilities for supplying large industrial consumers at 150 kV\. At the time of project appraisal, PLN required a lead time of about three years (from location of sources of finance, procurement of equipment and materials, to construction and erection of transmission facilities) to respond to requests from large industrial consumers for power supply\. The concept behind the ICCF was to reduce or eliminate the time taken for location of funds and procurement of equipment, so as to enable PLN to respond to consumer needs much faster\. To this end, a portion of the fund was to be utilized for maintaining a revolving stock of standard equipment and the balance of the fund was to be used for non-standard equipment and urgent requirements\. 11\. Implementation of the ICCF was not satisfactory\. Out of the US$15 million allocated from the Bank loan for setting-up of the ICCF, only US$6\.6 million was utilized mainly in West Java area and the balance was canceled upon the request of PLN\. Although PLN also carried out a Large Consumer Connection Program (PKB) using its own financing, the original idea of establishing a revolving stock of standard equipment and materials was in fact not implemented\. There are only about 50 150 kV customers in Java\. These customers all require customized equipment so the helpfulness of establishing a revolving stock is questionable\. Moreover, given the delays associated with procurement under Bank financing, it is not clear that utilizing Bank financing would  -4 - speed up customer connections\. Finally, since a high-voltage connection is usually associated with the construction of new facilities by the applicant, such as a new factory, its implementation period is typically a matter of years rather than months\. Such a time period should provide ample time for the procurement of the required equipment, which again calls into question the utility of the proposed revolving stock\. It is noticeable that the SAR contained only one paragraph on the ICCF, and no reference to any study providing a justification or design\. 12\. It should be noted, however, that US$6\.6 million spent under the ICCF component was not wasted\. It was used to purchase equipment and materials which have been utilized for connecting to large industrial consumers\. 13\. Compared to the original loan size (US$275 million, including US$30 million unallocated, and US$220 million allocated for the physical components), a very large portion (US$103\.4 million, or 38percent of the total loan) was canceled, due to much- lower-than-expected contract prices after bidding and conservative cost estimates at the project appraisal\. Notwithstanding this large cancellation, the original physical components have been completed successfully\. 14\. A substantial delay (about one and a half years) was experienced during implementation, which led to an extension of the loan closing date by nine months\. The delay was mainly caused by procurement delays and difficulties that PLN encountered in land acquisition -and obtaining right of ways in particular in the most populated and developed West Java and Jakarta area\. Another factor contributed to the delay was insufficient commissioning personnel (both in terms of quantity and quality) on project sites\. 15\. The main shortcoming of the project design with regards to its physical objectives was the lack of any outcome or impact indicators as distinct from output indicators\. Thus, while the output objectives of the project were all very satisfactorily achieved, it is very difficult to say if the broader objective of strengthening and upgrading the Java-Bali transmission system was satisfactorily achieved\. More recent analysis shows that while the transmission system has been expanded and significantly improved over the last decade, bottlenecks and overloading are still common, not surprisingly for a system with demand growing at close to 15percent p\.a\. The Bank's more recent transmission project, the Second Power Transmission and Distribution Project, includes broader outcome targets such as transmission losses and outages to enable better tracking of performance\. The loading of transformers and lines is also now being monitored\.  -5 - Review of Technical Assistance/Institutional Development Objectives 16\. Engineering, design and construction supervision of substations and transmission lines financed under the project: Three consulting contracts were signed and executed in this connection respectively for the three subcomponents of West Java/Jakarta, Central Java and East Java\. All the contracts were started in late 1992 or early 1993 but were terminated at different times\. For the East Java subcomponent, the consultants completed their work in end 1994 according to the original schedule, and the remaining construction supervision work (only for installation of transformers) was continued and completed by PLN staff\. The West Java/Jakarta consultant contract was extended once and ended in June 1997, while- the Central Java consultant contract was extended twice- and finished in end September 1997\. The consultants played an overall supervisory and coordination role which was critical to the successful completion of the physical invest:ment activities financed under the Project\. 17\. Engineering, design and construction supervision of several units of Suralaya Thermal Power Plant: The consultant contract financed under the Project for engineering, design and construction supervision of Units 5, 6 and 7 of the Suralaya Coal- fired Power Plant was completed successfully\. The remaining engineering activities as well as construction were financed under Bank Loan No\. 3501-IND for Suralaya Thermal Power Project\. The Suralaya Power Plant is now commissioned and in operation\. 18\. Site selection and feasibility study for a new thermal power plant in West Java: The feasibility study was successfully completed in March 1994\. The outcome of the study was a recommendation for a 4800 (8x600) MW coal fired power plant in Pangkalan, West Java\. Prior to the recent financial crisis, this plant was included in PLN's expansion program to be constructed in four phases commencing in 2005\. 19\. Study for long-term development of the transmission system in Java-Bali: The study was completed with a final report submitted in February 1995 and revised in January 1996\. Under the study, the existing system operation, engineering and load forecast were reviewed, network expansion was studied and preliminary project packages and investment plans were developed\. The consultant also conducted training of PLN staff in transrnission and engineering techniques\. Consequently, PLN's capability in transmission long-term planning was improved\. 20\. The study's recommendations are being taken into account particularly in finalizing the 500 kV backbone (both the northern and the southern lines) in the PLN Java system\. The study recommended not only the construction of 2 circuits for the entire northern route in Java but also the construction of the 500 kV southern route (Paiton-Kediri- Klaten-Tasikmralaya-Jakarta) for improving East-West Java power transfers, voltage stability as well as voltage profiles in the southern reaches of the line\. The Paiton-Kediri- Klaten portion of the southern line is being built under the Bank financed Second Power Transmission and Distribution Project (Loan 3978-IND), while the rest is being built under Japanese OECF financing\.  - 6 - 21\. The Project's focus on institutional development solely through a planning study can in hindsight be viewed as overly narrow\. The importance of broader organizational issues for transmission performance was recognized during preparation of the recent Second Power Transmission and Distribution Project (Loan 3978-IND, approved in February 1996) which is supporting the establishment of the Java-Bali Electricity Transmission Unit (JABETU) within PLN to have overall responsibility for PLN's transmission development and operation in Java\. The combining of transmission planning, construction and operation into a single body is expected to lead to major improvements in PLN's transmission development coordination and performance\. Review of Financial Objective 22\. One of the objectives of the project was to promote measures for strengthening PLN's financial position\. However, it should be noted that the project did not include any specific component to achieve this objective\. The idea was initiated during the project preparation and was pursued as part of the Bank's sectoral policy dialogue with GOI and PLN by the implementation of an automatic, quarterly electricity tariff adjustment mechanism (ETAM)\. ETAM was designed by ADB-financed consultants, with the Bank's support, and came into effect through a Presidential Decree in late 1994\. This project objective has only been partially achieved\. Although PLN's financial position showed improvement over the project period (before it started to sharply deteriorate after loan closing in late 1997 due to the sharp devaluation of the local currency, Rupiah), its profitability never reached target levels\. ETAM delivered only small tariff increases (only Spercent up to the end of 1997), and it became evident that reliance on ETAM will not avoid the need for substantial basic tariff increases\. This is partly because of factors never intended to be covered by ETAM (e\.g\., over-optimistic demand forecasts) and partly because of faulty design in ETAM itself (e\.g\., it provides only partial cost pass-through and then only with a long lag)\. 23\. It is now widely understood that ETAM alone will not be able to solve PLN's financial difficulties\. Also, a basic tariff increase but no revision to ETAM will only postpone the financial crisis for a year or two\. Therefore, the Bank, during its sector dialogue, has been pursuing with the Government a revision to ETAM through a new Presidential Decree (Keppres)\. Such revision, being still under consideration, would embody the following assumptions: * clear definition of base prices as prices in PLN budget of a selected reference year; * clear definition of weights as derived from annual PLN budget; * weights to add to one to allow full cost pass-through; * clear definition of base price of IPP plants not in service at time of basic tariff increase: base price for such plants should equal to an average IPP price\.  - 7 - Compliance wiith Financial Covenants 24\. The Loan and Project Agreements provide essential legal covenants to facilitate successful implementation of the project and successful operations of the implementing agency, PLN\. Among the covenants were important financial covenants\. Of these, the most important ones were to achieve annually an eight per cent rate of return on PLN's Java operations and to achieve break-even on PLN's outside-Java operations beginning FY1991/92\. The latter covenant was successively rolled-over\. In 1994, both covenants were replaced under Loan 3761-IND (Sumatera and Kalimantan Power Project) by a single eight percent rate-of-return (ROR) covenant for PLN's entire operation in Indonesia\. Another important financial covenant under the project was that PLN should not incur any debt unless it achieves a forecast debt service coverage (DSC) ratio of at least 1\.5 times\. 25\. PLN has for some time not been in compliance with the rate of return covenant\. The Government's reluctance to increase tariffs in the run-up to the Presidential election in March 1998 resulted in PLN's ROR for 1997 falling to 3\.Opercent (6\.8 percent for PLN's Java operations), far below the covenanted 8\.0 percent\. Up to 1997, PLN was at least in compliance with the DSC ratio\. However, in that year, the DSC ratio was estimated at 1\.3 times, below the covenanted 1\.5 times\. PLN's key financial indicators in recent years are given in Annex E\. 26\. With the collapse since November 1997 in the value of the Rupiah, PLN's financial position has further deteriorated significantly\. As part of the rescue package negotiated with the RMF, the Government has agreed to remove all electricity subsidies over the coming three years, starting with sizable tariff increase on April 1, 1998\. Implementation of this agreement will be crucial to restoring PLN's financial health, and will be closely monitored by Bank staff\. C\. MAJOR FACTORS AFFECTING THE PROJECT Implementation Record 27\. The implementation of the project was satisfactory\. Physical and technical assistance project components were completed, and the original targets were met\. Implementation was, however, characterized by substantial delays (one and a half years)\. To accommodate the implementation delays, the loan closing date was extended in end 1996 by nine months\. Major Factors Affecting the Project 28\. Procurement of goods and consulting services: The Borrower's procurement practices and consultant selection procedures substantially delayed procurement of both goods and consultants\. This was one of the key contributing factor in the nine-month loan extension\. There were lengthy delays between bid closing date and bid evaluation, and  - 8 - between receipt of Bank's no objection letter (NOL) and preparation of final contract document\. 29\. Land acquisition: Another key contributing factor to the project implementation delays was lengthy and cumbersome process for acquisition of land for transmission substations and obtaining of right of ways for transmission lines, especially in the populated and developed areas such as West Java and Jakarta\. 30\. It should be noted that the above mentioned factors were identified at the time of project appraisal and recorded in the SAR as the main risks to cause implementation slippage\. The SAR mentioned "The risk of slippage will be kept to a minimum through careful planning and attention to procurement to avoid protracted procurement actions and decision-making, to supervision of contracts \."\. However, procurement delays resulting in implementation slippage still took place under the project as well as under other Bank financed power projects in Indonesia\. It appears then that "careful planning and attention" are certainly not enough to minimize procurement delays, and the key factor behind procurement delays is the Government's and PLN's bureaucratic practices\. One of the aims of the process of sectoral commercialization, corporatization and unbundling embarked on since the commencement of this project is precisely to reduce bureaucracy and improve implementation\. 31\. With regard to land acquisition, this is an issue which has received much more attention in recent years\. With Bank assistance, PLN has now formulated and officially adopted a policy paper on land acquisition for transmission projects ("PLN's General Policy Concerning the Establishment of Overhead Transmission Lines", December 1995)\. Land acquisition is also now much more closely supervised, allowing potential delays to be noted and acted on more quickly\. D\. PROJECT SUSTAINABILITY 32\. The achievements and benefits of the project are sustainable\. The physical facilities will be productive for many years\. Although PLN is now facing financial difficulties, normal operation of the physical facilities (transmission lines and substations) financed under the project should nct be affected, because these new facilities, equipped with modern technologies, do not need much maintenance and in certain cases are even maintenance free\. 33\. Results and recommendations from the technical assistance should also be sustainable\. For example, the Suralaya Thermal Power Project, designed under the project, has now been built\. The study for long-term development of the transmission system has facilitated improvement of PLN's long-term planning capabilities, and the study recommendations are being implemented particularly in finalizing the 500 kV backbone in Java\.  - 9 - 34\. Operational Plans to ensure the sustainability of results achieved under the project were discussed with PLN during the ICR mission\. These plans are presented in Annex B\. E\. BANK PERFORMANCE 35\. Overall, the Bank's performance has been satisfactory\. The identification and preparation of the project were carried out smoothly\. The project's design was straight forward and the objectives were clear\. It was basically an investment project with some simple and straight forward technical assistance activities\. However, in hindsight, the Industrial Consumers Connection Fund (to establish a revolving stock of equipment and material for large industrial consumers) component was not well prepared\. No prior documents were prepared relating to its justification and design\. 36\. Appraisal was also carried out successfully\. The major risks were correctly identified, namely procurement delays and difficulties in land acquisition\. Attempts (such as action plan and supervision follow-up) were made to mitigate these risks, though these proved insufficient\. The implementation plan for the project components was simple, but sufficiently clear to quantify the extent of the delays which occurred\. Performance indicators were provided for the physical components of the project\. 37\. The project supervision arrangements were adequate\. During project implementation, the Bank successfully maintained good working relations with PLN\. A total of seven supervision missions were fielded during the project implementation period\. Most of the field supervision activities were carried out in conjunction with the supervision of other ongoing power projects\. The project was supervised by three task managers, wit:h no discernible negative impact on project continuity and outcome\. 38\. Project implementation involved no deviations from Bank policies and procedures\. F\. BORROWER PERFORMANCE 39\. PLN's and GOI's performance was overall satisfactory\. Macroeconomic conditions and sectoral policies were generally favorable\. The project was carried out successfully and the physical construction targets were met\. Counterpart funds were available and audit requirements were satisfied\. Ownership was generally taken of the technical assistance, close cooperation ensured knowledge-transfer, and ongoing utilization is now being made of the consultants' work\. Against this overall satisfactory rating, three less positive aspects of the borrower's performance should also be noted\. First, as mentioned previously, the project suffered from delays in implementation due to lengthy and inefficient procurement procedures and practices, as well as due to cumbersome process for land acquisition\. Second, although compliance with covenants was satisfactory in general, financial covenants were not complied with (see paras\. 24-26)\. Third, substantial delays were experienced in submission of progress reports for the physical investment components and final reports of studies under the technical assistance component\.  - 10- G\. SUMMARY ASSESSMENT OF OUTCOME 40\. The outcome of the project is satisfactory\. The project met most of its physical, and institutional objectives and the benefits from the project are likely to be sustainable\. 41\. The EIRR for the project has been re-estimated at 17\.7 percent, compared to the 17 percent estimated at the appraisal\. H\. FUTURE OPERATIONS 42\. It is expected that the project will be operated as planned\. The physical cQmponents have been taken over by PLN's various operational departments and have become an integrated part of PLN's entire operations\. Proper training has been conducted and comprehensively documented operation and maintenance procedures have been put in place\. 43\. Plans for future operations are presented in Annex B\. The Bank will continue to monitor PLN's operations and performance through its on-going lending and institutional development programs and policy dialogue with GOI/PLN\. L KEY LESSONS LEARNED 44\. Several specific key lessons, which have operational and strategic implications for the design of future power sector projects, can be drawn from this project\. These are discussed in the following\. 45\. Establishment of a central Project Management Unit (PMU) could benefit overall project coordination and accountability: The project did not require PLN, the implementing agency, to establish a central project management and implementation supervision unit at the head office level\. As a result, no senior PLN manager was responsible for monitoring progress and the outcome of the project, and for initiating corrective actions in a timely manner\. This also made it difficult for the Bank to supervise the project while adding to the time and financial resources devoted to the supervision activity\. Establishment of a PMU could have reduced delay\. This lesson has been taken on board by subsequent Bank financed projects, such as Second Rural Electrification project (Loan 3845-IND), which is already in operation with a PMU, and the Java Power Distribution Project, which is under preparation but which has a PMIU designed into it\. 46\. Cumbersome procurement processes are a leading cause of project implementation delays: PLN's procurement process results in a lengthy procurement cycle adding delays and unnecessary costs to projects that it undertakes\. Speedier  - I1 - procurement processing and more efficient inventory management and materials handling are key to increasing the efficiency of its investment program\. 47\. Action on land acquisition should be taken early on during project preparation stage: To ensure smooth project implementation, land acquisition should be completed before the project implementation starts, or a realistic and concrete time-bound action plan should be developed and followed through with close monitoring from both the Bank and the implementing agency\. Under the project, although agreement seemed to have been agreed during appraisal and loan negotiations that land acquisition should be completed by end 1992, it did not actually happen in some cases (resulting in transmission line rerouting) which caused implementation delays\. 48\. Performance targets: While the output targets were satisfactorily achieved, the project did not have any outcome or impact indicators to measure the performance of PLN's power transmission system in Java\. Explicit performance monitoring has since built in the Bank's most recent transmission project, the Second Power Transmission and Distribution Project, which includes broader outcome targets, such as transmission losses and outages, in addition to the conventional output or construction targets\. 49\. Focus on organization rather than just on studies or planning: The project's focus on institutional development solely through a system planning study can in hindsight be viewed as overly narrow\. The importance of broader organizational issues for transmission performance (such as coordination between planning, construction and operation) was recognized under the recent Second Power Transmission and Distribution Project which is supporting the establishment of an "investment center" within PLN to have overall responsibility for PLN's transmission planning, construction and operation in Java\. This arrangement is expected to lead to major improvement in PLN's transmission development coordination and performance\. 50\. More attention should be given on accurate cost estimate: A large portion of the loan was canceled (US$103\.4 million in 1994 and US$8\.9 million in 1998 at loan closing, in total about 40percent of the original loan amount)\. Given that the physical construction activities have been basically completed, the substantial cancellations do raise questions on the accuracy of cost estimates\. While international competitive bidding may have resulted in lower-than-expected contract prices, over conservative cost estimate may have been the main reason for the cancellations\. More attention should therefore be given in future projects on the accuracy of cost estimate and on application of contingencies\. Furthermore, project descriptions in the legal agreements should be more flexible to allow utilization of cost savings towards meeting the broad project objectives\.  - 12 - PART II\. STATISTICAL TABLES Table 1: Summary of Assessment Table 2: Related Bank Loans/Credits Table 3: Project Timetable Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual Table 5: Key Indicators for Project Implementation Table 6: Key Indicators for Project Operation Table 7: Studies Included in Project Table 8A: Project Costs Table 8B: Project Financing Table 9: Economic Costs and Benefits Table 10: Status of Legal Covenants Table 11: Compliance with Operational Manual Statements Table 12: Bank Resources: Staff Inputs Table 13: Bank Resources: Missions  - 13 - Table 1: Summary of Assessments A\. Achievement of Obiectives Substantial Partial Netgligble Macro Policies E a E 0 Sector Policies E E E 0 Financial Objiectives ] 0 E E Institutional Development E n E E Physical Objectives 0 n G E Poverty Reduction Q E El 0 Gender Issues E E El 0 Other Social Objectives E E E 0 Environmental Objectives E E E 0 Public Sector Management E E E 0 Private Sector Development E El 0 E Other (specify) E E E 0 B\. Project Sustainability Likely Unlikely Uncertain (/) (1') (1) Highly C\. Bank Performance satisfactorg Satisfactory Deficient (V) (V) (V) Identification E 0 El Preparation Assistance E 0 E Appraisal El 0 El Supervision El 0 El Highly D\. Borrower Performance satisfactorv Satisfactory Deficient (1) (1) (V) Preparation E E E Implementaition - Physical E 0 E El 0 E Institutional Covenant Compliance E E 0 Operation (if applicable) E 0 E Hip,hlv Hip-hlv E\. Assessment of Outcome satisfactory Satisfactory Unsatisfactory unsatisfactory E] 0 El El  - 14 - Table 2: Related Bank Loans/Credits Loan/credit title Purpose/Description Year of Status approval Loan 2506-IND Comprising: (a) a cistribution system for Jakarta and 1981 Completed in Eleventh Power the regencies of Bogor, Tangerang and Bekasi 1988 Project (Jabotabek) in West Java, involving about 450 km of kV cables, 760 km of 20 kV overhead lines; (b) a 150 kV voltage system, involving 5 new substations in Jakarta, 46 km of underground double-circuit 150 kV cables and 980 MBA of transformers; (c) engineering of the next base-load thermal power unit (at Paiton) in Java; (d) engineering of the Extra High Voltage (EHV) Central-East Java transmission line; and (e) management consultancy for further improvements in PLN's financial planning and control systems\. Loan 2214-IND Comprising: (a) construction of 110 (2 x 55) MW 1982 Completed in Twelfth Power extension of Kamojang geothermal power station in 1991 Project West Java; (b) construction of the third 400 MW thermal generating unit at Suralaya, including engineering services for the third and fourth generating units; (c) distribution system improvements in Java, North Sumatra and South Sulawesi; (d) a mini-hydro development program in North Sumatra; and (e) training facilities and services to assist PLN's manpower development program\. Loan 2300-IND Comprising: (a) construction of Cirata hydroelectric 1983 Completed in Thirteenth Power power project (4xl25 MW); (b) construction of 500 1990 Project kV switchyard and 25 km 500 kV transmission line; (c) consultant services for Cirata project and an energy sector support program to support engineering and design for major thermal stations, an information management system study, and feasibility studies for hydro, thermal and transmission and distribution schemes\. Loan 2443-IND To construct and install the third and fourth 400 MW 1984 Completed in Fourteenth Power thermal generating units at Suralaya in West Java; to 1992 Project extend the distribution network in Jakarta, Bogor, Tangerang and Bekasi (Jabotabek), East Java and Central Java; and to provide consulting services for engineering and construction supervision of transmission lines and substations in Java and for engineering and design of hydro projects\.  - 15 - Table 2: Related Bank Loans/Credits (Cont'd) Loan/credit title Purpose/Description Year of Status approval Loan 3097-IND The project included: (a) diesel power units 1989 Completed in Power Sector rehabilitation and relocation; (b) small hydropower 1995\. Efficiency Project renovation; (c) distribution investment; (d) expansion of PLN's telecommunication facilities; (e) training program; (f) distribution management program; (g) technical assistance for general accounting/cash management and financial/corporate planning; (h) institutional mechanism to advise GOI on energy price adjustments; (i) information system to provide costs for PLN's rural electrification program; and (j) utilization by PLN of captive generating capacity\. Loan 3098-IND To provide for the construction of the Paiton coal-fired 1989 Completed in Paiton Thermal power plant with an initial capacitv of 800 MW and 1995\. Power Project an ultimate capacity of 4,000 MW in East Java; associated 500 kV and 150 kV transmission system; and technical assistance to strengthen capacity of Ministry of Mines and Energy in environmental matters and train PLN personnel in power plant technology\. Loan 3501-IND The project includes: (a) the construction of three 1992 Implementation Suralaya Thermal coal-fired units of 600/MW each at Suralaya, underway; closing Power Project including associated works and a 500 kV transmission in 1999\. line from Cilegon to Cibinong, with associated substations; (b) consulting services for engineering, design and construction supervision of the proposed units; (c) feasibility study for a high voltage submarine cable link between Java and Sumatra; (d) engineering and design of a thermal power p-ant at Banjarmasin in South Kalimantan; (e) consulting services for institutional development; and (f) training of PLN's staff in public utility practices\.  - 16 - Table 2: Related Bank Loans/Credits (Cont'd) Loan/credit title Purpose/Description Year of Status approval Loan 3602-IND Its components are: (a) implementation of Phase II of 1993 Implementation Cirata the Cirata hydroelectric development on the Citarum underway; closing Hydroelectric River in West Java; (b) consulting services for the in 1999\. Phase II Project engineering and construction supervision; (c) studies to upgrade hydrological and environmental data bases, and improve data collection practices; (d) studies to update PLN's hydroelectric inventories, and determine pre-feasibility of selected schemes; (e) studies to identify options to enhance environmental conditions in the existing PLN reservoirs on the Citarum River, and training of PLN staff in environmental management; (f) training of PLN's staff in dam safety and instrumentation monitoring; (g) power sector institutional and regulatory framework studies for the Government of Indonesia (GOI); (h) studies aimed at assisting GOI to determine a long-term strategy for financing power sector investments; and (i) pre- construction stage engineering services\. Loan 3978-IND To improve customer service by (a) increasing the 1996 Implementation Second Power physical capacity, efficiency, and reliability of the underway; closing Transmission and Java-Bali transmission svstem and distribution in 2000\. Distribution network; and (b) promoting sector efficiency, Project competition, and private sector participation by implementing functional decentralization of State Electricity Corporation (PLN) operations in Java-Bali and developing effective regulatory oversight and institutions\. The project has two principal components: (a) the restructuring of and investment in PLN's operations; and (b) the development of regulatory oversight\.  - 17- Table 3: Project Timetable Steps in Project Cycle Date Planned Date Actual/ Latest Estimate Identification (Executive Project Summary) 01/30/87 01/30/87 Preparation 02/09/89 10/02/89 Appraisal 09/05/90 06/11/90 Negotiations 01/28/91 03/11/91 Board Presentation 03/26/91 06/19/91 Signing 08/08/91 Effectiveness 11/04/91 Midterm review (if applicable) 04/21/94 Project Completion 03/31/96 09/30/97 Loan Closing 12/31/96 09/30/97 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual (US$ million) FY92 FY93 FY94 FY95 FY96 FY97 FY98 Total Appraisal Estimate 5\.0 50\.0 165\.0 220\.0 264\.0 275\.0 - 275\.0 Actual 2\.4 16\.5 71\.4 136\.4 151\.0 160\.9 162\.7 162\.7 " Actual as % of Estimate 48\.0 33\.0 43\.3 62\.0 57\.2 58\.5 - 59\.2 Date of Final is February 23, 1998 Disbursement (An undisbursed balance of US$ 8\.9 million was canceled\.) " US$ 103\.4 million was canceled upon borrower's request effective November 7, 1994\.  - 18 - Table 5: Key Indicators for Project Implementation Number MVA MVAR Route (km) Target Actual Target Actual Target Actual Target Actual Substation New 20 19 1,190 1,270 Extension 41 52 1,870 1,740 - - - - Total substation 61 71 3,060 3,010 Reactive Power 33 40 - - 350 350 - - Compensation Equipment (Capacitors) Transmission Lines 19 16 - - - - 297\.5 182\.0 Note: a! Target figures were from SAR; b/ Actual figures were from PLN Proyek Induk and PCRs prepared by PLN's consultants\. Table 6: Key Indicators for Project Operation Non indicators for project operations were included in SAR/President's Report\.  - 19 - Table 7: Studies Included in Project Purpose as Defined at Impact of Study Appraisal/Redefined Status Study Site Selection To select a suitable site for Completed The feasibility study was and Feasibility a large steam power station successfully completed in Study for a in West Java of about 4000 March 1994\. The selected Thermal Plan in MW ultimate capacity at 4800 (8x600) MW coal fired West Java the selected site, and to power plant in Pangkalan was compare its economic and included in PLN's expansion technical merits against program and to be constructed other alternate sites in in four phases commencing in West Java\. 2005\. Study of the To prepare a transmission Completed The study was completed with Long-Term system master plan for a final report submitted in Development of Java-Bali integrated system February 1995 and revised in the Transmission to meet forecast electric January 1996\. Under the System in Java- load growth up to year study, the existing system Bali 2003/04; to prepare a operation, engineering and detailed investment load forecast were reviewed, program for the initial five network expansion was studied years of the study period; and preliminary project and to train PLN personnel packages and investment plans in transmission planning were developed\. The and engineering technique\. consultant also conducted training of PLN staff in transmission and engineering techniques\. Consequently, PLN's capability in transmission long-term planning was improved\.  - 20 - Table 8AM Project Costs Appraisal Estimate (USSM) ActualVLatest Estimate(USSM) Item Local Foreign Total Local Foreign Total Costs Costs Costs Costs Transmission Component Substations 33\.9 150\.5 184\.4 38\.3 81\.4 119\.7 Transmission lines 17\.9 53\.8 71\.7 36\.6 60\.4 97\.0 Industrial Consu\. Conn\. Fund (ICCF) 2\.0 15\.0 17\.0 Cost included in "substation" item\. Subtotal Transmission 53\.8 219\.3 273\.1 74\.9 141\.8 216\.7 Technical Assistance Component Project eng\., design & construction 2\.2 8\.0 10\.2 3\.2 5\.4 8\.6 spn\. Eng\.&designforSuralayaUnits 1\.1 10\.0 11\.1 1\.2 8\.3 9\.5 516/7 Plant Site selection & feasibility study 0\.6 4\.0 4\.6 1\.7 2\.3 4\.0 Java-Bali long-term trans\. dev\. study 0\.2 1\.6 1\.8 0\.3 0\.9 1\.2 Subtotal Technical Assistance 4\.1 23\.6 27\.7 6\.4 16\.9 23\.2 Owner admin\., eng\. and supervision 10\.0 - 10\.0 n\.a\. n\.a\. n\.a\. Total Base Cost 67\.9 242\.9 310\.8 81\.3 158\.7 240\.0 Physical contingencies 5\.8 16\.0 21\.8 - - - Price contingencies 7\.2 16\.1 23\.3 - - - Total Project Cost 80\.9 275\.0 355\.9 81\.3 158\.7 240\.0 Interest during construction 18\.2 41\.6 59\.8 12\.7 29\.6 42\.3 Total Financing Required 99\.1 316\.6 415\.7 94\.0 188\.3 282\.3  - 21 - Table 8B: Project Financing Appraisal Estimate (USSM) Actual/Latest Estimate(USSM) Source Local Foreign Total Local Foreign Total Costs Costs Costs Costs IBRD - 275\.0 275\.0 - 162\.7 162\.7 PLN 99\.1 41\.6 140\.7 83\.7 35\.9 119\.6 TOTAL 99\.1 316\.6 415\.7 83\.7 198\.6 282\.3 Table 9: Economic Costs and Benefits Appraisal Estimate Re-estimate Economic Internal Rate of Retum 17 Percent on PLN's investment 17\.7 percent on PLN's (EIRR) program in Java from investment program from 1990/91 - 1994/95\. 1990/91 - 1996/97\. For detailed calculations, see Annex D\.  - 22 - Table 10: Status of Legal Covenants Original Revised Agreement Section Covenant Present fulfillment fulfillment Description of covenant Comments type status date date Loan 3\.01(b) 3 C Subsidiary loan agreement between GOI and Condition of PLN\. effectiveness 4\.01(a) 9 C Review annually PLN's investment plan\. 4\.01(b) 11 C Review annually PLN's development plan and associated financial forecast and financing plan\. 6\.01 3 C Subsidiary loan agreement executed Prolect 2\.06 5 C PLN to carry out action plans for efficiency improvements for all its operations\. 2\.07 10 CD - PLN to acquire land for substations and right With delays\. of way for transmission lines\. 2\.08 10 CP PLN to maintain adequate revolving stock of Initial loan allocation materials for supplying industrial consumers\. for setup of revolving stock was only partially used\. However, stock materials and equipment for large consumer connection are being funded by PLN's intemal resources\. 2\.09 10 C PLN to fumish proposals for supplying industrial consumers for review and approval\. 4\.01 1 C PLN to submit audited accounts, and other fmancial information, including segregated RE accounts\. 4\.02 2 C PLN to review periodically with Bank its LRMC and tariff structure\. 4\.03 1 C PLN to revalue fixed assets and accumulated depreciation\. 4\.04 5 CP PLN to maintain projected debt-service coverage of at least 1\.5\. 4\.05 5 C PLN to (a) prepare ten-year financial forecast and review with Bank; (b) test each proposed development plan for feasibility, (c) develop financing plan for first 5 years; (d) ensure recommended development plan reviewed and approved by its Board (and GOI/Bank)\. 4\.06(a) 2 PLN to achieve an annual ROR of at least 8% Not applicable\. (i) for Java-Bali from FY91/92\. Covenant modified under Ln 376 1-IND to require ROR not less than 8% for PLN as a whole, commencing from FY94/95\. 4\.06(a) 2 PLN to achieve break-even for outside-Java Not applicable, as (ii) from FY93/493\. described above\. 4\.06(b) 2 C PLN to annually review adequacy of tariffs to meet 4\.06(a) targets and fumish to Bank results of such review\. Covenant types: I\. = Accounts/audits 8\. = Indigenous people 2\. = Financial performance/revenue generation from beneficiaries 9\. = Monitoring, review\. and reporting 3\. = Flow and utilization of project funds 10- = Project implementation not covered by categories 1-9 4\. = Counterpart funding 11\. = Sectoral or cross-sectoTal budgetary or other resource altocation 5\. = Management aspects of the project or executing agency 12\. = Sectoral or cross-sectoral policy/ regulatory/institutional action 6\. = Environmental covenants 13\. = Other 7\. Involuntary resettlemnent Present Status: C = covenant complied with CD = complied with after delay CP = complied with partially NC = not complied with  - 23 - Table II: Compliance with Operational Manual Statements Statement Number and Title Describe and comment on lack of compliance There are no OMS relevant to the Project that have not been complied with and/or been acted against\. Table 12: Bank Resources: Staff Inputs Planned Revised Actual Stage of___________________________ Project Cycle Weeks US$ Weeks US$ Weeks US$ Preparation to appraisal n\.a\. n\.a\. n\.a\. n\.a\. 38\.58 71,447 Appraisal n\.a\. n\.a\. n\.a\. n\.a\. 41\.55 86,863 Negotiation through Board approval n\.a\. n\.a\. n\.a\. n\.a\. 17\.53 44,232 Supervision n\.a\. n\.a\. 24\.0 58,922 27\.23 55,040 Completion 11\.0 27,669 11\.0 27,592 10\.50 16,290 TOTAL n\.a\. n\.a\. n\.a\. n\.a\. 131\.89 273,872  - 24 - Table 13: Bank Resources: Missions Performance Rating Stage of Month/ Number Days in Specialhzed Implemen- Develop- Types of Project Cycle Year of Field Staff Skldls tation ment Problems Persons Represented Status Objectives Through Appraisal 02/89 3 7 Power Eng\. Preparation n/a Fit\. Analyst 10/89 4 7 Power Eng\. Preparation n/a Fin\. Analyst 02/90 5 7 Power Eng\. Pre-appraisal n/a Energy Econ\. Fin\. Analyst 06/90 5 6 Power Eng\. Appraisal n/a A tariff increase needed to Energy Econ\. reach 8% ROR in 91/92; on- Fin\. Analyst lending terms to be determined\. Appraisal though 11/90 3 10 Power Eng\. Post- n/a A tariff increase needed to Board Approval Fin\. Analyst appraisal reach 8% ROR in 91/92\. Board Approval - - - - through Effectiveness Supervision 10/91 4 5 Power Eng\. 1 1 Fin\. Analyst 10/92 2 5 Power En& 1 I Some cost savings expected Fin\. Analyst due to lower-than estimnated contract prices\. 04/94 2 6 Power Eng\. 2 1 Implementation delays; cost Fin\. Analyst savings of about $100 m\. 11194 3 5 Power Eng\. S S Implementation delays mainly Op\. Officer due to land acquisition problems\. 03/96 2 4 Power Eng\. S S Implementation delays; late Op\. Officer submission of reports\. 11/96 1 5 Op\. Officer S S Implementation delays; non- compliance with financial covenants\. 07/97 2 5 Power Eng\. S S Implementation delays in Op\. Officer some components; non compliance with financial covenants\. Completion 11/97 2 5 Power Eng\. S S Op\. Officer Note: Preparation, appraisal and supervision of the project were conducted in combination with that of other power projects, therefore, the days spent in the fields were estimates\.  - 25 - ANNEX 1 ANNEX 1: AIDE MEMOIRE Introduction 1\. This Aide Memoire records the findings of a World Bank Mission comprising Messrs\. Yuling Zhou and Kurt Schenk, who visited Indonesia from November 3 to 7, 1997, for preparation of the Implementation Completion Report (ICR) for the Power Transmission Project (Loan 3349-IND)\. The mission records its thanks to PLN staff and the consultants for the assistance provided in the ICR preparation and acknowledges the courtesies and cooperation extended to it during its visit\. Activities Undertaken by Mission 2\. The mission: (i) collected the data necessary to prepare the statistical tables in the ICR; and (ii) reviewed other background data to develop its analysis\. Discussions were held with PLN staff and the consulting engineers to better understand and interpret the available data\. The project was assessed with regard to the degree of achievement of the objectives, prospects of its sustainability, Bank and Borrower performance, and the lessons learned\. In addition, the mission provided advice and support to the Borrower for preparing its own evaluation report which is to be attached to the ICR\. Overall Project Objective 3\. The overall objective of the project was to expand, strengthen and upgrade the transmission facilities for the Java-Bali system to supply electricity to new consumers and to meet increases in electricity demand arising from existing and new consumers\. With the successful comipletion of the physical investment components of the project (as discussed below), this overall objective has been generally achieved\. Review of Transmission Component 4\. This coimponent included investments in extension and construction of substations, installation of reactive power compensation equipment and construction of transmission lines\. As shown in the table below, the appraisal targets have either achieved or surpassed:  - 26 - ANNEX 1 Number \. MVA MVAR Route (km) Target Actual Target Actual Target Actual Target Actual Substations New 20 20 1,190 1,190 Extension 41 41 1,870 2,210 Total substation 61 61 3,060 3,400 - - Reactive Power 33 36 - - 350 350 Compensation Equipment (Capacitors) Transmission Lines 19 23 - - - - 297\.5 287\.2 5\. However, a substantial delay (about one and a half years) was experienced during implementation\. The delay was mainly caused by procurement delays and difficulties that PLN encountered in land acquisition and obtaining right of ways in particular in West Java and Jakarta area, as well as insufficient commissioning personnel on site\. 6\. The project was also to support establishment of a special fand -- the Industrial Consumers Connection Fund (ICCF)--of about US$20 million to finance the construction of new transmission facilities for supplying industrial consumers at 150 kV\. The Bank loan allocated US$15 million for this purpose\. However, only US$6\.6 million was utilized mainly in West Java area and the balance was canceled\. Although PLN also carried out a Large Consumer Connection Program (PKB) using its own financing, the original idea of setting up a revolving stock of standard equipment and materials (so that the connection time for large industrial consumers can be substantially reduced) was in fact not implemented\. The reason seems to have been inadequate attention given by both PLN and the Bank to this component in the early years of the project\. 7\. The project did not tackle the institutional aspects of transmission development\. PLN's overall transmission performance is mixed with impressive growth but also delays and bottlenecks\. The importance of these broader questions were recognized in preparation of the recent Second Power Transmission and Distribution Project (Ln\.3978-IND) which is supporting the establishment of the Java-Bali Electricity Transmission Unit (JABETU) within PLN to have overall responsibility for PLN's transmission development and operation in Java\. The combining of planning, construction and operation into a single body is expected to lead to major improvements in PLN's transmission development coordination and performance\.  - 27 - ANNEX 1 Review of TA Activities 8\. There were four technical assistance activities financed under the projects, namely: (a) Engineering, design and construction supervision of substations and transmission lines financed under the project: three consulting contracts were signed in this connection respectively for the three subcomponents of West Java/Jakarta, Central Java and East Java\. All the contracts started in late 1992 or early 1993 but completed in different times\. For the East Java subcomponent, the consultants completed their work in end 1994 according to the original schedule, and the remaining construction supervisory work (only for installation of transformers) was completed by PLN staff\. The West Java consultant contract was extended once and ended in June 1997, while the Central Java consultant contract was amended twice and finished in end September 1997\. The consultants have played an overall supervisory and coordination role which was critical to the successful completion of the physical investment activities\. (b) Engineering, design and construction supervision of several units of Suralaya thermal power plant: the contract financed under the project was successfully completed and remaining engineering activities as well as construction supervision were financed from the Bank loan for Suralaya Thermal Power Project\. (c) Site selection and feasibility study for a new thermal power plant in West Java: the feasibility study was completed in March 1994 with a selected site for a 8x6OO MW coal fired plant in Pangkalan, West Java\. According to PLN's 1997 Investment Plan (RUPTL), the first unit (600 MW) will be developed in 2005\. (d) Study for long-term development of the transmission system in Java-Bali: the study was completed with a final report submitted in February 1995 and revised in January 1996\. The study recommendations are being implemented particularly in finalizing the 500 kV backbone in Java\. Project Sustainability and Operational Plan 9\. The project achievements and benefits are sustainable\. The physical investments will be productive for many years\. The completed 150 kV transmission lines and 150/20 kV substations will provide safe, reliable and much needed power to the rapidly growing load centers in Java anc' will also assist in relieving transformer overloads as well as in improving system security\. 10\. The completed facilities have been integrated into PLN's entire operations in Java, and are being operated and maintained under PLN's standard procedures with  - 28 - ANNEX I performance indicators for quality, reliability and efficiency\. Maintenance on the transmission network (included substations) in Java is managed by PLN P3B (Transmission and Load Dispatching Center)\. Patrols of lines take place on a regular basis and any deficiencies are noted and corrected\. In addition, a fault detection system by means of impedance relaying is in place to provide rapid response to faults as they occur\. Disbursement 11\. Against the original loan amount of US$275\.0 million, US$161\.96 million was been disbursed as of end October 1997 and US$103\.4 million canceled (in November 1994, due to much lower-than-expected bid prices for equipment and materials)\. The undisbursed balance is US$9\.6 million\. According to the Bank's standard practice, a four- month grace period (up to end January 1998) was granted to continue disbursing the loan (but only for eligible expenditures incurred, i\.e\. goods, works and services provided before the loan closing date)\. The remaining undisbursed balance after this period will be canceled\. Next Steps 12\. The Economic Internal Rate of Return (EIRR) has been recalculated by PLN and received by hte mission\. The mission will review it and convey any comments to PLN as soon as possible\. 13\. The following schedule was agreed with PLN for the final preparation of the ICR: January 31, 1998 The Bank to send its draft final ICR to PLN for comments\. January 31, 1998 PLN to send its own evaluation report to the Bank (the report will be attached unedited to the final ICR; if the report is longer than ten pages, a summary should be provided)\. February 15, 1998 PLN to forward its comments, if any, on the draft ICR to the Bank\. March 1998 The ICR will be finalized and printed by the Bank\. Copies will be forwarded to relevant GOI agencies and PLN\.  - 29 - ANNEX 2 ANNEX 2: OPERATIONAL PLAN Transmission Network Maintenance on the Transmission network (included Substation and mobile Substation) in Java is managed by PLN P3B (Transmission and Load Dispatching Center)\. Patrols of lines take place on a regular basis and any deficiencies are noted and corrected\. In addition, a faults service is in place to provide rapid response to faults as they occur\. The maintenance and fault are conducted in accordance with the procedures for quality, reliability and efficiency indicators of electric supply\. The mobile substation were used for emergency condition as well as for temporary replacement of substation to be shut-down (due to construction or maintenance) and connection for new big consumers where the customer substation is not finished yet\. Reactive Power Compensation Maintenance on reactive Power Compensation in Java is managed by PLN P3B under request of the four distribution units\. Operational of these capacitors were augment about 10% voltage for network at south of Java area\. This incremental is not adequate to achieve standard operation due to delay of 500 kV transmission line construction Ungaran - Klaten which was planning be finished at the same time with this project (especially at South Central Java area)\. Technical Assistance The Technical Assistance program has been carried out for two studies\. The firs one is study about Site Selection and Feasibility Study for Thermal Power Plant in West Java\. The study was completed in March 1994 and was concluded that Pangkalan site is an optimum site and suitable for installation of steam coal power plant with ultimate capacity for 8 x 600 MW\. Pangkalan site is located in West Java Province, about 220 km from South East Jakarta or 40 km from Cijulang (Pangandaran)\. According to RUPTL 1997 which already submitted to GOI, Pangkalan Steam Coal Power Plant will be developed in 2005 for first unit (600 MW)\. The second is Study of the Long Term Development of the Transmission System in Java - Bali\. The study started on July 28, 1992 and was conducted using the total of 65 man- months\. The recommendations of the study are currently implemented on: 1\. 500 kV, the double circuit Transmission Line from Paiton - Kediri - Klaten which financed by IBRD 2nd Power T & D and partially by Export Credit\. Following by  - 30 - ANNEX 2 double circuit 500 kV from Klaten - Rawalo - Tasikmalaya - Depok financed by OECF and partially by Export Credit\. 2\. 150 kV, the suggested partly open operation on the 150 kV grid to avoid the increasing of short-circuit current has been adopted\. During the project implementation period, for all the construction activities, PLN was assisted by Consultants, i\.e\.: Ewbank Preece for West Java Project supervision, Fichtner for Central Java Project supervision and Newjec Inc\. for East Java Project supervision\.  -31- ANNEX 3 ANNEX 3: BORROWER'S OWN EVALUATION REPORT AN ASSESSMENT OF PROJECT, DESIGN, IMPLEMENTATION, OPERATION EXPERIENCE The main objective of the project is to support PLN and GOI in developing its power sector by providing reliable and efficient supply of electric power in the Java-Bali electricity system through the following endeavors: 1\. Ensuring adequate investments in power transmission facilities to expand, strengthen and upgrade electricity transmission system in supplying electricity to new consumers, and meeting the increasing demand for electricity from the existing ones\. With regards to the above investments, PLN has built 170 km 150 kV transmission lines, 12 km 150 kV underground cables; 15 New Substations, 2 New Gas Insulated Substations and two rnobile substations of 150/20 kV with total capacity of 1,190 MVA transformers, 52 extension Substations with total capacity of 1,870 MVA transformers and 350 MVAR capacitors for 40 Substations\. The project also supported the Industrial Consumers Connection Fund (ICCF) with a special fund of about US$6\.6 million which utilized mainly in West Java area\. 2\. To undertake the supervision and coordination of above projects, three consultants were assigned in this connection for three subcomponents, i\.e\. Ewbank Preece, Fichtner and Newjec respectively for West Java/ Jakarta, Central Java and East Java\. For the East Java subcomponent, the consultant completed their work in the end of 1994 which was in accordance with the original schedule, and the remaining construction supervisory work (only for installation of transformer) was completed by PLN staff\. The Central Java consultant contract was amended twice and finished in the end of September 1997\. The West Java consultant contract was extended once and ended in June 1997\. The consultants have played an overall supervisory and coordination role which was critical to the successful completion of the physical investment activities\. 3\. Engineering, design and construction supervision of 3 x 600 MW of the Suralaya Thermal Power Project (Unit 5, 6 and 7) financed by Bank loan IBRD 3349-IND has been successfully completed and remaining engineering activities as well as construction supervision were financed from the Bank loan IBRD 3501-IND for Suralaya Thermal Power Project\. 4\. Site selection and feasibility study for a new thermal power plant in West Java was completed in March 1994 with selected site for a 8 x 600 MW coal fired plant in Pangkalan, West Java\. 5\. Study for the long-term development of the transmission system in Java-Bali was completed with a final report submitted in February 1995 and revised in January 1996\.  - 32 - ANNEX 3 The study recommendations are being implemented particularly in finalizing the 500 kV backbone in Java\. AN ASSESSMENT ON COST AND BENEFITS, AND THE EXTENT TO WHICH THE PURPOSE/ OBJECTIVES OF THE LOAN HAVE BEEN ACHIEVED 1\. Substations with overload transformers were released by installing new transformers in new substations and additional transformers at the existing ones for spreading the load and anticipate the future growth load\. 2\. The bottle-neck transmission lines be released by constructing new transmission lines and substations\. 3\. To release the voltage drop (especially at South Java area), the voltage augment was araise by installing 350 MVAR capacitors in 40 Substations\. The standard voltage may be reached after the 500 kV Transmission Line through South Java installed\. 4\. The Consumers incremental in Java-Bali region area 1,250,248 customers in 1994, 1,769,023 customers in 1995 and 1,692,167 customers in 1996\. 5\. The peak load incremental in Java-Bali region are 1,308\.51 MW in 1994, 1,039 MW in 1995 and 1,904 MW in 1996\. Evaluation of the Borrower's own Performance 1\. During the project implementation, PLN has made its endeavor to improve the process\. However, delays occurred during the recruitment of Consultants and procurement processes\. 2\. The other delays during the project implementation was caused by PLN encountered in land acquisition and obtaining right of ways in West Java and Jakarta area\. The ffectiveness of the relationship among the Borrower, the Bank, and any corinanciers The relationship between the Bank and PLN was good\. Most of the problems encountered were clearly identified by both parties and relevant actions to solve the problem were promptly agreed and taken\. In particular, good mutual understanding was achieved by selecting least cost materials\.  -33- A,NNEX3 Key lesson learned 1\. To maintain the agreed project schedule and to minimize implementation delays, it is very important for PLN to improve it's internal procurement procedures and lobbying to the GOI\. 2\. For encountered land acquisition and obtaining Right of Way it's necessary to improve the relaLtionship between PLN and the affected people\. 3\. The project was a very complex one with many independent components\. A central project management within Supervision Division of PLN could have facilitated the overall project coordination and implementation\.  -34- ANNEX 4 ANNEX 4: CALCULATION OF ECONOMIC INTERNAL RATE OF RETURN (IERR) a! COSTS (US$ Million) Investment O&M Cost Fuel Cost cl Consumer Contflbuton Tota Year Genealon T&D Total Revaluation Constant Shtadow Current Constant Inr Incremental Current Constant Cost Index Price Prie bl 1983/84 10\.6 0\.0 10\.6 1\.947 20\.6 19\.1 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 19\.1 1984/85 12\.2 0\.0 12\.2 1\.875 22\.9 21\.2 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 21\.2 1985186 78\.8 0\.0 78\.8 1\.803 142\.1 131\.5 0\.0 0\.0 00 0\.0 0\.0 0\.0 131\.5 1986/87 102\.2 0\.0 1022 1\.629 166\.4 154\.1 0\.0 0\.0 00 0\.0 0\.0 0\.0 154\.1 1987188 387\.2 0\.0 387\.2 1\.494 578\.6 535\.8 00 0\.0 0\.0 0\.0 0\.0 0\.0 535\.8 1988/89 227\.0 0\.0 227\.0 1\.410 320\.1 296\.4 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 296\.4 1989/90 115\.8 306\.7 422\.5 1\.374 580\.4 537\.5 283\.6 389\.5 0\.0 0\.0 0\.0 0\.0 537\.5 1990S81 147\.2 2498 397,0 1\.298 515\.3 477\.2 335\.5 435\.5 46\.0 174\.1 (52\.0) (67\.5) 629\.7 199`192 530\.7 269\.7 800\.4 1\.242 993\.9 920\.3 374\.4 464\.9 75\.3 263\.3 (16\.6) (20\.6) 1,238\.3 1992i93 1,063\.3 746\.7 1,810\.0 1\.188 2,149\.4 1,990\.3 426\.0 505\.9 116\.3 343\.6 (62\.2) (73\.9) Z376\.4 1993S4 828\.5 538\.8 1,367\.3 1\.152 1\.574\.8 1\.458\.3 516\.5 594\.9 205\.4 578\.8 (147\.2) (169\.5) 2\.072\.9 1994 478\.5 991\.8 1,470\.2 1\.111 1,632\.9 1,512\.0 502\.3 557\.8 168\.3 274\.7 (191\.4) (212\.6) 1,7424 1995 806\.5 1,050\.5 1,857,0 1\.023 1,899\.7 1,759\.1 889\.3 909\.8 520\.2 555\.0 (267\.9) (274\.1) Z599\.2 1996 704\.9 15\.1 720\.0 1\.000 720\.0 666\.7 1,293\.0 1\.293\.0 9034 646\.3 0\.0 218\.4 1997 - - - 1\.000 1,293\.0 1,293\.0 903,4 559\.2 1,462\.6 1998 1\.000 1,293\.0 1,293\.0 903\.4 559\.2 1,462\.6 1999 - - - 1\.000 1,293\.0 1,293\.0 903\.4 559\.2 1,462\.6 2000 - - - 1\.00 1,293\.0 1,293\.0 903\.4 559\.2 1\.462\.6 2001 - - 1\.000 1\.293\.0 1,293\.0 903\.4 559\.2 1,462\.6 2002 - - - 1\.000 1,293\.0 1,293\.0 9034 559\.2 1,462\.6 2003 - - - 1\.000 1,293\.0 1,293\.0 903\.4 559\.2 1,462\.6 2004 - - - 1\.000 1,293\.0 1,293\.0 903\.4 559\.2 1,462\.6 2005 - - - 1\.000 1,293\.0 1,293\.0 903\.4 559\.2 1,462\.6 2006 - - - 1\.000 1,293\.0 1,293\.0 903\.4 559\.2 1,462\.6 2007 - - 1\.000 1,293\.0 1,293\.0 903\.4 559\.2 1\.462\.6 2008 - - 1\.000 1,293\.0 1,293\.0 903\.4 559\.2 1\.462\.6 2009 - - - 1\.000 1,293\.0 1,293\.0 903\.4 559\.2 1,462\.6 2010 - - 1\.000 1,293\.0 1,293\.0 903\.4 559\.2 1,462\.6 2011 - - - 1\.000 1,293\.0 1,293\.0 903\.4 559\.2 1\.462\.6 2012 - - - 1\.000 1,293\.0 1\.293\.0 903\.4 559\.2 1\.462\.6 2013 - - - 1\.000 1,293\.0 1,293\.0 903\.4 559\.2 1,462\.6 2014 - - - 1\.000 1,293\.0 1\.293\.0 903\.4 559\.2 1,462\.6 2015 - - - 1\.000 1,293\.0 1,293\.0 903\.4 559\.2 1\.462\.6 2016 - - 1\.000 1\.293\.0 1\.293\.0 903\.4 559\.2 1,462\.6 2017 - - - 1\.000 1,293\.0 1,293\.0 9034 559\.2 1\.4626 2018 - - - 1\.000 1,293\.0 1\.293\.0 903\.4 559\.2 1,462\.6 2019 - - - 1\.000 1\.293\.0 1,293\.0 903\.4 559\.2 1,462\.6 2020 - - - 1\.000 1\.293\.0 1\.293\.0 903\.4 559\.2 1,462\.6 av To maimLze compfarbiity, the methododogy used here fllows that in SAR\. 1997 prces are used 5hroughout bl Shadow pie fwactwforinvestrent = 0\.926 cl Data from PLN Statistics\. RKAP 1997\.  - 35 - ANNEX 4 ANNEX 4: CALCULATION OF ECONOMIC INTERNAL RATE OF RETURN (EIRR) a/ BENEFITS (US$ Million) Averge Total Not Year \. (t IneantSab _ (GIAl Tariff Revenbu Res4denti ln4 4 seneOt Befe ReekleeaI Comm\. lndu4toi P\.blie Tot Rekie\. Cm\.en,6aI hdirii Pub3c TeStl (UScMh) 4USS ) (US$ m) (US$ n) US$S) (US n) 1983194 0\.0 (19\.1 1I 4195 0\.0 (21\.2) 1985Is1 0\.0 (131\.5 1988187 0\.0 (154\.1 1987188 0\.0 (535\.8 198889 0\.0 0\.0 0\.0 0\.0 (298\.4 198990 5\.8891 1,5889 9,4764 1,558\. 18,487\.0 0\.0 0\.0 0\.0 0\.0 (537\.5 199011 ,694\.7 1,83\.3 1198s4\.8 18684\.5 22,043\.2 779\.5 270A 2,418\.4 107\.9 3,578\.2 5\.7 203\.3 56\.5 84\.8 324\.8 (305\.1 1991182 7,594\.0 2,238\.3 13,562\.5 1,583\.6 25,078\.3 1,728\. 809A 40806\.1 127\.0 8,811\.3 6\.3 419\.3 125\.3 109\.5 054\.2 (504\.1 1982183 9,571\.7 2,470\.1 15,088\.8 1J70\.8 27,837\.5 2,708\.5 901\.7 5,812\.2 150\.0 9,370\.5 8\.8 814\.2 108\.2 150\.4 900\.8 (1,415\.6 19934 9,679\.4 2,990\.5 18,8\.3 1,57\.9 31,213\.1 3813\.3 1,391\.6 7,39\.9 201\.3 ¶2\.748\.1 7\.0 895\.9 27t\.5 196\.7 1,389\.1 (703\.9 I9U4 10\.768\.7 3,278\.7 l8,748\.9 1,841\.1 34,637\.4 4,03\.8 1,709\.8 9,272\.5 284\.5 1¶8170\.4 89 1123\.0 355\.5 248\.5 1,727\.0 (15\.3 199 12,805\.6 3,944\.9 21,517\.8 2,084\.9 40133\.2 9,740\.8 2,378\.1 12,041\.3 509\.3 21,888\.1 7\.0 1,514\.5 489\.7 322\.7 2,325\.9 (234\.4 1998 14449\.0 4,924\.9 24,315\.5 229\.1 45,887\.9 0,582\.9 3259\.0 14839\.1 742\.5 27,420\.8 7\.0 1,906\.8 522\.3 397\.7 2a2B\.8 710\.2 1997 17,3108 5,402\.7 29,549\.7 2,899\.8 55,130\.0 11\.445\.7 3,833\.9 20,073\.2 1,310\.2 3,6622\.9 94 2,332\.2 829\.8 538\.0 3,700\.0 2,237\.3 19s 17,3108 5\.402\.7 29,549\.7 2,89\.8 55,130\.0 11,445\.7 3\.833\.9 20\.073\.2 1,310\.2 36\.992,9 8\.4 2\.34t\.4 029\.8 539\.0 3\.714\.2 2,251\.6 I99 17,310\.8 5,402\.7 20,949\.7 2,989\.8 55,139\.0 11,445\.7 3,s339 20,073\.2 1,310\.2 3,6\.92,9 8\.4 2,34S\.4 829\.8 538\.0 3\.714\.2 2,251\.6 2000 17,310,8 5,402\.7 20,549\.7 28W8\.8 55,130\.0 11445\.7 3,a33A 20\.073\.2 1,310\.2 38,882\.9 84 2\.346\.4 829\.8 538\.0 3\.714\.2 ,251,8 2001 ¶7\.310\. 5\.402\.7 20,549\.7 2,8S6\.8 55,130\.0 1,1445\.7 3\.833S9 20,073\.2 1S310\.2 3e,662\.9 8\.4 2,346\.4 929\.8 538\.0 3\.714\.2 2,251\.8 2002 17,310\.8 5, 02\.7 20,94\.7 2,866\.8 55\.130,0 11,445\.7 3,833s 20,073\.2 1,310\.2 3e\.,62\.9 8\.4 2\.348\.4 829\.8 038\.0 3,714\.2 2,251\.6 2003 17\.310\.S 5,402\.7 28,594\.7 2,888\. 55,030\.0 11,445\.7 3,833\.9 20\.073\.2 1310\.2 38,S62\.9 8\.4 2,346\.4 829\.8 538\.0 3,714\.2 2,251\.8 2004 17,310\.8 5,402\.7 29,4Y\. 2,899\.8 55,130\.0 11,445\.7 3,833,9 20,073\.2 1,310\.2 3e,e8239 8\.4 2,346\. 829\.8 538\.0 3,714\.2 2251\.6 200s 17,310,8 5,402\.7 20,949\.7 2,869\.8 55\.130,0 11,445\.7 3,833,9 20,073,2 1,310,2 39,962\.9 8\.4 2,348\.4 8298 538\.0 3,714\.2 2,251,6 2008 17,310\.8 5,402\.7 20,549\.7 2,BS698 55,130\.0 1\.1445\.7 3,833A 20,073\.2 1,310\.2 3\.,682,9 8\.4 2\.348\.4 829,8 539\.0 3,714,2 2,251\.8 2007 17,310\.8 5\.402\.7 20\.549,7 2B\.S698 55,130\.0 11,445\.7 3\.8332 20,073,2 1,310\.2 39,6g2\.0 8\.4 2,346\.4 829\.8 538\.0 3,714,2 2,201\.6 200 17,310\.8 5,402\.7 28\.54,73 23 \.8 55,130\.0 11,445\. 3,8339 20\.073\.2 1\.310\.2 30\.882,8 5A 2\.3484 829\.8 53290 3\.714,2 2251\.6 2009 17,310\.8 5,402\.7 20,549\.7 2,888\.8 55,130\.0 11\.445,7 3,8339 20,0732 1,310\.2 3e,992\.9 0\.4 2,348\.4 929\.8 53280 3\.714\.2 2,251\.8 2010 17,310\.8 5\.402\.7 20,949\.7 2,86998 55\.130,0 11\.445\.7 3,e33\.9 20,073\.2 1,310\.2 39,6e2,9 8\.4 2,348\.4 829\.8 538\.0 3,714\.2 22561\. 2011 17,310\.8 5,402\.7 20,949\.7 2,888\.8 55,13090 11\.445\.7 3,S33,9 20,073\.2 1,310\.2 30,682\.9 8\.4 2,34\.4 829\.8 523\.0 3,714\.2 2,251,8 2012 17\.310\.8 5,402\.7 20,598\.7 2,996\.8 55,130\.0 11,445\.7 3\.833\.9 20\.073\.2 1,310\.2 38,82\.9 8\.4 2,348\.4 a29\.8 538\.0 3,714\.2 2,251\.8 2013 17,310\.8 5,402\.7 29,4987 2,868\.8 55,130\.0 11\.44S\.7 3,83329 20,073\.2 1,310\.2 3e,e62\.9 9\.4 2,348\.4 829\.8 538\.0 3\.714,2 2,251\.8 2014 17\.310\.8 5,402\.7 20,549\.7 2,888\.8 55,130\.0 11\.445\.7 3,833,9 20,073\.2 1,310\.2 38,992\.9 6\.4 2\.346\.4 829\.8 538\.0 3\.714\.2 2,251\.6 2015 17,310\.8 5,402\.7 29,849\.7 2,866\.9 55,130\.0 11,445\.7 3,833, 20,073\.2 1,310\.2 32,992\.9 8\.4 2,348\.4 820\.8 538\.0 3\.714\.2 2,251\.8 2019 17,310\.8 5\.402\.7 20,\.49,7 2,988\.8 55,130\.0 11,45\.7 3,833S9 20\.073\.2 1,310\.2 3\.,892,9 8\.4 2,348\.4 820\.8 538\.0 3,714\.2 2,251,8 2017 17,310\.8 5,402\.7 20a\.48\.7 2\.866\.8 55,130\.0 11\.445\.7 3,833S9 20\.073\.2 1,310\.2 38,e2\. 8\.4 2\.346\.4 829\.8 538\.0 3,714\.2 2251\.8 2018 17\.310\.8 5,402\.7 29,549\.7 2,\.98\.8 55,130,0 11\.445\.7 3\.833,9 20,073\.2 1\.310,2 3206\.,86 e\.4 2,348\.4 8329\.8 538\.0 3\.714\.2 2,251\.8 2019 17,310\.8 5,402,7 20,549\.7 2,899\.8 55,130\.0 1¶,445\.7 3,33,9 20\.073\.2 1\.310\.2 30,e82\.9 6\.4 2\.348\.4 829\.8 538\.0 3,714\.2 2,251\.6 2020 17\.31098 54027L 2049\.7 29886\. 55\.130\.0 1144g\.7 38\.33\. 20073\.2 1\.310\.2 32,t62\.9 64 2346\.4 8298 538\.0 3714\.2 2251\.8 d/ Ad8Oosnal e \.ornic beft: IEIR * 17\.7% Reidentbal Sc 7\.2SmW 1nktarl t Sc 2\.63hWH  - 36 - ANNEX 5 ANNEX 5: PLN-INCOME STATEMENT (RP\. BILLION) 91192 9V93 93194 1994 1995 1996 1997 SAR Est\. Actual SAR Est Actual SAR Est Actual SAR Est Actual SAR-Est Actual Actual Est SDs~~~~~~~~~~L M Q 4in UK Lm 62 5\.252 7 r2 Lto gmst7 EMImI mw\.w\. 3\.921 4\.003 4\.790 4\.794 s\.sms 522 8\.442 5\.133 7\.704 6\.110 9\.418 11,250 C9r\.Wpum\.e 54 uw 107 118 121 122 135 140 15O 119 1ea 18e 228 22a - C,camercutbudwa 70 78 96 84 143 170 171 n}hw 48 45 44 5 53 se 57 -pemroi axpiz 21 am sM uz Ln LM2 17 2 Ll LSM Fud B hjb4ftg 1\.6,72 1,829 1\.50 2\.132 2,049 2793 2,224 2\.048 2\.80 2\.970 32355 4\.147 P p\.Nhat 15 23 1t1 20 42 47 1s sB 15 77 193 253 opwaPme 847 847 714 92o 21 1\.056 1\.028 1\.028 1\.187 1\.5s7 1\.7S7 2Z129 p825mB meow 387 308 413 427 484 504 622 473 se 8 758 875 1\.04 RtMmatvaw viatas 290 339 301 49S 357 582 496 5e 579 8a09 912 1\.083 DW"BM so2 830 991 712 1,23 909 1\.581 s99 1\.997 1\.587 1\.983 2381 121 162 129 203 136 265 144 249 152 356 404 476 ill if! _ 4 S a 2 LSe 112 £2 11 Zi wwN opw88ag 42 155 54 202 72 194 93 ¶89 119 180 492 210 NawM5MoUpzo ms 74 129 82 173 90 1s1 9S 153 107 210 281 326 NXe~~~~~~~7 113 1\.41 54 1149 1\.52 1\.23 Mi £221 1221 2\.22 1\.1 Int4t g 6 to op>w r 253 370 2e5 391 242 443 24< 398 358 718 1,041 1\.120 a r\.4a\.a 421 53 2sa 152 1\. 292 1\.21 13 1\.S 1221 1\.214 li CcewPO tax 0 0 0 0 0 0 0 0 0 0 0 0 Nd\.8araa1\.u b 21 133 2o54sa8 g152 142 22 1 5I 15 _ 12 23  -37- ANNEX 5 ANNEX 5: BALANCE SHEET (RP\. BILLION) 91122 922t93 93194 \. 9,94 9'5 _ s5 I __ SAR Est\.Act SAE ESL Actual SAR ESt ACtUal SAM EstAtSctu al tual Actual st\. ASI! FtxMAttds 1tB 15sa 27 1 ZLfI am 2111 371 ALMl D4M1 ALM 5 NaloijA*trvatt 13J8O 10,513 15,887 13,441 22,135 17A04 25\.00 18\.45d 30\.782 27\.211 2i\.353 3\.884 Gm= aro mn Samoa 19,345 13,942 22,752 17,572 30\.456 22291t W5\.58M 19\.978 43,383 2s\.774 32,747 42,489 A4znuatiedr\.a8808 5,535 3\.429 8\.785 4,124 8,321 4\.987 10\.251 520 12,001 1,553 3\.3SS 5\.005 Ws4iAm rgi 5\.898 5,043 8\.80, 8,258 8\.85 9,927 11,722 12,904 15,138 13\.521 17\.708 17,003 CuffwA Asset l2 8m LR L1 11 1 1231 152 28 MM Mi 4m Cash 18 804 377 91 425 853 488 754 s59 840 1St40 023 Gromaccons g,e\.abl\. 418 503 484 583 583 e7e 870 784 762 go0 A1osmutbrbaddobt (13) (1S) (17) (20) 23 N atee\.88m48e 419 491 484 589 683 859 870 784 782 885 52; 1,110 Gtn n 377 413 340 588 387 779 487 790 517 735 Am0sAte8VowWerOitormt (4) (5) (7) (a) (7) Not tWnterlz 377 408 340 583 387 773 467 782 517 728 as1 853 OOtwhe muwast 103 178 108 182 113 71 118 82 124 1l9 27 1\.544 Othw Asses Le la zt an Zn tm an zu an an il S lgt8nd8s 0 0 15 57 120 110 254 418tt ut, 154 G11 I78 872 570 814 477 TOWAssats32114 1 21\.17 Jug4 1ae 82271 sUrn 4&8 1J140 42 Sim1 MM EQUT)EAN L-lUTDn Pai44acaptal 13,371 9\.s81 15,089 11\.891 18\.955 15\.310 19\.910 19294 21\.260 22,408 2e,729 29\.222 \.uwMne 6\.ty 13171 9,s50 15\.000 11\.ee1 16,955 15\.318 19\.010 19\.294 21\.260 22,4as 28\.729 25\.22 ceigp* dse" 908a 0\.147 ,153 9,022 8\.853 9,822 6\.853 10\.552 13\.000 11\.202 13\.000 13\.000 13800 Addlain GwA \.tty 5\.224 2,038 6\.067 5\.228 7,133 s,882 8\.4 8,294 10,0e8 SA,8 13\.725 18,222 Co m,emk 0 0 0 0 0 0 0 0 0 0 ° ° Raingdeumgs 214 729 9W8 1\.185 2\.120 1\.347 3\.481 289 5\.389 1\.020 1,737 1,\.74 -s=l~~~~~! 12 MB 1e47 1\.121 1421 1\.21 1\.31 14 LOl 181 110 1M 5biN _ 2 1 UK LI U2zi 7, 11453 1741 (2120 1m 121 13 21 LMTD&bmaans(t axM p nom) 4\.798 4,1M8 7\.488 5\.031 10,483 8,185 13\.180 6\.930 17847 0,529 148900 18\.187 Lorng4mmo o(LTD) 4,798 4\.195 7\.488 4,731 10,483 5\.285 13,180 e\.030 178047 7031 12,210 18,589 80nds 300 0oo 900 1,898 2,508 2\.598 OtI*rUabd0w 502 884 803 3,847 723 4,407 s85 4\.107 1\.041 5\.oDe 2\.012 2\.5so Coftnnw Oppms 453 534 701 840 1\.03) I'M85 1\.303 Ots 231 3,113 3\.708 3,347 3\.978 1,817 1\.571 s munS 1\.182 1411 HE2 1\.22 £811 Ln I211 i12a g212 2, 2120 21 Cu,tponionLTD 388 402 320 448 328 487 4S4 540 4S9 1\.227 803 1\.408 Aceeun"DeW psymi542 859 58e e81 597 583 027 879 859 9Ol 744 730 Oth\.C\.n\.bt\. 03 437 88 598 104 883 188 1\.907 114 1,803 1\.380 1,374 Lai9ites letoRo 81 7 85 141 348 457 ln*811mpa4ys 353 415 414 552 934 ahw 77 85 108 1\.007 293 TWmucva,Ad \. 21\.1a 1 L 24\.3$ 31401 21a41 St,"j; 2t0 i 40 gm 0L 1  - 38 - ANNEX 5 ANNEX 5: PLN-FIJNDS FLOW STATEMENT (RP\. BILLION) 21h22 R2tS WNM 10s4 199S1S0 19 JARia Acu\. s ___\.UK ______ j 1967 SAR Est Aetua SAR Oat hE etuA& SAR Fst Actzu2 SAN t Acku,tl SAR Esg Actuml Actual Evt LB LB t LB LB LIE M4 lilt LB L 4447 4B opwP 6e ns gm J\.304 002 0,0m 972 o273 1,760 2\.064 1\.92 ith t ) 2s 29 1 I5 l (0) 220 (11(8 so 121 996 I9m on Is3 s 620 159 57 1,043 1\.63 2210 orw 1SO Ce 1n7 232 227 s20 204 450 277 #4e Su 062 D9ff\. C w_caDb 100 42 96 162 107 362 1009 300 04 20 370 24" Ca,w,mv44p_ 9I 54 101 91 120 167 146 141 173 091 194 100 DDWlk" gourw m la Lii I l \.iUI n an L D 63 GM41 03 a o 6gm 62 o 072 398 9S2 076 2,115 2 2Z3 - h*a\."g"5d*mwa 213 243 299 207 242 293 244 2z9 388 47 1,041 1,120 Dt 320 290 3 2220 463 V2 10 494 79 1\.079 W00 :Ed~~~~~ ~ ~ ~ ~ ~~~~~~~~~~~~~ qO 0 200 C\.P\.M*m a~~~~~ 00 0 0 0w 192 (1,737) 19 (7 s 1\.20 70 607 422 10\.4 289 g16 72n h8 5s 113 03 (2\.2e 11 (Z27) 5 (1\.937) o00 (222 400 702 Ch\.I W,t3et4 = \. 0\.1 a0,\.paOal( 0 (41) 3 se 11 21 (537) 1DS 147 S7 1\.s 0059\. 174 C2\.340 (4 (\.00) (290 (4) (g7m f_~~~~~~~~~~~~~~l 2= mm mu 2 UR im m M a LB II UR11 LEE UKELI LI LB LEE uS EL 0\.ma\.a \.q\.4y 1\.246 2274 675 2\.730 0 344 3\.240 850 4\.477 4\.243 2492 OIP s 6 97 1\.025 2\.186 1,292 P\.dA \. d 4b16p8 #mft 1,70 1\.0 497 2\.6te 3X452 1577 1,290 c _ "Ay0 a 0 a a a - o Lowe as9 603 3069 1\.236 3297 1,000 3\.0 "a 5\.102 214$ 3,4S7 499 so54 \.XL 9*) gas 3es 3\.056 on X 2i7 1,000 31025 9on 5\.12 1,147 2\.797 4,5d Ban* 0 0 0 00 0 Mc0 0 0 0 egg 700 300 12OL22MU am anI mu LB WI LB Liui LEE LE IZ LuN LB *-inteixLe UN 2m Am km I" LE Lo tf4 LK LB US LEMt Ca 090 06'49 3,372 3X722 S\.1 a79 50794 0 172 5152 9\.458 sse2 7\.405 7\.S9 458495059994a9919509 229 11 24 78 436 316 us 737 461 a67 \. 1\.292 mcn) i iE in A gm 2 Ii D 1924 Liu 1\.111 gUIm C558006\.5\.9\.67W 062 706 199 804 277 v1e 425 853 496 704 "a 0\.960 IS9 904 277 et9 425 899 469 754 659 649 I\.m0 821  MAP SECTION  IRD 22597 1i 1O INDONESIA POWER TRANSMISSION PROJECT MAJOR POWER PLANTS AND MAIN TRANSMISSION LINES UNDER PROPOSED DEVUELPET rasliOnies EXISTING CONSTRUCTION PROJECT OEVELOPMENT 500 LV SUMATERA 50k -SO kV ond 70 kV Power Stations 500 kV SubstIaions Er obyarJAKARTA S* 150 kV and 70 kV Substations W\.(iod\. Sre mmre I-P Petrokimi;1 C S t- -- -- S-S K,d,uay S XIV PLN's Wiloyah Numbers ,R\. 1 ,, nod\.nrnkk * Wilcyah or Distribusi Headquarters hl, rg,}l1\e C S i I Sgk mdi Indirmosu -W\.-y \. PUN', Wilayah Boundciries W ; ,1 4sL ~~~~~~~~~~~~~~ V ' Ic3Z uoreNn rl\.e\. 1epol pomolP& g e DOD O DemuR dut ooo C lge,e e le 3 \9uC IF <1 _ s bmrn wDlr -lbn Raw JAWA BARAT Enejo JAWA TENGAN en\.n,SURABAYA Be\."kbn *we wo t sh s st- ewssswb XIV V\.n1DD3' \W ,I m t bug\ Ugao ne o5uekl TNd RsanPs ;r>us wyrmt sumodro \4 mDIDyp \.*- PuntOkeltl |cO hP____ i_____ ___i Gpmbp \. *\. CpIon --GrmdSO xi P \. knTnknlr *\.Mn' 3ate iln a,tF Paraapth k-~ ' Rtj<, Elaunk (IMederl) >*, _ _<*<r1rX E oNg-l 106\. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Wae\.URd d 'WW \. L = = = = = _ | oWomxterl , JAWA TIMU9 /Y bWeto \ 4 Probollnggo poiton /~~~~~~~IAA TMUR 3 Pabolagg Pa JAKARA A,ag a 'I\.,VX Cengko\.eng r K _mcy_ -on Tgnl hg z K EIJn Ingv)eP P D ] 1> -ttoromdkD es b _ _ , ; q p^^ dJA6 aR t l \KP d -atu r Va S E M A R A N G S '>lb 9 ;mdku nd9> / PeLrok I T 10 w C SmPik Tarneadag Otnba P\ a F,,, I t s r b9 -- Dond, X C l15ngsl F > e o st Somorong l Xmodz \ g SmponZ e O StZ IL]D I10 KILOMETERS X \\S;r Nabaldar \o 4o eb--- tb ID l MILES 1 4' 9 112 PeERUARY 199

REVIEW

P070088

Document of The World Bank Report No: 32340 IMPLEMENTATION COMPLETION REPORT (SCL-45820) ON A LOAN IN THE AMOUNT OF US$16\.1 MILLION TO THE REPUBLIC OF CROATIA FOR A TRADE & TRANSPORT FACILITATION IN SOUTHEAST EUROPE PROJECT November 8, 2005 Infrastructure Sector Unit Europe and Central Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective March 2005) Currency Unit = HRK HRK I = US$ 0\.174 US$ 1 = HRK 5\.747 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS ASCD Automated System for Customs Data APL Adjustable Program Lending BCP Border Crossing Point CCE Croatian Chamber of Economy CDRC Customs Directorate of the Republic of Croatia EU European Union ECMT The European Conference of the Ministers of Transport FMS Financial Management System GDP Gross Domestic Product IRU International Road Transport Union LACI Loan Administration Change Initiative LAN Local Area Network MEPZ Ministry of Environmental Protection and Zoning MOE Ministry of Economy MOF Ministry of Finance MOU Memorandum of Understanding PIT Project Implementation Team RSC Regional Steering Committee SAD Single Administrative Document SECI Southeast European Cooperative Initiative SOE Statement of Expenditures SME Small and Medium Enterprises TIR Transport International Routier TOR Terms of Reference TTFSE Trade and Transport Facilitation in Southeast Europe UNCTAD United Nations Conference for Trade and Development UNECE United Nations Economic Commission for Europe WAN Wide Area Network Vice President: Shigeo Katsu, ECAVP Country Director Anand K\. Seth, ECCU5 Sector Manager Motoo Konishi, ECSIE Task Team Leader/Task Manager: Paulus A\. Guitink, ECSIE  CROATIA TRADE & TRANSPORT FACILITATION IN SOUTHEAST EUROPE 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 5 5\. Major Factors Affecting Implementation and Outcome 15 6\. Sustainability 17 7\. Bank and Borrower Performance 18 8\. Lessons Learned 20 9\. Partner Comments 22 10\. Additional Information 23 Annex 1\. Key Performance Indicators/Log Frame Matrix 24 Annex 2\. Project Costs and Financing 25 Annex 3\. Economic Costs and Benefits 27 Annex 4\. Bank Inputs 30 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 31 Annex 6\. Ratings of Bank and Borrower Performance 32 Annex 7\. List of Supporting Documents 33 Annex 8\. Borrower's Evaluation Report 34 Map IBRD Nos\. 31815R and 31814R  Project ID: P070088 Project Name: TRADE & TRANSPORT FACILITATION IN SOUTHEAST EUROPE Team Leader: Paulus A\. Guitink TL Unit: ECSIE ICR Type: Core ICR Report Date: November 14, 2005 1\. Project Data Name: TRADE & TRANSPORT FACILITATION IN L/C/TF Number: SCL-45820 SOUTHEAST EUROPE Country/Department: CROATIA Region: Europe and Central Asia Region Sector/subsector: Central government administration (100%) Theme: Regional integration (P); Infrastructure services for private sector development (P); Other accountability/anti-corruption (P) KEY DATES Original Revised/Actual PCD: 01/20/1999 Effective: 05/02/2001 Appraisal: 06/08/2000 MTR: Approval: 10/26/2000 Closing: 03/31/2004 03/31/2005 Borrower/Implementing Agency: REPUBLIC OF CROATIA/CUSTOMS DIRECTORATE Other Partners: Ministry of Finance/General Directorate of Customs/General Roads Directorate STAFF Current At Appraisal Vice President: Shigeo Katsu Johannes F\. Linn Country Director: Anand K\. Seth Andrew N\. Vorkink Sector Manager: Motoo Konishi Eva Molnar Team Leader at ICR: Paulus A\. Guitink Gerald Ollivier ICR Primary Author: Paulus A\. Guitink; Sati Achath; Madhu Nair 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: S 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 US$22\.0 million project (Loan US$13\.9 million) were to: (i) reduce non-tariff costs to trade and transport; and (ii) reduce smuggling and corruption at border crossings\. The project formed part of a regional program for Trade and Transport Facilitation in Southeast Europe (TTFSE) that aimed to strengthen and modernize the customs administrations and other border control agencies in Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the former Yugoslav Republic of Macedonia, and Romania\. Serbia and Montenegro, first, and then Moldova joined the program later, bringing the total to eight countries\. The Program was the result of a collaborative effort among the Government of Croatia, the Bank, the European Union (EU) and the United States of America (USA)\. The objectives were straightforward, clearly stated, important to the country's economic and social development, and realistic in scale and scope\. These objectives were expected to be achieved by: (i) supporting Customs reform; (ii) strengthening mechanisms of interaction and cooperation between private and public parties at regional, national and local levels; (iii) disseminating information and providing training to the private sector; (iv) financing infrastructure and equipment at selected border crossings; and (v) implementing, at pilot sites, an integrated set of new customs procedures, information technology, human resource management techniques, supporting infrastructure, and cooperation mechanisms for agencies at border crossings\. The project was consistent with the Bank's Country Assistance Strategy (CAS) for Croatia, discussed by the Board on June 3, 1999 ( Document No\. IDA/ R99-89; IFC/R99-75)\. It supported CAS's four main objectives, which underpinned the design and implementation of an export oriented development strategy: (i) reducing the size of the public sector and increasing efficiency; (ii) improving governance; (iii) creating conditions for competitive real sector improvements; and (iv) containing poverty\. The project was especially in line with the first three objectives, which aimed to facilitate trade, improve the environment for the private sector by reducing corruption and increasing transparency and strengthen public finance\. These elements were essential to move to export-oriented development and offer reliable, efficient and competitive transport connections to serve private sector activities\. The combined effect of institutional strengthening and border crossing improvements was expected to remove some of the existing excess costs linked to trade and transport, thus providing an environment for faster development of the private sector\. The project design reflected lessons learned from earlier projects in Croatia and other countries\. For example, the Transit Facilitation Project in Macedonia highlighted the need to: (i) tailor the complexity of the project's design to what can be achieved under a single loan; (ii) ensure the capability of implementing agencies; (iii) address issues perceived as real priorities by the borrower; and (iv) maintain flexibility to ease implementation\. The Turkish Public Financial Management Project underlined that involvement of high level political decision-makers was important for achieving the project objectives\. Finally, the project design assumed that the reforms to be undertaken were the beginning of a longer reform process that would continue beyond the life of the project for a total of eight to ten years\. The project envisioned the following social and economic benefits: (i) Customs reform and transparent Customs procedures would lead to lower trade and transport costs, which in turn would reduce the prices of imports for consumers and make exports more competitive; (ii) the reduction in border crossing delayswould lower the cost of inputs required for local manufacturing, with a corresponding creation of new jobs; (iii) the TTFSE website would allow access to all information related to border crossings in the eight countries involved in the program, improving transparency, and reducing opportunities for illegal payments\. - 2 -  The project took appropriate measures to mitigate the following four major risk factors that could affect implementation: (i) Cooperation between border agencies faces inertia and strong resistance:the high-level coordinator identified for each participating country was given the authority to request meetings gathering involved agencies; (ii) Regional cooperation issues prevent the achievement of regional goals: the Memorandum of Understanding (MOU), the Regional Steering Committee (RSC), the regional website, the benchmarking and the willingness to access the EU was expected to create a favorable environment for proper cooperation; (iii) The willingness to introduce significant changes at pilot sites across agencies is low:there was a close system of monitoring at pilot sites leading to definition of Action Plan whenever performance was not at par with targets; and (iv) Coordination by the RSC is not effective and does not receive participation by donors: donors were an integral part of the project, and the RSC included key decision-makers of each program country and observers from donor countries\. The project was not very complex in terms of design or implementation\. It was very demanding, however, because: (i) it required a high level of government commitment and good intra-, inter- and cross-border agency coordination ; (ii) it required coordination with other complementing projects financed by other donors, including the USA and the EU; (iii) re-orienting Customs to become a more service oriented organization requires a change in culture which does not happen `overnight'\. 3\.2 Revised Objective: The objectives were not revised\. 3\.3 Original Components: The project consisted of five components, all related to achieving the project's objectives\. These were standard components replicated in all TTFSE projects\. The Project Implementation Team (PIT) had sufficient technical, administrative and financial capacity for successful project management\. Component I: Institutional Reform on Customs Procedures (US$1\.4 million: 6\.3% of the total project cost) This component included: (i) technical services to define and prepare required legal amendments, bylaws and administrative regulations to fulfill customs functions while facilitating legitimate trade, in cooperation with other agencies; (ii) technical services to prepare and introduce new customs procedures and documentation; (iii) technical services to reform the CDRC; (iv) technical services to monitor CDRC performance; (v) technical services to streamline operations at three border posts and one inland terminal on a pilot basis; and (vi) training to enhance inter-agency awareness and cooperation\. This technical support would complement ongoing Croatian efforts to implement the CDRC strategy\. Component II: Trade Facilitation Development (US$0\.4 million: 1\.8% of the total project cost) Activities under this component consisted of: (i) provision of conventional and distance learning training to participants in trade, logistics and international freight transport through the Croatian Chamber of Economy (CCE); (ii) improvement of cooperation between public and private parties using a virtual forum1o; and (iii) creation of a website and provision of corresponding equipment to support information availability\. - 3 -  Component III: Support to CDRC Information System Improvement (US$8\.0 million: 36\.3% of the total project cost) This component consisted of: (i) software and technical services to enable exchange of all information related to trade (Electronic Data Interchange, electronic signature, digital payment) with other border inspection agencies, users and neighboring countries; (ii) hardware needed to improve the current information system (equipment availability and telecommunication) at border crossings and customs offices; and (iii) a regional experience-sharing program on integrated systems for border agencies to stimulate regional and interagency cooperation\. Component IV: Improvement of Border Crossing Facilities (US$11\.5 million: 52\.2% of the total project cost) This included improvements of the border crossing facilities at Slavonski Brod, Gunja, Maljevac and Samac\. These border posts are located on the border with Bosnia and Herzegovina\. The component consisted of paving and service lanes, the provision of building modules and buildings, lighting and canopies, and drainage and other utilities at the four border stations\. Component V: Program and Project Implementation (US$0\.7 million: 3\.2% of the total project cost) The component included the services required to support implementation of the program\. At the regional level these consisted of providing secretariat services to the Regional Steering Committee (RSC) and at the national level, services included financing auditors and procurement consultants, PIT staff, establishment of a financial management system, and training the PIT staff\. 3\.4 Revised Components: The components were not revised\. 3\.5 Quality at Entry: Satisfactory\. There was no official assessment of the quality at entry by the Quality Assurance Group (QAG)\. The ICR deems the quality at entry to be satisfactory and the project as well conceived\. As mentioned in the earlier section, the project objectives were consistent with the CAS and the Government priorities, and met the critical needs of Croatia's trade and transport sector\. Since the PIT had the technical capacity, the quality of project design was generally adequate to meet the project's objectives\. During preparation of the project, major risk factors and lessons learned from other earlier projects in Croatia and other countries were considered and incorporated into the project design\. The project was prepared in collaboration and consultation with exporters; importers; producers and consumers; road transport operators; freight forwarders/shippers; traders organizations and Cro-PRO (A professional body bringing together public and private stakeholders, who seek to improve international trade through the simplification and harmonization of procedures and practices in administration, commerce and transport,in accordance with UN/CEFACT guidelines); Ministry of Economy; foreign investors; Ministry of Finance and the CDRC; Ministry of Agriculture as well as sanitary and veterinary inspection agencies; Ministries of Interior and the Border Police\. The European Commission, the US Government; IRU and FIATA; World Customs Organization (WCO); private companies, and population in - 4 -  the vicinity of borders\. This kind of extensive stakeholder consultations, and the participatory process in project preparation substantially contributed to the quality and readiness at entry\. During project preparation, three project designs were considered: Regional Program of Investment Projects: A regional program of coordinated border crossing facilitation projects was more advantageous and was selected since it was expected to: (i) generate substantial benefit spill-over to customs users, producers, and consumers in the trade partner countries of Croatia; (ii) allow the program countries to share information and introduce more consistent customs and border control procedures/operations; (iii) be flexible enough to respond to country differences, the pace of European integration, and the impact of the EU enlargement process; (iv) enable the Bank to coordinate with other donors that also implement regional programs; and (v) minimize project implementation/supervision costs by near-simultaneous implementation\. Separate Individual Projects Carried Out by Each Country: The possibility of preparing independent projects for each participating country was reviewed and rejected since the achievement of overall project objectives would be greatly aided by simultaneous standardization and harmonization of cross-border institutions, operations, and legal frameworks among countries and with the EU\. Regional Adaptable Program Lending (APL): A regional or "horizontal" APL, would have enabled sequential entry of countries in the Program\. This horizontal APL, however, was judged to be unfeasible because: (i) such delegation by the Board was thought unlikely; and (ii) the determination of the future value of performance indicators to include potential borrowers to the program would have been a delicate and risky task, given the inherent complexity of the program\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective: Satisfactory\. The project met its development objectives to: (i) reduce non-tariff costs to trade and transport; and (ii) reduce smuggling and corruption at border crossings\. This is evidenced in the following discussion of performance indicators\. After about four years of implementation, the project resulted in positive achievements such as: (i) significant reduction of waiting time at both the borders and inland clearance terminals as a result of streamlined procedures, introduction of selectivity and risk analysis, and better inter-agency cooperation and awareness; this is reflected below in the indicators' results; (ii) improved dialogue with Customs administrations in Southeast Europe (SEE) region, and in particular with neighboring Serbia, Montenegro, Bosnia and Herzegovina, leading to joint border control teams; (iii) increased revenue collection as shown by the national performance indicators; (iv) constant monitoring of performance through indicators leading to the building of a regional data base; and (v) a reduction of smuggling through use of risk analysis and selective examination and border control equipment\. However, full implementation of the risk analysis strategy was delayed and only started in October 2004\. The full roll-out of the strategy is ongoing and it is expected this will reap further benefits in reduced waiting time and smuggling\. Anecdotal evidence has shown that through supporting electronic data interchange, the project has enhanced processing transparency, thus reducing opportunities for corruption when transferring information to Customs at border crossings as well\. Further strengthening of the Customs Information system ­ such as implementation of the 4th IT package foreseen under the project but delayed, as well as enhancing inter-agency information exchange will further reduce corruption opportunities\. - 5 -  These indicators enabled the Customs administration to measure its performance over time\. Additionally, and equally important, the performance indicator database enabled comparison of Customs (and border) performance among neighboring countries against benchmarks; (v) user surveys published for 2002 and 2003 on the TTFSE regional website; (vi) training of SMEs' staff through the Trade Facilitation component; (vii) development and maintenance of a regional website on trade and transport facilitation ( http://ttfse\.org) for the benefit of the trading community, transport operators, and foreign direct investors; and (viii) favorable preliminary evaluation of the economic impact of the regional program\. The overall project risk rating was modest; however, some such specific risks as resistance to cooperation by some border agencies remained well into project implementation\. In mid-2002 and mid-2003 the project encountered several short-term problems\. These were raised in supervision reports to management, and were quickly resolved\. The closing date of the project was extended by twelve months in order to enable completion of the paperless transaction package\. - 6 -  A\. Customs Modernization Indicators 1999 2000 2001 2002 2003 2004 Act\. Targ\. Act\. Targ\. Act\. Targ\. Act\. Targ\. Act\. Targ\. Act\. Development Objective Achievements Revenue Collected/Customs Staff 650 700 684 750 746 800 1092 850 954 900 1111 (US$000) Total CCA Cost/Revenue 2\.52 1\.5 1\.76 1\.5 1\.6 1\.5 0\.85 1\.5 1\.14 1\.5 1\.19 Collected (%) Salaries/Revenue Collected (%) 1\.2 1\.2 0\.95 1\.1 1\.2 1\.0 0\.56 1\.0 0\.93 1\.0 0\.94 Trade Volume/Number of Staff 2\.5 2\.5 3\.7 2\.6 4\.1 2\.7 3\.6 2\.9 4\.3 2\.9 5\.25 (US$000) Annual Number of 420 440 568 500 422 800 310 1000 312 1200 547 Declarations/Custom Staff Value of Recorded Imports (US$ 4,300 4,530 4432 4800 4127 5050 3650 5340 4500 5590 5800 mil\.) Value of Recorded Exports (US$ 7,800 8,160 7923 8550 7539 8950 7125 9330 9300 9730 10\.7 mil\.) The revenue collected /customs staff increased from $650, 000 in 1999 to $1\.1 million in 2004\. The significant increase in revenues collected by Customs can be attributed to both acceleration in trade/imports, and to improved performance of Customs staff in the detection of irregularities and smuggling through streamlined procedures and use of detection equipment, supported through the project\. Total CCA cost/revenue collected (%) in 2004 was 1\.19, meeting the target of <1\.5\. This ratio was 2\.52 in 1999\. At this cost of 1\.19% of revenue collected, the CDRC remains the most cost-effective Customs Administration in Southeast Europe, exceeding the development objective target of 1\.5%\. Salaries/revenue collected (%) was 0\.94, meeting the target of <1\.0\. In 1999 this ratio was 1\.2\. Trade volume/number of staff ($ million/staff) increased from $2\.5 million in 1999 to $5\.25 million in 2004, which was exceeded the target of $2\.9 million\. Annual Number of Declarations/ Custom Staff increased from 420 in 1999 to 547 in 2004, even though it was much short of the target of 1200\. Value of Recorded Imports: The value increased from $7800 million in 1999 to $10700 million in 2004\. Value of Recorded Exports: The value increased from $4300 million in 1999 to $5800 million in 2004\. - 7 -  Pilot Sites Indicators Indicators 1999 2000 2001 2002 2003 2004 Act\. Targ\. Act 1 Targ\. Act\. Targ\. Act\. Targ \. 3 Act\. Targ\. Act\. 1\. Performance of CRDC Pilot Inland Terminal of Jankomir Import Clearance Time (min\.) 240 220 150 171 80 166\.8 40 155\.3 40 145 Physical Examination (%) 60 50 35 30\.5 15 21\.7 10 24\.3 10 23\.8 Trucks cleared in less than 15 0 0 10 3\.75 25 3\.6 50 2 50 12\.1 min\. (%) Irregularities/No\. of 15 15 15 17\.3 15 11\.16 15 5\.4 15 5\.79 Examinations (%) Pilot Border Crossing of Macelj Truck Examination (%) 40 35 25 9\.7 20 28\.4 15 9\.5 15 7,1 Irregularities/No\. of 1 2 5 0\.1 10 10\.2 10 9\.6 10 7,5 Examinations (%) Average Border Exit Time (min\.) 20 20 20 9\.1 15 9\.1 10 9\.1 10 9,1 Average Border Entry Time 90 80 70 77 40 77 20 54\.3 20 53\.3 (min\.) Pilot Border Crossing of Zupanja Truck Examination (%) 40 35 25 84\.6 20 22 15 15 15 8 Irregularities/No\. of 1 2 1\.5 0\.03 10 0\.01 10 0\.6 10 1\.1 Examinations (%) Average Border Exit Time (min\.) 70 60 50 34 35 7\.3 15 29 15 13 Average Border Entry Time 60 60 50 8\.7 40 8\.7 20 8\.7 20 5\.79 (min\.) Pilot Border Crossing of Gradiska Truck Examination (%) 40 35 25 98\.9 20 100 15 11\.3 15 21\.4 Irregularities/No\. of 1 2 5 0\.02 10 5\.27 10 1\.85 10 0\.75 Examinations (%) Average Border Exit Time (min) 70 60 50 43 35 17\.2 15 45 15 8 Average Border Entry Time 60 60 50 15 40 14\.8 20 14\.8 20 14\.8 (min) The development of the methodology and data collection for the performance indicators at pilot sites was a huge regional and country endeavor, carried out with the support of US Customs assistance\. The indicator results reflect the extent to which the proposed procedural reforms have been achieved; to that end, comparisons must be made between the baseline figures collected before the project start, the targets set for each year, and the actual performance\. The 2004 (final) targets are common for all TTFSE program countries and were set in line with the practice in the European Union\. Although not all the ambitious performance targets have been met, significant results should be noted\. Physical/truck examination percentages decreased substantially at all sites, sometimes even in excess of the targets, as in the case of Macelj and Zupanja\. These were the result of a dramatic change in Customs' mentality, from a virtual "total control" (almost 100% cursory examination of all consignments) to a range of 7 to 24 percent\. The change included the introduction of risk management and selectivity concepts and practice in Customs officers' work, and involved decisions and commitment at high level management\. This indicator had a direct and major impact on such other indicators as the total time to clear Customs and/or enter and exit the country\. - 8 -  Average border entry time: a significant reduction from 60 minutes to 6 minutes, better than the target of 20 minutes, was registered at the entry point of the port of Zupanja\. Similarly, at Gradiska, the actual entry time in 2004 was only 14\.8 minutes, exceeding the target of 20 minutes\. Reduction in border entry and exit time are indicators of better organization of traffic flows and of improved inter-agency awareness and cooperation\. There was also significant improvement in the average exit time\. For example, at Macelj, it was 9\.1 minutes meeting the target of 10 minutes; at Zupanja, it was 13 minutes against a target of 15 minutes, and Gradiska, the actual time was only 8 minutes, almost half of the the target of 15 minutes\. Regional Performance Indicators 3 Development of transport time and costs on the routes Istanbul - Bucharest, Istanbul ­ Tirana, Sarajevo - Ljubljana Survey Period Route Indicators CYCLE 1 CYCLE 2 CYCLE 3 (2001/02) (Spring 2003) (Autumn 2003) I\. Istanbul-Bucharest Avg\. Time No data available 24-48 24-48 (hours) since Turkey was Average Cost not one of the three 800-1560 800-1460 (US$) main trading partners II\. Istanbul-Tirana Avg\. Time 120 90 85 (hours) Average Cost 1900 1500-1900 1500-1800 (US$) III\. Sarajevo-Ljubljana Avg\. Time 16 17-24 18-24 (hours) Average Cost 30-1000 550-1025 520-1060 (US$) It should be noted that the transport fees of forwarders included in these costs do not reflect just the situation at border crossings included in the project, but rather the situation of the whole transport market of a TTFSE country and the extent of its stability\. In general, there is an increase in the TTFSE region of transportation costs, that can be attributed - but not limited - to: (i) increased range of services and share of services in total costs; (ii) influence of the individual contacts of a forwarder and the chances (coming from bilateral foreign trade) to get load for the return trip or not; (iii) development of road pricing on special routes; (iv) modernization of the truck fleet; (v) a still unstable transport market; (vi) stronger enforcement of transport legislation within the EU-15 countries by transporters from SEE; and (vii) escalation especially in the price of fuel and lubricant but also for tires and spares\. B\. Trade Facilitation (TF) Development Trade Facilitation Component (i) Strengthening of Public-Private Partnership This component supported the activities of Cro-PRO, gathering main stakeholders from the private sector (Croatian Chamber of Economy, Association of Freight Forwarders, and the public sector (Croatian - 9 -  Foreign Trade Center, Ministry of Economy, Ministry of Finance, CRDC)\. The outputs included: An extensive public outreach effort to raise awareness about trade and transport facilitation over the years 2001-2004, in the form of articles and promotional editorials published in magazines such as Newspaper- "Glas slavonije",Vecernji list", "Osjecki dom" ; TV- "Slavonska televizija"; Radio- "Hrvatski radio-Radio Osijek, Radio plus and Gradski radio\. Active regional opportunities to cooperate\. The PRO committees of Southeast Europe met three to four times a year regionally to discuss about the Trade Facilitation component and other trade facilitation issues\. They also met regularly on a bilateral basis to address urgent issues and discuss cooperation\. The willingness by the private sector to match grant funding of Trade Facilitation component\. The PRO Committees provided a full matching of donor contribution that was directly targeted to them, ensuring their active commitment to the program\. The elaboration and release of a joint information platform for users (www\.ttfse\.org)\. The website, designed and maintained regionally provides information on requirements of many border agencies in Southeast Europe\. Multiple regional coordination meetings were organized to define and build the platform\. Three exchange programs to the US focused on border issues, supply chain management and security, and use of analytical tools (trade facilitation audits) to review their present status\. (ii) Improvement of the Performance of Trade Facilitation Agents Training and Seminars\. A regional curriculum was developed for TTFSE countries covering topics such as trade operations, transport, customs procedures, transit, business ethics, INCOTERMS, trade payment methods\. The Croatian Chamber of Economy successfully delivered the planned training courses to more than 700 participants in four major Croatian cities\. The seminars were well received by participants who came mostly from small to mid-size firms\. Global Facilitation Partnership Distance Learning Initiative\. The first two distance learning programs for Road Transport Operators, co-organized between the International Road Transport Union, the TTFSE program and the Road Transport Association TransportKomerc, were successfully rolled out\. These programs, with certification recognized in 24 countries, are aligned to EU requirements in terms of competence of road transport operators\. Following the 65 participants who were included in the pilot phase of the program in 2003, 40 participants took the program and received their IRU Certificate\. These programs appeal particularly to forwarding companies, many of which are involved in customs brokering, an activity which will be drastically reduced upon Croatia's accession to the EU\. TransportKomerc is working with the International Road Transport Union to become an accredited center of the IRU Academy\. A new distance learning program, in partnership with FIATA (international freight forwarder association) was prepared by the Freight Forwarders' association in the Croatian Chamber of Economy\. TTFSE\.ORG Website\. Little progress was achieved in updating data at project closing Information for some sections of the site are still not available\. While the private sector operators are positive about the tool, responsible governmental bodies have not delivered what they promised by signing the Memorandum of Understanding\. - 10 -  C\. CDRC Information System With the advent of the IT infrastructure and updated operational systems, the CDRC will be in a position to lead a process of integration of the border agency operations\. In terms of trade and transport facilitation, the benefits of customs modernization can go unrealized without the corresponding modernization of the border agency operations\. There is a wide spectrum of possible innovations, from simple web-based links and document exchange all the way to deep cross-agency inter-operation\. 4\.2 Outputs by components: Component 1\. Institutional Reform on Customs Procedures Training\. Southeast European Cooperative Initiative (SECI)/TTFSE Advisory Team (STAT), USA financed the periodical training of the Croatian Customs staff and other border agencies' staff from the pilot sites on the data collection process and inter-agency cooperation in order to calculate the performance indicators of the project\. Hazard materials and Endangered Species training courses were provided by the representatives from Ministry of Waters and Environmental Protection to the Customs officers and some of the local Customs brokers from the pilot sites, during May-July 2003, under the supervision of STAT and the NCA environmental officer\. Seminars on applying the risk profiles in selective and/or targeted verifications at the pilot sites were provided in 2003, by the Customs Headquarters Risk Analysis Office\. Workshop\. A Risk Management Workshop was held by the STAT team in Bucharest at the Romanian Customs Directorate, in September 2004, where risk management team members from regional offices and the headquarters attended\. A manual providing operational guidelines to the Intelligence staff on profiling, selectivity, risk assessment, and risk indicators was prepared and delivered\. Achievement for this component is satisfactory\. Component II\. Trade Facilitation Development See Section 4\.1 (B)\. Achievement of this component is satisfactory\. Component III: CDRC Information System CDRC completed its information processing and communications infrastructure for customs operations\. A unified systems management system is now in place, covering all devices in network, the servers, the workstations, as well as ancillary devices\. The Risk Analysis & Selectivity unit started its activities in March 2004 and was assisted by consultants and the STAT team based in Zagreb\. The selectivity module was developed and installed at pilot sites in October 2004 for a six-weeks test\. The roll out of the module to all customs office started in December 2004\. Training was organized in March 2005 in the premises and within the scope of the Customs Academy\. Training equipment was provided by the EU\. - 11 -  The project also financed purchasing the software, hardware, and telecommunications equipment for supporting CDRC Info System\. CDRC Personnel Training\. Training was provided by the suppliers for the Customs staff operating with the equipment purchased under all the contracts performed under the project\. Achievement of this component is satisfactory\. Component IV\. Improvement of Border Crossing Facilities Rehabilitation works at border crossings and related Supervision contracts, were completed, as shown below: Slavonski Brod Border Post improvement Construction of new border crossing point is completed\. BCP consists of traffic areas: passenger traffic (six traffic ways: three entry lanes and three exit lanes), separate cargo road with four traffic ways: two entry lanes and two exit lanes, parking area for personal vehicles with the capacity 28 parking places and parking area for trucks with the capacity of six parking places\. Gunja Border Post Construction of new border crossing point was completed in 2003\. BCP consists of traffic areas: passenger traffic (four traffic ways: two entry lanes and two exit lanes), separate cargo road with four traffic ways: two entry lanes and two exit lanes and parking area for personal vehicles with the capacity about 30 parking places\. Maljeviac Border Post The new border crossing point is constructed as a joint locality\. It consists of traffic areas: passenger traffic (four traffic ways: two entry lanes and two exit lanes), separate cargo road with four traffic ways: two entry lanes and two exit lanes, parking area for personal vehicles with the capacity about 30 parking places and parking area for trucks with the capacity five parking places\. Samac Border Post The new border crossing point consists of traffic areas: passenger traffic (six traffic ways: three entry lanes and three exit lanes), separate cargo road with four traffic ways: two entry lanes and two exit lanes, parking area for personal vehicles with the capacity of 40 parking places and parking area for trucks with the capacity of 23 parking places\. Achievement of this component is satisfactory\. Component V\. Program and Project Implementation The project financed the operating costs and consultants for PIT and the consulting services for auditors, and procurement advisors\. Achievement for this component is satisfactory\. - 12 -  4\.3 Net Present Value/Economic rate of return: Based on actual results and on the methodology used during the appraisal, the project had an estimated net present value of US$23\.8 million, compared to an estimated US$25\.5 million at the time of project appraisal\. Traffic expanded as a result of the reopening of Pan European Transport Corridor X through Serbia and Montenegro, and offset partly the delay in reducing processing times at borders (reduction in processing time was significant, but took longer than anticipated to take place)\. The overall project costs were higher than projections, mainly due to currency fluctuation in 2003-2004\. The delay in disbursements, while procedural progress were taking place and performance improved at the crossing, resulted nonetheless in a rate of return in excess of 75 percent, higher than the originally anticipated of rate of 49 percent\. It is worth noting that, in line with the overall project objective of facilitating trade, Croatia experienced solid trade expansion during the project life, increasing its trade from US$11\.7 billion in 2001 to US$24\.4 billion in 2004\. This was not considered directly as part of the analysis, to follow the appraisal methodology\. It is likely that the estimated trade benefit equivalent to 20 percent of transport benefits used in the evaluation is an understatement of the actual impact of improved border crossing\. The impact of the computer network rolled out across the territory at 400 locations was not measured either (in line with the appraisal approach), although it is likely to have had a significant positive economic impact through accelerated processing and reduced administration costs\. Costs The project costs were higher than what was originally anticipated in the Project Appraisal Document, due mostly to currency fluctuations (weakening of the US Dollar/Euro) for components 3 and 4 of the project (information system and improvement of border crossing facilities)\. The total project cost was increased to US$24\.4 million, including US$4\.1 million of taxes (not considered in the economic evaluation) compared to a PAD estimate of US$22\.1 million\. Project Benefits The project expected two types of benefits: (i) lower transport costs due to the diminution of waiting times at border crossings and inland terminals; and (ii) economic benefits of trade expansion resulting from the project\. Trade and Transport Cost Reductions\. The annual savings on transport costs at the Croatian border crossings and the inland terminal under the project are estimated at US$9\.1 million by 2005 versus US$11\.3 million at appraisal\. Delays at border crossings and inland terminals have been substantially reduced with an estimated 65 percent processing time reduction on average for the pilot sites and sites upgraded\. These measured benefits were slightly lower than the projections made in the project appraisal document, due to delays in reducing processing time\. These estimates nonetheless do not capture the positive impact of the computerized system (a major project component and expenditure) which now covers the entire Croatian territory\. Since this system is responsible for the collection of over US$5 billion in revenues, even small productivity gains are likely to have a significant impact, compared to its cost\. Economic Impact of Increased Trade\. The link between trade facilitation, trade expansion, and Customs revenue collection clearly exist but is difficult to quantify, due to the multiplicity of other factors influencing the macro-economic development and trade of the TTFSE countries\. Company competitiveness, - 13 -  in particular their ability to deliver reliably their inputs in international supply chain, depends nonetheless on their capacity to assess border transaction cost (direct and time cost) with a fair degree of certainty\. Since 1999, Croatia, and other countries involved in the TTFSE program enjoyed very strong growth of their trade volumes\. In Croatia, trade increased from US$11\.7 billion in 2001 to US$24\.4 billion in 2004, with export more than doubling to reach US$8\.8 billion in 2004 instead o US$4\.1 billion in 2001\. In the meantime, Customs collected revenues increased from US$2\.1 billion to US$5\.1 billion\. For the purpose of the economic rate of return calculation a very conservative 20 percent of additional transport benefits linked to increased trade was added, as per the approach used during appraisal\. 4\.4 Financial rate of return: The fiscal impact of the project was positive\. Trade expansion and improved performance of Customs have generated additional Customs duties and excise taxes\. There was substantial increase in revenue collection by Customs: For example, it increased from US$2\.1 billion in 2001to US$4\.4 billion in 2004\. Since the Customs administration is not a revenue earning entity, FRR was not calculated\. Part of the increase in revenue collection can be associated to the enhanced processing by Customs, particularly at pilot sites, but not only (e\.g\. the project supported extension of Customs information system, that had an impact)\. The calculation of direct fiscal impact was however not possible since many factors played a role (trade increase, reduction in tariffs, free trade agreements, change in excise and VAT collection mechanisms ) in the fiscal collection by Customs\. The overall efficiency indicators (See Development Indicators) also underline significant progress in the cost effectiveness of Customs\. 4\.5 Institutional development impact: Substantial\. The project focused on procedural changes at the border, and the trade facilitation role of Customs\. It created an awareness on the importance of cross-border cooperation among neighboring countries\. The project was also instrumental in improving dialogue among Customs administrations within the region\. For example, since the first RSC meeting was held in February 2000 in Skopje (Macedonia), seven other RSC meetings had taken place on a regular basis before the project closure, with an average of two per year\. They are likely to continue after the completion of TTFSE projects\. The project has also contributed to capacity building in the Customs administration\. Customs staff have been trained on using modern equipment, with new procedures and new systems which were tested during the life of the project\. More and more Customs staff are being trained by those who received original training under the project\. A main problem in this area was the delay in getting the risk analysis done\. Monitoring the performance of Customs administration using key performance indicators has led to substantial institutional development impact\. Even though these indicators were initially tested on three pilot sites, they are now replicated in 50-60 more Customs stations, and would be extended very soon to all the Customs stations in Croatia\. The CDRC information system introduced by the project will also increase Customs Department's capacity to make effective use of its financial resources\. The project was instrumental in creating local project teams, which were semi-informal structures with representatives of each administration working at border/customs sites (Customs, Veterinary, Health, Police, and Phyto-sanitary)\. It also provided technical assistance and advisory services to trade and international transport participants through Cro-PRO Committee\. - 14 -  Finally, the three-year Users Survey comparative results published on the TTFSE regional website, provided a diagnostic of the overall Customs environment from the users' perspective in a transparent manner, thus contributing to a substantial improvement of the dialogue between Customs and its clients\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of government or implementing agency: Positive Factors (i) The vision of becoming a member of the EU on the part of all the TTFSE countries was a major incentive, significantly motivating the ownership of, and commitment to, the project\. (ii) The preparation of the TTFSE Program was preceded by the SECI, which was sponsored by the USA and the Stability Pact\. The TTFSE was designed to mesh with co-financing from the USA under SECI and seen as the first regional program under the Stability Pact\. This gave the projects under the program high credibility and visibility\. (iii) Excellent donor coordination among the Bank, EU, and the US Government and their speaking as one voice made a positive impact on the project\. Collaborative mechanisms were created in both Washington, D\.C and the field, and recurrent missions stopped in Brussels for consultation\. (iv) The regional approach of the TTFSE Program, including the creation of a Regional Steering Committee where the performance of individual projects could be compared with the performance of neighboring countries and the sharing of experience and lessons learned created peer pressure among the participating countries, which in turn generated a competitive spirit and motivated them to perform better\. (v) Strengthening the role of the private sector, especially with the emergency of Pro-Committees under SECI, and the increased professionalization of operators through training, certification, and the web-site under the project provided the beginning of a private sector watch-dog function monitoring government performance and breaking down the resistance to data sharing in the sector\. Negative Factors (i) The dramatic increase in oil prices, not foreseen during project preparation, affected the achievement of regional performance indicators related to reduction of transport costs\. Similarly, the drop of the US dollar vis-a-vis the Euro had not been foreseen when establishing the targets\. These situations diminished the usefulness of the regional indicators\. (ii) Vested interests within the trade sector and related economic interests were well-entrenched, not readily transparent, and still serve to reinforce corruption as an institutionalized way of doing business\. Addressing corruption in such a setting cannot bring results overnight\. This was recognized in the project design, and the reform process was projected within an eight to ten year time-frame\. 5\.2 Factors generally subject to government control: Positive Factors (i) Building cooperation among representatives of border crossing agencies\. Because of: (i) the - 15 -  Local Project Teams created at the border crossing points to promote collaboration; and (ii) inter-agency communication and cooperation facilitated through signing of a Protocol/Agreement promoted by the Borrower through the National Coordinator, towards the end of project life, the dialogue and cooperation among border crossing agencies had improved considerably\. (ii) Cross-border cooperation of Customs\. The MOF through CRDC initiated, updated and implemented agreements with neighboring Bosnia Herzegovina on joint border control teams to facilitate trade and transport while reducing smuggling and increasing border security\. Negative Factors (i) Lack of cooperation between the Customs administration and the Border Police (BP)\. In spite of the new Customs legislation, the Border Police considered that they should play a major managerial role at the border\. This often resulted in re-inspections of goods already cleared by Customs, interference in Customs routine inspections, and a general tendency to overstep, which was in contradiction with many international conventions, standards, or best practice as observed in the Western world\. It further demoralized Customs officers, and crippled efforts at modernizing control of goods and cross-border traffic (such as selective examination of goods and vehicles)\. (ii) Public-Private Dialogue\. Cro-PRO experienced difficulties in maintaining its role as coordinating body for public and private stakeholders\. Change of government created some instability and led to a lack of awareness of its mandate\. Whenever there was a change of government, the Cro-PRO Committee had to re-establish itself with the new government\. (iii) Institutional reform\. Modernization of the Customs administration slowed down because of the: (i) demoralization of staff due to managerial, organizational, and institutional policies; (ii) unclear responsibilities of the Customs administration, and difficult relations with other law enforcement agencies; (iii) changes in the managerial structure, which resulted in major past technical assistance inputs being possibly neglected\. These factors directly affected performance at pilot sites\. 5\.3 Factors generally subject to implementing agency control: See Section 5\.2 5\.4 Costs and financing: The total final cost of the project was US$24\.4 million compared with the PAD estimate of US$22\.0 million\. The difference is mainly due to currency fluctuations in the past years of project implementation\. The original loan amount was US$18\.5 million\. The Bank financed US$16\.1 million, USA financed US$1\.8 million, and the Government contributed US$6\.5 million\. Project Cost and Financing, Including Taxes (US$) Government USA IBRD Total Estimated cost (PAD) 6\.2 1\.9 13\.9 22\.0 Final Cost (ICR) 6\.5 1\.8 16\.1 24\.4 - 16 -  6\. Sustainability 6\.1 Rationale for sustainability rating: Likely\. The sustainability of the project is considered likely for several overarching reasons: (i) considering that Croatia is keen to become a member of the EU, it is highly likely that the Government will continue to make special efforts to sustain the achievements of the project for a smooth integration with the EU; (ii) due to the high visibility of the regional program and the project, the wide publicity given on the results achieved, and the availability on the web of information on Customs and border performance, the public is well aware of the recent developments and as a result, it will be difficult for the Government to backtrack; (iii) Customs has already taken steps to move to the replication of performance monitoring at other sites; this has been a decision outside the scope of the project; and (iv) the Government has taken actions to affirm participation in the follow-up Trade and Transport Integration Project (TTIP)\. The project supported values that are critical to fulfilling Croatia's long-term objective of achieving sustainable growth\. Once these reforms are in place, the sustainability of the effort would be assured by the transparency in Customs operations, regular cooperation among border crossing agencies including those of other countries, and the gains captured by all parties involved in legitimate trade\. Continuous upgrading of the Customs services, procedures, management, and equipment based on a re-engineered budget would enable the CRDC to cope with trade and traffic growth, technological advance, and continued compatibility with the EU\. The inter-agency and cross-border cooperation approach and culture promoted through the project are further supported by the EU-funded program on Integrated Border management (IBM)\. The monitoring approach using key indicators developed under the TTFSE Project is likely to be continued beyond the project life, as the management of Customs is determined to follow-up on performance monitoring and to gradually expand it to all border and Customs inland locations in Croatia\. For the continued collection of data, the Government has proposed that the Customs service itself would take on this function according to an Action Plan that would gradually be applied to all borders and inland terminals\. The Action Plan was initiated outside the scope or requirements of the project\. Use of X-ray equipment, which is beneficial for the detection of smuggling, will also continue\. After the project completion, but in line with the principles designed by the TTFSE, Croatia developed an agreement with Bosnia Herzegovina to create and carry-out joint border control procedures between Maljevac(Croatia) and Izacic (Bosnia Herzegovina), which were both pilot locations during the project life\. Significantly, these actions arise not from initiatives of the World Bank but from the staff of Customs and other border control agencies\. Croatia is looking ahead to future progress in trade facilitation through participation in the TTIP, seen as a follow-up regional operation building on the experience, lessons learned, and mechanisms developed under TTFSE\. Various stakeholders from the Government and the private sector participated in a brainstorming session in March 2004 to identify key components that might be included under this follow-on project\. They expressed their interest in continuing their membership in the program based on a scaled-up, broader platform focused on the European Corridors and expanded to other modes of transport\. The target date for the new project is FY 2006\. One area which would require continued support for sustainability is the TTFSE regional website\. The sustainability of the website, however, will require further commitment by the respective contributing - 17 -  agencies and ministries as well as further funding\. The Bank has received requests from the Government and the Chamber of Commerce for continued support under the potential TTFSE II program\. All organizational units are in place including Risk Assessment, which had encountered some initial problems\. There is a high degree of probability that the achievements will be sustained\. 6\.2 Transition arrangement to regular operations: See Section 6\.1 7\. Bank and Borrower Performance Bank 7\.1 Lending: Satisfactory\. The Bank's performance in the identification, preparation, and appraisal of the project was satisfactory, especially in view of the setting of the project within a regional program\. The identification process focused on critical gaps and opportunities for interventions in the region's trade and transport sectors and then sought to match these with the specific needs and interest of the Government of Croatia and the evolving private sector\. The identification and preparatory phase, however, took longer then planned because the Bank team was completely changed\. The project objectives were consistent with the CAS and the Government's development priorities\. The Bank considered the adequacy of the project's design and technical, economic, institutional aspects, procurement and financial management\. Project design also took into account efforts with Customs reforms elsewhere (e\.g\. crucial importance of software aspects), and was also built on similar projects which were undertaken in parallel in six neighboring countries\. In addition, the Bank assessed the project's risks and benefits\. The Bank had a consistently good working relationship with the Borrower during preparation and appraisal\. Consultation with and participation of major stakeholders was a key strength of the project\. Various public institutions in Croatia as well business community were consulted during preparation and were closely involved in project implementation arrangements\. Further, close collaboration and cooperation with neighboring countries and the EU was another key feature of the project\. In addition, the Bank also covered in-depth sociological aspects and local issues while designing the project\. This included the conduct of separate focus groups with: (i) the staff of Customs and (ii) users to better understand needs and priorities\. The team considered options for promoting the development of a new work culture within Customs, including the promotion of anti-corruption\. The team benefited from a good skill mix (including trade facilitation, Customs, transport, safeguard, institutional, and change management specialists)\. This is reflected in the project design and enabled providing for flexibility and responsiveness to local needs\. The continuous presence of Customs experts (from both the Bank and theUS partners) during project preparation created a climate of mutual confidence and transparency which are normally not easy to achieve in the realm of Customs, and in particular in SEE countries\. The extensive stakeholder consultations and participatory approach used by the team were highly productive, initiating a process of ownership that proved invaluable at the implementation stage, and introducing elements for gradual incorporation into the work culture of Customs\. - 18 -  7\.2 Supervision: Satisfactory\. The Bank's performance during the implementation of the project was satisfactory\. The task team was very proactive in the management of this project\. Sufficient budget and staff resources were allocated, and the project was adequately supervised and closely monitored\. The Bank's client relationship was very cordial and productive\. Review teams included specialists in transport, trade facilitation, Customs, environment, financial management, and procurement\. External consultants were used for specific aspects of project components\. Supervision was regularly joined by the US Customs Assistance Team (STAT) at country and regional level; the US experts brought their knowledge and expertise in the Customs institutional reforms assessment, data collection, monitoring of performance indicators, and selectivity\. Project implementation progress was adequately reported, and implementation problems were identified early and addressed proactively\. Performance ratings given in the PSRs were realistic, and sufficient attention was paid to the project's likely development impact through the monitoring indicators\. The Bank enforced loan covenants and remedies were duly exercised\. The task team showed flexibility in suggesting or approving needed modifications, and successfully worked with the government, implementing agencies, cofinanciers and other partners\. Because of the continued presence of the consultant based in Zagreb who was involved with the project during the entire project period, the Bank was able to maintain continuity even when the TTLs changed\. This enabled the Bank to maintain a very active dialogue with the counterparts\. 7\.3 Overall Bank performance: Satisfactory\. Overall, the Bank performance was satisfactory during project preparation, appraisal and implementation\. Borrower 7\.4 Preparation: Satisfactory\. The Borrower's performance in the preparation of the project was satisfactory\. The Borrower was committed to the objectives of the project and took into account the adequacy of the project design and technical, financial, economic, institutional, environmental and sociological factors\. The government officials and staff of the PIT worked in full cooperation with the Bank's project team\. 7\.5 Government implementation performance: Satisfactory\. The Government implementation performance was satisfactory\. While the project focused on the role of Customs as the main agency responsible for the control process of goods entering, leaving and transiting Croatia, the Government understood well the importance of coordination with other border agencies\. To facilitate this process, a National Coordinator was appointed who also participated in the regular meetings of the Regional Steering Committee\. The Government was responsive in establishing necessary regulatory framework when needed and providing counterpart financing in time\. The implementation of civil works at border crossings was a complex task, involving various agencies (Ministry of Transport, Border Police, Customs, Utility Agencies, etc) and having to face the challenge of keeping the border crossing operational and functioning\. While some operational problems occurred - 19 -  (especially temporary access to Slavonski Brod), contrary to experience in several other TTFSE countries, the Government has facilitated good coordination between various agencies resulting in completion of these facilities as scheduled, including a joint facility with Bosnia and Herzegovina at Maljevac, one of the first joint facilities in the region\. Implementation of the Customs Information and Communication System could not be fully completed under the project\. The procurement of the fourth and last IT package (PKI/EDI) was stopped by the e-Government office, which within the framework of establishing a uniform and consistent e-Government, reviewed specifications and procedures proposed under the fourth package\. This review process was not very well coordinated and was very time consuming, delaying procurement of the fourth package beyond the project closing date\. 7\.6 Implementing Agency: Satisfactory\. The performance of the PIT, which implemented the project under the overall coordination of CRDC management, was satisfactory\. The PIT consisted of competent staff and it was adequately funded\. It was capable of managing the project, under the supervision of and with the support of the Minister of Finance\. The PIT was actively involved in the implementation\. Monitoring and reporting to the Bank were satisfactory\. The PIT maintained a good financial management system with detailed internal controls, and satisfactory accounting and reporting systems, and auditing arrangements\. While outside the PIT mandate, like in several other countries, a problem area remains the updating/maintenance of the TTFSE website which contains information on border crossing classification, procedures, opening hours, fees and tariffs, documentation needed, etc\. for border crossing users\. The voluntary basis on which this information is to be provided regularly by all relevant agencies to the Chamber of Economy, which maintains the website, is too weak and timely updating is problematic\. While the website is an important tool to enhance transparency of border crossing procedures, commitment and ownership of agencies expected to provide regular inputs needs further strengthening\. 7\.7 Overall Borrower performance: Satisfactory\. The overall performance of the Borrower was satisfactory\. 8\. Lessons Learned Project and Program-related Lessons Interagency Cooperation at Border Cross Points\. Trade facilitation is always a multi-sectoral and multi-agency activity\. For a project of this type where seven to eight agencies are involved, their active participation and cooperation are essential for successful implementation and achievement of project, objectives and also for ensuring sustainability\. There is a need for strengthening the interagency cooperation in the follow-up project, as there are still unresolved problems between the agencies\. The inter-agency cooperation should include cross-border agency cooperation, preferably not limited to neighboring countries, but including all countries that form the SEE regional marketplace\. Replication of Procedures at Pilot Sites\. The lessons learned and the success experienced at the more progressive border crossing points provide a model for replication in Croatia as well as in other - 20 -  TTFSE countries\. The economic returns from such replication could be considerable, multiplying the economic returns to date by several times\. Croatia should pursue in this direction, making changes in procedures at border crossing points that were not included as pilot sites under the project, placing emphasis on replication of joint border crossing facilities, including expansion to other modes\. Customs control will become more effective and efficient under selective procedures, but this requires a change of culture since the actual perception is that the more vehicles are inspected, the higher the detection rate of irregularities\. Experience from elsewhere shows that targeted, in-depth inspections that are based on risk analysis of intelligence data yield much better results, both in terms of detection and efficiency\. Implementation of selectivity and risk analysis mechanism will allow much more targeted control of suspicious cargo/trade/transport\. Support for the TTFSE Website\. Further cooperation and support from government agencies, especially in the area of updating data in website are essential to make the regional website sustainable and successful\. Having an updated, informative website can contribute significantly to enhance transparency of border crossing procedures and to reduce solicited `informal payments' at border crossings\. Procedures on Border Stations\. It is important to improve procedures on all border stations as early as possible to enhance implementation of standard procedures and uniformity of processing\. Such uniformity will enhance the efficiency of the overall transport system, because it reduces the risk of traders/transporters to make a detour in order to circumvent strict enforcement at pilot stations\. Multifunctional Border Inspection Facilities\. While constructing border inspection facilities, it will be better to design them as multifunctional facilities that can be converted in logistical centers once borders disappear ­ in the case of Hungary and Slovenia after Croatia's accession to EU, when these borders would be less relevant\. Introduction/improvement of EDI based information flows, not only between border agencies but also across borders with neighboring countries is important, especially when freight forwarders and shippers will be using electronic data interchange\. A comprehensive approach to the question of trade facilitation, looking from multiple angles, including joint-border facilities, institutional support, information technology, and training contributed to the success of the project\. Some civil works were delayed because of the permit approval process, which proved to be quite slow, reflecting a very stringent EU-like requirements of the Croatian government\. Any IT component is subject to lot of external factors, including e-policies of the government that are developed in parallel and not well coordinated\. For example, the Customs administration wanted to move forward to provide electronic signature (PKI), and direct submission by traders reached 80-85% declaration signed online, but did not get the final tender for public key infrastructure\. As a result, this component did not get implemented\. Bank-related Lessons The Bank's Focus in the Future Programs\. The Bank must include `behind the border' issues in new trade and transport facilitation programs\. Most regulatory, administrative, and operational non-tariff barriers at borders require some kind of reform at the institutional level\. Good coordination - 21 -  with other Bank projects, focused at improving the business climate in countries, is therefore required\. In addition, programs need to include legitimate security requirements and anti-terrorism aspects such as container security code for the scanning of cargoes\. Further, the Bank should recognize that, when the project involves several innovative reforms, it is normal to have higher risks and higher rewards\. Holistic Corridor Approach\. It is important to take a more holistic corridor approach, targeting the functional aspects of transport corridors to optimize their use and capacity\. The new project should complement the EU policy of transport corridor development which primarily focuses on physical improvement of the TEN-T network and transnational transport axes into EU neighboring countries\. Result-Oriented Approach\. The main characteristic of the project was that it was very focused on one border crossing agency (Customs) and result oriented with measurable indicators\. This unique quality was a major factor which contributed to the success of the project\. Policy Dialogue\. It is important to start the policy dialogue at the very beginning of the project, and to involve all important stakeholders\. Regional Approach\. To optimize the results of trade facilitation, a regional approach is required since most trade in the SEE region is not with neighboring countries, but with the EU and CEE project, for which a uni- or bilateral approach would not do much\. Furthermore, a regional approach can create peer pressure among the participating countries, which in turn would generate competitive spirit and motivation amongst them to perform better\. Miscellaneous The contribution of the US as a parallel financier contributed to the success of the project\. The USAID Grant was instrumental in improving public-private partnership, especially in light of the Government's reluctance to borrow for technical assistance to the private sector\. Likewise, US Customs financed permanent presence of Customs advisors in Croatia (and the whole TTFSE region), who helped with data collection, monitoring indicators, and improving the risk-management system in Customs administration\. It is important to avoid overlaps with EU's Integrated Border Management\. This will require closer coordination with EU so as to compliment the Bank's activities and avoid any overlapping\. 9\. Partner Comments (a) Borrower/implementing agency: See Annex 8 (b) Cofinanciers: N/A (c) Other partners (NGOs/private sector): N/A - 22 -  10\. Additional Information A\. The Bank's ICR Team Consisted of the Following Members Paulus A\. Guitink Task Team Leader Sati Achath Consultant Madhu Nair Consultant Marie Laygo Program Assistant B\. List of Task Team Leaders of the Project in Chronological Order Gerald Ollivier Paulus Guitink C\. Persons Interviewed for the Preparation of the ICR Gerald Ollivier Former Task Team Leader and Transport Specialist Vladimir Skendrovic Consultant, Croatia Country Office, World Bank Vesna Kadic Projects Director, Customs Directorate Ante Kapulica Department for BCP, Ministry of Finance Rajko Cupic Department for BCP, Ministry of Finance Sanja Flegar PIU Manager, Department for European Integration and International Finance Relations, Ministry of Finance Tatjana Rucevic PIU Manager, Department for European Integration and International Finance Relations, Ministry of Finance Alexander Friedman TTFSE Website Consultant, Croatian Chamber of Economy Ritva Heikkinen Sector Manager, Public Administration, European Union Sasa Subotic President, CroatiaPRO Committee c/o Croatian Chamber of Economy Zdenka Peternel Head of Office, Croatian Chamber of Economy Ljubica Herceg Department Manager, Croatian Chamber of Economy Donald E\. Russell Chief of Party, SECI-TTFSE Ralph W\. Whiteside Advisor, SECI-TTFSE D\. Footnotes 1/ No collection for 2000 due to the lack of US assistance (started in 2001)\. 2/ The 2003 targets will remain the same for year 2004 and throughout project extension\. 3/ Source: PlanConsult and Chamber of Commerce and Survey results, May 2004\. - 23 -  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome/Impact Indicators: Projected in SAR/PAD Actual/ Indicator End of Project Latest Estimate Revenue Collected/Customs Staff (US$000) 650 1111 Total CCA Cost/Revenue Collected (%) 1\.8 1\.19 Salaries/Revenue Collected (%) 1\.2 0\.94 Trade Volume/Number of Staff (US$000) 2\.5 5\.25 Annual Number of Declarations/Custom Staff 420 547 Value of Recorded Imports (US$ mil\.) 4,300 5\.8 Value of Recorded Exports (US$ mil\.) 7,800 10\.7 Output Indicators: Projected in SAR/PAD Actual/ Indicator End of Project Latest Estimate Pilot Inland Terminal of Jankomir Import Clearance Time (min\.) 240 145 Physical Examination (%) 60 23\.8 Trucks cleared in less than 15 min\. (%) 0 12,1 Irregularities/No\. of Examinations (%) 15 5\.79 Pilot Border Crossing of Macelj Truck Examination (%) 40 7,1 Irregularities/No\. of Examinations (%) 1 7,5 Average Border Exit Time (min\.) 20 9,1 Average Border Entry Time (min\.) 90 53\.3 Pilot Border Crossing of Zupanja Truck Examination (%) 40 8 Irregularities/No\. of Examinations (%) 1 1\.1 Average Border Exit Time (min) 70 13 Average Border Entry Time (min) 60 5\.79 Pilot Border Crossing of Gradiska Truck Examination (%) 40 21\.4 Irregularities/No\. of Examinations (%) 1 0\.75 Average Border Exit Time (min) 70 8 Average Border Entry Time (min) 60 14\.8 - 24 -  Annex 2\. Project Costs and Financing Annex 2a Project Costs by Components (in US$ million equivalent) Appraisal Actual/ Percentage Project Component Estimate Latest Estimate of Appraisal Part A: Institutional Reform on Customs Procedures 1\.4 1\.4 100 Part B: Trade Facilitation (TF) Development 0\.4 1\.4 100 Part C: CDRC Information System Improvement 6\.8 10\.6 155\.9 Part D: Improvement of Border Crossing Facilities 9\.8 11\.9 121\.4 Part E: Program and Project Implementation 0\.6 0\.1 16\.7 Total Baseline Costs 19\.0 24\.4 127\.7 Physical Contingencies 2\.0 Price Contingencies 1\.0 Total Project Costs 22\.0 24\.4 110\.4 - 25 -  Annex 2b Project Costs by Procurement Arrangements (In US$ million equivalent)* Procurement Method Procurement Method Expenditure Categories Appraisal Estimate Actual/Latest Estimate ICB NCB Other NBF Total ICB NCB Other NBF Total 1\. Works 11\.2 11\.2 11\.8 11\.8 (6\.8) (6\.8) (9\.1) (9\.1) 2\. Goods 7\.6 0\.3 7\.9 9\.5 9\.5 (6\.2) (0\.2) (6\.5) (6\.5) (6\.5) 3\. Consultant Services & 0\.6 1\.9 2\.5 1\.2 1\.7 2\.9 Equipment (0\.5) (0\.5) (0\.5) (0\.5) 4\. Training 0\.1 0\.1 (0\.1) (0\.1) 5\. Operating Costs 0\.1 0\.2 0\.3 0\.2 0\.2 (0\.1) (0\.1) Total 18\.8 1\.1 2\.1 22\.0 21\.3 1\.2 1\.9 24\.4 (13\.0) (0\.9) (13\.9) (15\.6) (0\.5) (16\.1) * Note: NBF = Not Bank Financed (includes elements provided under parallel cofinancing 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 footnotes to the table\. Annex 2c Project Financing by Component (in US$ million equivalent) Appraisal Actual/ Percentage of Component Estimate Latest Estimate Appraisal Bank Govt\. Cofinancier Bank Govt\. Cofinancier Bank Govt\. Cofinancier Part A: Institutional Reform on 0 0 1\.4 Customs Procedures Part B: Trade Facilitation (TF) 0 0 0\.4 Development Part C: CDRC Information 8\.8 1,8 0 System Improvement Part D: Improvement of Border 7\.2 4\.6 0 Crossing Facilities Part E: Program and Project 0\.1 0\.1 0 Implementation - 26 -  Annex 3\. Economic Costs and Benefits Based on actual results and on the methodology used during the appraisal, the project had an estimated net present value of US$23\.8 million, compared to an estimated US$25\.5 million at the time of project appraisal\. Traffic expanded as a result of the reopening of Pan European Transport Corridor X through Serbia and Montenegro, and offset partly the delay in reducing processing times at borders (reduction in processing time was significant, but took longer than anticipated to take place)\. The overall project costs were higher than projections, mainly due to currency fluctuation in 2003-2004\. The delay in disbursements, while procedural progress were taking place and performance improved at the crossing, resulted nonetheless in a rate of return in excess of 75 percent, higher than the originally anticipated of rate of 49 percent\. It is worth noting that, in line with the overall project objective of facilitating trade, Croatia experienced solid trade expansion during the project life, increasing its trade from US$11\.7 billion in 2001 to US$24\.4 billion in 2004\. This was not considered directly as part of the analysis, to follow the appraisal methodology\. It is likely that the estimated trade benefit equivalent to 20 percent of transport benefits used in the evaluation is an understatement of the actual impact of improved border crossing\. The impact of the computer network rolled out across the territory at 400 locations was not measured either (in line with the appraisal approach), although it is likely to have had a significant positive economic impact through accelerated processing and reduced administration costs\. Costs The project costs were higher than what was originally anticipated in the Project Appraisal Document, due mostly to currency fluctuations (weakening of the US Dollar/Euro) for components 3 and 4 of the project (information system and improvement of border crossing facilities)\. The total project cost was increased to US$24\.4 million, including US$4\.1 million of taxes (not considered in the economic evaluation) compared to a PAD estimate of US$22\.1 million\. Project Benefits The project expected two types of benefits: (i) lower transport costs due to the diminution of waiting times at border crossings and inland terminals; and (ii) economic benefits of trade expansion resulting from the project\. Trade and Transport cost reductions\. The annual savings on transport costs at the Croatian border crossings and the inland terminal under the project are estimated at US$9\.1 million by 2005 versus US$11\.3 million at appraisal\. Delays at border crossings and inland terminals have been substantially reduced with an estimated 65 percent processing time reduction on average for the pilot sites and sites upgraded\. These measured benefits were slightly lower than the projections made in the project appraisal document, due to delays in reducing processing time\. These estimates nonetheless do not capture the positive impact of the computerized system (a major project component and expenditure) which now covers the entire Croatian territory\. Since this system is responsible for the collection of over US$5 billion in revenues, even small productivity gains are likely to have a significant impact, compared to its cost\. Economic Impact of Increased Trade\. The link between trade facilitation, trade expansion, and Customs revenue collection clearly exist but is difficult to quantify, due to the multiplicity of other factors influencing the macro-economic development and trade of the TTFSE countries\. Company competitiveness, in particular their ability to deliver reliably their inputs in international supply chain, - 27 -  depends nonetheless on their capacity to assess border transaction cost (direct and time cost) with a fair degree of certainty\. Since 1999, Croatia, and other countries involved in the TTFSE program enjoyed very strong growth of their trade volumes\. In Croatia, trade increased from US$11\.7 billion in 2001 to US$24\.4 billion in 2004, with export more than doubling to reach US$8\.8 billion in 2004 instead o US$4\.1 billion in 2001\. In the meantime, Customs collected revenues increased from US$2\.1 billion to US$5\.1 billion\. For the purpose of the economic rate of return calculation a very conservative 20 percent of additional transport benefits linked to increased trade was added, as per the approach used during appraisal\. FY 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201 201 4 5 Costs Investment Costs With the Project Trade Facilitation 0\.1 0\.1 0\.1 0\.1 Development 0\.3 0\.5 0\.3 0\.3 Customs 0\.2 0\.1 1\.7 5\.1 1\.8 Administration 0\.2 0\.1 1\.9 5\.7 1\.8 Institutional Reform 0\.7 0\.8 4\.0 11\.2 3\.6 Information Systems Improvement Border Facilities Improvement Total With the Project Total Incremental 0\.7 0\.8 4\.0 11\.2 3\.6 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 Costs Economic Benefits Transport Cost Reduction (with 0\.2 3\.5 3\.6 4\.4 4\.0 4\.1 4\.3 4\.4 4\.5 4\.6 4\.8 4\.9 5\.1 5\.2 5\.4 project) 0\.0 0\.0 0\.9 2\.1 2\.9 2\.9 3\.0 3\.1 3\.2 3\.3 3\.4 3\.5 3\.6 3\.7 3\.8 Pilot Crossings 0\.5 1\.4 2\.0 2\.4 2\.2 2\.9 3\.0 3\.1 3\.1 3\.2 3\.3 3\.4 3\.5 3\.6 3\.8 Other 0\.6 4\.9 6\.4 9\.0 9\.1 9\.9 10\.2 10\.6 10\.9 11\.2 11\.5 11\.9 12\.2 12\.6 13\.0 Crossings/Posts Pilot Inland Terminal 0\.1 1\.0 1\.3 1\.8 1\.8 2\.0 2\.0 2\.1 2\.2 2\.2 2\.3 2\.4 2\.4 2\.5 2\.6 Total -4\.3 -5\.4 -7\.2 -7\.4 -7\.6 -7\.8 -8\.1 -8\.3 -8\.6 -8\.8 -9\.1 -9\.3 Impact of Reduced Transport Costs on Trade Trade Benefits from Transport Cost Reduction Transport Cost - 28 -  Reduction (without project) Total Benefits from 0\.7 5\.9 7\.7 6\.4 5\.4 4\.8 4\.9 5\.1 5\.2 5\.4 5\.5 5\.7 5\.9 6\.0 6\.2 Project Net Benefits from 0\.0 5\.2 3\.7 -4\.8 1\.9 4\.8 4\.9 5\.1 5\.2 5\.4 5\.5 5\.7 5\.9 6\.0 6\.2 Project Source for Costs : Email dated 09/23/2005 from Vesna Kadic, Project Manager, email from Goran Bozicevic, dated 09/26/2005, and projects database\. - 29 -  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 3/6-11/2000 1 TRANSPORT SPECIALIST (1) 4/23-28/2000 1 TRANSPORT SPECIALIST (1) Supervision 02/27/2001 3 TRANSPORT SPECIALIST (1); S S SNR CUSTOMS SPECIALIST (1); SNR OPERATIONS OFFICER (1) 04/30/2002 4 TTL (1); SENIOR CUSTOMS S S SPEC\. (1); SR\. PROCUREMENT SPEC\. (1); SR\. FMS (1) 11/12/2002 6 TEAM LEADER (1); SR\. S S CUSTOMS SPECIALIST (1); IT PROCUREMENT (1); SR\. PROJECT OFFICER (1); PROGRAM TEAM LEADER (1); FMS (1) 06/17/2003 2 TEAM LEADER (1); S S CONSULTANT (1) 10/19/2004 2 CONSULTANT (1); PROJECTS S S OFFICER (1) ICR 5/20005 1 CONSULTANT (1) (b) Staff: Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks US$ ('000) Identification/Preparation NA 95\.5 Supervision NA 381\.6 ICR NA 20\.0 Total NA 497\.1 SAP no longer provides information on staff weeks\. - 30 -  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 - 31 -  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 - 32 -  Annex 7\. List of Supporting Documents 1\. Aide Memoires, Back-to-Office Reports, and Project Status Reports\. 2\. Project Progress Reports\. 3\. Consultant Study Reports financed under the Project\. 4\. Borrower's Evaluation Report dated November 6, 2005\. 5\. Project Appraisal Document for Croatia Trade and Transport Facilitation in Southeast Europe Project, dated September 27, 2000 (Report No\. 20459-HR)\. - 33 -  Additional Annex 8\. Borrower's Evaluation Report 1\. Project Objectives The Trade and Transport Facilitation in Southeast Europe Project, which forms a part of a regional program, had two development objectives: a) to reduce non-tariff costs to trade and transport; and b) to reduce smuggling and corruption at border crossings\. Measures through which it was planned to achieve these objectives were: Support to the reform of customs administration; strengthening interaction and cooperation between border control agencies and trading community; disseminating information and providing training to the private sector; improvement of infrastructure and equipment at selected border crossings; implementing, at pilot sites, new set of customs procedures, information technology, human resource management techniques and strengthening interagency awareness\. Development objectives of the Project were relevant and important\. Since trade has an important role in Croatian economy, trade would be facilitated by offering efficient and more competitive transport connections to serve also to the private sector activities\. By institutional strengthening and border crossing improvements, it was expected to reduce the costs of trade and transport\. 2\. Suitability of Project Design The project was designed as to focus on modernizing customs administration and its procedures, on upgrading customs facilities, improving private-public interactions and strengthening regional cooperation\. The project consisted of the following five components: a) Institutional Reform on Customs Procedures, including technical assistance in preparation of laws, bylaws and administrative regulations, introducing some new customs procedures, assisting in CDRC reform, monitoring operations at four pilot sites and provide training to enhance interagency cooperation; b) Trade Facilitation Development, including distance learning training for economic operators, through Croatian Chamber of Economy and creation of a web site to support information availability; c) CDRC Information system Improvement, including supply and installation of new hardware and software; d) Improvement of Border Crossing facilities at Slavonski Brod, Gunja, Maljevac and Slavonski Samac; and e) Program and Project Implementation, including support to the PIT, training to the Project manager and Project Implementation team\. - 34 -  The project design was suitable to meet the objectives\. However, in some terms it was to ambitious, especially related to the performance targets on four pilot sites (three border crossings and one inland terminal)\. Monthly measurements showed improvement at these pilot sites, especially related to the reducing waiting times, but it was hard to expect that targets which were stated in the Performance Indicators, due to a fact that the whole project design was meant to be performed in a longer process (eight to ten years), than it was a planned project duration\. The initially project closing date of March 31, 2004 was extended one year, due to the extensiveness of IT system improvement process and because of hiring Consultants for establishment of risk analysis system with delay\. This project extension did not caused any changes in project design\. 3\. Suitability of Implementation Arrangements Implementation arrangements were suitable for Project implementation\. All components were implemented by the Croatian Customs Directorate, except trade facilitation development component, which was implemented by the Croatian Chamber of Economy\. Component on Institutional Reform on Customs Procedures was implemented together with SECI team, which provided technical support to the CDRC\. At the beginning of the project, Procedures Manual was prepared, which defined responsibilities off all actors in the Project\. Financial Management Unit was established in the Ministry of Finance, and it was responsible for financial disbursement under the TTFSE project\. Procurement Unit was established in the Customs Directorate and was responsible for preparation of all tender documentation and whole procurement process\. CDRC IT system and border crossings improvement components were implemented through procurement procedures, done by CDRC\. All procurement was done through ICB methods and was transparent and in accordance with the World Bank Guidelines\. For IT component, it was planned to have a four procurement packages, but the CDRC has withdraw the last one regarding electronic signature and asked for reallocation of funds for upgrading the previous packages\. Improvement of border crossings component has been done together with the Department for construction and maintenance of border crossing facilities, within the Ministry of Finance\. They were responsible for preparation of technical specifications\. 4\. Project Implementation Project implementation commenced as originally planned and a number of activities have proceeded within the original timeframe\. On the other hand, some activities started with some delay, mainly due to the fact that some documentation, meaning technical specifications for border crossings, had to be adjusted and some decisions related to the IT development have to be made on the governmental level\. - 35 -  The Bank was very responsive and flexible in making any additional adjustments, especially in IT documentation, bearing on mind very fast changes and development of new information technologies\. 5\. Project Cost and Financing The total final cost of the project is higher than the original estimate\. The difference is mainly in currency amounts due to currency fluctuations in the years of project implementation\. Due to the fact that the CDRC withdraw from the fourth IT package regarding electronic signature, the Bank reallocated the funds for upgrading the previous IT package, on Customs Network\. 6\. Project Benefits The main beneficiaries of the project are Ministry of Finance, CDRC, border agencies, Croatian Chamber of Economy and economic operators\. Performance indicators showed that project resulted with positive achievements in reduction of waiting time at pilot sites, as a result of introducing selectivity and risk analysis criteria and better interagency cooperation\. The project contributed to the better cooperation between customs administrations in this region and reduced smuggling\. Through the project, web site, which provides information about requirements of border agencies, was introduced\. Constructed and improved border crossing facilities are enabling more effective work of customs and police officers, and facilitate also passenger's traffic\. Improved IT system of Customs Directorate enabled networking of all customs locations and modernized its equipment\. 7\. Borrower's Performance The Borrower's and implementing agency's performance was satisfactory, starting from the preparation phase, during which the Borrower showed a high degree of commitment and cooperation with the Bank and through out the project implementation the Borrower and the implementing agency were trying to resolve any problem or task in a timely and efficient manner\. 8\. Bank's Performance Bank's performance has been highly satisfactory both in the preparatory phase and in project implementation\. The Bank's team has established a very effective relationship with the Borrower and its implementing agency\. Supervision and procurement review were performed in a timely manner, providing advice and assistance to the Borrower and PIU whenever needed\. - 36 -  IBRD 31814R 15° GERMANY CZECH REP\. 20° 25° From Germany 30° SOUTHEAST EUROPE REGION To Germany Exports: Imports: SLOVAK REP\. Exports: Imports: $58 $159 TRADE AND TRANSPORT $41 $89 10/5 10/5 UKRAINE FACILITATION IN SOUTHEAST To France From France 60/10 60/10 $475 $450 $1,400 $1,600 EUROPE PROJECT Exports: Imports: $722 $799 Exports: Imports: 90/6 90/6 $245 $133 MAIN TRADE PATTERNS AUSTRIA $1,100 $1,600 60/10 60/10 Exports: Imports: Imports: $1,300 $650 $1,627 $1,923 $116 To / From 76/6 76/6 IMPORT AND EXPORT PATTERNS (2000): 10/3 Russian Federation Exports: Imports: $920 $1,270 $350 $132 $325 MOLDOVA Exports (US$, Millions) Imports (US$, Millions) 78/6 79/7 HUNGARY Exports: $400 Exports: Imports: Exports: Imports: $1,730 $2,000 $46 $211 $300 $631 $679 Imports: 85/15 192/24 192/24 53/5 53/5 $3,800 $3,800 $530 $1,700 $1,400 $1,500 19/5 Transport Time (between capital cities)*/ Transport Time (between capital cities)*/ SLOVENIA $630 Exports: Imports: Waiting Time @ Border Crossing Points (Hours)** Transport Waiting Time @ Border Crossing Points (Hours)** $168 $491 Costs 60/10 60/10 (US$)** Exports: Imports: $1,300 $1,700 ROMANIA $481 $629 Color of value reflects change in import/export situation since 1999: 7/2 11/3 $4,344 $300 Worsening situation $300 $400 To USA Exports: $1,569 192/24 Improving situation CROATIA Exports: Exports: Imports: $380 Imports: From Russian Federation $3,800 No change in situation 45° $498 $256 $252 $1,120 55/10 65/10 Exports: Imports: Thickness of import/export line reflects import/export amount; $1,900 $1,900 $991 $1,318 Color of import/export line reflects change in import/export situation since 1999: Exports: Imports: Worsening situation 42/6 45/5 $82 $545 Exports: Imports: 45° $1,000 $1,100 9/1 12/2 Improving situation $2,319 $2,443 $630 $860 SERBIA No change in situation Exports: Imports: $1,114 68/8 68/8 Exports: $66 $341 AND $1,100 $1,900 $627 *Milan is used for Italy\. 14/2 16/3 MONTENEGRO 17/7 **Average time and costs estimated based on surveys and estimates\. SAN MARINO $800 $1,000 $800 BOSNIA AND HERZEGOVINA Exports: Imports: $436 $905 MAIN MACRO-TRADE INDICATORS: 88/18 88/18 $605 $2,000 $1,550 GDP per capita (US$) Black $4,000 Exports: Imports: Sea Exports: Imports: Exports: Imports: $333 $190 $216 $390 $188 $304 14/4 14/4 Exports: Imports: Imports: $2,000 51/8 51/8 11/2 14/3 $500 $600 $686 $551 BULGARIA $1,588 From Russian Federation $1,140 $1,590 $600 $600 56/16 56/16 $1,000 $1,700 $1,800 Exports: Imports: Exports: Imports: $500 ITALY $150 $255 $23 $72 $1,566 Exports: 58/8 56/8 144/24 144/24 $492 $1,150 $1,600 $2,000 $2,500 18/3 Color of circle, and GDP Per Capita value, reflects change in GDP situation since 1999: $300 FYR $500 Worsening situation MACEDONIA $500 Improving situation Adriatic Sea Exports: Imports: $500 No change in situation $376 $318 Imports: $1,704 19/3 19/3 Exports $111 Import Exports: Imports: ALBANIA Exports: $500 $1,100 Real GDP $165 $338 $84 GDP (FOB) (CIF) per 120/24 120/24 $970 15/2 in US$ Capita $1,450 $2,500 in US$ in US$ Imports: $600 billion billion billion $200 in US$ 2000 34/10 40° $800 ALBANIA* 3\.8 0\.3 0\.9 970 BOSNIA AND HERZEGOVINA* 4\.2 0\.6 2\.3 1,114 Exports: Imports: Imports: 40° $37 $213 BULGARIA 12\.4 4\.8 6\.5 1,566 $50 60/24 96/24 120/48 CROATIA 19 4\.4 7\.9 4,344 $1,100 $1,100 $1,900 INTERNATIONAL BOUNDARIES FYR MACEDONIA 3\.7 1\.3 2\.0 1,704 0 100 200 Aegean ROMANIA 35\.2 10\.3 13\.0 1,569 Sea This map was produced by the Map Design Unit of The World Bank\. The boundaries, colors, denominations and any other information KILOMETERS GREECE TURKEY SERBIA AND MONTENEGRO 9\.0 1\.7 3\.7 865 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 MOLDOVA** 1\.5 0\.5 0\.9 400 endorsement or acceptance of such boundaries\. 20° *1999 data\. **2001 data\. MAY 2003  IBRD 31815R Salzburg 15° Bratislava 20° 25° Chernivtsi 30° Miskolc A U S T R I A Yuzhnoukrayinsk Nyíregyháza W Siret Satu Mare Balti Gyor " M U K R A I N E Suceava Budapest Debrecen Baia O Mare Lienz Graz L Székesfehérvár D H U N G A R Y Oradea Chisinau Iasi O Chisinau Villach V Kecskemét Piatra- Leuseni V Tighina Maribor V X IV Neamt¸ Cluj-Napoca A SLOVENIA Palanca Odessa Targu Mures Bacau Bacau Ljubljana Macelj Pécs Szeged Arad IX Zagreb Cahul Trieste Jankomir Horgos R O M A N I A X Venice Rijeka Karlovac CROATIA Osijek Sibiu Focsani Brasov 45° Maljevac W Gradiska Slavonski Brod Samac WNovi Novi Sad IV W Pula Braila Grad W IV Bosanska Zupanja Buzau 45° C Izacic Gradiska Ramnicu Bihac C W Batrovci Valcea Banja Banja Orasje Gunja Luka Drobeta- Luka Doboj C Raca Pitesti Ploiesti Turnu Tuzla Belgrade Severin A BOSNIA AND SAN Craiova Bucharest MARINO d Jajce Travnik r HERZEGOVINA SERBIA Constanta C Constanta i a D Kamensko AND Vidin W Giurgiu B l a c k V t Split Sarajevo Rousse i Konjic MONTENEGRO VII C Rousse c Grude Dobrich IX S e a Gorica D X Pleven I T A L Y Mostar Nis IV D Doljani Varna Terni X B U L G A R I A Gradina Pescara Dubrovnik Sliven Pristina Sofia Plovdiv VIII W Bourgas Rome Bourgas SOUTHEAST EUROPE REGION S Podgorica Pernik Debeli Breg e Presevo Deve Stara Zagora Bair TRADE AND TRANSPORT a C Gyueshevo Shkodër C C C FACILITATION IN SOUTHEAST Morina Tetovo Skopje Tabanovce Kumanovo EUROPE PROJECT Kapitan Foggia Cotse W Gostivar FYR Edirne Delchev Andreevo Durres VIII PROJECT*: Tirana MACEDONIA Kulata Bari Durrës Tirana W IV W Naples INFRASTRUCTURE PROJECT C Kafasan Prilep Struga X D DESIGN PROJECT W Elbasan Ohrid Qafe Bitola Kadiköy PILOT BORDER STATIONS Istanbul Sakarya Thane IV PILOT INLAND TERMINALS ALBANIA X C COMBINED PILOT AND INFRASTRUCTURE Taranto Korçë Golcük Thessaloniki 40° Vlorë II PAN EUROPEAN TRANSPORT CORRIDORS Lecce T U R K E Y MAJOR ROADS Ersekë Bursa MAJOR RAILROADS 40° Mediterranean MAIN CITIES Sarandë G R E E C E Sea NATIONAL CAPITALS This map was produced by the Map Design Unit of The World Bank\. The boundaries, colors, denominations and any other information INTERNATIONAL BOUNDARIES 0 50 100 150 200 Balikesir shown on this map do not imply, on the part of The World Bank 15° 20° Larisa 25° Group, any judgment on the legal status of any territory, or any 30° *Subject to change as other projects are finalized\. KILOMETERS Trikala endorsement or acceptance of such boundaries\. MAY 2003

REVIEW

P000400

 ICRR 10509 Report Number : ICRR10509 ICR Review Operations Evaluation Department 1\. Project Data : OEDID : OEDID: L3388 Project ID : P000400 Project Name : Food Security Project Country : Cameroon Sector : Other Agriculture L/C Number : Ln\.3388-CM Partners involved : Japan Prepared by : Madhur Gautam, OEDST Reviewed by : Keith Pitman Group Manager : Gregory K\. Ingram Date Posted : 08/16/1999 2\. Project Objectives, Financing, Costs and Components : Objectives : The overall objective was poverty reduction \. This was to be achieved through (i) employment creation and raising the purchasing power of rural groups, particularly women; (ii) reduce the impact of locust attacks on food prodution in northern areas; (iii) increase food marketing and storage efficiency; (iv) improve dietary practices of vulnerable groups\. Components : (i) Micro-projects: to finance income generating micro -projects prepared by groups at grass roots level; (ii) locust control: to reduce locust attacks by aerial spraying; (iii) early warning system: to establish a fully operational early warning and information system to avert famines; (iv) market infrastructure: to build and renovate about 30-40 markets in secondary cities and rural communes; and (v) nutrition education: to pilot an education program through research, testing and dissemination of nutrition messages targeted at high risk groups \. Costs and financing : At appraisal (1989) estimated costs were US$35\.3 million, of which IBRD was to provide US$23\.0 million\. The project closed 6 months ahead of schedule on December 31, 1998 (except for the locust control component which closed on May 31, 1999)\. Actual project costs were US$19\.2 million, with IBRD contribution being US$11\.0 million and Japan providing a grant of US$ 5\.1 million\. An amount of US$10\.6 million of the IBRD loan was cancelled in 1997\. 3\. Achievement of Relevant Objectives : The project was partially successful in meeting its primary objective of poverty reduction \. The famine early warning system has been fully operational since 1997\. The micro-project component was partially successful, providing training to groups member, creating employment and raising the incomes of beneficaries by financing profitable activities\. The experimental fund for cash -generating activities was not implemented \. The locust control component was much delayed and unable to make progress during the life of the project \. The achievements under the market infrastructure component were negligible, The nutrition component partially achieved its objectives, conducting several education, research and training activities \. 4\. Significant Achievements : The established of a fully operational early warning system, which has already started to yield benefits by providing forescasts of potential shortages \. The micro-projects component financed a large number of profitable activities, which have had a positive impact on the beneficiaries, athough the component could have had a much greater impact under appropriate institutional and financial arrangements \. Towards the end of the project 92% of the beneficiaries were linked with private MFIs \. The nutritional program has also provided some education and training to vulnerable groups, and evaluation studies some at least some positive impact on feeding habits among the target groups\. 5\. Significant Shortcomings : The project made little contribution towards improving the efficiency of food marketing or storage \. The project components were poorly integrated and lacked appropriate monitoring and evaluation making it diffcult to assess progress towards the components' or overall objectives \. There was poor coordination by government and marked differences in institutional performance among the range of institutions involved \. There was no Mid-Term Review to redirect the project\. The micro-projects component was entrusted to civil servants with inadequate experience in financial matters; the recovery rates were low and the decision to charge zero interest rates was inappropriate \. Avoidable procurement problems (for locust control component ) and poor inter-agency coordination, lack of local counterpart funds and political disagreements (for market infrastructure component ) limited the project's benefits\. The project's outreach could have been substantially greater with appropriate institutional and financial arrangements for on-lending operations\. From a micro-finance perspective, the component performed poorly : it charged zero interest rates and had a recovery rate of 73%\. The recycling of funds was delayed because of inadequate administrative arrangements \. Eventually, the recycled funds were transferred to trust funds to be managed by private micro-finance institutions (MFIs), who are expected to make second -generation loans to project beneficiaries\. About 92% of the beneficiaries are expected to be linked with the MFIs \. Procurement problems led to lack of chemicals and planes (and spare parts)\. Six markets were buillt, of which only 2 are fully operational\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Institutional Dev \.: Partial Modest Same rating\. Sustainability : Uncertain Uncertain Bank Performance : Deficient Unsatisfactory Same rating\. Borrower Perf \.: Deficient Unsatisfactory Same rating\. Quality of ICR : Satisfactory 7\. Lessons of Broad Applicability : 1\. Micro-finance operations should be handled by competent financial intermediaries and implemented using sound financial principles to ensure sustainability and economic benefits \. 2\. Decentralized management responsibilities can help improve project outreach and effectiveness \. 3\. Reliable monitoring and evaluation systems are needed for all project components to assess progress and impact \. 4\. Consistency and stability is needed in supervision teams, both on the Borrower's and the Bank's side, to ensure progress towards the project's relevant objectives \. 5\. The project demonstrates the usefulness of a participatory approach for innovation, to create ownership and build capacity at the community level \. 6\. A Mid-Term Review is essential\. 8\. Audit Recommended? Yes No 9\. Comments on Quality of ICR : The ICR provides a very good and detailed account of the project's implementation and outcomes \.

REVIEW

P001506

 Accounting and management training project Report No: ; Type: Report/Evaluation Memorandum ; Country: Madagascar; Region: Africa; Sector: Tertiary Education; Major Sector: Education; ProjectID: P001506 December 29, 1995 Madagascar: Accounting and Management Training Project (Credit 1661-MAG) The Madagascar Accounting and Management Training project (Credit 1661 for US$10\.3 million equivalent) was approved in FY86\. Cofinancing was provided by Canada, France and the United States\. The credit was closed on December 31, 1994, after a two-year extension\. About 40 percent of the credit was canceled largely due to grant financing made available to the borrower after appraisal\. The Implementation Completion Report (ICR) was prepared by the Central Africa and Indian Ocean Department of the Africa Regional Office\. The borrower's contribution is included in Appendix B\. The project aimed to upgrade the expertise of Malagasy accountants, auditors and managers in order to strengthen the management planning and finances of local enterprises\. A second objective of this operation was to improve the procurement procedures of the borrower\. These objectives were to be achieved through: (i) the establishment and operation of a National Institute for Accounting and Management (INSCAE); this component was to account for 92 percent of total project cost; and (ii) the provision of technical assistance and training for borrower staff responsible for procurement\. The project successfully contributed to an improvement in the quality and quantity of trained manpower\. Under the project, INSCAE trained 603 qualified accountants and 101 business management graduates, achieved high enrollments and a 100 percent graduate placement rate\. The borrower links these good results to the participation of the private sector, teachers and students in redefining INSCAE's curriculum\. The improvement of procurement regulations and procedures was initially inadequate owing to differences of view on regulatory reform between IDA and the borrower\. Over time, however, the borrower did take measures to improve procurement under Bank- financed projects\. The Operations Evaluation Department (OED) rates project outcome as satisfactory (versus highly satisfactory in the ICR), as not all project objectives were fully achieved, and implementation of the procurement component was weak\. OED rates institutional development as modest, equivalent to the ICR's partial rating\. Like the ICR, OED rates sustainability as likely\. Both OED and the ICR rate the performance of IDA as satisfactory\. This operation offers some important lessons\. One is that projects like this one, which benefit from a strong government commitment and are designed to meet widely perceived needs, have a high likelihood of meeting their development objectives\. Another is that it is not advisable to pursue unrelated objectives—in this case education and improved central government procurement—in the same operation\. The ICR is good, but would have benefited from a more thorough analysis of available project data\. For example, although the ICR does not mention it, a review by the Canadian grant agency noted that about 40 percent of students are women, a high proportion for this type of training\. No audit is planned\.

REVIEW

P037588

 ICRR 11731 Report Number : ICRR11731 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 02/17/2004 PROJ ID : P037588 Appraisal Actual Project Name : Ivc:agric\. Svcs\. Ii Project Costs 202\.00 85\.73 US$M ) (US$M) Country : Cote d'Ivoire Loan/ US$M ) 50\.76 Loan /Credit (US$M) 29\.67 Sector (s): Board: RDV - Agricultural Cofinancing extension and research US$M ) (US$M) (85%), Central government administration (10%), Media (5%) L/C Number : C3117; CQ086 Board Approval 99 FY ) (FY) Partners involved : Closing Date 12/31/2001 06/30/2003 Prepared by : Reviewed by : Group Manager : Group : John English Ronald S\. Parker Alain A\. Barbu OEDST 2\. Project Objectives and Components a\. Objectives The first agricultural support project (PNASA I) ran from 1994 to 1997\. This aimed to (i) streamline and decentralize agricultural services; (ii) enhance the role of the Ministry of Agriculture and Animal Services (MINAGRA) in policy-making and monitoring of agricultural development; and (iii) increase farmers' role in the policy -making process\. PNASA I succeeded in streamlining the agricultural services and initiating a process of farmers' empowerment, but largely failed to strengthen MINAGRA \. PNASA II was planned as an adaptable program loan (APL) with three phases\. PNASA II, Phase I (this project) was to run from 1998 to 2001, with the succeeding phases running over a further 8 years to 2009\. The objective of Phase 1 was to firmly establish responsive, cost -effective and autonomous agencies for agricultural research and extension services, largely owned and managed as private sector entities by their beneficiaries\. The second phase (2002 - 2005) was to consolidate the achievements of the first, and the third phase (2006-2009) aimed to complete the transfer of financial responsibility to the shareholders /clients of the research and extension institutions to ensure long -term sustainability\. b\. Components The agencies involved in implementation of the project were : the Ministry of Agriculture and Animal Resources (MINAGRA); the National Rural Development Support Agency (ANADER); National Agricultural Research Center (CNRA) and Ministry of Information (MININFO)\. The project had four components : Support to ANADER (US$116\.6 million or 58 percent of program costs), to strengthen adaptive research, extension and support Producer Organizations (POs) through (i) institutional reforms of ANADER; and (ii) investments in human and physical infrastructure \. Support to CNRA (US$61\.3 million or 30 percent of program costs), to support a decentralized CNRA, to be privately owned and managed, like ANADER, by its main clients \. The program was to finance investments in infrastructure, selected research programs, promote scientific networking (including the participation of CNRA in regional and international networks ), and other capacity-building activities such as training and study tours \. Support to key directorates in MINAGRA (US$20\.9 million or 10 percent of program costs), to support selected directorates to decentralize planning, carry out an agricultural census, and strengthen animal genetic improvement programs, and policy making and coordination for cooperatives \. Rural Radio Stations (US$3\.2 million or 2 percent of program costs), to support the dissemination of information on market prices, and agricultural and environmental issues through MININFO \. c\. Comments on Project Cost, Financing and Dates Implementation of the program was heavily disrupted by civil and political turmoil in the country \. There was a coup in December 1999, and a second coup in September 2002 followed by a civil war, that continues \. After the first coup counterpart funding was sharply reduced and Bank disbursements were suspended for almost two years \. Closing was extended for 18 months\. Total project expenditure was US$ 86 mil, or 42% of the appraisal estimate\. Expenditure percentages for the major components were about 60 for ANADER, 24 for CNRA and 10 for MINAGRA\. The Bank has decided to suspend the PNASA program operation and to follow the present program with more specifically targeted operations, through the National Capacity Support Program (PARC) to support relevant activities in MINAGRA and support for locally focused activities through the Rural Land and Infrastructure Development Project (PNGTER)\. 3\. Achievement of Relevant Objectives: ANADER and CNRA were established as autonomous agencies for agricultural extension and research, respectively, funded from dedicated sources from fees from beneficiaries and the government \. Support to MINAGRA to strengthen its policy making and related activities was sharply curtailed because of the political and economic turmoil and little progress was achieved \. 4\. Significant Outcomes/Impacts: ANADER\. The institutional reforms of ANADER were carried through (with the majority of the staff opting to switch from civil service status), and a financial and administrative decentralization of its operations was carried out \. The central office was restructured, creating four Directorates; extension /on-farm research, livestock, crops, and training/communication\. Specialists were appointed in each of the 10 regions for each of the four directorates \. Regional technical review committees (with producer input) were established, providing regular and efficient guidance for extension programs \.Close liaison was maintained between ANADER staff and teams from the Rural Land and Infrastructure Development Project (PNGTER)\. These worked together to develop a village level participatory approach, preparing village diagnostics, an exercise also drawing on local farmer groups and the expertise of NGOs\. Three hundred villages were covered in 1999, and 500 in 2000\. CNRA\. Although rather slowly, CNRA also decentralized its operations, and completed a research planning process in close collaboration with beneficiaries and the research institutions \. CNRA also put considerable emphasis on strengthening links with international and overseas research institutions to develop national and international partnerships for agricultural research \. A significant amount of training and capacity building was achieved, with both local training courses and workshops and external training opportunities were utilized \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): Both ANADER and CNRA activities were adversely affected by the social turmoil and economic crisis that began in 1999\. In addition to the hostilities, Bank disbursements were suspended for much of 2000 and 2001, and government counterpart funding was reduced almost to nil \. The financial difficulties had the affect of forcing the agencies to shift responsibility to the regions and, thus, fostered the decentralization process \. It is clear, though, that the overall pace of activity was adversely affected and, following the coup in September 2002 and the start of the civil war, rebels are occupying the northern half of the country and implementation activities over much of the country have come to a standstill\. MINAGRA \. Some activities and reforms were undertaken by MINAGRA but little overall progress was made, with expenditure only amounting to 10 percent of that planned\. The Rural Radio Stations component was largely unimplemented \. Little training was implemented, no equipment was purchased and little dissemination of information was achieved \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Satisfactory Although the ICR's 4-point scale does not allow for a "moderately sat\." rating, the ICR in its text rates the outcome as "Marginally Satisfactory", so there is no disagreement Institutional Dev \.: High Substantial ICR does not give sufficient evidence to judge that the project made a 'critical' rather than a 'substantial' contribution to the country's ability to effectively use its resources\. Sustainability : Likely Non-evaluable Because of current country conditions, the degree of uncertainty as to future conditions is so high that no assessment of sustainability is possible \.  Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Unsatisfactory Unsatisfactory 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 states a series of lessons learned, but these are generally more assertions than lessons, e \.g\. publicly financed/publicly managed agricultural services do not work Project experience does suggest one key lesson : Functional independence does insulate an organization from political paralysis and enable actions to be taken even under adverse economic and social conditions, even if operations have to be scaled back \. 8\. Assessment Recommended? Yes No Why? To verify ratings and clarify findings, if feasible, as current conditions clearly limited the ability of the ICR to assess outcomes on the ground (see section 9)\. 9\. Comments on Quality of ICR: The ICR provides a great deal of data on institutional changes made under the project \. However, it is clear that the adverse economic, social and political conditions have hampered the program's plans to support an expanded range of activities under the reformed structures \. These conditions also clearly made it difficult for the ICR to assess how much the agencies were able to achieve under these conditions \. The ICR also does not make clear why the decision has been made not to proceed to the second phase of the initially planned program, but to channel assistance through different operations\.

REVIEW

P003492

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 19700 IMPLEMENTATION COMPLETION REPORT CHINA DAGUANGBA MULTIPURPOSE PROJECT (LOAN 3412/CREDIT 2305) September23, 1999 Energy and Development Sector Unit East Asia and Pacific Regional Office 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 = Yuan (Y) 1991 $1 = 5\.45 1992 $1 = 5\.75 1993 $1 = 8\.70 1994 $1 = 8\.45 1995 $1 = 8\.32 1996 $1 = 8\.30 1997 $1 = 8\.30 1998 $1 = 8\.30 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS EIRR - Economic Internal Rate of Retum GOC - Government of China HEPCO - Hainan Electric Power Company HMC - High Main Canal HMCMD - High Main Canal Water Management Division ICR - Implementation Completion Report MSDI - Mid-South Investigation and Design Institute O&M - Operating & Maintenance RCC - Roller-Compacted Concrete SAR - Staff Appraisal Report SDPC - State Development and Planning Commission Vice President Jean-Michel Severino, EAPVP Sector Director Yoshihiko Sumi, EASEG Country Director Yukon Huang, EACCF Task Manager Barry Trembath, EASEG  CONTENTS PREFACE EVALUATION SUMMARY \.i PART I: PROJECT IMPLEMENTATION ASSESSMENT \.1 A\. Statement/Evaluation of Objectives \.l 1 B\. Achievement of Project Objectives \. 2 C\. Implementation Record and Major Factors Affecting the Project \.4 D\. Project Sustainability \. 17 E\. Bank Performance \. 17 F\. Borrower Perfornance \. 18 G\. Assessment of Outcome \. 19 H\. Future Operation \. 19 1\. Key Lessons Learned \. 21 PART II: STATISTICAL TABLES \. 22 Table 1: Summary of Assessments \. 22 Table 2: Related bank loans \. 23 Table 3: Project Timetable \. 28 Table 4: Loan/Credit Disbursement: Cumulative Estimate and Actual \. 28 Table 5A: Key Indicators for Project Implementation \. 29 Table 5B: Key Indicators for Project Implementation \. 30 Table 5 C: Key Indicators For Project Implementation \. 31 Table 6A: Key Indicators For Project Operations \. 32 Table 6B: Key Indicators for Project Operations \. 33 Table 7: Studies included in Project \. 34 Table 8A: Project Costs \. 35 Table 8B: Project Costs \. 36 Table 8C: Project Financing \. 37 Table 9A: Economic Costs and Benefits \. 38 Table 9B: Economic Costs and Benefits \. 39 Table 10: Status of Legal Covenants \. 40 Table 11: Compliance with Operational Manual Statements \. 42 Table 12: Bank Resources: Staff Inputs \. 42 Table 13: Bank Resources: Missions \. 43 ANNEX A: FINANCIAL STATEMENTS OF HEPCO \. 44 ANNEX B: BORROWER'S CONTRIBUTION TO THE ICR \. 47 ANNEX C: ICR MISSION'S AIDE MEMOIRE \. 55 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\.   IMPLEMENTATION COMPLETION REPORT CHINA DAGUANGBA MULTIPURPOSE PROJECT (LOAN 3412/CREDIT 2305) PREFACE This is the Implementation Completion Report (ICR) for the Daguangba Multipurpose Project in China, for which Loan 3412 in the amount of U$30,000,000 million equivalent and Credit 2305 in the amount of SDR 28,100,000 million (US$37,000,000 million equivalent) were approved on October 31, 1991 and made effective on February 20, 1992\. The loan and credit were closed on December 31, 1998\. They were fully disbursed, and the last disbursement took place on February 24, 1999\. The ICR was prepared by Barry Trembath and Yuling Zhu in the Energy and Mining Sector Unit, and Qun Li in the Rural Development and Natural Resources Sector Unit of the East Asia and Pacific Region, and reviewed by Mr\. Yoshihiko Sumi, Sector Director\. The Borrower/Beneficiary provided comments, which are incorporated in the ICR, its own completion report, an executive summary of which is included as an annex to the ICR\. Preparation of this ICR was begun during the Bank's final supervision mission in October 1998, and an ICR mission visited the Province in March 1999\. A follow-up mission to obtain outstanding data was undertaken in June 1999\. This ICR is based on the documents and data received during those missions, discussions with Beneficiary staff and consultants, Staff Appraisal Report, the Loan and Project Agreements, supervision reports, correspondence between the Bank and the Borrower/Beneficiary, and internal Bank memoranda\.   CHINA DAGUANGBA MULTIPURPOSE PROJECT (LOAN 3412/CREDIT 2305) EVALUATION SUMMARY Introduction 1\. The Daguangba Multipurpose Project is located in the western part of Hainan Island, the driest and poorest region of the Hainan Province\. As a newly established province in China, Hainan's potential for economic growth remained largely untapped partly due to the lack of infrastructure\. It was in this context that the Project was approved by the Bank and the Government of China\. The Beneficiary of the Project was the Hainan Electric Power Company (HEPCO)\. Project Objectives 2\. The main objectives of the Project were to: (a) develop non-polluting and cost- effective hydropower resources; (b) increase agricultural production and the income of poor farmers; (d) improve the environmental quality and public health of the region by implementing an environmental management program; (e) promote prudent investment programming; (f) promote rational pricing of electricity and irrigation water; and (g) enhance the operational efficiency and financial management of HEPCO\. 3\. To meet the above objectives, the project included two categories of components: power and agriculture/resettlement\. The power components included: (a) a 56 m high, 719 m long concrete gravity dam; (b) an underground powerhouse, equipped with four 60 MW generation sets; (c) some 36 km of double circuit 220 kV transmission line and a substation; (d) a computerized load dispatch system for the Hainan power grid; and (e) technical assistance and training in project design, power system planning and tariff studies, utility and financial management\. The agriculture/resettlement components included: (f) a 16 km long main irrigation canal; (g) about 154 km of branch and lateral canals and on-farm works for irrigation of about 12,700 ha of which about 1,400 ha would be related to resettlement; (h) resettlement of about 23,800 people; (i) and agricultural support services\. 4\. The objectives remained unchanged for the duration of the project\. They were clearly stated\. The physical objectives were realistic\. The institutional development objectives may have been too ambitious, given HEPCO's status as a province owned power bureau and an unlikely candidate to pilot reforns in the power sector\. Both power and agricultural development objectives were important in supporting economic growth and alleviating poverty in an a very poor region\.  - ii - Implementation Experience and Results 5\. The project achieved its primary objective of developing hydropower resources, to provide needed peaking power and auxiliary services in a system which is now predominantly thermal\. Though the irrigation facilities have not been fully completed due to shortage of counterpart funds, the project objective of increasing agricultural production and income of the poor farmers has been partly achieved and there are good prospects to extend this achievement with the recent allocation of funds by the provincial government to allow completion of this component by the end of 2000\. The objective of improving environmental quality and public health of the region has been at least partly achieved with a general improvement of public health in resettlement villages\. Success in achieving objectives of promoting rational pricing of electricity and irrigation water and institutional development has been modest\. 6\. The ex-post Economic Internal Rate of Return (EIRR), based on a minimum proxy of "willingness to pay" for power benefits is calculated as 16\.1 percent in comparison with 15\.0 percent estimated at appraisal using similar methodologies\. The appraisal estimate is exceeded despite the fact that the irrigation component is not complete and energy production has been less than planned because of severe drought\. 7\. The major shortcoming in achievement of objectives is in relation to the restoration of income of resettlers\. The overall standard of resettlement housing and community facilities is better than before the move and based on sample surveys average income is about 10 percent higher than that before the move, after allowing for inflation\. However, incomes are unevenly distributed and about 40 percent of villages have average incomes which are still at least 20 percent lower than before the move\. Development plans have been prepared specifically targeted at problem areas, and with the recent approval of additional funds by the provincial government it is hoped that needed agricultural development work can be completed by the end of 2000\. 8\. The dam and power plant were started and completed basically on schedule\. The first generating unit commenced trial operation on December 29, 1993 and the entire power component was completed and put into commercial operation on December 30, 1995\. The dam and power plant are of good quality\. The reservoir first filled to full supply level in November 1996, and in 1997 the generation was close to the design level of 520 GWh\. However, there was a decrease in 1998 due mainly to an exceptional drought in the region\. 9\. The power transmission facilities constructed under the project included: 35\.4 km of double circuit 220 kV transmission lines from Daguangba to Emaoling and 194\.2 km of 220 kV line fom Emaoling to Sanya; extension of Emaoling 220 kV substation and a new 220 kV substation in Sanya City\. The Emaoling substation was put into operation in November 1993 and the Sanya substation in July 1995\. The extension to Sanya was not included in the project scope but in May 1993, the Bank agreed that Bank financing could  - iii - be used to finance the purchase of imported materials and equipment for the extension to Sanya providing for a more effective usage of Daguangba power in the Hainan grid\. 10\. The first phase of the High Main Canal was also completed generally as planned and is of a high standard\. It entered operation in June 1994 and has been operating successfully since then\. The second phase is not yet complete due to shortage of local funds, however with the recent approval of additional funds by the provincial government it is expected that the project can be completed by the end of 2000\. Achievements in agriculture support services substantially exceed appraisal targets\. Agro-technical extension services system were also strengthened with construction and rehabilitation of four new county and township centers, and introduction of various new production technologies\. 11\. The detailed resettlement plan, prepared in 1987, provided for the relocation and re-establishment of 20,516 persons\. The plan provided for resettlement to be primarily land based\. Actual numbers of people requiring relocation increased to 22,243 which is still less than the SAR estimate of 23,800 people\. However, the above numbers do not include a further 5,343 people in 13 additional villages who are affected by loss of land, raising the total number of project affected persons to 27,586\. The original resettlement budget of Y 150\.5 million was adjusted twice during implementation, in 1993 and in late 1997, eventually reaching 269\.4 million\. However, because of slow arrival of funds from the provincial government, by the end of 1998 only Y 206\.3 million had been allocated by HEPCO\. Achievements of the resettlement plan up until the end of 1998, included: construction of new housing and community facilities, providing substantially more floor space of considerably higher quality than before the move; land development accounting for 93 percent of the plan target\. However for land-loss villages, because of the late start and lack of finance, only 14 percent of land development targets had been achieved\. Restoration of livelihood is being achieved albeit gradually\. According to the most recent survey carried out by the independent momitoring agency, the average per-capita income of all resettlers in 1997 was 9\.7 percent higher than before the move after allowing for inflation\. However, income restoration was unevenly distributed\. Most villages served by the HMC have considerably improved their income\. Another third of villages seem to be well on the way to full restoration, but about 40 percent had a 1997 per-capita income at least 20 percent below that before the move\. Development plans have been prepared specifically targeted at the problem areas and with the provincial government approval, on August 13, 1999 of an allocation from the provincial development loan, HEPCO are optimistic that the remaining development work can be completed by the end of 2000\. 12\. The estimated cost of the project at appraisal (excluding interest during construction) was equivalent to a total of $193\.0 million (Y 1,086\.5 million)\. The final cost was equivalent to a total of $197\.5 million (Y1,514\.4 million)\. There is an apparent cost overrun of some 2\.3 percent when expressed in US dollars and 39\.4 percent when expressed in local currency\. The difference in the two figures for cost overrun is due to the higher-than-expected-inflation in China and the devaluation of the local currency\.  - Iv - The comparison of costs expressed in US dollars is considered to give a reasonable estimate of cost overrun excluding the effects of inflation and devaluation\. Given the size of the project and the uncertainties involved, this slight increase of 2\.3 percent is considered to be reasonable\. 13\. The ex-post Economic Internal Rate of Return (EIRR), based on a minimum proxy of "willingness to pay" for power benefits is calculated as 16\.1 percent in comparison with 15\.0 percent estimated at appraisal using similar methodologies\. The appraisal estimate is exceeded despite the fact that the irrigation component is not complete and energy production has been less than planned because of severe drought\. Summary of Findings, Future Operations, and Key Lessons Learned 14\. The objectives of the projects were consistent with those of the Chinese Government and the Bank\. While major objectives were achieved there is a significant shortfall in the area of resettlement where 40 percent of resettlement villages are still some way from full restoration of income\. However, with recent approval of additional local funds, it is anticipated that this achievement will be eventually achieved\. 15\. Daguangba Hydropower Plant is well staffed and has comprehensive and well- documented operation and maintenance procedures in place to ensure proper operation and maintenance of the power plant\. With regard to performance indicators, the Daguangba power plant has already been accredited as meeting State Power Corporation standards for safe and efficient operation as well as aesthetics and working environment\. The H1MC Phase I was completed and started operation in June 1994\. The Water Resource Bureau of Dongfang City has operated and maintained the new irrigation facilities since May 1994\. Future operations will focus on efficient operation and maintenance of the completed irrigation works and facilities so as to achieve the project's full development\. To further enhance the project's economic benefits, the irrigation areas and agricultural support service facilities will be progressively adapted to a market- oriented production economy with a self-supporting operation mechanism, responsible for its own profits and losses\. 16\. For resettlement, the additional Y50 million recently allocated by the provincial government should allow general completion of the remaining works after which the reservoir maintenance fund will generate income based on energy production of about Y 2\.1 million per year for ten years which should sustain annual workplans for the resettlement unit within HEPCO and two county resettlement offices\. 17\. In line with Bank management's response to the OED report "Recent Experiences with Involuntary Resettlement (Report No\. 17538), it is recommended that the Bank continue to supervise the resettlement component until it is clear that incomes have been restored in real terms, or at least until physical facilities are in place to ensure this\. It is recommended that in FY00, two supervision missions are mounted for this purpose\.  - v - 18\. Key lessons mainly relate to the resettlement and irrigation components\. Those relating to resettlement serve to reinforce those derived from other Chinese reservoir resettlement projects\. Lessons are: (a) the need to carefully appraise: proposed institutional arrangements for resettlement, both at overall project level and implementation (county and township) level; the treatment of land acquisition even where, prima facie, relocation is not required; the feasibility of "moving back resettlement strategies where there is a tendency to over-estimate remaining land resources\. (b) the need to further advance resettlement planning at the planning stage to allow better assessment of resettlement strategies, and the preparation of more accurate cost estimates\. (c) the need to consider in the project design measures to ensure borrower commitment to all elements important to the success of the project, including increased level of Bank financing for these elements and staged performance targets so that implementation can be carefully monitored\.   - 1 - CHINA DAGUANGBA MULTIPURPOSE PROJECT (LOAN 3412/CREDIT 2305) PART I: PROJECT IMPLEMENTATION ASSESSMENT A\. STATEMENT/EVALUATION OF OBJECTIVES 1\. The Daguangba Multipurpose Project is located in the western part of Hainan Island, the driest and poorest region of the Hainan Province\. As a newly established province in China, Hainan's potential for economic growth remained largely untapped partly due to the lack of infrastructure\. It was in this context that the Project was approved by the Bank and the Government of China (GOC)\. 2\. The main objectives of the Project were to: (a) increase the development of non-polluting and cost-effective hydropower resources to provide needed peaking power in a predominantly thermal system; (b) increase agricultural production to meet the needs of a growing population; (c) increase the income of the poor farmers by intensifying agricultural production and increasing the productivity of cropland by alleviating water shortages and optimizing the cropping pattern; (d) improve the environmental quality and public health of the region by implementing an environmental management program; (e) promote prudent investment programming and strengthen local capabilities in development planning of both power and agricultural sectors; (f) promote rational pricing of electricity and irrigation water; and (g) enhance the operational efficiency and financial management of HEPCO\. 3\. The development-based resettlement of the reservoir population, while not singled out as a specific development objective, would be carried out in the context of OPN 10\.08 and OMS 2\.33\. These Bank directives called for the relocation of reservoir population in a manner that would leave them after relocation as well off as before, possibly better\. 4\. To meet the above objectives, the project included two main categories of components: power and agriculture/resettlement\. The power component included:  -2 - (a) Construction of a 56 m high, 719 m long gravity dam of roller-compacted concrete (RCC), flanked by about 5,100 m long earth embankments; (b) Construction of an underground powerhouse, equipped with four 60 MW generation sets, a surge shaft and 420 m long twin tailrace tunnels; (c) Erection of about 36 km double circuit 220 kV transmission line and Changjiang substation; (d) Installation of a computerized load dispatch system for the Hainan power grid; and (e) Technical assistance and training in project design, power system planning and tariff studies, utility and financial management\. 5\. The agriculture/resettlement component included: (a) Construction of the 16 km long High Main Canal (HMC), about 154 km long branch/lateral canals and on-farm works for irrigation of about 12,700 ha in Dongfang County, of which about 1,400 ha would be related to resettlement; (b) Resettlement of about 23,800 people in Dongfang and Ledong Counties, and provision of housing, infrastructure (including public buildings), on- farm works and land development for irrigation of about 2,300 ha; (c) Provision of agricultural support services; (d) Provision of environmental management; and (e) Technical assistance for the preparation of an agricultural development plan\. 6\. The objectives remained unchanged for the duration of the project\. They were clearly stated\. The physical objectives were realistic\. The institutional development objectives may have been too ambitious, given HEPCO's status as a province owned power bureau and an unlikely candidate to pilot reforms in the power sector\. Both power and agricultural development objectives were important in supporting economic growth and alleviating poverty in an a very poor region\. B\. ACHIEVEMENT OF PROJECT OBJECTIVES 7\. With the successful completion of the dam and the hydropower plant as originally designed, the project achieved its primary objective of developing hydropower resources, to provide needed peaking power in a system which is now predominantly thermal\. There have been no major operating problems since the rather extensive teething  -3 - problems encountered in the early stages of project operation\. As of end 1998, about five years after the commercial operation, all four units have generated a total of electricity of 1,981\.3 GWh\. The project improved the balance and location of thermal and hydro power resources in Hainan power grid\. It also provides the badly needed functions of load following and frequency regulation in a grid which has become somewhat unbalanced towards large thermal plants\. 8\. Though the irrigation facilities have not been fully completed due to shortage of counterpart funds, the project objective of increasing agricultural production and income of the poor farmers has been partly achieved and there are good prospects to extend this achievement\. The currently completed irrigation facilities can supply water to about 97,100 mu (6,473 ha) of agricultural land, and extensions are currently underway to increase this by 30,000 mu (2000 ha) by the end of 1999, thus irrigating two thirds of the originally planned area\. In addition, funds have now been allocated to complete works required to irrigate the full planned area by the end of 2000\. The irrigation system developed under the project can also supply water for industrial and residential use\. It plays a significant role in alleviating the long-term drought situation in the southwest area of the province\. 9\. The ex-post Economic Internal Rate of Return (EIRR), based on a minimum proxy of "willingness to pay" for power benefits is calculated as 16\.1 percent in comparison with 15\.0 percent estimated at appraisal using similar methodologies\. The appraisal estimate is exceeded despite the fact that the irrigation component is not complete and energy generation has been less than planned because of drought, because of higher demonstrated willingness to pay for power and higher irrigation benefits due to improved cropping patterns\. 10\. The objective of improving environmental quality and public health of the region by implementing an environmental management program has been at least partly achieved with a general improvement of public health in resettlement villages\. Hygiene and sanitation have considerably improved and infectious diseases are dramatically down since before the move\. The standard of health care in the villages has also improved considerably\. 11\. The major shortcoming in achievement of objectives is in relation to the restoration of income of resettlers\. The overall standard of resettlement housing and community facilities is better than before the move, and based on sample surveys, average income is about 10 percent higher than that before the move, after allowing for inflation\. However, incomes are unevenly distributed among the resettlement villages\. Among 29 resettlement villages, only 7 villages have increased per capita income, while some 40 percent have incomes which are still at least 20 percent lower than before the move\. Development plans have been prepared specifically targeted at the areas which are having difficulties re-establishing income, and budgets have been approved by central government authorities\. However, both the provincial government and HEPCO have suffering severe funding shortages due to the economic downturn and fund allocations  -4 - have arrived very slowly\. The situation is expected to improve with the allocation on September 13, 1999 of a provincial development loan to enable the resettlement development work to be completed\. 12\. Success in achieving objectives of promoting rational pricing of electricity and irrigation water has been limited\. While power pricing studies were completed, the proposed tariff structure reform was not implemented because of lack of approval from the provincial government\. Water charges are being levied but are well below O&M costs\. Similarly, achievements with respect to the objective of enhancing the operational efficiency and financial management of HEPCO are also modest\. C\. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT Background 13\. The major factors affecting the project during preparation and implementation largely relate to the changing administrative, political and economic enviromnent during this period summarized as follows: (a) At the time of project identification, Hainan had only recently been granted provincial status and establishment of government administrative arrangements, including the status of HEPCO, significantly slowed down decision making\. To some extent this administrative uncertainty continued throughout the preparation and implementation period with HEPCO's relationship to the provincial government changing several times\. It was initially established as a provincial power bureau under the provincial government\. Later it "piloted" a separation of government and commercial functions (although allocation of functions to bureau and company did not seem to have been thought through)\. It was then established as a joint stock company with joint ownership by provincial and local governments\. Finally, it went back to being a wholly owned subsidiary of the provincial government\. Throughout this process it appears to have had little autonomy from the provincial government, and required approvals for virtually all activities\. This was complicated by several changes for responsibility for HEPCO within the government\. (b) The processing of the project in the Bank was adversely affected by the political events of 1989\. Appraisal occurred in April 1989, but Board presentation was delayed until October, 1991\. Large scale work started on the dam in March, 1990\. Before Board presentation, Bank staff were limited in their ability to influence events on site with respect to construction, resettlement etc\. (c) The project design (in the larger sense) was very much dictated by the desire of the Hainan authorities to limit the use of foreign exchange,  - 5 - particularly as the central government was insisting from the outset that Hainan should assume the responsibility for foreign exchange convertibility for loan repayment\. Bank finance was thus limited to peripheral elements rather than the main work\. (d) Over the course of project preparation and implementation, Hainan went through a period of explosive economic growth from 1987 to 1995 with HEPCO energy sales increasing 25 percent per year on average\. For 1997 and 1998 this reduced to about three percent before recovering to about II percent in 1998\. The high growth period resulted in large provincial government commitments to infrastructure investments and power company commitments to power purchases, which left both in constrained financial conditions during the ensuing slow down\. Power Component 14\. The Power component consisted of construction of a dam, an underground power house, associated transmission lines and substations, and installation of a computerized load dispatch system for the Hainan power grid, as well as the related technical assistance and training\. Implementation Organization 15\. HEPCO, the owner of the project, was also the implementing agency\. For the Daguangba Hydroelectric Power Plant, a special and temporary organization - the Project Comrmand Office - was set up to manage construction\. Mid-South Investigation and Design Institute (MSDI) served as the designer\. Guangxi Electric Power Investigation and Design Institute served as the supervision engineer\. A Special Board of Consultants consisting of domestic and international experts was also appointed to provide consulting and advisory services during the project implementation\. The dam and powerhouse civil works and equipment were not financed by the Bank and contracts were awarded based on local procedures\. The Changjiang Gezhouba Project Construction Bureau was selected as the civil works contractor\. Dongfang Electric Power Equipment Corporation was the supplier of the turbine and generator sets and the Tenth Water Resources and Hydropower Project Bureau conducted the installation of mechanical and electrical equipment\. Implementation Status 16\. The implementation schedule included in the SAR provided for commencement of the main civil works in the second quarter of 1990, commissioning of the first unit in the third quarter of 1993, the second unit in December 1993, the third unit in September 1994 and the fourth unit in December 1994\. 17\. The dam and power plant were started and completed basically in line with the above schedule\. The civil works began in March 1990\. It took 63 months for the  -6 - concrete dam to reach its design height in June 1995, involving concrete volumes of 910,900 m3 including 258,500 m3 roller-compacted concrete (RCC)\. Generating Unit 1 started operation on December 29, 1993, followed by Unit 2 on May 26, 1994, Unit 3 on October 29, 1994 and Unit 4 on March 29, 1995\. The entire power component was completed and put into commercial operation on December 30, 1995\. 18\. The associated power transmission facilities constructed under the project included: (a) double circuit 220 kV transmission lines from Daguangba Hydropower Plant to Emaoling (the length of the double circuit lines are 35\.3 km and 35\.5 km respectively); (b) 220 kV transmission line from Emaoling to Basuo in the length of 48\.9 km; (c) 220 kV transmission line from Basuo to Sanya in a length of 145\.3 km; (d) extension of Emaoling 220 kV substation (with 2 GIS bays and 2 x 120 MVA transformer capacity) which was completed and started operation in November 1993; and (e) a new 220 kV substation in Sanya City, which was put into operation in July 1995\. The scope of the transmission component exceeds that envisaged at appraisal in that the original project scope simply provided for the connection of the Daguangba project to the grid at Emaoling including extension of the substation there\. In May 1993, the Bank agreed that Bank financing could also be used to finance the purchase of materials and equipment for a line from Emaoling to Basuo and thence to Sanya including a new substation at Sanya\. This reinforcement provided for a more effective usage of Daguangba power in the Hainan grid taking into account the rapid growth rates in the Sanya region\. The additional lines and substation also serve to strengthen the interconnection between north and south load centers of Hainan\. Implementation Experience 19\. Adoption of Roller-Compacted Concrete (RCC)\. RCC was adopted in the construction of the Daguangba gravity dam\. In the preliminary design, volcanic ash was selected to be the binding mixture in the process of making RCC\. However, tests showed that the volcanic ash it was planned to use contained 50 percent of material which would accelerate setting and also cause drying shrinkage\. Therefore, extensive testing was conducted on fly ash (which was available from a thermal power plant in the area) as a substitute for the volcanic ash and this testing eventually proved its suitability\. 20\. The proportion of the dam that was composed of RCC is substantially less - 28 percent - than in the original design, which projected 57 percent\. This is attributed to the fact that detailing of the dam had been imperfectly adapted to accommodate RCC placing methods and the contractor found it impractical to use RCC in many areas\. Review of the design by specialists with more experience in RCC may have allowed for the planned proportion of RCC to have been achieved with concomitant cost savings\. 21\. Geological Treatment of the Main Dam Foundation\. Following completion of the dam and during reservoir filling, abnormal downstream movement (maximum about 11 mnm) was recorded in relation to one dam block\. Drilling revealed a zone of weathered material, which was considered to be responsible for the movement beneath the dam,  - 7 - which of the reservoir filling was temporarily halted and a 14 member panel was assembled to advise on required remedial works\. Based on the recommendations of the panel, a program of drainage, buttress construction and anchoring was recommended and promptly implemented\. On resumption of dam filling, no further abnonmal movements were observed Agriculture/Irrigation Component Overview 22\. During the initial identification of the Daguangba project, the irrigation component was limited to that associated with the resettlement in Dongfang County, with further development of the High Main Canal and the area served by it left to the future\. However, the Bank preparation team found that, as a pure power project, the economic justification of Daguangba was particularly sensitive to load growth projections, and therefore requested that the full development of the Stage 1 irrigation area be included in the scope of the project\. Significantly, however, Bank financing was not increased to cover this additional scope\. The project file records the visit of a deputy governor to the site during the "hiatus" period, and his confirmation that the provincial government would take responsibility for the implementation of the full Stage 1 development\. However, during project supervision in October 1996, the mission discovered that the government were not intending to develop the full area until well into the future\. The mission reminded the government of their commitment in accordance with the Hainan agreement, and followed up several times after that\. While these endeavors succeeded to some extent, by the end of 1998 the irrigation area developed and supplied with water as limited to 55 percent that envisaged at appraisal\. Plans were to complete the balance by the end of 2000, but until recently definite funding had only been identified to cover about one fourth of this expansion\. The situation has recently improved with provincial govemrnment approval of an allocation of loan funds available to the government to cover the financing gap\. Irrigation Development\. 23\. Despite the non-completion of the second phase of the HMC, and the associated restriction of irrigated area, physical targets of the irrigation component, as laid out in the SAR were largely achieved\. The Phase I construction involved the construction of the HMC with a length of about 14\.7 km and a discharge capacity of 14 cum/sec (about 94\.2 and 116\.7 percent of the SALR), 57\.7 km of main branch canals (196 percent of the SAR), 47\.1 km of lateral branch canals (245\.3 percent of the SAR) and some 175\.4 km of field ditches (154\.8 percent of the SAR\. Detailed comparisons are included in Table 5\. The irrigation on-farm works resulted in improving 30, 000 mu of existing and expanding 97,100 mu of new irrigation areas, making a total of 127,100 mu (about 67 percent of the SAR)\. The extensions for Phase II are currently underway to increase this to 190, 000 mu (12,667 ha) by the end of 2000\. The budget for HMC extension, approved by the government, is Y68 million\. To date, about Y18 million has been financed, leaving a  - 8 - financing gap of Y50 million\. On September 13, 1999 the Provincial Development Planning Department approved an allocation from provincial development loan of YIOO million (Y50 million for the HMC, and Y50 million for resettlement)\. A copy of the approval document was provided to the Bank\. With these funds, HEPCO are optimistic that remaining works will be completed in the year 2000\. Farm development will be by contributed labor to the estimated value of Y1 7\.75 million\. Agricultural Support Services 24\. Achievements in agriculture support services substantially exceed appraisal targets\. For agricultural inputs, one seed company was established, which supplied 225 kg/ha of quality seeds\. A total of 2,836 tons of fertilizer and 141\.8 tons of agro- chemicals were procured and distributed to the project area\. Some 22 sets of agricultural machinery and equipment, and 110 tractors were purchased and operated to increase the level of farm mechanization\. On land and soil improvement, some 9,122 ha of cultivated land were leveled and some 1,789 ha of soil improved\. Agro-technical extension services system were strengthened with construction and rehabilitation of four new county and township centers, and introduction of various new production technologies\. Training 25\. The project provided institutional strengthening and development mainly through staff training in project implementation and management and upgrading of technical skills and competence at all provincial and local government levels\. Farmers completed 1,200 person-months of training, project staff 95 person-months, and project managers 8 person-months during implementation of the irrigation component\. In addition, domestic study tours involving 30 person months and 450 person-months of domestic consultancy services were provided\. Resettlement Implementation Organizations 26\. Resettlement planning was carried out by MSDI and they were also employed periodically throughout implementation to carry out supplementary planning and to develop revised budgets for submission to central government authorities\. In 1990, resettlement organizations were set up in the two affected counties and three state farms\. In addition, for overall management of implementation, a resettlement office, with staff seconded from provincial departments, was set up under HEPCO project office\. Unlike most other Chinese reservoir resettlement projects, there was no provincial resettlement office to provide leadership to the county offices in resettlement implementation\. 27\. HEPCO also employed MSDI to carry out a program of independent resettlement monitoring and evaluation as foreseen at appraisal\. This monitoring and evaluation by MSDI is taking place over a five year period (1995 to 2000) and involves samples of 327 households and all 29 resettlement villages\. The annual reports of this program have  - 9 - proved to be very valuable in providing HEPCO and the Bank with regular information on progress of physical relocation, economic rehabilitation, and other measures of well- being of the resettled population\. Implementation Experience 28\. The detailed resettlement plan, prepared in 1987, provided for the relocation and re-establishment of 20,516 persons living in 29 villages, 6 townships, two counties, 80 percent of whom were rural, and 20 percent urban'\. The plan summarized in Annex 16 of the Staff Appraisal Report (SAR), provided for resettlement to be primarily land based\. Each resettler would be provided with one mu of paddy and one mu of dry land plus some additional land for tropical trees crops, housing plot and fuel wood\. All paddy land was to be irrigated\. 29\. Actual numbers of people requiring relocation increased to 22,243\. This includes 1682 persons in three villages which were not originally planned to be relocated since village infrastructure and buildings were not to be inundated\. However, a 1997 survey revealed that remaining land resources were not viable and relocation became necessary\. The total number is still less than the SAR estimate of 23,800 people\. However, the above numbers do not include a further 5,343 people in 13 additional villages who are affected by loss of land, raising the total number of project affected persons (PAPs) to 27,586\. Some allowance was evidently included in initial budgets as compensation for lost land in these areas but no detailed rehabilitation planning was carried out\. Detailed rehabilitation plan for villages affected by loss of land only were not prepared until the end of 1997\. 30\. The original resettlement budget was Y 150\.5 million\. This was adjusted twice during implementation, in 1993 and in late 1997 primarily for inflation, but in the last adjustment to fully take into account rehabilitation measures which would be needed for land loss villages\. The finally approved budget was Y 269\.4 million\. However, because of slow arrival of funds from the provincial government, by the end of 1998 only Y 206\.3 million had been allocated by HEPCO\. 31\. Achievements of the resettlement plan up until the end of 1998, included: (a) Relocation of 22,243 persons, 18,162 of whom were agricultural; (b) Construction of 318,810 m2 of new housing and 107,837 m2 of community facilities, providing 11\.2 percent more floor space of considerably higher quality than before the move; (c) Development of 25,002 mu of land accounting for 93\.3 percent of the plan target\. However for land-loss villages, because of the late start and lack of The SAR used a figure of approximately 23,800 people based on "1990 survey data adjusted for growth"\. No details of this survey are on file\.  - 10- finance, only 14 percent of land development targets had been achieved, mostly located in two newly relocated villages although the pace of land development is accelerating now with the allocation of additional funds\. 32\. Restoration of livelihood is being achieved albeit gradually\. According to the 327 sample household survey by MSDI, the average per-capita income of all resettlers in 1997 was Y 532, which was 10 percent higher than that in 1996 and 9\.7 percent higher than before the move after allowing for inflation\. However, income restoration was unevenly distributed among resettlement villages, with only seven of 29 villages restoring their income on a per-capita basis\. In general, these are villages that moved to Datian resettlement area (served by the HMIC) which now have reliable irrigation and developed paddy\. Another third of villages seem to be on the way towards restoration of income\. These are generally "moving back" villages in Ledong and Dongfang which have relatively greater land resources and developed irrigation\. However, about 40 percent of villages have a per-capita income in 1997 at least 20 percent below that before the move\. Development plans have been prepared specifically targeted at the areas which are having difficulties re-establishing income, and budgets have been approved by central government authorities\. However, both the provincial government and HEPCO have been suffering severe funding shortages due to the economic downturn and fund allocations are arrived very slowly\. The situation has recently improved with the provincial government approval, on August 13, 1999, of an allocation from the provincial development loan, which will basically cover the funding shortfall\. Environmental Issues 33\. It is evident from a review of correspondence in the project preparation phase that health issues were of primary concern to resettlement specialists, particularly infectious diseases such as malaria and hepatitis\. The Resettlement Monitoring and Evaluation program reports have consistently described a general improvement in health and hygiene in resettlement areas\. With the establishment of a medical service network, access to health care has been greatly improved\. Access to potable water has also generally improved in comparison with pre-move conditions, and work is continuing to ensure all resettlement villages will have access to potable water in all seasons\. Sanitation is also substantially better in the new villages\. All of these factors have resulted in substantial drops in the incidence of infectious diseases as can be seen from the following table, although there was a partical resurgence of Malaria in 1997\. This was reportedly due to several factors including climate factors in 1997, and the extension of access roads to poorer isolated areas, thus extending reporting to these areas\.  Infectious Diseases Among Resettlers Incidence per 1,000 Population 1992 1993 1994 1995 1996 1997 Malaria 6\.80 5\.00 4\.25 2\.39 1\.82 3\.65 Dysentery 0\.75 0\.67 0\.10 0\.14 0\.04 0\.08 Hepatitis 0\.25 0\.51 0\.21 0\.10 0\.12 0\.06 Measles 0\.00 0\.05 0\.32 0\.01 0\.01 0\.00 Poliomyelitis 0\.00 0\.01 0\.00 0\.00 0\.00 0\.00 7\.00- 6\.00 5\.00 \.[ Malaria 4\.00 l Dysentery 3\.00 l Hepattis 2\.00 -j Measles 1\.00 L Poliomyelitis I0\.00Mb1 l_ csi co v Un co rl- O 0) 0') 0') 01) CD 0 0 0) ) 0) 34\. In relation to other issues raised in the SAR: (a) Water quality monitoring is less frequent than desirable\. However, results to date show no change from the pre-project situation i\.e\. generally high quality except for an excessive bacterial count attributed largely to human waste from Ledong upstream\. The project financed sewage treatment plant for this area has only just been completed (due to lack of finance) and when the completion mission visited the site was still not in operation\. Since then, HEPCO have reported that it commenced trial operation on August 18, 1999\. Water quality should be fully acceptable when the plant comes into full operation\. (b) Protection of the rare Datian deer has been improved by partially fencing- in and patrolling the protected area\. The deer population is reported to have increased from about 40 at the time of appraisal to over 200\. (c) The afforestation around the reservoir rim recommended by the SAR has been partially implemented\. Houiniling forestry farm land planted, between 1991 and 1992, 2,400 mu of forest on the right bank of Changhua river, and 600 mu of forest in Datian area\. The trees are mainly eucalyptus\. Erosion into the reservoir is not significant\.  - 12 - (d) The slight moderation in temperature adjacent to the reservoir (attributable to the reservoir itself) is reported to be beneficial to agriculture\. 35\. In the irrigation area, the completed irrigation and drainage facilities, land and soil improvements, and afforestation (forest belts and fruit trees) have improved the land productivity and enhanced the general ecological environment of the project area\. The increased water diversion to the western region of Hainan has improved the environment for agriculture, aquaculture, urban and rural water supply\. Procurement 36\. The procurement under the project was conducted in line with the agreed arrangements as stipulated in the Legal Agreements and SAR\. Overall, 94 contracts worth $70 million equivalent were executed\. As shown in the table below, ICB was the major procurement method used under the project, accounting for 67\.7% of total contract value, in comparison with 63 percent projected in the SAR, followed by NCB for civil works contracts for irrigation and resettlement components\. Procurement was generally uneventful\. The only incidents occurred during initial LCB contracts when it was found that prior review procedures were not being correctly followed\. On an exceptional basis, the Bank carried out post-review and accepted the contracts for financing\. Procurement No\. of Contracts Contract Value Method Number % of Total Value ($'000) % of Total ICB 33 35\.1 47,403\.5 67\.7 LIB & IS 17 18\.1 1,132\.1 1\.6 NCB (Works) 44 46\.8 21,467\.8 30\.7 Total 94 100\.0 70,003\.3 100\.0 Consultants Project Management Consultants 37\. The SAR envisaged that HEPCO would employ foreign consultants to assist HEPCO in managing project construction\. In the event, this did not occur\. Because of the delay in loan approval, the civil works commenced well before the effectiveness of the Bank loan\. In early supervision missions, the Bank attempted to catalyze the employment of international consultants\. Shortlists and terms of reference were agreed and proposals were requested from three firms\. The Bank questioned HEPCO's recommendation for award\. Protracted correspondence ensued\. Eventually, HEPCO advised that the construction was already at its peak and local project managers seemed to be performing effectively and there was no longer any need to employ foreign consultants, particularly in view of the scarcity of foreign exchange\. The Bank accepted HEPCO's decision\.  - 13 - Special Board of Consultants 38\. Earlier in the project a Special Board of Consultants (financed by Technical Cooperation Credit), consisting of domestic and international experts, was appointed to provide certain quality control for the project\. The consultants conducted three missions respectively in the preparation stage of construction, early stage of construction, and peak period of construction\. They reviewed the preliminary design, construction drawings and the project site situation, and provided many suggestions and recommendations related to design, construction and future operation\. Most of the suggestions and recommendations were adopted and proved to be useful\. Project Costs and Loan Disbursement 39\. Project Costs\. The estimated cost of the project at appraisal (excluding interest during construction) was $59\.1 million in foreign costs and Y 754\.5 million in local costs, equivalent to a total of$ 193\.0 million (Y 1,086\.5 million)\. The final cost was $68\.4 million in foreign costs and Y954\.1 million in local costs, equivalent to a total of $197\.5 million (Y1,514\.4 million) (see Table 8a and 8b for details)\. Considering overall costs (foreign plus local), there is an apparent cost overrun of some 2\.3 percent when expressed in US dollars and 39\.4 percent when expressed in local currency\. The difference in the two figures for cost overrun is due to the higher-than-expected-inflation in China (91 percent between 1991 to 1996 compared with 37\.5 percent estimated) and the devaluation of the local currency from an exchange rate of Y5\.24 to the dollar at the time of appraisal to Y8\.70 to the $1 in 1993 (with a slight recovery to 8\.30 thereafter)\. The comparison of costs expressed in US dollars is considered to give a reasonable estimate of cost overrun excluding the effects of inflation and devaluation\. Comparing the two sets of figures, major deviations are noted in the areas of civil works, canals and on-farm works beyond those required for resettlement\. The civil work cost increase can be largely attributed to the increased proportion of conventional concrete in relation to RCC referred to earlier\. The reduction in costs in relation to the irrigation canals can be attributed to the fact that this component is so far incomplete and the incomplete status has been taken into account in the economic analysis\. The transmission cost increase relates to the revision of project scope to include the line to Sanya and an additional substation as referred to earlier\. Given the size of the project and the uncertainties involved, this slight increase of 2\.3 percent is considered to be reasonable\. 40\. Loan Disbursement\. A comparison of the estimated loan disbursements at appraisal with the actual disbursements is given in Table 4\. Loan disbursement was slower than the appraisal schedule in earlier years due to initial procurement delays for Bank financed contracts\. However, by FY95 disbursements had accelerated and cumulative disbursements had reached 94 percent of the total amount of loan and credit\. Thereafter, remaining funds were progressively reallocated to priority areas such as resettlement civil works, disbursement of which occupied the remaining time until project closure\. Both the loan and the credit were fully disbursed\. The last disbursement was made on February 24, 1999 for the loan and on March 3, 1999 for the credit\.  - 14 - Economic Performance Power Benefits 41\. At appraisal an analysis was carried out to verify that the Daguangba power project was part of the least cost development for the Hainan grid by comparing it with a notional thermal alternative (85 MW coal and 225 MW gas turbine)\. A similar analysis was carried out for the ICR\. Capital costs and fuel costs were derived based on recent project justification reports for power projects in China\. Distillate was assumed as fuel for the gas turbine, rather than gas as assumed in the appraisal report as gas supplies to Hainan are fully committed, and there are no immediate plans for further resource development\. The analysis summarized in Table 9A, yielded hydropower costs (at 10 percent discount rate )of 46\.4 fen/kWh if all joint costs are allocated to power and 40\.5 fen/kWh if allocation of joint costs is carried out in accordance with the "separable-costs- remaining-benefits" methodology\. This compares with an alternative thermal cost of 61\.7 fen/kWh\. The equalizing discount rate is 21 percent ofjoint costs are fully allocated to power and increasing to 41 percent if they are only partially allocated to power\. The ratio of hydro to alternative thermal costs, assuming full allocation of joint costs is 75 percent compared to 53 percent estimated at appraisal\. Differences can be explained by conservative allocation of full transmission costs (increased scope) to the hydro project, and that the appraisal analysis evidently did not allow for lower energy generation in early years until completion of spillway crest gates\. Nevertheless, it is clear that Daguangba is considerably more economical than a thermal alternative\. Agricultural Benefits 42\. The investment in the irrigation component has brought significant benefits in terms of increased agricultural yields and production due to the expanded irrigation facilities, improved extension services and input availability\. The project was successful in expanding and improving an irrigation area of 8,473 ha with increases of crop intensity\. At project completion, major grain crops (rice, corn, bean and sweet potato) and cash crops (off-season vegetables, sugarcane, mango and watermelon) generally exceeded the SAR-projected yields and production for the full development\. Table 6B shows the area cultivated, yields and production achieved for each crop\. 43\. The main crop yields currently achieved in the project area are 4\.7 tons for rice (109\.2 percent of SAR), 1\.9 tons for beans (105\.8 percent of SAR), 10\.3 tons for vegetables (103\.1 percent of SAR), 51 tons for sugarcane (102 percent of SAR), and 21,221 tons for mangos (102\.5 percent of SAR), respectively\. Preliminary data show a further increase in yields and production for cash crop as farmners fully utilize the climate advantage of Hainan to diversify crop production and increase inputs in response to higher market prices\. The total annual crop production increased during the project period (in 1998) by about 21,048 tons for rice, 2,653 tons for other grain, 1,594 tons for peanuts, 10,373 tons for off-season vegetables, 98,673 tons for sugarcane, 17,028 tons for mangos, 1,420 tons for pineapples, and 3,294 tons for melons\. The increased outputs  - 15 - from various crops resulted in higher incomes for beneficiary farmn households\. The annual gross value of crop production was estimated at about Y 197 million\. Rural Income and Poverty Reduction 44\. The component has effectively reduced the incidence of poverty for the household beneficiaries (2,270 families/10,529 persons) in the project area, especially for about 5000 of the poorest famnilies in the western region of Hainan\. The implementation of the project generated employment opportunities, both short- and long-term, including employment for women\. An annual increase of about three million labor-days per year, equivalent to about 10,000 new jobs have been created\. Together with the production gains especially from high-value cash crops, the project has helped to raise the income level of the farmers\. The MSDI sample surveys of farm income among resettlement villages in the irrigation area indicated that villages which are served by the HMC have increased their income by an average of about 30 percent over that before the move after allowing for inflation\. No detailed data has been collected in relation to non-resettlers, but spot interviews indicate a much larger increase, attributable to the fact that per capita land areas are considerably greater\. Indirect Benefits 45\. The irrigation project has contributed to an increase in local government revenues through the collection of agricultural and special product taxes derived from the expanded irrigated/reclamation land and the change of the cropping pattern (increased high-value cash crops) in the project area\. The local govermments, in turn, have invested in infrastructure (roads, electricity, water supply, etc\.) and other social amenities (health clinics, schools, etc\.), all of which have contributed to the overall improvement of the quality of life for the project beneficiaries\. Internal Rate of Return (EIRR) 46\. At appraisal, an EIRR of 15% was calculated for the project as a whole based on the estimated benefits of power and irrigation\. In the absence of willingness-to-pay data long run marginal cost was used as a proxy for benefit\. For the ICR a "willingness-to- pay" type of analysis was carried out ex-post using prices of energy sold to the grid in 1996, plus power development surcharges applied at provincial levels\. The generation tariff assumed was a 50/50 blend of two current generation tariffs: 59 fen/kWh from a 300 MW coal fired power plant and 65 fen/kWh for new industrial gas turbines burning gas2\. The operating pattern for Daguangba supports this split with about 50 percent of output being scheduled for peaking\. Surcharges of 2\.4 fen/kWh for power development funds which are added at the consumer level were added to give a total tariff at generation level of 64\.4 fen/kWh\. The calculated ex-post EIRR with joint costs allocated in 2 This is less than the 74 fen/kWh tariff recommended for Daguangba by expert team from SPDC and construction Bank but considerably more than the 37 fen/kWh "temporary" tariff currently allowed by the pricing commission\.  - 16 - accordance with the "separable-costs-remaining-benefits" methodology is 16\.1 percent overall, 16\.4 percent for power and 15\.1 percent for irrigation\. Table 9B provides details\. HEPCO Financial Performance 47\. Comparative financial statements containing the appraisal projections and the actual data for the period of project implementation (1991 through 1998) are summarized in Annex A\. Over the seven-year period of project implementation, HEPCO's energy sales have increased by a factor of 2\.9, an average increase of 27\.2 percent per annum, reflecting the fast economic growth in Hainan Province, the largest special economic zone in China\. The average tariff has been increased by 65\.3% from 32\.0 fen/kWh in 1991 to 52\.9 fen/kWh in 1998 (representing about six percent increase in dollar terms)\. The actual operating revenue in 1998 amounted to Y 1\.45 billion, about 4\.8 times of that in 1991 and 44\.8 percent higher than projected at appraisal\. Along with the increase in revenues, operating expenses also rose but more rapidly, largely due to much higher than expected power purchase costs\. This resulted from changes in the power sector structure, whereby most new power plants were built by independent or semi-independent joint investment partnerships which sell power to the HEPCO grid\. HEPCO role has thus changed to certain extent to that of a purchasing agency and transmission utility\. HEPCO was profitable until 1996, but suffered losses in both 1997 (Y 1\.6 million) and 1998 (Y 43\.2 million)\. The main factor behind this change in fortune was the sharp slow down in demand growth that occurred in 1996, after HEPCO had entered into substantial power purchase commitments at high prices\. Purchased power costs doubled from 1995 to 1996, while average tariff is actually lower in 1998 than 1995 due to lack of provincial government approval to pass through tariffs determined on the basis of the central government's "new power/new price" policy\. For example, the "temporary" tariff approved by the provincial pricing commission for Daguangba power plant is only 37 fen per kWh in comparison with 74 fen recommended by a task force composed of representatives from Construction Bank and State Development and Planning Commission (SDPC)\. Another contributing factor to the losses is the wet season failure in 1998 which resulted in low inflows and low reservoir levels severely limiting the energy generation of Daguangba\. 48\. Three financial covenants were included in the Legal Agreements, namely: HEPCO should (a) cover all operating costs and debt service in 1991/92, and maintain a self-financing ratio of not less than 20 percent in 1993, 25 percent in 1994, and 30 percent thereafter; (b) ensure that its debt service coverage ratio is not less that 1\.1 times in 1991- 1993, 1\.2 times in 1994-1996, and 1\.3 times thereafter; and (c) maintain a debt/equity ratio of no more than 85/15 in 1991, 80/20 in 1992/93, 75/25 in 1994/95 and 70/30 thereafter\. Over the course of project implementation, HEPCO has been basically in compliance with debt service and debt equity covenants, but has generally not been in compliance with self financing covenants, and failed to break even in 1997 and 1998\.  - 17- D\. PROJECT SUSTAINABILITY 49\. Technically, the dam, power plant constructed under the project are of good quality, are being adequately maintained and operated\. HEPCO could improve reservoir operations to maximize benefits\. Financially, the "temporary" tariff allowed by the provincial government would not be adequate to sustain it as an independent power plant\. However, as an operating unit of HEPCO its operations budget and debt repayment are being maintained\. While HEPCO is in financial difficulties, it remains solvent partially through transfers from the provincial power development as "debt swaps"\. The situation should improve as power demand continues to recover and excess generating capacity is absorbed\. 50\. The irrigation component is likely to be sustainable because of: the good quality of the completed works; the commitment of the local government in the project area; the newly developed agricultural commodity (tropical crops) production bases; clearly defined and assigned responsibility in O&M Regulation of the HMC System to ensure sustained operation of the completed irrigation facilities; the effective agricultural support services system to_ensure sustained agricultural production; and project-promoted growth of the local economy and generated revenue for the local governments that, in return, provide continued support for the project area\. 51\. The rehabilitation strategy for resettlement is land based supplemented by income from tropical tree crops, and therefore is potentially sustainable in all cases\. Sustainability has been proven for about 60 percent of resettlers\. For the remaining 40 percent it will be sustainable provided existing plans for land development and provision of irrigation facilities are implemented\. E\. BANK PERFORMANCE 52\. During project preparation, there appears to have been a tendency to equate the project with similar power projects in China and underestimate the effect of special circumstances such as the multipurpose nature of the project, the fact that the power company involved was under the province rather than the state, and that Hainan itself had only recently been upgraded to provincial level\. However, internal review procedures resulted in adequate consideration being given to these matters\. The originally scheduled appraisal review meeting was downgraded to a peer review meeting and a further pre- appraisal mission was undertaken\. During the hiatus period, several brief missions were carried out in conjunction with other operational work in China, followed by a full post- appraisal mission to update data and analyses\. Thus, by the time the project was presented to the Board all important issues had been addressed\. One shortcoming in the appraisal process was the apparent failure to recognize inadequate resettlement planning in relation to villages which lost a major portion of their land but were not planned to be relocated\. In addition, more consideration could have been given to methods of ensuring the provincial government met its commitment to irrigation development beyond that required for resettlement, including specific covenants and partial Bank financing\.  - 18 - 53\. After loan approval, supervision was initially light, with the first supervision mission not occurring until about 15 months after Board presentation, although procurement review was intensive during this period\. After this, supervision was intensified, particularly when it was recognized that there were shortcomings in resettlement implementation\. From 1992 to 1999, there were a total of 14 missions 13 of which included a resettlement specialist\. These missions (and the leverage applied at the time of closing date extension and ICR rating) played a role in improving resettlement implementation, including the contracting of the independent resettlement monitoring and evaluation program, the 1998 adjustment to the resettlement budget, preparation of a supplementary resettlement plan for land loss villages in 1998, the establishment of the reservoir maintenance fund in May, 1999 and finally in the approval of supplementary funds for the HMC Phase 2 and resettlement in August 1999\. After recognition, in 1997, of the provincial governnent's intention to curtail irrigation development to the area serviced by the HiMC Phase 1, supervision missions also focused on this aspect\.3 54\. Overall, it is considered that the Bank's performance was satisfactory\. F\. BORROWER PERFORMANCE 55\. The assessment of Borrower performance needs to cover the signatory to the various agreements: central and provincial governments and HEPCO\. HEPCO's performance was good in relation to those aspects about which it cared most: the construction of the dam, power plant, transmission lines etc\. It also performed adequately in construction of the HMC and reviewing and coordinating resettlement implementation\. The resettlement office under HEPCO made great efforts in relation to the latter function\. On the other hand, resettlement budget allocation apparently received a lower priority by HEPCO in comparison with other project components, often resulting in slow allocations and delayed completion of relocation and rehabilitation targets, although the slow arrival of provincial government funding was cited as the main reason for such delays\. The central government generally performed satisfactorily including the approval of necessary revisions in revised resettlement budgets, not however without the usual delays associated with such revisions\. It was also instrumental in putting together a financing plan for completion of the agricultural and resettlement components at the time of closing date extension in late 1997\. However, this was not modified when the planned contribution from the Construction Bank of China did not materialize\. The performance of the provincial government has been disappointing in the areas of fund allocation, approval of tariff level for Daguangba, approval of consumer tariff structure changes, approval of level of reservoir maintenance fund and approval of overseas training programs\. On the other hand, it must be acknowledged that financing difficulties have been exacerbated by the East Asia economic crisis\. The provincial government has now 3 The reason that this was not recognized earlier was due to confusion in the SAR definition of project scope which included HMC Stage 1, but the lengths given only covered Phase I of Stage 1\. The remainder was apparently intended to be covered by Other Canals and On-Farm Works financed by the provincial government\.  - 19- allocated funds to complete the project and HEPCO report that tariff restructuring is being accelerated\. Considered as a whole Borrower performance is rated as Satisfactory\. G\. ASSESSMENT OF OUTCOME 56\. The overall assessment must take into account: the satisfactory achievement of objectives with regard to the power plant including environmental matters, the largely achieved objectives of the irrigation component, the limited achievement of institutional development objectives, and the currently unsatisfactory outcome with regard to the resettlement project, which however could be reversed in the near term with the recently approved allocation of resources and increased attention to this matter by HEPCO and the provincial government\. Overall, a rating of Satisfactory is assigned\. H\. FUTURE OPERATION Power Plant 57\. The Daguangba Hydropower Plant commenced operation on December 29, 1993 with the commissioning of the first generating unit\. The commissioning of the fourth generating unit was on March 29, 1995\. Since its operation, the power plant has generated a cumulative 1,981\.3 GWh with breakdown by year as follows: Year 1994 1995 1996 1997 1998 Total GWh 312\.4 372\.6 426\.1 501\.5 368\.7 1,981\.3 58\. The relatively slow buildup of generation can be attributed to the fact that in accordance with the design schedule, first generating units entered service prior to completion of spillway crest gates and reservoir filling\. The reservoir first filled to full supply level in November 1996 and in 1997 the generation was close to the design level of 520 GWh\. The decrease in 1998 was due to an exceptional drought in the area exacerbated by the fact that the dispatchers were overusing Daguangba generation based on system requirements\. The reservoir water level has been at the minimum operating level for quite some time\. The limited amount of water used each day is mainly to meet demands of irrigation and residential/industrial water supply\. 59\. Daguangba Hydropower Plant is well staffed with one director, two deputy directors (including one chief engineer), 83 employees in plant operation and maintenance, and 337 employees in non-core service businesses\. Comprehensive and well-documented operation and maintenance procedures are in place to ensure proper operation and maintenance of the power plant\. Methodology for efficient utilization of water, procedures for regular dam safety inspection and reporting as well as for flood forecasting and environment monitoring are also in place and followed\. Nevertheless, it appears that there is room for substantial improvement in HEPCO's operation of Daguangba\. Admittedly the project is unique in the HEPCO system and there is no previous experience in reservoir operation on this scale\. Also the relative size of the  - 20 - project in relation to the overall system will diminish\. On the other hand flow diverted for irrigation - only nominal to date - will increase\. As an overall guide, HEPCO should endeavor to maintain the reservoir at a relatively high level under normal conditions - closer to the MSDI upper rule curve\. This will produce several advantages, namely: (a) maintaining plant capability at 240 MW; (b) minimizing the risk of reservoir failure, i\.e\. draw-down to MOL as at present; and (c) increasing energy by maintaining a higher average head\. 60\. With regard to performance indicators for the future, the State Power Corporation has set benchmarks including numerous parameters which collectively measure safety, reliability and efficiency of operation of hydroelectric power plants\. Some of the main performance indicators are listed in Table 6A\. In addition, a different set of criteria relate to factors such as cleanliness, aesthetics and working environment which, if met, qualify the power plant for "civilized" status\. When both of these standards are met the power plant is accredited as having met the dual standards\. A "first class" standard is also in place involving more rigorous performance indicators for some operating efficiency factors\. The Daguangba power plant has already been accredited as meeting the dual standards\. Irrigation Facilities 61\. The HMC Phase I was completed and started operation in June 1994\. The Water Resource Bureau of Dongfang City has operated and maintained (O&M) the new irrigation facilities since May 1994\. The High Main Canal Water Management Division (HMCMD) in the Bureau is the unit responsible for O&M of the HMC irrigation system\. Under HMCMD, four water management stations were set up\. The O&M for the main, sub-main, branch, and lateral canals is carried out by each station according to the O&M Regulation of the HMC Irrigation System and to a schedule prepared by the Dongfang Water Resource Bureau\. Sub-laterals and field ditches are maintained by water users twice a year\. In addition, each township government, village committee and agro- economic development organization takes an active part in assisting the water authority in the O&M work\. The agriculture technical support was provided to the project area by the South China Academy of Tropical Crops and the Dongfang City Agriculture Research Institute for the introduction, testing, and extension of new and improved varieties\. Future operations will focus on efficient operation and maintenance of the completed irrigation works and facilities so as to achieve the project's full development\. The existing HMCMD and staff will be maintained to concentrate on O&M aspects of the project\. To further enhance the project's economic benefits, the irrigation areas and agricultural support service facilities will be progressively adapted to a market-oriented production economy with a self-supporting operation mechanism, responsible for its own profits and losses\.  - 21 - Resettlement 62\. With regard to resettlement, about Y 56 million of the approved budget of Y 262\.33 million remains to be spent on production development\. On June 15, 1999, HEPCO, based on a review of action plans prepared by the two counties, submitted a plan outlining a list of remaining resettlement works which need to be completed between July 1999 and June 2000\. The total cost for these remaining works totals Y 56 million, but the source of funds was not identified\. The Y50 million recently allocated by the provincial government should allow general completion of the remaining works after which the reservoir maintenance fund will generate income based on energy production of about Y2\. 1 million per year for ten years which should sustain annual workplans for the resettlement unit within HEPCO and two county resettlement offices\. Bank 63\. In line with the management's response to the OED report "Recent Experiences with Involuntary Resettlement (Report No\. 17538), it is recommended that the Bank continue to supervise the resettlement component until it is clear that incomes have been restored in real terms, or at least until physical facilities are in place to ensure this\. It is recommended that in FY00, two supervision missions are mounted for this purpose\. I\. KEY LESSONS LEARNED 64\. Key lessons mainly relate to the resettlement and irrigation components\. Those relating to resettlement serve to reinforce those derived from other Chinese reservoir resettlement projects\. Lessons are: (a) the need to carefully appraise: proposed institutional arrangements for resettlement, both at overall project level and implementation (county and township) level; the treatment of land acquisition even where, prima facie, relocation is not required; the feasibility of "moving back resettlement strategies where there is a tendency to over-estimate remaining land resources\. (b) the need to further advance resettlement planning at the planning stage to allow better assessment of resettlement strategies, and the preparation of more accurate cost estimates\. (c) the need to consider in the project design measures to ensure borrower commitment to all elements important to the success of the project, including increased level of Bank financing for these elements and staged performance targets so that implementation can be carefully monitored\.  - 22 - PART II: STATISTICAL TABLES TABLE 1: SUMMARY OF ASSESSMENTS Achievement of Objectives Not Substantial Partial Negligible Applicable Macroeconomics policies X Sector policies x Financial objectives X Institutional development X Physical objectives X Poverty reduction X Gender concerns X Other social objectives X Environmental objectives X Public sector management X Private sector development X Project Sustainability Likely Unlikely Uncertain x Bank Performance Highly Satisfactory Satisfactory Deficient Identification X Preparation assistance X Appraisal X Supervision X Borrower Performance Highly Satisfactory Satisfactory Deficient Preparation X Implementation X Covenant compliance X Assessment of Outcome Highly Satisfactory Satisfactory Unsatisfactory Highly Unsatisfactory x  - 23 - TABLE 2: RELATED BANK LOANS Year of Loan Title Purpose Approval Status Ln\. 2382-CHA To construct a rockfill dam, a spillway, 02/21/84 Loan was closed on Lubuge Hydroelectric an underground powerhouse, to install 4 06/30/92\. Project generating units of 150 MW each, 3 single circuits of 220 kV transmission lines; to provide consultant services and a training program\. Ln\. 2493-CHA To construct a 500 kV transmission line 02/19/85 Loan was closed on Second Power Project from Xuzhou to Shanghai and 5 06/30/92\. associated substations totaling 3,500 MVA in capacity, to install tele-control and telecomnmunications equipment for load dispatching, and to provide training for 400 kV transmission lines and substations\. Ln\. 2706-CHA & To construct a coal-fired thermal power 05/29/86 & First loan closed Ln\. 2955-CHA project with two units of 600 MW and 06/14/88 06/30/94\. Second loan Beilungang Thermal two single circuit of 500 kV transmission closed 06/30/95\. Power Projects I and II lines, and to carry out a tariff study, a study on ZPEPB reorganization and management improvement and a study for improvement of distribution networks for the cities of Ningbo and Hangzhou\. Ln\. 2707-CHA To construct a 110 m high concrete 05/29/86 Loan was closed on Yantan Hydroelectric gravity dam, a spillway, a powerhouse, 06/30/94\. Project and a shiplift; to install 4 generating units of 275 MW each, 2 single circuits of 500 kV transmnission lines and 3 associated substations; and to carry out a training program\. Ln\. 2775-CHA & To construct a 101 m high concrete 01/06/87 Closed 6/30/93\. Shuikou Hydroelectric gravity dam, a spillway, a powerhouse Project and a navigation lock; to install 7 generating units of 200 MW each; to carry out a resettlement program in the reservoir\. Ln\. 3515-CHA To complete the ongoing Shuikou dam 09/01/92 Closed 6/30/98\. Current Second Shuikou and hydroelectric power plan, upgrade ICR\. Hydroelectric Project the control and data acquisition system of the Fujian grid, carry out an action plan for tariff reform, and a training program for planning and financial management\.  - 24 - Year of Loan Title Purpose Approval Status Ln\. 3387-CHA & To construct a 240 m high arch dam with 07/02/91 Implementation under Ln\. 3933-CHA an underground powerhouse, to install 6 & way\. First loan closed Ertan Hydroelectric 550-MW generating units and associated 08/22/95 12/31/96\. Closing date Projects I & II equipment; to carry out an environmental second loan 12/31/2001 management program, studies of power pricing and reservoir operation, and a training program\. Cr\. 2305-CHA & To construct a 56 m high gravity damn 10/31/91 Closed 12/31/98\. ICR Ln\. 3412-CHA and an underground powerhouse with 4 x in preparation Daguangba Multipurpose 60 MW generating units; to erect a 36 km Project long double-circuit 220 kV transmission line and to build canals to irrigate 12,700 ha of land\. Ln\. 3433-CHA To install 2 300-MW generating units 01/14/92 Closed 12/31/97\. Yanshi Thermal Power and 5 220-kV transmission lines and Project associated substations; to carry out a tariff study, a tariff action plan, and a training program for upgrading the technical, financial and management skills for HPEPB staff\. Ln\. 3462-CHA To install 2 additional 600 MW 04/12/92 Implementation under Zouxian Thermal Power generating units; to construct 500 kV and way\. Closing date Project 220 kV transmission lines and 06/30/99\. substations; and to cany out an air quality control study, a power tariff study, an action plan for tariff adjustment, and a training program for the technical, financial, and management staff of SPEPB\. Ln\. 3606-CHA To construct a pumped-storage hydro- 05/18/93 Implementation under Tianhuangping electric power plant with six 300 MW way\. Closing date Hydroelectric Project reversible pump-turbine units, together 12/31/2001\. with upper and lower reservoirs, a water conveyance system, an underground powerhouse; to erect 250 km long 500 kV transmission lines; to carry out studies of optimal power plant operation and its output pricing; and to strengthen the beneficiary's organization through technical assistance and training\.  - 25 - Year of Loan Title Purpose Approval Status Ln\. 3718-CHA To construct a coal-fired thermal power 03/22/94 Inplementation under Yangzhou Thermal plant with two 600 MW generating units; way\. Closing date Power Project to erect two 500 kV transmission lines 12/31/2000\. (30 km long); to extend technical assistance for the development and implementation of improved accounting and fnancial management information systems; and undertake management development and staff training\. Ln\. 3848-CHA To construct a new 500 kV transmission 02/28/95 Implementation Sichuan Transmission network consisting of 2,260 km of commenced\. Closing Project transmission lines and 5,250 MVA of date 12/31/2001\. substations; provide technical assistance for implementation of sector reform plan, organizational improvements and financial management systems\. Ln\. 3846-CHA To construct Beilungang Phase H power 02/28/95 Inplementation Zhejiang Power plant consisting of three 600 MW coal- commenced\. Closing Development Project fired units; to construct 400 circuit-km of date 12/31/2002\. 500 kV transmission lines, 2,250 MVA of 500 kV substations and reinforce distribution networks in Hangzhou and Ningbo; to extend technical assistance to assist the power company in commercialization and corporatization, establish computerized financial management infornation system, improve transmission and distribution planning and upgrade environmental monitoring\. Ln\. 3980-CHA To construct two 600 MW coal-fired 2/27/96 Canceled 12/12/97 Henan (Qinbei) Thermal thermal power units; to erect two 165 km without disbursement\. Power Project 500 kV transmission lines; to assist HPEPB in engineering, procurement and construction supervision; and to extend technical assistance to support the implementation of the power sector reforn action plan\.  - 26 - Year of Loan Title Purpose Approval Status Ln\. 41720-CIIA To construct the first two coal-fired 600 05/27/97 Implementation TuoketuobThermal MW units in Inner Mongolia underway\. Closing Power Project Autonomous Region; to implement a date 7/31/2004\. desertification control and dryland management program: to assist TEPGC with the introduction; of modem accounting and financial management systems, environmental management, operation and maintenance of the power plant and involvement of private investors in existing and new power projects in Inner Mongolia\. To construct two 220 kV indoor substations in Beijing: to add a 250 MVA transformer to Wangfujing substation in Beijing; and to assist NCPGC to implement accounting and financial management systems\. Ln\. 41970-CHA To construct two 900-1000 MW coal- 06/24/97 Implementation Waigaoqiao Thermal fired supercritical units; to install FGD underway\. Closing Power Project facilities at Shidongkou Power Plant to date 1/31/2006\. offset SO2 emissions from the project; to construct two 500 kV transmission lines; to assist SMEPC to implement modem accounting and financial management systems, promote efficient management and power sector reforms including financial and corporate restructuring of the generation company\. Ln\. 4304-CHA To achieve large, sustained and growing 03/26/98 Implementation Energy Conservation increases in energy efficiency and underway\. Closing Project associated reductions in growth of carbon date 6/30/2006\. dioxide emnissions and other pollutants by: (a) introducing, demonstrating and disseminating new project financing concepts and market-oriented institutions to promote and implement energy efficiency measures in China; and (b) developing a more efficient national energy conservation information dissemination program\.  - 27 - Year of Loan Title Purpose Approval Status Ln\. 4303-CHA To alleviate critical bottlenecks in power 03/26/98 Not yet effective\. East China (Jiangsu) transmission infrastructure and increasing Implementation Power Transmission electricity trade on a commercial basis in underway\. Closing Project the East China region by (a) the date 9/30/2004 construction of 500 kV transmission lines and substations; (b) implementation assistance for engineering and construction management; (c) technical assistance for improved interprovincial power exchange policies and procedures; (d) technical assistance for improved accounting and financial management systems; and (e) institutional development and training\. Ln\. 4350-CHA To remedy power shortages in Hunan by 06/18/98 Not yet effective; Hunan Power providing efficient, reliable, and Implementation Development Project environmentally sound power supply\. underway; closing date Project components include: (a) 12/31/2004\. development of two 300 MW anthracite- fired generating units; (b) supply and installation of about 794 km of 220 kV lines and 1,920 MVA of transformer substations capacity; (c) provision of technical assistance for construction management; (d) provision of technical assistance for preparation of commercial power purchase agreements and other relevant documentation; (e) provision of technical assistance for implementation of HEPC's restructuring plan; and (g) provision of technical assistance for improvement of the financial management system\.  - 28 - TABLE 3: PROJECT TIMETABLE Steps in project cycle Date planned Date actual Identification 09/23/1986 Preappraisal 05/15/1988 Appraisal 04/11/1989 Negotiations 03/05/1990 Board presentation 10/31/1991 Signing 11/22/1991 Effectiveness 02/20/1992 Project completion 12/31/1996 03/31/2000* Loan closing 12/31/1997 12/31/1998 * The dam and power plant were completed before the planned completion date\. The delays are mainly for IMC and resettlement components\. TABLE 4: LOAN/CREDIT DISBURSEMENT: CUMULATIVE ESTIMATE AND ACTUAL (US$ million) FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 Appraisal estimate 17\.9 36\.2 53\.1 65\.0 67\.0 Actual 7\.76 15\.43 44\.50 60\.92 64\.10 64\.70 67\.72 69\.28 Actual as % of adjusted estimate Date of fial disbursement February 24, 1999  - 29 - TABLE 5A: KEY INDICATORS FOR PROJECT IMPLEMENTATION PHYSICAL CONSTRUCTION Key implementation indicators in SAR Appraisal Actual Comparison Estimated Completion Completion Preparatory works 06/91 06/90 Civil works dam & power facilities 12/94 12/95 Hydraulic gates & hoists 09/93' 29/07/95 Generating units Unit 1 09/93 12/29/93 Unit 2 12/93 05/26/94 Unit 3 09/94 10/29/94 Unit 4 12/94 03/29/95 Overall commercial operation - 12/30/95 Substation 09/93 11/93 Transmission line 09/93 11/93 PLC & load dispatch system 12/94 Planned 11/992 MC & Sanjiaolu canal (3,667 ha) 06/94 06/94 HMC Phase I 06/94 HMC Phase II Planned 03/2000 Other canals (9,000 ha) & on-farm works 12/96 Planned 12/2000 Resettlement (physical relocation) 12/95 08/95 Environmental protection 12/93 Planned 12/99 Resettlement budget adjustment including 12/98 Baoying and Baoding villages As reported in SAR, which was evidently not in accordance with HEPCO schedule\. 2 Delayed until new HEPCO building complete\.  - 30 - TABLE 5B: KEY INDICATORS FOR PROJECT IMPLEMENTATION HEPCO TRAINING PROGRAM Appraisal Estimates Actual Training Areas Number of Duration Number of Duration Trainees (months) Trainees (months) 2\. TRAINING OF HIGH-LEVEL STAFF Overseas Training Department heads 5 1 6 1 Division chiefs 23 1 35 1 Domestic Training Department heads 5 6 6 1 Div\. chiefs/project managers 23 6 40 2 Power plant superintendents 5 12 18 1 Teaching staff 20 12 10 5 Mgmt information system 5 6 10 3 Load dispatch & telecom\. 10 6 20 9 Planning 5 6 5 3 3\. TRAINING OF TECHNICAL STAFF (DOMESTIC TRAINING) Design staff Power plants 10 4 10 6 Transmission and distribution 10 4 10 6 Construction supervision Power plants 20 6 20 6 Transmission and distribution 20 6 20 3 Contract management 5 3 5 3 Tendering 3 3 10 2 Operation and maintenance Power plants 20 6 109 15 Transmission and distribution 20 6 50 6  - 31 - TABLE 5C: KEY INDICATORS FOR PROJECT IMPLEMENTATION AGRICULTURAL COMPONENT Item/Description Unit Estimated Estimated at Project Completed as % of at Project Completion (98-99) SAR estimate Appraisal IiTigation Component Total irrigated areaa Ha 12667\.0 8473\.3 66\.9 Maximum draw off through Cuni/s 12\.0 14\.0 116\.7 High Main Canal High Main Canal Km 15\.6 14\.7 94\.2 Hongguan and Jiucun Km 19\.2 47\.1 245\.3 Branch Canal Sanjiaolu Branch Canal Km 10\.3 10\.6 102\.9 Lateral Branch Canal Km 29\.0 8\.9 30\.8 Field Ditches Km 113\.3 175\.4 154\.8 On-farm works and agriculture support Landleveling Ha 4320 9122 211\.2 Soil improvement Ha 1200 1789 149\.1 Fertilizer Ton 1502\.3 2836 188\.8 Agrochemnical Ton 102\.3 141\.8 138\.6 Seeds Kg/ha 225 220 97\.8 Seeds company No 1 1 100\.0 Agriculture service center No 4 4 100\.0 Training Irrigated agriculture No 1 1 100\.0 research and training center Farmers m-month 500 1000 200\.0 Project Manager m-month 6 8 133\.3 Project Staff (local training) m-month 50 95 190\.0 Consultant services m-month 300 450 150\.0 Study tour (domestic) m-month 4 30 750\.0 a A total of 6473\.3 ha developed in 1994, and about 1333\.3 ha has been developed for existing irrigation area to be supplied with supplementary irrigation\. The balance of about 4000 ha will be completed by the end of year 2000, in which 666\.7 will be completed by end of 1999\.  - 32 - TABLE 6A: KEY INDICATORS FOR PROJECT OPERATIONS POWER PLANT Index Unit Actual Target Value Target Value Completion Dual Standard First Class Standard' to 12/31/98 1\. Continuous Safe Days 1026 Three 100 day periods Three 100 day periods Operation 2\. Human accidents at year No 0 0 0 end 3\. Dam Safety Evaluation2 Regular Regular Dam Regular Dam Dam2 4\. Annual Energy Output GWh 368\.73 495\.0 495\.0 5\. Station Services as % of % 2\.19 0\.15 0\.15 generation 6\. Average Availability % 93\.1 7\. Perfect Operation of % of year 100 100 100 Main Equipment 8\. Perfect Operation of % 100 95 95 Flood Forecasting System 9\. Accuracy of Forecast of % 85 (peak) 92 92 Largest Flood 84 (vol\.) 10\. Average accuracy of % 83 (peak) 85 85 Flood Forecast 89 (vol) In addition to meeting targets listed, first class performance standard requires following: (a) Computerized MIS system for\. (b) Computerized SCADA and EMS for plant\. (c) Automatic hydrological forecasting system in place\. (d) No leakage from equipment\. (e) Plant labor force less than 0\.15 persons/MW\. 2 Routine safety evaluation every year\. Reviewed by panel every five years\. Compliance with all criteria required\. See text\.  - 33 - TABLE 6B: KEY INDICATORS FOR PROJECT OPERATIONS AGRICULTURAL COMPONENT SAR estimate ICR estimate % of ICR/SAR Area Yield Production Area Yield Production Area Yield Production (ha) (ton) (ton) (ha) (ton) (ton) (%) (%) (%) Crops Rice 6000\.0 4\.3 25800\.0 6018\.0 4\.7 28254\.5 100\.3 109\.2 109\.5 Corn 334\.0 3\.5 1169\.0 340\.0 3\.5 1196\.8 101\.8 100\.6 102\.4 Peanuts 1140\.0 2\.1 2394\.0 1150\.0 2\.1 2415\.0 100\.9 100\.0 100\.9 Beans 334\.0 1\.8 601\.0 340\.0 1\.9 647\.7 101\.8 105\.8 107\.8 Sweet Potato 927\.0 3\.0 2781\.0 930\.0 3\.0 2799\.3 100\.3 100\.3 100\.7 Vegetable 1334\.0 10\.0 13340\.0 1350\.0 10\.3 13911\.8 101\.2 103\.1 104\.3 Watermelon 334\.0 25\.0 8350\.0 340\.0 25\.0 8501\.7 101\.8 100\.0 101\.8 Sugar Cane 3212\.0 50\.0 160600\.0 3153\.0 51\.0 160803\.0 98\.2 102\.0 100\.1 Pineapple 200\.0 11\.0 2200\.0 157\.0 11\.0 1726\.2 78\.5 100\.0 78\.5 Pepper 134\.0 2\.5 335\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 Mango 1360\.0 11\.6 15780\.0 1784\.0 11\.9 21220\.7 131\.2 102\.5 134\.5 Rubber 1534\.0 1\.3 2025\.0 1100\.0 1\.4 1485\.0 71\.7 102\.3 73\.3 Sisal 1047\.0 1\.5 1571\.0 439\.0 1\.5 658\.5 41\.9 100\.0 41\.9 Eucalyptus NA NA NA 2733 ? ?  - 34 - TABLE 7: STUDIES INCLUDED IN PROJECT Study Purpose as defined at Status Impact of Study Appraisal/Redefined Power Pricing Study To transfer to HEPCO modem Completed 1994 Comprehensive tariff methods of power tariff design structure based on the criteria of economic recommended\. efficiency, financial viability and HEPCO proposed to fairness to power consumers and the provincial suppliers; to look into the government to practical problems raised by the implement new tariff transition from the existing structure including pricing system to more desirable time-of-day tariff, but pricing arrangements and to has not obtained the propose a medium-term action government's approval\. plan\. Power System Planning To develop an appropriate Completed 1994 Least cost investment Study methodology for establishing plan with specific investment plans in Hainan power generation which take into account facilities identified\. uncertainties about load forecast, Such plan was the availability and price of implemented\. fuels, and the rate of connection However, due to of isolated systems to the main economic downtum in grid\. This methodology later recent years, there is could be replicated for similar now excessive cases in mainland China\. To generation capacity in strengthen HEPCO's capability Hainan\. in routinely applying some of the planning methods identified from the study and in developing and maintaining the required database\.  - 35 - TABLE 8A: PROJECT COSTS (Yuan million) Appraisal estimate Actual/latest estimate Item Local Foreign Total Local Foreign Total Preparatory Works 24\.0 0\.9 25\.0 41\.7 0\.0 41\.7 Resettlement 135\.4 15\.1 150\.5 205\.8 63\.6 269\.4 Environmental Management 6\.2 3\.7 9\.9 2\.8 10\.8 13\.6 Civil Works (Dam and Power Facilities) 182\.1 4\.5 186\.6 440\.1 0\.0 440\.1 HMC and Sanjiaolu Canal System 39\.1 13\.2 52\.2 24\.4 64\.2 88\.6 Canals andon-farmworks beyond 62\.8 16\.3 79\.1 37\.7 0\.0 37\.7 resettlement Major constructionmaterials 5\.2 133\.1 138\.3 75\.6 192\.5 268\.1 Gates and Hoists 15\.3 6\.8 22\.1 25\.0 0\.0 25\.0 Turbines and Generators, and other plant 70\.1 6\.3 76\.4 65\.2 15\.2 80\.3 equipment T&G Governors and Static Excitation 0\.9 19\.6 20\.5 0\.0 20\.5 20\.5 PLCEquipment,transmissionline, 11\.6 26\.5 38\.1 14\.2 161\.8 176\.0 substation LoadDispatchSystemforHainanIsland 0\.2 13\.1 13\.3 0\.0 29\.3 29\.3 Grid Agricultural Support Services 4\.2 0\.0 4\.2 0\.0 0\.0 0\.0 ProjectManagementandEngmeering 26\.0 5\.4 31\.5 58\.8 0\.0 58\.8 Technical Assistance and Training 5\.0 7\.0 12\.0 0\.4 2\.4 2\.8 TotalBase Costs- 588\.0 271\.7 859\.7 Contingencies Physical 59\.0 15\.4 74\.3 Price 107\.6 44\.9 152\.5 TotalProjectCos 754\.5 332\.0 1,086\.5 991\.8 560\.4 1552\.2 Interest during Construction IBRD Loan6 26\.5 12\.2 38\.7 0\.0 9\.2 9\.2 OtherLoans 101\.5 0\.0 101\.5 451\.9 0\.0 451\.9 Total Financing Required7 882\.5 344\.2 1,226\.7 1443\.7 569\.6 2013\.3 4 The project is exempt from taxes and duties\. 5 The actual project cost excludes $12\.1 equivalent (YIOO million) local cost allocated by the provincial government in August 1999 to complete HMC and resettlement components\. Potential benefits also ignored in economic analysis\. 6 Interest during construction (IDC) is based on onlending rate for projected disbursements of loan/credit proceeds\. Foreign currency portion of IDC is based on Bank loan variable rate for projected disbursements of loan proceeds\. 7 Figures may not total exactly due to rounding\.  - 36- TABLE 8B: PROJECT COSTS (US$ million) Appraisal estimate Actual/latest estimate Item Local Foreign Total Local Foreign Total Preparatory Works 4\.9 0\.2 5\.1 7\.7 0\.0 7\.7 Resettlement 25\.9 2,9 28\.8 26\.8 7\.6 34\.4 Environmental Management 1\.2 0\.7 1\.9 0\.4 1\.3 1\.7 Civil Works (Dam and Power Facilities) 35\.3 0\.9 36\.2 59\.9 0\.0 59\.9 HMC and Sanjiaolu Canal System 7\.5 2\.5 10\.0 4\.1 7\.5 11\.6 Canalsandon-farmworksbeyond 12\.0 3\.1 15\.1 4\.6 0\.0 4\.6 resettlement Major construction materials 1\.0 25\.7 26\.7 9\.1 24\.8 33\.9 Gates and Hoists 3\.0 1\.3 4\.3 2\.9 0\.0 2\.9 Turbines and Generators, and other plant 13\.5 1\.2 14\.7 7\.7 1\.8 9\.5 equipment T&G Governors and Static Excitation 0\.2 3\.8 3\.9 0\.0 2\.4 2\.4 PLC Equipment, transrnission line, 2\.2 5\.1 7\.3 1\.7 19\.2 20\.9 substation LoadDispatchSystemfor HainanIsland 0\.0 2\.5 2\.5 0\.0 3\.5 3\.5 Grid Agricultural Support Services 0\.8 0\.0 0\.8 0\.0 0\.0 0\.0 Project Management and Engineering 5\.2 1\.0 6\.3 8\.9 0\.0 8\.9 Technical Assistance and Training 1\.0 1\.4 2\.3 0\.1 0\.3 0\.4 Total BaseCostsS 113\.6 52\.2 165\.8 Contingencies Physical 10\.5 2\.9 13\.4 Price 9\.8 4\.0 13\.7 TotalProjectCosts- 133\.8 59\.1 193\.0 133\.6 68\.4 202\.0 Interest during Construction IBRD Loan'0 4\.8 2\.0 6\.8 0\.0 1\.1 1\.1 Other Loans 17\.9 0\.0 17\.9 56\.3 0\.0 56\.3 TotalFinancingRequired" 156\.5 61\.1 217\.7 189\.9 69\.5 259\.4 8 The project is exempt from taxes and duties\. 9 The actual project cost excludes $12\.1 equivalent (Y100 million) local cost allocated by the provincial govemment in August 1999 to complete HMC and resettlement components\. Potential benefits also ignored in economic analysis\. 10 Interest during construction (IDC) is based on onlending rate for projected disbursements of loan/credit proceeds\. Foreign currency portion of IDC is based on Bank loan variable rate for projected disbursements of loan proceeds\. 1 l Figures may not total exactly due to rounding\.  - 37 - TABLE 8c: PROJECT FINANCING (US$ million) Appraisal estimate ActuaVlate estimate Source Local Foreign Total Local Foreign Total IBRD/LDA 17\.0 50\.0 67\.0 0\.0 69\.3 69\.3 TCC 1112 - 0\.3 0\.3 0\.0 0\.2 0\.2 UNDP - 0\.1 0\.1 0\.0 0\.0 0\.0 MWR 12\.0 - 12\.0 20\.5 0\.0 20\.5 SEIC 21\.0 - 21\.0 45\.7 0\.0 45\.7 Hainan Government Loans 98\.5 10\.7 109\.2 87\.7 0\.0 87\.7 Grants 8\.0 - 8\.0 31\.5 0\.0 31\.5 Local Government 4\.5 0\.0 4\.5 Total Financing Required13 156\.5 61\.1 217\.7 185\.4 69\.5 259\.4 12 Credit 1664-CHA 13 Includes IDC of about $25 million; all of the financing sources would finance IDC relating to their own loans\.  -38 - TABLE 9A: ECONOMIC COSTS AND BENEFITS Comparison to Alternative Thermal Power (85MW coal & 225MW GT Plant) (Y million in 1997 Economic Prices) Year Thermal Fixed Costs Output (GWh!) Fuel Costs Summary Thermal Costs Proect Costs _Hydro - Thermal Investment O&M Investment O&M Total Coal GT Coal GT Total Coal GT Coal GT Total Invest\. O&M Total Power Joint Power Joint Allocated Full Allocated Full 1990 46\.8 0\.0 0\.0 0\.0 0\.0 0\.0 o\.0 0\.0 0\.0 0\.0 46\.8 0\.0 46\.8 0\.0 102\.4 0\.0 0\.0 84\.6 102\.4 37\.9 55\.7 1991 140\.3 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 140\.3 0\.0 140\.3 9\.6 102\.1 0\.0 0\.0 93\.9 111\.7 -46\.3 -28\.6 1992 187\.0 90\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 277\.0 0\.0 277\.0 57\.1 270\.7 0\.0 0\.0 280\.7 327\.8 3\.7 50\.8 1993 93\.5 315\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 408\.5 0\.0 408\.5 101\.3 356\.1 0\.0 0\.0 395\.4 457\.4 -13\.1 48\.9 1994 0\.0 270\.0 14\.0 5\.6 312\.0 272\.0 40\.0 54\.4 16\.0 70\.4 270\.0 19\.7 360\.1 222\.2 261\.6 5\.1 7\.0 449\.2 495\.9 89\.1 135\.9 1995 0\.0 0\.0 14\.0 16\.9 373\.0 253\.0 120\.0 50\.6 48\.0 98\.6 0\.0 30\.9 129\.5 70\.7 163\.1 10\.1 14\.1 227\.2 258\.0 97\.7 128\.5 1996 0\.0 0\.0 14\.0 16\.9 426\.0 306\.0 120\.0 61\.2 48\.0 109\.2 0\.0 30\.9 140\.1 15\.5 28\.4 10\.1 14\.1 60\.7 68\.1 -79\.4 -72\.0 1997 0\.0 0\.0 14\.0 16\.9 501\.0 381\.0 120\.0 76\.2 48\.0 124\.2 0\.0 30\.9 155\.1 16\.4 72\.0 10\.1 14\.1 97\.7 112\.7 -57\.4 -42\.4 1998 0\.0 0\.0 14\.0 16\.9 369\.0 249\.0 120\.0 49\.8 48\.0 97\.8 0\.0 30\.9 128\.7 13\.3 48\.8 10\.1 14\.1 75\.3 86\.2 -53\.4 -42\.5 1999 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 10\.1 14\.1 21\.7 24\.2 -137\.2 -134\.7 2000 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2001 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2002 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2003 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2004 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2005 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2006 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2007 0\.0 90\.0 14\.0 16\.9 520\.0 400\.0\. 120\.0 80\.0 48\.0 128\.0 90\.0 30\.9 248\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -231\.4 -229\.5 2008 0\.0 315\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 315\.0 30\.9 473\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -456\.4 -454\.5 2009 0\.0 270\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 270\.0 30\.9 428\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -411\.4 -409\.5 2010 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2011 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2012 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2013 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2014 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2015 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2016 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2017 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2018 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2019 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2020 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2021 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2022 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 2023 0\.0 0\.0 14\.0 16\.9 520\.0 400\.0 120\.0 80\.0 48\.0 128\.0 0\.0 30\.9 158\.9 0\.0 0\.0 8\.3 11\.1 17\.5 19\.4 -141\.4 -139\.5 Totals 467\.5 675\.0 1817\.5 506\.1 1405\.3 Equalizing Discount Rate 0\.41 0\.21 Present Values 10% 362\.8 558\.2 90\.3 101\.7 3014\.9 2291\.9 723\.0 458\.4 289\.2 747\.6 921\.0 192\.0 1860\.5 319\.1 947\.5 55\.6 76\.0 1220\.2 1398\.2 -640\.4 -462\.3 12% 346\.1 493\.7 71\.8 80\.0 2364\.8 1795\.9 568\.9 359\.2 227\.6 586\.8 839\.8 151\.8 1578\.3 293\.0 882\.5 44\.3 60\.6 1116\.3 1280\.4 -462\.0 -298\.0 14% 330\.5 441\.8 58\.1 64\.1 1890\.3 1434\.3 456\.0 286\.9 182\.4 469\.3 772\.3 122\.3 1363\.8 269\.5 823\.8 35\.9 49\.2 1026\.6 1178\.5 -337\.2 -185\.4 Average Energy Costs (10% discount rate) Thermal Cost 61\.7 fen}kWh INTMM OlEr ~ ~~~~~~Hydro Cost 82\.6% Joint to Power 40\.5 fcn/kWh 100 °/ Joint to Power 46\.4 fen/kWh  - 39 - TABLE 9B: ECONOM,IC COSTS AND BkNf-US Economic Internal Rate of Re ni fEil Assumed Tariff(fen/kWlh) 54\.4 Costs and benefits in Y million 1997 economic prices Enerm Benefits Investment !et 'e Cashflow Year GVVh Power lrrigation Total Joint Power Irrigation\. Joini Power trigoocer ' fiv ,owei-rrigation Total (NET) i - 1990 0 0 0 0 102 0 ° ° 1\. _"'2; -Y7 -IS -102 1991 0 0 0 0 102 10 Sj 0 0 N12 -Oo -24 -120 1992 0 0 0 0 271 57 6 0 0 -2S7 -71 -358 1993 0 0 0 0 356 1I0 411 0 0 o 4 \.18 404 -94 -498 1994 312 201 0 201 262 222 15' , 5- -58 -313 1995 373 240 44 284 163 71 i ! 14 IU 9 3 12 1996 426 274 51 325 28 1if Wi 4 1C : H 213 32 244 1997 501 323 66 389 72 16 i 10 623 37 260 1998 369 238 79 317 49 13 IQl 14 IC 3 i6l 53 213 1999 520 335 64 419 0 0 1 27 313 79 392 2000 520 335 61 396 0 0 2' i7 56 373 2001 520 335 79 414 0 0 0: 3 3'7 74 391 2002 520 335 65 400 0 0 0 Ii I 61 378 2003 520 335 66 401 0 0 0; 61 378 2004 520 335 70 405 0 0 8 3 2 3I 66 383 2005 520 335 70 405 0 ° 3 20i 3\.7 60 383 2006 520 335 70 405 0 0 - I , 66 383 2007 520 335 70 405 0 0 0 1 s S 3i, 66 383 2008 520 335 3 418 0 0 7 395 2009 520 335 70 405 0 0 2 i1 e ; 2i 317 66 383 2010 520 335 68 403 0 0 71, 1 64 381 2011 520 335 73 408 0 0 \.,l 'I S 68 385 2012 520 335 73 408 0 0 68 385 2013 520 335 73 4 08 0 68 385 2014 520 335 73 408 0 0 7 68 385 2015 520 335 69 4041 0 0 o0 335 3i7 64 381 2016 520 335 57 391! 0 0 317 52 369 2017 520 335 52 3g7 0 0 t 3 \.17 47 365 2018 520 335 57 391 0 ' 3\. -il? 52 369 2019 520 335 57 391 0 0 13 52 369 2020 520 335 57 392 0 t) '2 ''7 52 370 2021 520 335 57 392 0 0 00 ii \. 2; 3: 52 370 2022 520 335 57 3921 0 0 3;7 52 370 2023 520 335 57 392 0 0 52 370 |PV at Benefits Investment i --Jct5 Cash Flow discount rate Power Irrigation Total Joint Power *rrigatior r Joist 7, 1 t ,oe r Irrigation Total 10% 1,941\.57 384\.02 2,325\.59 947\.48 319\.15 90\.70I 75\.37 55 3\.6t 1\.5C71, 605\.99 122\.02 818\.01 1;% 1715\.22 338\.11 2,053\.33 914\.12 305\.72 86\.991 61\.70 4,54 ' 5' 1\. 40 64 524\.60 8S\.09 612\.69 12% 1,522\.96 299\.05 1\.822\.01 882\.45 293\.00 63\.49 0 66\.6: 4, i-\.SI 3,\.6S\.6 4 60\.08 443\.32 13% 1,358\.64 265\.65 1,624\.29| 852\.37 2SO\.90 00\.8I 54\.5 I 39-\.8 i,! 25621 36\.89 303\.14 14% 1\.217\.37 236\.92 1,454\.30 823\.76 269\.55 17\.051 49\.29 ' 2\.31 169\.13 17\.65 186\.79 15% 1,095\.25 212\.09 1 30735 796\.54 258\.72 74\.091 44\.60 , 0\.0\. 30 1\.67 89\.97 16% 989\.13 190\.53 1,179\.66 770\.63 248\.45 71\.29 40\.56 29\.50 Y\.37 'i' 20\.90 -11\.63 9\.26 17% 896\.44 171\.72 1,068\.i6 745\.95 238\.70 63\.64, 37\.Ci -22\.71 -58\.11 PoNver Irrigation Total 6\.P ,v \. , Benefits 1942 384 23261 3Osw 44' Share 83\.5% 16\.5% Separable Costs 374\.79 109\.34 484\.13 Rem\. Benefits 1,566\.78 274\.68 1,641\.47 Share 85\.1% 14\.9% Joint Costs 870\.79 152\.66 1,023\.45 Net Benefits 695\.99 122\.02 818\.01, Total Costs 1,245\.58 262\.00 1,507\.561 Share 82\.6% 17\.4% Sep\. Investment 319\.15 90\.70 409\.65 JointInvestment 806\.15 141\.33 947\.48 Total Investment 1,125\.30 232\.03 1,357\.33! Ben\./Invest\. Ratio 1\.73 1\.66 1,71  - 40 - TABLE 10: STATUS OF LEGAL COVENANTS Cove- Original Revised Agree- nant Present fulfillment fulfillment ment Section type Status date date Description of covenant Comments Credit 3\.01(b) 3 C The Borrower shall onlend the proceeds of the credit and the loan to Hainan for onlending to HEPCO, under the subsidiary loan agreement under terms and conditions satisfactory to the Association and the Bank\. Project 2\.02 3 C Hainan will relend the proceeds of the loan/credit to HEPCO on temis satisfactory to the Bank/IDA\. 2\.01 (a) & (b), 7 CP Hainan will carry out or cause to 2\.02 be carried out the agreed resettlement program\. 3\.01 1 C Hainan shall maintain, or cause to be maintained records and accounts adequate to reflect in accordance with sound accounting practices; Hainan sball have the accounts audited annually by independent auditors acceptable to the Association and the Bank and fumished a certified copy of the Association and the Bank no later than six months after the end of each year\. 3\.02 2 CP Hainan shall provide for adequate irrigation water charges which would be collected to meet at least the full operating and maintenance costs of irrigation system\. 2\.01 10 C HEPCO shall complete the system planning and the tariff studies and shall review the findings of the study with the Association and the Bank not later than June 30, 1993\. 4\.01 1 C HEPCO shall fumish its annual financial statements and project accounts certified by an acceptable auditor, within six months from the end of each financial year\. 4\.02 2 CP HEPCO shall take measures to ensure that it eams a cash surplus sufficient to (a) cover all operating costs and debt service in 1991/1992; and (b) maintain a self-financing ratio of no less than 20 percent in 1993, 25 percent in 1994, and 30 percent thereafter\. 4\.03 2 CP HEPCO shall not incur any debt unless its debt service coverage ratio is no less than 1\.1 times in 1991-1993, 1\.2 times in 1994- 1996, and 1\.3 times thereafter\. 4\.04 2 CP HEPCO shall maintain a debt/equity ratio of no more than 85/15 in 1991, 80/20 in 1992/93, 75/25 in 1994/95 and 70/30 thereafter\.  - 41 - Cove- Original Revised Agree- nant Present fulfillment fulfillment ment Section type Status date date Description of covenant Comments 4\.05 1 C HEPCO shall fumish its annual financial statements and project accounts, certified by acceptable auditors, within six months from the end of each financial year\. 4\.06 5 NC HEPCO shall furnish to the Association/Bank no later than June 30, 1992, an action plan for organizing and staffing its internal audit unit, and shall thereafter implement such plan taking into consideration the Association/Bank's comments\. Covenant Class: Status: I =Accounts/audits 8 = Indigenous people C = covenant complied with 2 =Financial performance/revenue 9 = Monitoring, review, and reporting CD = complied with after delay generation from beneficiaries 10 = Project implementation not CP = complied with partially 3 = Flow and utilization of project covered by categories 1-9 funds It = Sectoral or cross-sectoral 4 =Counterpart funding budgetary or other resources 5 = Management aspects of the allocation project or executing agency 12 = Sectoral or cross-sectoral policy/ 6 = Environmental covenants regulatory/institutional action 7 = Involuntary resettlement 13 = Other  - 42 - TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS There was no significant lack of compliance with an applicable Bank Operational Manual Statement (OD or OP/BP) Statement Number and Title Describe and Comnment on lack of Compliance 1\. OMS 2\.33 - Social Issues Associated Income not yet fully restored\. with Involuntary Resettlement 2\. OMS 2\.36 - Environmental Aspects of Fully Complied\. Bank Work TABLE 12: BANK RESOURCES: STAFF INPUTS Planned Revised Actual Stage of project cycle Weeks $'000 Weeks $'000 Weeks $'000 Preparation to appraisal 167\.3 331\.0 Appraisal 22\.4 46\.2 Negotiations through 44\.8 97\.3 Board approval Supervision 63\.7 134\.9 Completion 14\.7 28\.7 Total 312\.9 638\.1  - 43 - TABLE 13: BANK RESOURCES: MISSIONS Performance rating Specialized staff Imple- Devel- Stage of project cycle Month/ Number of Days skills represented mentation opment Type of year persons in field /a status /b objectives problems /c Preidentification 09/86 1 2 HE Identification/ Preparation 02/87 5 6 HE,IE,E,PE,Ag, RS,PE 06/87 4 5 RS,FA,FA,HE Preappraisal 05/88 5 12 IE,FA,HE, Ec,E 11/88 3 13 Ec,FA,HE Appraisal 04/89 8 9 Ag,IE,Ec,FA,E, LC,CO,AS Negotiation 03/90 Post-appraisal 03/90 2 10 Ag,Ec 04/90 2 3 FA,E 07/90 2 13 Ag,As 02/91 5 5 FA,RS,PC,HE,E 06/91 1 5 RS 11/91 1 10 HE Board approval 10/91 Signing 12/91 Effective 02/92 Supervision 1 11/92 2 4 RS,RSLd Supervision 2 05/93 2 12 RS,PE S HS Supervision 3 04/94 7 5 A,FA,E,RS,Ec, S HS Ec,HE Supervision 4 10/94 3 6 IE,RS,IE S S Supervision 5 11/95 3 8 IE,RS,IE S S Supervision 6 05/96 1 3 HE'd Supervision 7 11/96 2 6 HE,RS U U Supervision 8 05/97 2 5 HE,RS U U Supervision 9 11/97 2 4 RS,IE S S Supervision 10 03/98 2 5 HE,RS S S Supervision 11 07/98 1 4 RS'd Supervision 12 11/98 2 4 HE,RS S S Completion 03/99 6 5 HE,RS,OO,IE 06/99 2 3 RS,OO /a A: Accountant, Ag: Agronomist, As: Agricultural Specialist, CO: Country Officer, E: Environmental Specialist, EC: Economist; HE: Hydro Engineer, PE: Power Engineer, IE: Irrigation Engineer, FA: Financial Analyst, LC: Legal Counsel, 00: Operations Officer, RS: Resettlement Specialist, S: Sociologist /b HS: Highly satisfactory, S: Satisfactory, U: Unsatisfactory /c Typical problems included: implementation delays in technical assistance and studies\. /d Form 590 not prepared\.  -44 - ANNEX A DAGUANGBA MULTIPURPOSE PROJECT HAINAN PROVINCIAL ELECTRIC POWER COMPANY LTD\. (HEPCO) Income Statement (Yuan Million) Year Ending December 31 1991 1992 1993 1994 1995 1996 1997 1998 SAR Actual SAR Actual SAR Actual SAR Actial SAR Act Act ual al SAR Actual SAR Actual ElectcicitySales(GWhi) 845 944 956 1,177 1,082 1,531 1,225 1,944 1,387 2,300 1,570 2,385 1,777 2,469 2,012 2,740 Aniinual Sales Growth (%) 27 13\.14 24\.70 13\.18 29\.99 13\.22 26\.99 13\.22 18\.35 13\.19 3\.70 13\.18 3\.50 13\.22 10\.99 Average Tariff(Fen/kWh) 33\.50 31\.96 30\.60 33\.99 45\.00 39\.13 47\.50 46\.31 47\.50 51\.10 51\.60 54\.49 50\.50 51\.41 49\.70 52\.85 Operating Revenuie: Sales Reveniue 282\.5 301\.8 292\.4 400\.2 486\.6 598\.8 582\.1 900\.1 659\.0 1,175\.4 810\.7 1,299\.7 896\.6 1,269\.4 1,000\.5 1,448\.4 Other Operating Income 9\.5 3\.0 - Less: Sales tax - - - - - - 1\.1 - 1\.1 - 2\.8 - 1\.9 - Total Operating Revenue 282\.5 301\.8 292\.4 400\.2 486\.6 608\.3 582\.1 902\.0 659\.0 1,174\.4 810\.7 1,297\.0 896\.6 1,267\.4 1,000\.5 1,448\.4 Operatinig Expenises: Fuel 92\.9 104\.8 78\.9 163\.4 100\.2 312\.4 104\.5 181\.6 111\.6 231\.3 130\.6 192\.7 171\.5 201\.5 219\.7 222\.4 Putrchased Power 5\.5 8\.9 6\.0 9\.0 6\.4 5\.4 6\.5 316\.2 6\.8 274\.6 7\.2 534,9 7\.5 475\.4 7\.9 618\.3 Operatiig&Maintenasscc 36\.4 37,8 39\.8 54\.8 43\.0 67\.2 47\.7 92\.9 58\.8 162\.2 71\.2 184\.4 79\.6 129\.9 88\.7 117\.4 Adniisiistration 16\.3 12\.1 18\.3 19\.3 20\.0 19\.4 21\.8 42\.2 23\.9 73\.9 26\.1 86\.8 28\.5 61\.3 31\.1 59\.7 Depreciationi 52\.3 58\.3 55\.2 67\.8 60\.2 83\.6 79\.1 80\.5 121\.8 124\.0 160\.5 80\.8 184\.2 165\.6 210\.4 176\.2 Other Expelises 4\.4 7\.3 43\.1 44\.7 86\.7 111\.9 73\.6 72\.5 Total Operating Expenses 203\.4 226\.2 198\.2 321\.6 229\.8 S31\.1 259\.6 758\.0 322\.9 952\.6 395\.6 1,191\.4 471\.3 1,107\.4 557\.8 1,266\.6 Operating Income 79\.1 75\.8 94\.2 78\.6 256\.8 77\.3 322\.5 144\.0 336\.1 221\.7 415\.1 105\.5 425\.3 160\.1 442\.7 181\.8 Noni-Operatinig Iliconie Net Noni-Operating Ilicooise (1\.4) (0\.5) (2\.2) (36\.7) (82\.0) (12\.5) (1\.8) (4\.7) Investsnel tProfit 8\.5 1\.8 11\.5 3\.4 6\.0 4\.1 Finasice Expenses 66\.4 71\.4 79\.9 63\.1 110\.2 97\.7 144\.0 71\.5 156\.5 83\.3 154\.2 165\.1 148\.9 214\.4 TotalNoii-operatiiigliscome (66\.4) (1\.4) (71\.4) (0\.5) (79\.9) (56\.8) (110\.2) (132\.6) (144\.0) (142\.0) (156\.5) (92\.4) (154\.2) (160\.9) (148\.9) (215\.0) Net Income Before Incosise Tax 12\.7 74\.2 22\.8 78\.1 176\.9 20\.5 212\.3 11\.4 192\.1 79\.8 258\.6 13\.2 271\.1 (0\.8) 293\.8 (33\.2) Iniconse Tax 11\.9 11\.1 14\.1 11\.7 38\.5 0\.8 48\.4 3\.0 50\.4 1\.4 62\.3 0\.4 63\.8 0\.8 66\.4 10\.0 Net Income (Loss) 0\.8 63\.0 8\.7 66\.4 138\.4 19\.7 163\.9 8\.4 141\.7 78\.4 196\.3 12\.7 207\.3 (1\.6) 227\.4 (43\.2) Average Rate Base 1,000\.0 984\.8 992\.5 1,022\.2 1,071\.4 1,358\.9 1,068\.0 1,986\.1 1,159\.3 2,425\.9 1,382\.3 2,651\.1 1,365\.5 2,904\.8 1,251\.8 RateofRetum (%) 7\.55 9\.57 7\.92 25\.12 7\.21 23\.73 13\.48 16\.92 19\.13 17\.11 7\.63 16\.04 11\.72 15\.24 14\.52 OperatingRatio(%) 72\.0 75\.0 67\.8 80\.4 47\.2 87\.3 44,6 84\.0 49\.0 81\.1 48\.8 91\.9 52\.6 87\.4 55\.8 87\.4  - 45 - ANNEX A DAGUANGBA MULTIPURPOSE PROJECT HAINAN PROVINCIAL ELECTRIC POWER COMPANY LTD\. (HEPCO) Balance Sheet (Yuan Million) Year Ending December 31 1991 1992 1993 1994 1995 1996 1997 1998 SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual ASSETS Current Assets Cash 85,6 71\.1 86\.9 91\.9 102\.9 141\.4 82\.7 296\.0 91\.5 232\.8 95\.5 232\.3 100\.8 200\.5 96\.5 543\.7 Account Receivables 23\.2 152\.0 24\.0 239\.7 40\.0 108\.6 47\.8 187\.2 54\.2 235\.8 66\.6 262\.3 73\.7 263\.2 82\.2 326\.6 Inventories 68\.9 40\.6 83\.0 58\.6 104\.2 142\.2 108\.5 35\.1 115\.7 78\.6 134\.7 55\.2 160\.8 62\.5 197\.8 52\.6 Other Current Assets 79\.6 79\.6 - 79\.6 388\.9 79\.6 427\.7 79\.6 532\.2 79\.6 473\.1 79\.6 441\.3 79\.6 632\.9 Total Current Assets 257\.3 263\.7 273\.5 390\.1 326\.7 781\.1 318\.6 946\.0 341\.0 1,079\.3 376\.4 1,022\.9 414\.9 967\.6 456\.1 1,555\.9 I\.ong-Terinlnvestsneet - - 99\.0 413\.3 438\.7 414\.8 413\.1 416\.9 Fixed Assets: Plant in Service 1,157\.6 1,198\.8 1,214\.7 1,223\.0 1,347\.8 1,521\.1 2,027\.3 1,306\.1 2,803\.0 1,897\.9 3,189\.4 2,038\.5 3,598\.2 2,110\.7 4,091\.3 2,153\.0 Less: Accumulated Depreciation 173\.7 186\.8 229\.0 250\.0 289\.2 351\.3 368\.2 339\.9 490\.0 545\.5 650\.6 626\.3 834\.8 791\.9 1,045\.1 968\.2 NetPlantinService 983\.9 1,012\.0 985\.7 973\.0 1,058\.6 1,169\.8 1,659\.1 966\.2 2,313\.0 1,352\.4 2,538\.8 1,412\.2 2,763\.4 1,318\.7 3,046\.2 1,184\.8 Construction WIP 307\.6 152\.1 671\.1 408\.9 934\.8 835\.4 637\.5 1,372\.6 212\.1 1,715\.0 244\.8 1,866\.1 103\.3 2,127\.1 222\.1 2,201\.4 Total Fixed Assets 1,291\.5 1,164\.1 1,656\.8 1,381\.9 1,993\.4 2,085\.2 2,296\.6 2,338\.8 2,525\.1 3,067\.4 2,783\.6 3,278\.3 2,866\.7 3,445\.8 3,268\.3 3,386\.2 Special Fund Assets 3\.0 35\.0 3\.2 27\.8 5\.0 - 6\.2 - 8\.5 - 9\.6 - 12\.2 14\.4 Intangible Assets & Deferred Assets - 142\.8 141\.8 532\.7 504\.4 501\.8 503\.8 TOTAL ASSETS 1,551\.8 1,462\.9 1,933\.5 1,799\.9 2,325\.1 3,028\.0 2,621\.4 3,839\.8 2,874\.6 5,118\.0 3,169\.6 5,220\.4 3,293\.8 5,328\.3 3,738\.8 5,862\.8 LIABILITIES AND EQUITY Current Liabilities: Short-Termn Loan 40\.0 15\.3 40,0 23\.0 40\.0 54\.5 40\.0 30\.0 40\.0 75\.5 40\.0 98\.8 40\.0 77\.4 40\.0 31\.3 AccountPayable 51\.4 51\.7 58\.2 43\.3 65\.9 30\.8 74\.6 170\.4 84\.5 102\.6 95\.6 162\.5 108\.3 26\.2 122\.5 412\.4 Other Current Liabilities - 0\.0 4\.6 256\.2 264\.7 433\.3 278\.8 268\.3 203\.4 Current Portion of Long-Terrn Debts - 75\.0 42\.4 53\.5 19\.1 15\.9 88\.5 Total Current Liabilities 91\.4 67\.0 98\.2 71\.0 105\.9 416\.6 114\.6 507\.6 124\.5 665\.0 135\.6 559\.2 148\.3 387\.9 162\.5 735\.6 Long-Tern Loan 1,046\.1 835\.2 1,382\.6 1,061\.5 1,601\.9 1,898\.9 1,700\.1 2,240\.2 1,768\.3 2,492\.3 1,820\.4 2,671\.9 1,683\.5 2,849\.7 1,840\.3 3,088\.8 Total Liabilities 1,137\.5 902\.2 1,480\.8 1,132\.5 1,707\.8 2,315\.4 1,814\.7 2,747\.7 1,892\.8 3,157\.3 1,956\.0 3,231\.1 1,831\.8 3,237\.5 2,002\.8 3,824\.5 Minority Stockholder's Equity 234\.3 264\.4 234\.3 234\.3 Owner's Equity: Paid-in Capital 414\.3 560\.7 452\.7 667\.3 617\.3 516\.8 806\.7 669\.9 981\.8 718\.4 1,213\.6 743\.3 1,462\.0 1,387\.2 1,736\.0 1,387\.2 Capital Surplus 181\.6 402\.9 964\.5 950\.7 440\.2 465\.9 Surplus Reserves 3\.7 5\.4 (0\.2) 0\.6 0\.6 9\.2 Undistributed Profit 10\.5 13\.8 43\.7 30\.2 28\.6 (58\.2) Total Owner's Equity 414\.3 560\.7 452\.7 667\.3 617\.3 712\.6 806\.7 1,092\.1 981\.8 1,726\.5 1,213\.6 1,724\.8 1,462\.0 1,856\.6 1,736\.0 1,804\.0 TOTAL LIABILITIES & EQUITY 1,551\.8 1,462\.9 1,933\.5 1,799\.9 2,325\.1 3,028\.0 2,621\.4 3,839\.8 2,874\.6 5,118\.0 3,169\.6 5,220\.4 3,293\.8 5,328\.3 3,738\.8 5,862\.8 Debt Equity Ratio (debt as % of debt-equity) 72 60 75 61 72 73 68 67 64 59 60 61 54 61 51 63 Current Ratio (times) 2\.8 3\.9 2\.8 5\.5 3\.1 1\.9 2\.8 1\.9 2\.7 1\.6 2\.8 1\.8 2\.8 2\.5 2\.8 2\.1 Note: a/ Paid-in capital projected in SAR and the actuals in 91/92 includes sworking capital fund, Governtoent/fixed fund, constmction allotinent and special fund\.  -46 - ANNEX A DAGUANGBA MULTIPURPOSE PROJECT HAINAN PROVINCIAL ELECTRIC POWER COMPANY LTD\. (HEPCO) Funds Flow Statement (Yuan Million) Year Ending December 31 1991 1992 1993 1994 1995 1996 1997 1998 SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual SAR Actual Internal Sources of Funds: Net Income 67 63 80 66 218 83 274 106 2S6 150 353 96 362 (2) 376 (43) Depreciation 52 58 55 68 60 84 79 80 122 152 161 81 184 166 210 176 Amortization - 1 38 24 35 7 1 Maintenance 14 15 14 17 15 - 16 24 33 38 44 Other Internal Source of Funds II 15 41 365 774 124 243 128 Total Internal Sources 133 147 149 167 293 208 369 590 432 1,100 547 336 584 414 630 262 Non-Internal Sources of Funds Distribution Expansion Fund 22 30 25 78 28 - 32 36 41 46 52 OtherSourcesofFunds 9 17 218 Total Non-Internal Sources of Funds 22 39 25 95 28 218 32 - 36 - 41 - 46 - 52 Borrowings Foreign Loans - - 161 46 119 120 98 275 42 52 3 15 - 24 - 20 DomesticalLoans 229 235 208 246 214 500 171 455 204 163 297 117 119 77 431 266 Total Borrowings 229 235 369 292 333 620 269 730 246 215 300 132 119 100 431 286 Grants 5 - 4 - 2 - - - - - - Inicrease of Minority Stockholder's Equity 234 30 (30) Total Sources of Funds 389 421 547 554 656 1,045 670 1,319 714 1,548 888 498 749 484 1,113 548 Capital Expenditures Increase in Fixed-Assets and WIP 264 193 421 266 399 708 383 334 353 934 420 292 270 333 614 117 Increase in Long-Term Investment - - - 99 314 25 - - 4 iocrease in Intangible & Deferred Assets - - - 143 37 415 6 5 3 Total Capital Expenditures 264 193 421 266 399 950 383 685 353 1,374 420 298 270 338 614 123 Operational Requiremenits Increase/Decrease in Workiig Capital 14 62 8 97 30 (32) 3 (81) 4 39 20 50 21 148 31 (103) Increase/Decrease in Special Funds - 14 - (7) - - - - - - - - Debt Service (total) 97 64 104 109 192 63 282 560 321 198 404 124 410 30 423 141 Remittances to Government - 6 - 5 - 2 - - - - Special Fund Expenditures 12 96 13 65 19 - 22 - 27 40 43 49 Surplus Reserves 26 - 44 Dividend 12 Total Operational Requirements 123 241 125 268 241 46 307 480 352 237 464 200 474 178 503 82 Total Application of Funds 387 434 546 533 640 996 690 1,165 705 1,612 884 498 744 516 1,117 205 Increase/Decrease in Casls 2 (13) 1 21 16 49 (20) 155 9 (63) 4 (0) 5 (32) (4) 343 Debt Service Coverage 1\.37 2\.30 1\.43 1\.54 153 3\.30 1\.31 1\.05 L35 5\.55 1\.35 2\.70 1\.42 13\.76 1\.49 1\.86 Three Years Average Investment 361 470 401 634 378 1,003 385 786 348 670 435 253 295 154 Self-FinancingRatio(%) 6\.3 16\.7 44\.1 2\.2 56\.1 4\.6 49\.9 19\.1 74\.4 3\.3 62\.4 -2\.0 99\.7 -21\.2  - 47 - ANNEXB ANNEX B: BORROWER'S CONTRIBUTION TO THE ICR BORROWER'S PROJECT COMPLETION REPORT (Extract) CHINA DAGUANGBA MULTIPURPOSE PROJECT (LOAN 3412/CREDIT 2305-CHA) Prepared by Hainan Provincial Electric Power Company Limited April 1999 Approved by: Zhu Wanshun Examined by: Hu Xingpei Prepared by: Feng Shengfu Translated by: Han Jiachou  - 48 - ANNEX B Preface This is the Project Completion Report for Daguangba Multipurpose Project in China for which Loan 3412-CHA in the amount of U\.S\. $ 30 million and Credit 2305- CHA in the amount of SDR 28\.1 million (U\.S\.S37 million equivalent) were approved on November 26, 1991\. The IBRD Loan and IDA credit were used for the construction of Daguangba Multipurpose Project and implemented in accordance with the stipulations of Loan Agreement No\.3412-CHA and Credit Agreement NO\.2305-CHA\. The original closing date of the Loan and Credit was December 31, 1997, it was postponed to December 31, 1998 with the consent of World Bank\. A five member World Bank supervision mission headed by Mr\. Barry Trembath, Principal Power Engineer of Energy and Mining Sector Unit visited Daguangba project area between March 14 to 20 1999\. During the mission, the mission members commented and complemented on the Project Completion Report (draft) provided by the owner of the Project\. This report (extract) was prepared in line with the guidelines and aide memoire advised by World Bank missions\. The construction of Daguangba Multipurpose Project was officially started in June 1990\. The first generating unit was put in service in December 1993, and the hydro complex project was completed by the end of 1995\. The reservoir impoundment started in December 1993, by end of December 1998 the accumulated energy generation of Daguangba hydropower Station reached 1981\.296 GWh\. The reservoir impoundment had reached the normal full reservoir level of 140 El (above sea Level at Yulin port) in November 1996\. A construction quality inspection panel had conducted a completion acceptance check on Daguangba project and submitted a report in April 1996\. The report concluded that "The construction of Daguangba Multipurpose Project is in good quality in general terms\. It can operate with nornal full impoundment of the reservoir, and is ready for acceptance test\." The owner of Daguangba Multipurpose Project has been Hainan Provincial Electric Power Company\.  - 49 - ANNEXB Project Objectives 1\. The objectives of Daguangba Multipurpose Project were to: (a) construct a 56m high main dam with 5842 m total length, including a 719 m long concrete dam flanked by 5123 m long earth embankments; (b) construct a shallow-embedded type underground powerhouse with dimension (LxHxW) of 87\.Om x 37\.50m x 14\.0m; (c) provide and install four generating units of 60 MW each, totaling at 240 MW capacity and the associated electric system including a 220KV step-up substation; (d) construct an overflow dam in the middle of the concrete dam and erect 16 sets of radial gate with outcropping top; and (e) introduce the latest technology and advanced equipment for Daguangba Hydropower Station construction\. 2\. The Daguangba reservoir has got a total storage capacity of 1\.71 billion cubic meter\. The construction of High Main Canal (HMC) will provide irrigation service for 190 thousand mu of farmland through sub-canal gravity irrigation, and will provide irrigation system for a total area of 0\.995 million mu in the long term planning\. The Daguangba reservoir will provide 81\.90 million cubic meter of water supply for agricultural, industrial and residential consumption in the down stream area annually\. 3\. Erections of 35\.48 Km double circuit 220KV transmission lines between Daguangba and Emaoling, and 48\.872Km 220KV transmission line between Emaoling and Basun, and 144\.762Km 220KV transmission line between Basuo and Sanya and two associated 220KV Substations\. The above transmission facilities will transmit electric power generated by Daguangba Hydropower Station to outside area\. 4\. Resettlement of about 22,240 people in the reservoir area\. 5\. Conducting design liaison meeting and technical training abroad\. 6\. Upgrading the capability of Hainan Provincial Electric Power Company (HEPC) in financial management and management of large civil works contracts\. 7\. Strengthening local capabilities in Hainan power grid development planning, electric tariff study and promoting the economic development of Hainan province, China\. 8\. The objectives were relevant and important in the context of government and Bank Strategy in the power sector at the time of appraisal\. Therefore the project implementation has facilitated the local capabilities upgrading in the aspects of funds financing, expertise introduction and enhancement of management, etc\. Implementation Experience and Results 9\. The Adoption of Roller-Compacted Concrete (RCC)\. Rollers-compacted concrete was adopted in the construction of Daguangba gravity dam\. In the preliminary design stage, volcanic ash was chosen as the binding mixture in the process of making  - 50- ANNEX B RCC\. Due to the reason that the volcanic ash contains 50 percent of tuff which tends to cause fast-freeze and shrink effect in the RCC\. To avoid this adverse after effect, experts had conducted an experiment on the adoption of flying ash as the mixture in the making of RCC\. The experiment gave positive result, and the flying ash been applying in the construction practice and succeeded\. 10\. Geological Treatment of Main Dam Foundation\. Excavation on the concrete dam foundation found certain faults and major fractures, analysis on the situation of composition and spread of the faults and major fractures indicates that the concrete dam formulation is not in a position of possible deep sliding\. 11\. In the original design philosophy, it is not required in principle to excavate further on the dam river-bed foundation, while it is necessary to trim the concrete dam foundation by clearing off weakly weathered granite loosen by joint fractures\. Some faults and bigger fissure should be treated by slotting and then backfilling with concrete\. The joint swarmed zones should be strengthened by consolidation grouting\. 12\. Based on the specific situation of dam foundation excavation as well as the comments of special Board of Consultants, an optimal design was undertaken which focused on the treatment of faults and fractured zone, adverse-effected zone, closely spaced joint zones and surrounding rocks of Class Ill\. The special treatment included consolidation grouting, dam foundation curtain grouting and foundation consolidation treatment on No\. 20 block of the concrete dam\. 13\. A quality report on the completion of dam construction issued by the Supervision Engineer had the following conclusion: "No structural treatment is required for concrete dam foundation against the Class I and Class II rock\. In accordance with the design requirement, faults and fractured zones with widely distributed joint fissure should be treated by groove excavation, replacement with concrete plugs and drilling of reinforce steel for split resisting purpose\. After the above structural treatment and enhancing consolidation grouting, the quality is considered good\." 14\. Treatment on the Interfaces of Concrete Dam and Flanking Earth Dams\. Special Board of Consultants had suggested the following improvement measures on the original structural interfaces treatment, the implementation of these measures had produced positive results\. 15\. Earth dam foundation should be treated in line with that of concrete dam foundation\. No any grooves which will have adverse effect on seepage resisting measures should be allowed when using form boarding in the concrete placement process\. The adjacent area surrounding the three sides of the end of the concrete dams should be excavated to the top surface of the weakly weathered granite zone, the excavation should produce a three meters wide stripe area which should be backfilled by bond clay with better impermeability, earth dam on the downstream side of concrete dam should arrange seepage-control drainage body\.  - 51- ANNEX B 16\. Introduction of Advanced Equipment and the Latest Technology\. The project had utilized World Bank Loan/Credit for purchase of advanced equipment adopting international competitive bidding made, meeting the needs of effective and safe operation of Daguangba Hydropower Station\. The advanced equipment included computer controlled supervision system and microcomputer regulated governor operation system both provided by NARI System Engineering International (NSI), and the generator excitation system provided by ABB Sweden\. 17\. The latest technology adopted in the construction of civil works comprised the following: roller compacted concrete; chimney drainage arrangement within the body of earth dam; riprap protection on the upstream slope of the earth dam; shallow-imbedded type underground power house; adoption of rock bolt crane beam in underground power house; utilization of the adit as the lower chamber of the surge shaft; cancellation of telescopic joint for the power intake penstocks; the adoption of hydrologic data automatic collecting and transmitting instrument\. 18\. Effective Activities of Special Board of Consultants\. The Special Board of Consultants had conducted three missions of field inspection and consultation which resulted in many effective comments and suggestion on the improvement of preliminary design, construction process and post-construction operation\. The design institute and construction units had studied these comments and suggestions carefully and adopted most of them\. The adoption had facilitated the optimization of the original design and the construction operation\. 19\. The Implementation of Resettlement Component\. The resettlement component had been implemented basically in synchronous with civil works construction of hydro complex in terms of funds allocation and detailed component implementation\. The implementation had followed the approved budget and the approved construction schedule\. Up to date, all the resettled people have been relocated in accordance with plans\. No any casualty or riot of relocatee occurred\. The resettlement task was carried out in general good condition\. 20\. Adjustment and complement had been made to the original resettlement plans in accordance with the physical condition\. Up to the end of December 1998, a total number of 22,243 people had been relocated which account for 100 percent of the planned resettlement people\. 21\. Assessment of Resettlement Component\. All the resettled rural people were Li and Miao minority ethnic who used to live in the poorest mountain area\. The project had provided an opportunity for them to get rid of poverty and backwardness and to go to more developed and comparatively well off life\. (a) Relocatees living conditions had changed substantially: The relocatees new villages comprised of numerous new brick concrete structure houses with  - 52 - ANNEX B the associated school building, clinic and grocery shop scattered\. The relocatees had undergone a substantial changes for their living condition with economic fruit trees planted around the houses, residential environment had change greatly\. (b) Relative sufficient living space in the relocated area: Due to natural favorable condition, every resettled township in the reservoir area had got sufficient land resource, the average distributed land area per capita was above 20 mu while the reclaimable land resource was very rich which will guarantee the smooth implementation of "land for land" and "the same amount land compensation after land acquisition" for the resettlement component\. The sufficient land resource had been the guarantee for the success of the implementation\. (c) Say good bye to the most simple agro-production: The relocatees had been leading the most simple slash and bum cultivation\. They were not used to chemical fertilizer and tropical fruit trees\. Now they began to accept new concepts and new technique of agricultural science, at the same time, the second and third industries had grown steadily\. (d) Improvement of the infrastructure construction and public facilities: The relocatees had transferred from inconvenient traffic mountain are to more open spaced area\. The transfer had laid the foundation for improvement of infrastructure construction especially in the aspect of domestic water supply and irrigation service\. In general terms, the residential infrastructure had been upgraded\. 22\. Irrigation Component\. The High Main Canal is an important component of the project\. The HMC will cover an area of 190 thousand mu\. 23\. Project Objectives\. (a) The first stage of HMC will construct a gravity irrigation canal system of 58\.6 Km; (b) Construction of 2 tunnels with total length of 4709m of which Erjia tunnel with 358m length, 3\.4m bottom wide and 3\.4m tunnel high, the cross section is horseshoe shaped\. Hongling tunnel with 1 124m length, 3\. lm bottom wide and 3\.6 tunnel high the cross section is circular arch straight wall shaped; (c) Construction of 12 aqueducts with total length of 2363 m of which Chongnan aqueduct located at the left bank of the main dam was 750 m length\. The Chongnan aqueduct utilized precast concrete flume with 15 m span and weighted 78\.51\. A pedestrian bridge with 1 m wide arranged on the top surface of the aqueduct; (d) Construction of 5 culverts with total length of 1119 m of which No\. 5 culvert is 449 m length; (e) Construction off associated structures including culverts under canal, canal gate drainage gate, etc\.; (f) Construction of irrigation administration office building and apartment building; and (g) Construction of a canal head hydro plant with installed generating capacity of 2x 1000KW\.  - 53 - ANNEX B 24\. Benefit of HMC Project\. The HMC first stage construction started in March 1992 completed and went into service in June 1994\. The completion acceptance was conducted in May 1996 and then the facilities were taken over by Water Resource Bureau of Dongfang City ever since\. The HMC first stage current provides irrigation service for 97\.1 thousand mu farmland\. 25\. Second Stage of HMC\. The second stage consists of Datian lateral main canal lengthen 27\.6 km with total length of 71 km of 13 branch canal lateral branch canal field ditch, etc\. HMC second stage will be constructed between 1998 to 2000, 104\.8 thousand mu of farmland will be benefited with irrigation service after the completion of second stage\. 26\. Power Transmission Project\. (a) Erection a double circuits 220kv transmission lines from Daguangba Hydropower station to Emaoling 220KV substation\. The length of double circuit lines were 35\.33km and 35\.48km respectively; (b) Erection a 48\.87kv transmission line between Emaoling and Sanya substations; (c) Erection a 145\.29km 220kv transmission line between Basao and Sanya Substations; and (d) Extension Project of Emaoling 220kv substation which comprised of 2 GIS bays and 2x120 MVA transformers\. The extension project went into service in November 1993\. 27\. Financial Performance\. In 1998 HEPCO took effective measures to expand power consumption market and strengthened internal management at the same time 2740 GWh of energy sale had been realized in 1998 which increased 11 percent compared with year 1997\. The financial performance indicated that an obvious increase in economic benefit and in total assets of HEPCO\. The assets quality had also improved (other economic performance indicators refer to attachments of Borrower's Project Completion Report)\. 28\. Environment\. Environment management had focused on water quality monitoring and reservoir peripheral protection\. Artificial clearing had been undertaken on reservoir sedimentation for an area of about 81 square km\. A sewage treatment plant located in the up stream end of reservoir had been constructed with the treatment capacity of 10,000 effluent daily the cost was 8\.20 million Yuan RMB\. The completion of sewage treatment plant will contribute to the protection of up steam water source\. (a) Environment monitoring and management had started simultaneously with the construction of hydro complex\. The project owner and Hainan Provincial Environmental Projection and Natural Resources Department had played important roles in the environment project implementation\. Official from the environment protection authority had chaired the design examination meeting of the sewage treatment plant\. Experts from the authority had conducted field investigation and issued instructive comments on the environmental protection implementation\.  -54 - ANNEXB (b) All the relevant organs including resettlement service center of Dongfang city, resettlement office of Ledong county, Guangba state farmn, Shancong state farm and Houmiling forest farm took part in the reservoir sediment clearing\. The shore area of about 81 square Km area above EL 114 m was subject to artificial clearing which included clearing, disinfecting and burying of old lavatories and manure pits, removal of bushes, etc\. The clearing cost was 750 thousand Yuan\. (c) The sewage treatment plant in Ledong county seat was the important component of the environment protection program - Its treatment capacity is 10,000 tons daily and it costs 8\.20 million Yuan\. The competitive bidding was conducted in December 1977 in which a contractor was chosen\. By end of December 1998, the construction of sewage treatment plant had basically completed\. The completion of the project is expected to contribute to the protection of water source from pollutant and to improvement of resident's health\. (d) After the impounding of reservoir, an artificial lake was formed with much open lake surface\. The reservoir contributes to the improvement of climate condition of Guangba Datian district the average ambient temperature is 2°C lower than that before the reservoir impounding also precipitation in the reservoir peripheral area has increased which will facilitate the growth of tropical economic crops\. Taking Datian district for example, Dongfang city has conducted a large scale reclamation program which resulted in the formation of Datian ten thousand mu farmland the history of no paddy rice planting in Datian district had gone for ever\. Large scale plantation had followed for example, 30 thousand mu of banana, 10 thousand mu of vegetable and about 1 0 thousand of fresh water breeding\. (e) Fruit trees planting resettlement offices of both Dongfang and Ledong had sent team to Dongjiang reservoir in Hunan province and shuikou reservoir in Fujian province for inspection and training\. After the return of the team, they had mobilized the relocatees to undertake a large scale fruit trees planting along the shore of Daguangba reservoir and in the new resettled villages\. A substantial amount of mango, coconut tree, longan, litchi trees had planted, and the relocatees had developed multicultural model from monocultural model\.  - 55 - ANNEX C ANNEX C: ICR MISSION'S AIDE MEMOIRE 1\. A World Bank mission comprising Messrs\. B\. Trembath (mission leader), Y\. Zhou, Ms\. Q\. Li, (Bank), D\. Creamer, W\. P\. Ting, and Y\. Zhu (Consultants), visited Hainan to review the status of preparation for the Implementation Completion Report (ICR) and the data requested prior to the arrival of the mission\. The mission also reviewed the completion report prepared by Hainan Electric Power Company (HEPCO)\. In addition to meetings with staff from HEPCO, the mission visited the site and Dongfang and Ledong counties\. After a wrap-up meeting the mission was also able to meet with Vice Governor Mr\. Yu Xun to discuss areas where provincial government intervention is required\. The main points and actions which were discussed and agreements reached are summarized below: Completion Report 2\. HEPCO provided a draft completion report for review but then withdrew it for finalization\. The mission requested that thefinalized report be sent as soon as possible\. With regard to the overall project, the main shortcoming is the lack of a detailed cost table showing costs versus item on a yearly basis and in foreign and local currencies\. HEPCO promised to provide this before departure of the mission but it was not received\. With regard to the agricultural component information provided by HEPCO was far from complete, and some of the data in the report did not reflect the actual situation\. The mission stressed the importance of ensuring the accuracy of the information prepared for the mission\. The mission subsequently met with project staff from the Dongfang Water Conservancy Bureau and Bureau of Agriculture, and explained in detail regarding the information needed to evaluate the impact of the project\. The Vice Mayor of Dongfang County, in-charge of the project assured the mission that most of the materials requested will be given to the mission prior to their departure from Haikou and the rest will be forwarded to the Bank before March 31\. A detailed list of data requested for the agricultural component is included in Annex 1\. Uncompleted Work 3\. Resettlement\. Since last supervision mission (November 1998), little progress has been achieved with regard to resettlement implementation\. Between November, 1998 and March 1999, only Y 3\.74 million of resettlement budget had been allocated, which accounted for 6\.7 percent of the remaining resettlement budget (56\.08 million)\. According to the data provided by HEPCO and MSDI resettlement monitoring report, by the end of 1998, a total of Y 206\.3 million of resettlement budget had been allocated by HEPCO, accounting 78\.6 percent of total resettlement budget (Y 262\.33 million approved  - 56 - ANNEX C in 1997)\. The slow allocation of resettlement budget in the past four months has made it almost impossible to achieve the objective promised by HEPCO in November 1998 for completing all remaining resettlement work by the end of June 1999\. More importantly, the slow allocation of resettlement funds will caused further delays of some critical resettlement works in two counties, and prolong the process of restoring income and livelihood for the resettlers\. 4\. Based on the information provided in Resettlement Monitoring and Evaluation Report No\. 5, by the end of 1997 22 out of 29 resettlement villages in two counties had not restored their income to their previous levels, with per capita income being less than 80 percent of that before the move for 12 villages\. Given the fact that there was serious draught in the reservoir area in 1998, the income for most resettlers (except for Datian resettlement area) in 1998 would have declined further compared with that in 1997\. Although the current monitoring efforts did not cover the 15 land loss villages, based on available information, at least 50 percent of them did not restore their income to the previous levels\. In other words, the objective of Daguangba resettlement in terms of restoring income and livelihood of the resettlers has not yet been achieved, even though the main power project was completed four years ago\. 5\. The two affected counties are fully aware of the areas where there are problems and have prepared detailed action plans to address them\. They include building the long waited Nanmei and Nanba irrigation systems, relocating four villages to Datian area, developing more farmland, and completing all remaining infrastructure works\. The total cost for the detailed action plans amounted to Y 53 million\. The successful completion of the remaining works would address most of the remaining problems\. HEPCO should review these plans and reach agreements with the two counties in order to finalize the list of remaining resettlement works as well as the fund allocation schedule in 1999, and submit such plans to the Bank by the end of April 1999\. 6\. With regard to the establishment of Reservoir Maintenance Fund for Daguangba Project which was supposed to occur by the end of February, 1999, no decision had been made yet by Hainan Provincial Governiment\. The mission expressed serious concern over the delay in establishing the fund since the resettlement budget will be exhausted in 1999\. Based on Y 400 per person and normal power generation amount by Daguangba Power Plant, a total of Y 7 million would be available each year for providing badly needed rehabilitation assistance for the affected people\. During the meeting with Vice Governer Mr\. Yu Xun, this issue was raised by the mission; and an assurance received that such a fund would be established in the nearfuture\. High Main Canal Construction\. 7\. The provincial government has approved funds amounting to about Y68 million for the completion of this work, of which some Y 12 million is coming from remaining Bank funds\. HEPCO is providing some Y 18 million\. There is understood to be a funding gap of about Y 30 million\. The most promising source for these funds is the provincial government itself\. This matter was also raised during the meeting with Vice  57- ANNEX C Governer Mr\. Yu Xun who promised to follow up on the funding issue\. If funds are available, the remaining portion of the HMC could be completed in June, 1999\. Dam and Power Plant Operation 8\. Dam\. The problem of excessive leakage into the underground powerhouse has reportedly been solved by the addition of a drainage gallery\. There have been no major operating problems since the rather extensive teething problems were corrected\. There is a flood forecasting system and a warning is normally provided some 4 hours in advance of spillway operation\. The spillway has apparently only operated on one occasion, in 1996, at some 7800 m3/s - a fairly typical flood discharge\. This did cause some damage to the scour area downstream of the apron - in a faulted zone subsequently repaired\. Given the relatively high and frequent spillway discharges that should be expected, more repair work is probable and HEPCO should be prepared\. The plant has been operating for some 1095 days without a significant accident\. There is no requirement for any continuous riparian discharge from the plant\. There is in any case no low level outlet\. No survey has been made as yet on reservoir sedimentation, incoming sediment is thought to be very low\. 9\. Power Plant The power plant has been in more-or-less full operation for over four years\. The last of the 4x60 MW units was commissioned in May, 1995 and the reservoir was filled to close to its normal full supply level in late 1995\. The natural flow regime is highly variable with an average flow of 97 m3/s combined with a recorded minimum and maximum annual flows of 29 m3/s and 168 m3/s\. Minimum dry season flows are of the order of 5 to 10 m3/s\. The large reservoir gives a considerable degree of flow regulation but the firm flow is a relatively low 34 m3/s\. The plant is designed primarily for peaking operation with an average plant capacity factor of 25%, during low- flow periods the capacity factor could be as low as 10%\. The head range is quite large: from 85 to 62m, with a rated head of 73m\. The effect is that at higher reservoir levels the plant output is constrained and at lower levels it reduces - to about 190 MW at the minimum operating level (MOL)\. Plant operation is guided by an operational study carried out by MSDI in 1997\. This was based on a simulation of plant operation over the 41-year historical flow record from 1955-96\. It is not clear which objective function e\.g\. firm or average energy, was chosen as the optimization target\. The study produced recommended upper and lower reservoir rule curves as a guide to operation and derived the following energy capabilities: * Average annual - 491 GWh or 56 MWe,' * Firm annual - 309 GWh or 35\.2 MWe with a guaranteed reliability of 93%, * Firm monthly - 18\.5 MWe\. Slightly lower than reported in the SAR probably due to the inclusion of the recent lower flow years\.  -58 - ANNEX C 10\. The MSDI study allowed for the full irrigation demand at the High Main Canal\. Although a relatively modest 4 m3/s on average, during drier years irrigation demand can be a quite significant, reducing dry season flow available for power generation by up to a third\. The study also compared actual to simulated operation for the two-year period 1995-96\. This showed that actual operations did not conforrn well to the optimized simulation\. The main discrepancies were: * Actual operation produced very low energy -5 MWe, i\.e\. well below the nominal firm, over some periods, * Actual operation tended to produce lower reservoir levels, hence less head and potentially less energy\. 11\. In discussions, HEPCO personnel confirmed that the MSDI rule curves are used as a guide to operations but have been frequently disregarded when overall system requirements - set by the dispatch center - dictate\. Examination of a typical daily load duration curve shows that the Daguangba plant - when adequate flow is available - plays a very important role\. It effectively handles most of the load variation during the daytime period, thus allowing for more efficient operation of the relatively large thernal plant units\. Daguangba also provides local reactive power support during the nighttime off- peak period\. This role for Daguangba is a function of the present relatively small power demand in comparison with the large size of the generating plants\. Typical loads on the grid are around 250 MW off-peak and 550-600 MW at peak\. The main Haikou coal fired plant has 2x125 MW units which can thus be base loaded\. Other smaller thermal units pick up part of the load during the day with the 240 MW Daguangba plant and the smaller 80 MW Niululing hydro plant covering the rest\. It is evident that a failure of one of the large thermal units would be best covered by increasing generation at Daguangba\. Analysis of reservoir levels at Daguangba over the last four years shows that they have tended to be considerably lower than indicated by the rule curves\. The reservoir reached its minimum operating level (MOL) at el\. 116m in late 1998 and has since been held at this level through the present dry season\. In effect, there has been a 'failure' in that the target firm energy can not be supplied\. During the last few months plant operation has been limited to an hour or so a day with typically only a single 60 MW unit on line\. In this way the low natural dry season flow (-10 m3/s) is passed downstream\. Total generation in 1998 was some 370 GWh i\.e\. more than the nominal firm\. Annual inflow to the reservoir was -49 m3/s i\.e\. low but not unprecedented\. In effect, the failure was primarily attributable to excessive generation (at above firm) between August and November - coupled of course with the below normal inflow\. 12\. In conclusion, it appears that there is room for substantial improvement in HEPCO's operation of Daguangba\. Admittedly the project is unique in the HEPCO system and there is no previous experience in reservoir operation on this scale\. Also the relative size of the project in relation to the overall system will diminish\. On the other hand flow diverted for irrigation - only nominal to date - will increase\. As an overall guide, HEPCO should endeavor to maintain the reservoir at a relatively high level under  -59 - ANNEX C normal conditions - closer to the MSDI upper rule curve\. This will produce several advantages: * Maintaining plant capability at 240 MW, * Minimizing the risk of reservoir failure, i\.e\. drawdown to MOL as at present, * Increasing energy by maintaining a higher average head\. 13\. Environmental Issues\. Comments on specific issues arising from the SAR follow: * There is only minimal monitoring of water quality\. This is done once a year, with samples taken by the plant personnel\. Results to date show no change from the pre-project situation i\.e\. generally high quality except for an excessive bacterial count attributed largely to human waste from Ledong upstream\. The project financed sewage treatment plant for this area has only just been completed and is still not in operation\. The delay is attributed to lack of finance\. * Protection of the rare Datian deer has been improved by partially fencing-in and patrolling the protected area\. The deer population is reported to have increased (from -40 to over 200)\. * The afforestation around the reservoir rim recommended by the SAR has not been implemented, in part due to the apparent minimal risk of erosion\. * There has been some increase in fishing but no attempt to develop a reservoir fishery to the benefit of the resettled population\. - The slight moderation in temperature adjacent to the reservoir (attributable to the reservoir itself) is reported to be beneficial to agriculture\. * The Independent Evaluation of Resettlement indicated some improvements to public health in some areas\. HEPCO Aspects 15\. Power System Expansion\. The SAR included an expansion plan as a means of assessing the cost-effectiveness of the Daguangba power plant\. A subsequent MSDI study of October 1994 developed a least cost expansion plan\. The following table compares these two plans to the actual situation as of 1998:  -60 - ANNEX C SAR 1991 Plan MSDI 1994 Plan Actual Status Peak Demand, MW 585 1073 627 Generation, GWh 2970 5376 -3000 Annual Load Factor 58% 57% -55% Installed Capacity, MW Hydro 370 525 370 Steam (Coal or oil-fired) 350 864 350 Gas Turbine and other 170 350 550 Total 890 1739 1270 Reserve capacity, MW 305 666 643 16\. The table covers the Hainan Island power grid\. The generation plant quoted by MSDI appears to include approximately 100 MW of small hydro plant that may not be connected to the grid\. There are some very glaring differences: The SAR took a deliberately conservative annual load growth of about 14%, which has turned out to be reasonably accurate\. In contrast MSDI used -20%\. In fairness, however, at the time of the MSDI review power demand had grown at a much faster rate than predicted in the SAR\. MSDI anticipated that the 80 MW Gezhen hydro plant (downstream of Daguangba) and large amount of thermal steam plant would be installed\. In actuality, no hydro projects are in the pipeline at present\. The one major plant not foreseen by the SAR is a large gas turbine project (Yangpu) installed to meet the projected demand from an export-processing zone which has not yet materialized\. 17\. HEPCO Financial Aspects\. HEPCO is currently facing some financial difficulties because of large capacity payment obligations for new power plants which are not being loaded, the drought which has severely limited Daguangba operations and the tariff which has been approved by the provincial pricing commission for Daguangba power plant which is only 37 fen per kWh in comparison with 74 fen recommended by a task force composed of representatives from Construction Bank and SDPC\. This matter was also raised with the vice governor\. 18\. Tariff Study\. Following the tariff study financed under the project, HEPCO applied to the provincial government to implement a time of day tariff structure but received no response\. At the mission's suggestion, HEPCO agreed to follow-up on their application\. A higher peak load consumer tariff would help to justify a higher power tariff for the Daguangba power plant\.  -61- ANNEX C Agriculture and Irrigation Component 19\. Discussions were held with representatives from the provincial and Dongfang County Water Conservancy Bureaus and Agriculture Bureau\. According to the SAR, the project will provide for the development of irrigation to serve about 190,000 mu (12, 667 ha)\. Thus far a total of about 97,000 mu have been developed (including about 35,000 mu for resettlement)\. About 20,000 mu has been developed under Phase II (including about 20,000 mu of existing irrigation area to be supplied with supplementary irrigation)\. The balance of 60,000 mu will be completed by the end of 2000\. 20\. Operation and Maintenance (O & M)\. The Dongfang County Water Resources Bureau has established the High Main Canal Management Division (HMCMD) as the unit responsible for operation and maintenance of the system\. The division has a staff of 15 - four at HMCMD, four at the High Main Canal Water Management Station, five at the Sub-main Canal Water Management Station and two at the distributing sluice which supply water to the Lemei Reservoir and the sub-main canals\. The 0 & M for the main, sub-main, branch and lateral canals is carried out by each station according to a schedule prepared by the Dongfang Water Conservancy Bureau\. Sub-laterals and field drains are maintained by water users twice a year, first following summer harvest and the second following winter harvest\. The mission was impressed with the quality of the completed works and the standard of 0 & M in the project areas visited\. At present, funds collected from water charges (about Y 240,000/yr\.) are inadequate to cover the annual 0 & M costs and these have to be partly funded by the provincial Water Conservancy Bureau and county\. The mission recommended that Dong/ang County should estimate the total costs requiredfor 0 & Mfor the completed works and that the water charges should at least cover the 0 & M costs\. In this respect, the county should work closely with the Price Bureau and Planning Bureau in determining an appropriate formula for water charges in the project area\. Water Charges should be based on the amount of water delivered and type of crops grown by farmers\. Dongfang County has agreed to provide the mission with an English translation of the 0 & M regulation\. 21\. The mission noted that water charges are very low (Y 32/mu for all irrigated land) and are inadequate to meet the major repairs and depreciation requirements\. The mission recommends the following actions to be taken: * O&M Manual for newly developed irrigation area\. The 0 & M plan prepared for the new irrigation system (from the high main canals down to the branch canals, lateral canals and outlets) should be revised into a permanent manual for reference and use by the operation and maintenance staff\. The revised draft should be sent to the Bank for review before issuing to the 0 & M staff; * The annual operation and maintenance costs for the developed irrigation area from 1995 to 2000 (fully developed) should be provided by the local Water Resources Bureau, including the salary for 0 & M staff, 0 & M machinery and equipment, materials, utility, replacement cost, etc\.;  -62 - ANNEX C To improve the irrigation efficiency the collection of water charges should be based on the cost of total amount of water used for different crops, water measuring equipment should be installed during the construction of canal system and on-farm structure, and the monitoring system for the whole Daguangba irrigation system should be established; * Most of the land in Phase I has been developed and in production and some of the land has been leased to private individuals from out of state\. To increase the efficient use of water, the mission recommended that the on-farm irrigation works of the leased land shouldfollow the design standards of the Water Conservancy Bureau\. Land under Phase II has also been allocated and about 20,000 mu has been developed\. There has been a considerable shift in the cropping pattern to higher value crops as compared to the SAR\. In view of the demand on the mainland and overseas, the area under banana has increased significantly (about 30% of the project area), as well as seedless watermelon, mango and high value vegetables\. Good technical support was provided by the South China Academy of Tropical Crops (SCATC) and the Dongfang City Agriculture Research Institute in the introduction, testing, and extension of new and improved varieties to the project area\. In order to sustain the development of the project area, it is important that the organization established under the project be maintained, especially the provincial PMO, and in particular the Dongfang High Main Canal Management Division\. There is also need to strengthen the agriculture support services in the project areas\.  - 63 - ANNEX C ATTACHMENT Agricultural Component Data Requirements for SAR Economic and Financial Data\. The mission reviewed the documents prepared by HEPCO for the ICR mission and agreed that the following items will be completed before April 20, 1999\. HEPCO will complete, per ICR format, the necessary background data and analyses as discussed with the mission\. A brief summary of the tables and related information requirements are as follows: * Complete project investment costs and benefit analyses for Irrigation and Agriculture components by finalizing: > The actual detailed investment costs by year, components, and expenditure in Yuan and US$ (based on the information from annual financial and physical progress reports) for the Irrigation System, On-Farm Works and Soil Improvement, 0 & M Facilities and Equipment, and Agricultural Support Services components with the financing table, including the actual costs financed by the local government and farmer's contribution (see summary table in Annex 26 page 10), and the total costs allocation by year for the agriculture and irrigation components; ; The current farm-gate prices (1999) for all farm inputs and outputs for agriculture and irrigation component (World Bank price projections or the actual export and import prices in Hainan should be used to estimate farm-gate prices in 1999 constant terms for traded inputs and outputs with domestic and international transport and handling), -- table 3 and 4, annex 26 in SAR; \. The actual detailed crop budgets by year (to full development) for all the annual and perennial crops in project area: * detailed crop budgets should reflect the actual production from 1992 to 1998, and the estimated yield after 1998 (to full development) based on the experience of the crop production in Hainan for existing and planned cropping pattern (such as rice, peanut, sweet potato, vegetable, watermelon, sugarcane, banana, pepper, mango, rubber, sisal, etc\.), and production without project in SAR; X quantity of seed, fertilizer, and farmn chemicals should be the actual average and the incremental for optimal farm input applications (with project) in each area\. > The actual cropping pattern and intensity for cultivated and sown land under irrigated, dry land and slopping land by year and crops (based on the actual phasing of investment expenditure for development of on-farm works development) -- see table 2, annex 26 in SAR\.  -64 - ANNEX C *+ Farm household survey data from sampling of predetermined areas selected for typical beneficiary families, including actual detailed income from crop and fruit production, sideline activities and others; and expenditures for investment and operation cost, taxes, and other charges with and without project (refer to SAR, annex 26 table 7)\. *: Complete summary tables for Key Monitoring Indicators for project implementation at the start of the project, during Mid-term Review, and project completion at the end of the 1998 for agriculture and irrigation components (see tables in SAR, annex 12 and 20)\. * The mission suggested the following areas that need to be strengthened andl/or supplemented with the information/data required for the ICR: > Explanations should be provided for the substantial changes between the planned SAR, mid-term Review and actual completed quantities of various targets for each component; and if cost changes were significant, this should be discussed and, if possible quantified, such as changes in project scope/scale/design, estimates of physical quantities and base unit costs, changes in exchange rates, implementation delay, and performance of contractors; u Poverty alleviation and /or other social economic benefits should be discussed\. Details regarding especially improved living standard and income for all farm households in project area, including the settlers; and the number of beneficiaries, incremental employment opportunity for farmers and the role of women in each component and the project as a whole\.

REVIEW

P082973

 Document of The World Bank Report No: ICR1316 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-72810) ON A LOAN IN THE AMOUNT OF US$ 70\.0 MILLION TO THE REPUBLIC OF COLOMBIA FOR A WATER AND SANITATION SECTOR SUPPORT PROJECT March 30, 2012 Sustainable Development Department Colombia and Mexico Country Management Unit Latin America and the Caribbean Region  CURRENCY EQUIVALENTS (Exchange Rate Effective March 31, 2011) Currency Unit = Colombian Pesos (COP) COP1\.00 = US$ 0\.000567 US$ 1\.00 = COP 1,764\.55 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ACODAL Colombian Association of Sanitary and Environmental Engineering (Asociación Colombiana de Ingeniería Sanitaria y Ambiental) APL Adaptable Program Loan CAR Autonomous Regional Corporation (Corporación Autónoma Regional) CAT Associative Work Cooperatives (Cooperativa Asociativa de Trabajo) CFAA Country Financial Accountability Assessment CPS Country Partnership Strategy CQ Consultants’ Qu\.alifications CRA Water Regulatory Commission (Comisión Reguladora de Agua) DANE Departamento Administrativo Nacional de Estadísticas DAPSBA Directorate of Potable Water and Basic Sanitation (Dirección de Agua Potable y Saneamiento Básico) DDSS Directorate of Sustainable Sector Development (Dirección de Desarrollo Sectorial Sostenible) DNP National Planning Department (Departamento Nacional de Planeación) EIA Environmental Impact Assessment ERR Economic Rate of Return FINDETER Colombian Regional Development Bank (Financiera de Desarrollo Territorial) FM Financial Management FMR Financial Management Report FNR National Royalties Fund (Fondo Nacional de Regalías) FONADE Colombian Fund for Development Projects (Fondo Financiero de Proyectos de Desarrollo) IBRD International Bank for Reconstruction and Development ICANH Colombian Institute of Archaeology and History (Instituto Colombiano de Antropología e Historia) ICB International Competitive Bidding ICV Quality of Life Index (Ã?ndice de la Calidad de Vida) IDA International Development Association IDU Colombian Urban Development Institute (Instituto de Desarrollo Urbano) INCODER Colombian Institute for Rural Development (Instituto Colombiano de Desarrollo Rural) IRR Internal Rate of Return ISA International Standards of Auditing LA Loan Agreement LCR Latin America and the Caribbean Region LCS Least Cost Selection M&E Monitoring and Evaluation MAVDT Ministry of Environment, Housing, and Regional Development (Ministerio de Ambiente, Vivienda, y Desarrollo Territorial) MDG Millennium Development Goal NBI Unmet Basic Needs (Necesidades Básicas Insatisfechas) NCB National Competitive Bidding NDP National Development Plan NGO Non-Government Organization NPV Net Present Value O&M Operation and Maintenance OP Operational Policy PAL Labor Adaptation Program (Programa de Adaptación Laboral) PME Utility Modernization Program (Programa de Modernización Empresarial) POI Works and Investment Plan (Plan de Obras e Inversión) PSP Private Sector Participation PVC Polyvinyl Chloride QAT Quality Assurance Team QBS Quality Based Selection O&M Operational & Maintenance RAS 2000 Technical Norms for the Water and Sanitation Sector (Reglamento Técnico del Agua Potable y el Saneamiento Básico de Colombia) SAL Structural Adjustment Loan SBD Standard Bidding Document SIIF National Integrated Financial Information System (Sistema Integrado de Información Financiera) SIL Sector Investment Loan SOE Statement of Expenditure SRAP Social Remedial Action Plan SSPD Superintendency of Public Enterprises (Superintendencia de Servicios Públicos Domiciliarios) SSS Single Source Selection TA Technical Assistance TAL Technical Assistance Loan UfW Unaccounted for Water WSS Water Supply and Sanitation Vice President: Hasan Tuluy Country Director: Gloria M\. Grandolini Sector Manager: Greg Browder (Acting) Project Team Leader: Taimur Samad ICR Team Leader: Carmen Yee-Batista  COLOMBIA WATER AND SANITATION SECTOR PROJECT 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 \. ii 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 \. 4 3\. Assessment of Outcomes \. 9 4\. Assessment of Risk to Development Outcome\. 15 5\. Assessment of Bank and Borrower Performance \. 16 6\. Lessons Learned \. 18 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 19 Annex 1\. Project Costs and Financing \. 20 Annex 3\. Economic and Financial Analysis \. 35 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 42 Annex 5\. Beneficiary Survey Results \. 44 Annex 5\. Beneficiary Survey Results \. 44 Annex 6\. Stakeholder Workshop Report and Results\. 45 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 46 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders \. 47 Annex 9\. List of Supporting Documents \. 48 Annex 10\. Assessment of Risk to Development Outcome \. 49 Annex 11\. Map IBRD 39061 \. 61 A\. Basic Information Water And Sanitation Country: Colombia Project Name: Sector Support Project 1st APL Project ID: P082973 L/C/TF Number(s): IBRD-72810 ICR Date: 03/29/2012 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: APL Borrower: COLOMBIA Original Total USD 70\.00M Disbursed Amount: USD 70\.00M Commitment: Revised Amount: USD 70\.00M Environmental Category: B Implementing Agencies: Ministry of Housing and Territory Cofinanciers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 12/16/2003 Effectiveness: 08/31/2005 08/31/2005 Appraisal: 10/04/2004 Restructuring(s): 04/21/2009 Approval: 03/22/2005 Mid-term Review: 01/30/2008 02/07/2008 Closing: 04/30/2009 03/31/2011 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: 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 No 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) Central government administration 4 2 Sewerage 48 30 Water supply 48 68 Theme Code (as % of total Bank financing) Corporate governance 17 5 Pollution management and environmental health 17 10 Rural services and infrastructure 33 35 Urban services and housing for the poor 33 50 E\. Bank Staff Positions At ICR At Approval Vice President: Hasan A\. Tuluy David de Ferranti Country Director: Gloria M\. Grandolini Isabel M\. Guerrero Sector Manager: Greg J\. Browder John Henry Stein Project Team Leader: Taimur Samad David N\. Sislen ICR Team Leader: Carmen Rosa Yee-Batista ICR Primary Author: Carmen Rosa Yee-Batista Carlos A\. Uribe F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project aims to improve the provision of water supply and sanitation services in Colombia in a financially efficient and sustainable manner through the provision of capital investment subsidies for poverty-focused coverage expansion and service quality ii improvement\. The Project will (a) scale-up the involvement of the private sector in medium-sized cities through the introduction of performance-based management arrangements with specialized operators; (b) support service-improvement related investment through targeted capital grants in small, medium, and large urban areas served by public utilities; and (c) deliver appropriate water supply and sanitation investments in Colombia underserved rural areas\. 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 1\.2 million consumers (especially the poor) receive improved access to reliable Indicator 1 : and safe water supply and sanitation services\. Value quantitative or 0 1,200,000 1,520,554 Qualitative) Date achieved 02/15/2005 04/30/2009 02/04/2012 There were 1,520,554 people receiving WSS where the infrastructure was Comments upgraded under the project\. The extent to which infrastructure improvements (incl\. % enhance access to reliable and safe WSS is unclear since a M&E system wasn't achievement) defined at the subproject level (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 : 10 new private sector transactions using the "modernization" framework\. Value (quantitative 0 10 10 or Qualitative) Date achieved 02/15/2005 04/30/2009 02/04/2012 Comments (incl\. % Achieved by 100 percent achievement) Indicator 2 : 760,000 consumers receive improved water supply services\. Value (quantitative 0 760,000 1,152,027 or Qualitative) Date achieved 02/15/2005 04/30/2009 02/04/2012 Comments (incl\. % Achieved 152 percent\. achievement) iii Indicator 3 : 40,000 new consumers connected to urban water supply networks\. Value (quantitative 0 40,000 44,205 or Qualitative) Date achieved 02/15/2005 04/30/2009 02/04/2012 Comments (incl\. % Achieved 111 percent\. achievement) Indicator 4 : Improved sewerage services benefiting 340,000 consumers\. Value (quantitative 0 340,000 239,200 or Qualitative) Date achieved 02/15/2005 04/30/2009 02/04/2012 Comments This indicator was not achieved\. The value is expected to reach 369,200 (incl\. % customers by mid 2012 when pending projects are completed\. achievement) Indicator 5 : 60,000 new consumers connected to urban sewerage networks\. Value (quantitative 0 60,000 25,773 or Qualitative) Date achieved 02/15/2005 04/30/2009 02/04/2012 Comments This indictor was not achieved\. This result is understandable given that the first (incl\. % priority for operation and customers in a constrained economic environment is achievement) water supply\. Basic water and sanitation services improved for 20,000 beneficiaries in 20 rural Indicator 6 : areas\. Value 20,000 people in 59,349 people in 57 (quantitative 0 20 rural areas areas or Qualitative) Date achieved 02/15/2005 04/30/2009 02/04/2012 Comments Population target was achieved by 297 percent and number of rural areas was (incl\. % achieved by 285 percent\. achievement) Indicator 7 : 40 utilities enter into programs for technical assistance/institutional reforms\. Value (quantitative 0 40 53 or Qualitative) Date achieved 02/15/2005 04/30/2009 02/04/2012 Comments (incl\. % Achieved by 133 percent\. achievement) Unaccounted for water reduced by 5% in municipalities which enter into Indicator 8 : programs for institutional development\. Value (quantitative 0 5% 9% or Qualitative) 02/04/2012 Date achieved 02/15/2005 04/30/2009 iv Comments Achieved\. Losses reduced by 9% in three municipalities that included UfW (incl\. % program under an operational condition\. achievement) Collection ratios improved by 5 percentage points in municipalities which enter Indicator 9 : into programs for institutional development\. Based on a sample of 11 subprojects, Value the collection ratios (quantitative 0% 5% improved by 6% in or Qualitative) four subprojects and worsened in seven\. Date achieved 02/15/2005 04/30/2009 02/04/2012 Comments This indicator was not achieved\. None of the Bank-financed subprojects has a (incl\. % collection ratio condition\. achievement) Indicator 10 : The MAVDT has established sufficient internal institutional capacity (yes/no)\. Value (quantitative N/A Yes Yes or Qualitative) Date achieved 02/15/2005 04/30/2009 02/04/2012 Comments (incl\. % Achieved achievement) 80% of subprojects, on an annual basis, are being implemented according to Indicator 11 : schedule\. Value (quantitative 0 80% Not achieved or Qualitative) Date achieved 02/15/2005 04/30/2009 02/04/2012 Comments (incl\. % Not achieved\. All subprojects experienced delays\. achievement) G\. Ratings of Project Performance in ISRs Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 05/02/2005 Satisfactory Satisfactory 0\.00 2 04/26/2006 Satisfactory Satisfactory 6\.00 3 11/20/2006 Satisfactory Satisfactory 6\.35 4 06/04/2007 Satisfactory Satisfactory 24\.57 5 12/20/2007 Satisfactory Satisfactory 24\.73 6 06/20/2008 Moderately Satisfactory Moderately Satisfactory 70\.00 Moderately 7 12/09/2008 Moderately Satisfactory 70\.00 Unsatisfactory v  8 04/28/2009 Moderately Satisfactory Moderately Satisfactory 70\.00 9 05/24/2010 Moderately Satisfactory Moderately Satisfactory 70\.00 10 02/12/2011 Satisfactory Satisfactory 70\.00 11 08/02/2011 Satisfactory Satisfactory 70\.00 12 12/28/2011 Satisfactory Satisfactory 70\.00 H\. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions 04/21/2009 MS MS 70\.00 I\. Disbursement Profile vi 1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal 1\. At the time of appraisal, Colombia had made impressive progress in the expansion of water supply and sanitation (WSS) services in urban areas achieving coverage levels of 97 percent for water and 90 percent for sewerage\. However, in peri-urban and rural areas about 50 percent of the drinking water was below standard levels, sewerage facilities were inadequate, less than 10 percent of the domestic wastewater was treated, supply was intermittent and rationing was common, and water and sanitation coverage in rural areas was 55 percent and 15 percent respectively\. 2\. Colombia has struggled for years to provide WSS services throughout its 1,122 small, relatively poor and geographically scatter municipalities\. After financial difficulties and poor results from the traditional service model that prevailed during most of the 20th century, Colombia initiated a series of institutional reforms in the 1990’s aimed at incorporating market economy elements and strengthening the business capacities of the service providers in order to deliver sustainable, high quality service to Colombia’s underserved population\. 1 , 2 The main characteristics of the reforms included: (i) decentralization of public service provision supported by a shift in responsibility from the Government to public or private companies and by the creation of the General Revenue-Sharing System, a tax-sharing mechanism to transfer resources from the Government to the municipalities; (ii) establishment of Public Services Companies (ESP) as the entity that would provide public services with the possibility of being municipal- owned, private, or mixed; and (iii) the separation of policy-making, regulation and operation functions, recognizing the Ministry of Environment, Housing and Regional Development (MAVDT, currently the Ministry of Housing, City and Territory) as the sector policy maker, the Commission for the Regulation of Water Supply and Sanitation (CRA) as the independent regulator, and the Superintendency of Residential Public Services (SSPD) as the overseer and inspector of service providers\.3 3\. In 2002, the Government of Colombia allocated US$500 million to support the financing of investment projects in an array of sectors, including transport, health education, water and sanitation and tourism, to meet development needs and extend the reach of the State to municipalities that had not received public investments for decades because of the guerrilla violence\. To determine the investment priorities, the Government conducted Audiencias Públicas, public consultation activities, in municipalities, throughout the country that determined the National Planning Department’s (DNP) allocation of funds by sectors and municipalities\. As a result, the Government launched a water public works program (the Program) to channel capital grant resources to improve the access to and quality of WSS services in municipalities\. The Program was estimated to cost US$180 million, and the Government requested support from the World Bank to finance part of the Program\. 1 Water supply and sanitation services were provided by public companies in large and some medium-sized cities and in the rest of the municipalities by the National Government through local administrators\. 2 World Bank, Charting a New Course: A Structural Reforms in Colombia’s Water Supply and Sanitation Sector, 2010 3 In 2001 the Ministry of Environment, Housing and Regional Development was divided into the Ministry of Environment and Sustainable Development and the Ministry of Housing, City and Territory\. The Vice-Ministry of Water (Project’s implementing agency) is currently housed under the Ministry of Housing, City and Territory\. 1 4\. The Bank was well positioned to support the Program\. The Bank was working on the Water Sector Reform Assistance Project (7077-CO), which developed the private sector participation model that the Government sought to expand\. The Bank had also had experience in policy-based and technical assistance lending that supported broader sector reform\. In addition, the Program was fully consistent with the Bank’s Country Partnership Strategy (CPS) objectives of “Achieving Sustainable Growthâ€? and “Improving Infrastructure Services\.â€? 5\. The Bank-financed Water and Sanitation Sector Support Project (the Project) was the first phase of the Adaptable Program Loan (APL1) to support Colombia’s objective of investing in needed infrastructure and building necessary institutional, monitoring, and oversight capacity\. The Project originated from the Government’s public works program, which was based on the Audiencias Públicas and did not emphasize institutional reform\. The APL anticipated including broader strategic water reform activities in future phases\. The reform activities included in this Project were envisioned as a first step towards to the provision of effective, efficient and sustainable WSS services to Colombia’s underserved population\. At appraisal, the total Project cost was US$93\.4 million with an IBRD loan of US$70 million\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators 6\. According to the PAD, the PDO aimed “to improve the provision of water supply and sanitation services in Colombia in a financially efficient and sustainable manner through the provision of capital investment subsidies for poverty-focused coverage expansion and service quality improvement\.â€? Specifically, “the Project will (a) scale-up the involvement of the private sector in medium-size cities through the introduction of performance-based management arrangements with specialized operators; (b) support service-improvement related investment through targeted capital grants in small- and medium- size cities, and in some high poverty peri-urban areas of large cities served by public utilities; and (c) deliver appropriate water supply and sanitation investments in Colombia’s underserved rural areas\.â€? The PDO indicator is that 1\.2 million consumers (especially the poor) receive improved access to reliable and safe water supply and sanitation services\. Annex 2 of the PAD includes a results framework with five intermediate results and 11 intermediate indicators\. The PDO in the Loan Agreement (LA) was “to improve the access to water supply and sanitation services in rural and urban communities throughout the Borrower’s territory\.â€? 7\. Both PDOs include improve access to WSS services in rural and urban communities; however, “in a financially efficient and sustainable mannerâ€? is not included in the LA\. The ICR considers that the LA PDO is more aligned with the Project’s design\. The accomplishment of institutional reform activities are considered process indicators, which are paving the way to a more efficient and sustainable sector\. 8\. This ICR will assess the following outcomes: (i) improve access to WSS services in rural and urban communities with focus on the poor and (ii) contribute to a financially efficient and sustainable water sector\. The PAD results frameworks will be used to measure these two outcomes in Section 3 of the ICR\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification\. The PDO was not revised\. 1\.4 Main Beneficiaries 9\. The primary target group was a population of approximately 1\.2 million people in low-income rural and urban communities who needed improved WSS services\. According to the PAD, the Project targeted 2 poor beneficiaries who were classified by Colombia’s national tariff system as Strata 1, 2, and 3\.4 Among the estimated beneficiary population, the Project included an underserved population of 284,000, who would gain new water and sanitation benefits\. 1\.5 Original Components (as approved) 10\. The project components, as presented in the Loan Agreement, are summarized below\. Component A: Municipal Water Supply and Sewerage Infrastructure\. This component is divided in two parts\. Part A1: Carrying out of investments in Participating Territorial Entities for purposes of, inter alia: (i) rehabilitating, constructing and expanding secondary water and sewerage systems; (ii) constructing water treatment plants, pumping stations and main collectors; (iii) constructing wastewater treatment infrastructure, including, inter alia, treatment plants and discharge infrastructure; (iv) enabling participation of the Borrower’s private sector in the management of Participating Territorial Entities’ utilities; (v) carrying out environmental and social assessments; (vi) designing and implementing engineering plans for water and sanitation infrastructure work; (vii) enabling participation of private sector consulting firms in the design of water and sanitation infrastructure projects; (viii) providing technical assistance to bring Participating Territorial Entities’ utilities to reasonable levels of management, operational efficiency and financial viability; and (xi) resettling Affected Persons in connection with the carrying out of Part A1 of the Project\. Part A2: Provision of the necessary technical assistance and training for the strengthening of the capacity of MAVDT for the carrying out of the Project, including the contracting of independent supervisors for the supervision of the works referred to in Parts A\.1 (i), (ii), and (iii) of the Project\. Component B: Program Management, Benchmarking, Monitoring and Evaluation\. Provision of support for overall Project coordination, evaluation, supervision and implementation, including, inter alia: (i) the strengthening of the capacity of MAVDT to comply with its responsibilities referred to in Section 3\.06 of this Agreement; (ii) the provision of training to MAVDT and Participating Territorial Entities’ staff to enhance their knowledge of the Bank’s procurement and financial management policies and procedures; (iii) the carrying out of audits under Section 4\.01 of this Agreement; and (iv) the carrying out of the evaluation and monitoring of the Project, including the monitoring and evaluation of the Participating Territorial Entities’ utilities performance\. 1\.6 Revised Components: The Project components were not formally revised\. 1\.7 Other Significant Changes 11\. There were no significant changes in the design, scope, scale and implementation arrangements of the Project; however, there were changes in the implementation schedule and funding allocations\. The Project underwent three level II restructurings, which extended the closing date by a cumulative period of 23 months\. The extensions were necessary due to delays in subproject execution and disbursements as well as issues with the management of social and environmental safeguards and the monitoring and evaluation of the Project’s impacts\. The Project restructurings also included (i) a consolidation of two loan proceeds categories into one in order to simplify internal project accounting and (ii) a reallocation of loan proceeds from Category 1 (investment) to Category 3 (project management) for the Borrower to conduct the Social 4 Colombia’s national tariff system incorporates a built in poverty-focused cross subsidy, with the poor (Strata 1, 2 and 3) paying below cost- recovery tariff levels, populations in Stratum 4 paying cost-recovery tariffs, and the wealthy (Strata 5 and 6) paying up to 120% o f the cost- recovery tariff\. 3 Remedial Action Plan (SRAP) and the Project’s final evaluation\. These changes did not adversely impact or alter the project development objectives or the ability to achieve the objectives\. The Loan Agreement was amended to reflect these changes\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 12\. The Bank utilized its extensive knowledge of the water sector in Colombia to perform a solid background analysis for the Project\. Two key lessons learned that contributed positively to the Project were (i) linking investments with reform measures at a utility level to support institutional and financial sustainability and (ii) establishing a clear and transparent institutional structure with defined procedures for transferring resources between levels of government\. The background analysis also identified the need to work in small and medium-size municipalities where WSS needs were most urgent\. 13\. The PDO reflected WSS priorities identified by local governments, the national government and the CPS\. The component design was found to be adequate\. First, the infrastructure component led to the improvement of WSS services in 91 municipalities in 22 departments\. Second, the Project linked capital subsidies with various mechanisms for institutional improvements of service providers, including the incorporation of private sector participation (PSP) in the management and operation of WSS services through the Ministry’s Utility Modernization Program (PME or modernization) and targeted technical assistances for small towns and rural communities where PSP is not likely to be adopted in the short-term\. Third, the institutional strengthening and capacity building component created to assist the Ministry implement the Program was crucial to support the development of the Ventanilla Unica, a technical screening and prioritization process to ensure that the subprojects selected were feasible and that social, environmental and institutional aspects were adequately considered\. The large number of subprojects (87 subprojects), the number of organizations involved (91 municipalities, 87 service providers, national agencies, and contractors) and the geographic dispersion made this a very complex Program to coordinate\. Strengthening the Ministry’s capacity to set uniform rules of the game for the investment of water and sanitation projects in the country was essential given the interagency coordinator role that it has played\. 14\. At the time of appraisal, the commitment from all levels of government was high\. The Government implemented sector reforms activities and allocated US$180 million to subsidize WSS projects\. The Uribe Administration actively participated in Audiencias Públicas, visiting municipalities throughout the country and meeting with mayors, governors and local leaders in large public hearings to determine their investment needs in order to distribute resources and identify projects that would be financed under the Program\. 15\. The Project satisfactorily identified risks and mitigation measures at the time of appraisal\. The PAD identified potential technical weaknesses due to the lack of feasibility analysis from the Audiencias Públicas process and projected coordination difficulties between the Ministry and other stakeholders due to project complexity\. To mitigate these risks the Ventantilla Unica was created with a statutory designation of a law\. The Project also included legal agreements between the Government and local authorities that made compliance with technical, institutional, social and environmental aspects conditions for capital resources for the water and sanitation works\. The PAD identified implementation difficulties as a high risk because of the complexity of the Project and the limited technical and management skills of the Ministry at that time\. In addition to strengthening the internal capacity of the Ministry, the operation made the Colombian Fund for Development Projects (FONADE) an implementing partner to manage day-to-day reporting and fiduciary tasks\. Although the design features included in the Project were crucial to mitigate the identified risk, the Project still suffered from implementation setbacks due to the 4 low capacity at the local level to manage contracts and apply social and environmental safeguards\. This weakness was not clearly identified and addressed during appraisal; the Project may have benefitted from a more structured institutionalized arrangement of capacity building on project implementation and post- construction support focused on low capacity municipalities and rural areas\. 16\. The Project was structured under an APL framework in order to continue supporting water and sanitation investments and the water reform agenda\. During implementation, however, the regulatory framework and overall approached moved to the Planes Departamentales de Agua (PDA), a policy complementary to the 1990 reforms that strengthened the roles of departments in the governance of the water sector\. As a result, the APL instrument became less relevant\. The Bank and the Government moved ahead with two stand-alone operations: the La Guajira Water and Sanitation Infrastructure and Service Management Project in 2007 (P096965), a pilot project to support the implementation of PDA, and the Solid Waste Management project in 2009 (P101279)\. 2\.2 Implementation 17\. The factors described below contributed to significant Project achievements in the provision of WSS services (indicated in Section 3), and to problems that led to a 23 month extension of the Project closing date, nine pending subprojects, and a reduced attention to supervision and documentation of institutional reform outcomes\. 18\. Subproject preparation and screening\. The Ministry evaluated subprojects presented by the municipalities through the Ventanilla Unica process during their design stage\. A large number of subprojects had technical deficiencies and were returned to the municipalities for redesigning\. The main deficiencies were associated with limited technical and institutional capacity at the municipal level to formulate projects, weak consultancy performance in the engineering studies and designs, and a lack of comprehensive planning\. Despite these setbacks, the Ventanilla Unica was a powerful tool because it allowed the Ministry to detect issues early during the project cycle and to resolve them to ensure that the works constructed fulfilled their objectives\. Despite the overall effectiveness of the Ventanilla Unica, some faulty subprojects were not detected and had to be corrected during construction\. 19\. Subproject implementation and arrangements\. After the subprojects were approved, a complex implementation arrangement to ensure adequate fiduciary management and project oversight of capital funds was established\. Under this arrangement, the municipalities executed the subprojects with the participation of independent supervisors\. The municipalities hired contractors for the execution of goods and works using Bank Procurement guidelines and managed their corresponding contracts\. FONADE, with Ministry supervision, contracted independent supervisors and acted as a fiduciary agent disbursing directly to the municipality contractors after approval from the independent supervisors\. This arrangement required some time to work effectively due to its complexity and weak capacity of the municipal team to manage the procurement process\. The consolidation of supervision and fiduciary aspects in FONADE, however, allowed the Ministry to provide better project management controls, technical assistance, and coordination with local authorities\. 20\. The subprojects were expected to be executed in 16 months, but the subprojects, on average, took 44 months to be executed\. The primary cause was related to the inability of municipalities to obtain right of way permits and acquire land in a timely manner\. Other factors included suspension of contracts due to design errors, contractor insolvency and delays in obtaining counterpart funds\. The latter became an issue when additional funds were required to cover project changes that were not accounted for in the allocation of Government grants\. Furthermore, implementation of some subprojects was delayed by severe rains in 2010-2011 that caused floods in several project areas\. 5 21\. Midterm evaluation\. After the midterm evaluation, the Implementation Progress (IP) was downgraded to moderately unsatisfactory\. Suboptimal supervision of safeguards, slow disbursement and legalization of funds, and shortcomings with the M&E reporting were identified as the main reasons for the downgrading\. The Ministry and the Bank agreed on a work program to resolve the midterm evaluation findings\. The work program was implemented, the IP rating was changed to satisfactory, and the Ministry was able to disburse and legalize the entire loan amount of US$70 million\. 22\. Pending subprojects\. While all Bank-financed activities are complete, there are nine subprojects in which additional time is required for the expected results to be obtained\. Seven subprojects are expected to be in operation by mid-2012, and the Ministry has provided documentation indicating proper allocation of funds and institutional commitment to have these subprojects functioning\.5 One subproject in Malaga will need about a year to be completed since a viaduct in Servita River was damaged by landslides during the 2011 severe rainy season\. The Santander PDA will finance the redesigning and construction of the viaduct\. In Santa Rosa, the water main connecting Santa Rosa with Cartagena was completed, but its operation depends on the delivery of ACUACAR’s water (the water price is currently under negotiations between Ministry and the District of Cartagena)\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 23\. M&E Design\. This ICR takes into consideration that the PAD was written in 2004 and that there have been subsequent changes in the Bank’s guidelines since\. In addition, since the subprojects were not defined at appraisal, the indicators and target values were selected based on an analysis of 37 subprojects identified in the PAD, increasing the uncertainty of meeting target values\. 24\. The selected monitoring indicators reflected Project design and were appropriate to measure the project development objective\. The PAD results framework had two features that are included in the Bank 2010 Core Water Sector Indicators Framework, namely: (i) two indicators – people provided with access to improved WSS and number of service providers supported by the Project, and (ii) distinctions between rural and urban areas and improved access and new connections\. 25\. At the subproject level, objectives were centered on outputs (i\.e\. water and sanitation works) and general performance outcomes were indicated, such as improved continuity or improved pressure\. The municipalities envisioned subprojects without a comprehensive diagnosis of the water and sanitation systems, making it difficult to define appropriate baseline and target values\. 26\. M&E Implementation and Utilization\. Three information systems were used to measure several aspects of the project: (i) the PAD results framework; (ii) MAVDT’s monitoring system designed to track specific subproject results and beneficiaries; and (iii) the FONADE information management system (GEOTEC) designed to track works contracts and financial flows\. The design proposal for each subproject presented the number of beneficiaries calculated by the municipality using actual service area numbers and projections from the Departamento Administrativo Nacional de Estadística (DANE)\. During the mid-term review, the Bank and the Ministry conducted an extensive review of the PDO indicators that helped clarify inconsistencies found in the population database\. At the end of the Project, the Ministry worked directly with field contractors to conduct a verification review of the population data, which increased the data confidence level\. The population data used in Section 3 of the ICR is the results 5 In three subprojects (Reten, Sonson, and Tunja), client-financed activities under the Project are still being executed\. Four subprojects (Regional Fruticas, Aracataca, Zaragoza, and Fundación) are finished, but to have them in operation other complementary projects, which are in execution need to be completed\. 6 of the verification review and represents actual population values\. Despite the slow pace with updating GEOTEC, FONADE’s information management system was a useful tool that provided a detailed account of each subproject on a public website, adding transparency to the process and accessibility to the stakeholders\. The Ministry efficiently collected output data on the institutional strengthening activities conducted for the participating service providers, but it encountered greater difficulty collecting data on performance indicators since it depended more heavily on the municipalities’ willingness and capacity to collect and send information\. After the midterm evaluation, the Ministry attempted to collect performance data through formal letters to the municipalities and service providers but had little success\. 2\.4 Safeguard and Fiduciary Compliance 27\. Safeguards Compliance: The Project triggered the Environmental Assessment (OP 4\.01), Cultural Property (OP 4\.11), Involuntary Resettlement (OP 4\.12), and Indigenous Peoples (OP 4\.10) safeguards\. During preparation the subprojects were not yet defined, so framework documents were prepared for Indigenous Peoples, Involuntary Resettlement, and Environmental Assessment policies for a category B project\. The frameworks were developed to ensure compliance with national laws and Bank policies and included procedures, instruments, and arrangements to support implementation and oversight\. Specifically, as part of the screening process conducted through the Ventanilla Unica program, the Ministry took in consideration social and environmental criteria, requested environmental and social management plans, and reviewed compliance with national environmental authorizations\. To ensure compliance during implementation, FONADE included standard environmental and social requirements in construction contracts and municipality agreements and included oversight provisions in the independent supervision contracts\. Despite these efforts, the Bank team encountered weaknesses in the application of safeguards, as a result of: (i) very little participation from municipal and regional authorities; (ii) limited technical capacity on safeguards from contactors and independent supervisors; (iii) insufficient number of professionals in MAVDT with competency on social and environmental project management issues; and (iv) limited Bank supervision and lack of an M&E process to ensure that safeguards activities are carried out at the beginning of the Project\. During the midterm evaluation in 2007, the Bank team conducted a detailed safeguards evaluation with the following results\. 28\. Environment\. The Bank team and the Ministry conducted audits for 18 subprojects under construction and implemented an action plan which resulted in the following accomplishments: (i) implemented environmental supervision templates to be used by FONADE and MAVDT field supervisors; (ii) updated the subproject screening template to include sludge treatment and disposal from water and wastewater treatment plant projects; (iii) revised the goods and works contracts to improve and clarify the environmental and industrial safety provisions; (iv) held workshops for contractors, construction supervision consultants, and local authorities; and (v) updated the potable water and basic sanitation technical regulation to include environmental best management practices\. No major environmental impacts, serious accidents or complaints related to environmental work within the subprojects were recorded\. 29\. Social safeguards\. The midterm review revealed substantive and procedural issues in the application of involuntary resettlement and indigenous peoples policies\. The Ministry contracted three social experts to conduct field evaluations and to design and implement, in close collaboration with the Bank, a remedial action plan for each subproject that needed attention\. The SRAP was approved on April 28, 2010 and contained specific actions for subprojects involving land acquisition, easements, resettlement, and indigenous peoples\. At project closing, a final report concluded that all activities that fell under the Ministry’s responsibility (i\.e\. providing technical assistance to the municipalities and documenting legal 7 and administrative procedures) were completed and that a high percentage of cases were resolved\.6 The SRAP, however, is not complete as the resettlement of two families in the Municipality of Neiva and the legalization of 23 parcels and 84 easements are currently in progress\. Full conformity is not realistic in the short term as most parcels and easements cases are entangled in legal and administrative procedures\. The Bank will continue supervising the Borrower’s progress towards completing these remaining cases\. 30\. The ICR notes a strong commitment and dedication from the Ministry and close supervision and guidance from the Bank staff after the midterm evaluation to resolve these issues\. Since the midterm evaluation, the Ministry has been more diligent during project screening and supervision to ensure that subprojects presented by their municipalities comply with national laws indicating an increased capacity at the national and local level to manage environmental and social issues\. The Project closed with an ISR rating of satisfactory for safeguards\. 31\. Financial Management and Procurement\. Financial management (FM) arrangements were satisfactory throughout project implementation\. The FM assessed risk as substantial due to the complexity of the project, which involved activities countywide\. Audits and unaudited financial reports were received by their due dates\. The external auditors issued unqualified opinion (without exception) on the project financial statements for the audit periods 2006 to 2011, and MAVDT implemented their recommendations in a timely manner\. The final audit report, for the period from January 1, 2010 to March 2011, disclosed internal control issues that were incorporated in an action plan being implemented by the Ministry7\. Because of outstanding advances in the amount of US$6\.5 millions for contracts whose works and supervision services could not be completed by the project closing date, the MAVDT substituted them with project expenditures paid with counterpart funds\. Bank found the substituted expenditures eligible for financing under the loan\. 32\. The Project’s procurement performance was rated as satisfactory in the ISR throughout the life of the Project and there were no cases of misprocurement\. At the beginning of the Project, the procurement process conducted by the municipalities encountered challenges and setbacks\. In response, the Ministry hired a procurement specialist to closely guide and review the procurement process, and the Bank also provided closer supervision and assistance\. The decentralization of procurement responsibility was only possible due to the technical support and supervision provided by MAVDT and FONADE, which trained the municipalities and oversaw the procurement process\. One post review indicated shortcomings by FONADE in the selection of consulting firms due to limited capacity to review the large number of contracts\. After the post review recommendations, FONADE and the Ministry resolved the issues identified and the following post review was rated highly satisfactory\. 2\.5 Post-completion Operation/Next Phase 33\. After subproject completion, the municipalities will remain responsible for investments and all aspects of local utility management, including tariff setting, billing, collection, and operation and maintenance (O&M)\. This is in line with the Colombia Public Service Provision law in which the municipalities are responsible for ensuring that their inhabitants are provided with efficient domestic WSS services by public companies\. The Project provided technical assistance and supported the 6 A Bank review showed that the Ministry completed 80 out of 103 parcels (80 percent compliance) and 1,093 out of 1,177 easements (93 percent compliance) satisfactorily\. A Bank review and a safeguards report prepared by the Ministry are in included in the Project files\. 7 Control issues included (a) the information system SIGEVAs was not being fully updated and implemented by the VAS’ users; (b) the need to create back-ups of the project financial and monitoring information; and (c) subprojects with fiduciary agreements pending of liquidation and/or incomplete works for some of the subprojects inspected by the auditors\. 8 introduction of private operators and public companies, which helped increase the level of institutional and operational performance of service providers\. Moreover, through capital grants the Project allowed service providers to increase service quality thus improving cost recovery opportunities\. There are incentives in place under the current policy framework to meet institutional reform in order to access Government Programs and capital funds\. Furthermore, the SSPD provides an oversight and monitoring of service providers\. 34\. Despite the Project’s contributions and Colombia’s solid water policy, Colombia faces challenges related to the performance of service providers in small towns and rural areas\. To that end, the Government created the PDA to expand private sector participation and improve service in smaller municipalities by strengthening the roles of departments in the governance of the water sector\. The PDA approach is being implemented in several departments, and in 2007 the Government assigned US$500 million for the sector to be implemented under the PDA framework\. The Ministry continues to work on improving this model, and the Bank continues supporting this effort by sharing experiences from La Guajira project and from the Water Sector Reform Assistance project\. The Bank is conducting an in depth study (Specialized Water Operators in Colombia, SFLAC TF098814) of the Water Sector Reform Assistance project that focuses on improving the incentives of private operators to access less developed service providers, which is expected to be of great assistance to the Government’s sector policies and initiatives\. 35\. Since 1988, the World Bank has supported Colombia through advisory work, capacity building, and lending services that have contributed to significant sector improvements\. There is a need for further financial support in the sector, especially to improve the quality of service in small cities, access in rural areas, and wastewater management\. Based on the Bank and Colombia’s long-term partnership and the Bank’s extensive knowledge of the sector, the ICR team recommends that the Bank engage with the Government to discuss and develop possible options for a new operation that is aligned to the sector’s needs and reflects the lessons learned during recent operations\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation 36\. The Project is relevant to current national priorities and the Bank assistance strategy\. The Government of Colombia continues to place a strong emphasis on improving WSS services and retaining central elements of the previous administration’s water policy and program\.8 The recent CPS 2012-2016 was designed to support Colombia’s NDP\. The Project directly supports the CPS goals of “Improved Sustainable Urban Developmentâ€? and “Improved Environmental Management and Climate Change Resilience\.â€? The CPS also highlights the need to improve multi-city service quality, improve access in rural areas and small towns, and dramatically improve wastewater management\. Institutional and policy improvements continued public investments and efforts to promote and attract private sector participation will help Colombia overcome these challenges\. The ICR rates the relevance of the Project as substantial because of the close alignment of the Project with Colombia’s development priorities and the CPS\. 3\.2 Achievement of Project Development Objectives 8 As indicated in the current National Development Plan (NDP) 2010-2014, “Prosperity for Allâ€?\. 9 37\. The project performance indicators proposed in the PAD Results Framework, along with their original targets and achievements at project completion are shown in Table 1\. Data to track progress in achieving the objectives was produced by the MAVDT’s monitoring system\. The population numbers were obtained from the subprojects’ design information and were updated and verified by project engineers and field contractors after project completion\. The population data represents the actual population estimated when subprojects were commissioned\. This section discusses the outcome results and briefly presents causal linkages between outputs and outcomes, with details on outputs in Annex 2\. The actual Project cost is US$ 107\.1 million with a loan of US$70 million and a counterpart contribution of US$37\.1 million, 56 percent higher than expected\. Table 1\. Summary of PDO Indicator and Efficacy Rating\.9 PDO Indicators Target Value % of Rating Value March Target 2012 Achieved Improved Access: Number of People Reached (Water Supply, Urban) 760,000 1,152,027 152 New Access: Number of People Reached (Water Supply, Urban) 40,000 44,205 111 Improved access to WSS services in rural Improved Access: Number of People Reached (Sanitation, Urban) 340,000 239,200 70 and urban Substantial communities with New Access: Number of People Reached focus on the poor\. (Sanitation, Urban) 60,000 25,773 43 Access WSS Rural: Number of People 20,000 59,349 297 Access WSS Rural: Number of Areas 20 57 285 Reached Number of new private sector transactions using modernization framework 10 10 110 Number of public utilities enter into programs of technical 40 53 138 assistance/institutional reforms1 Contributed to a Unaccounted for water (UfW, losses) financially efficient reduced in selected municipalities\.2 5% 9% 180 Modest and sustainable water Collection ratios improved in selected Not sector municipalities\.2 5% Note 3 achieved MAVDT has established sufficient internal institutional capacity Yes Yes 100 Subprojects are being implemented Not according to schedule\. 80% None achieved 1\.Only refers to public utilities that did not participate in the modernization program\. 2\.Selected municipalities corresponds to those that participated in the institutional development program that had UfW as an operational condition\. 3\. Values were difficult to obtain since none of the Bank-financed subprojects had a collection ratio condition as part of the institutional development program\. However, based on a sample of 11 subprojects, the collection ratios improved by 6 percent in four subprojects and worsen in seven\. 9 The table below presents a streamlined version of the indicators presented in Annex 2 of the PAD\. 10 PDO: Improved access to WSS services in rural and urban communities with focus on the poor 38\. The Project directly targeted the poor by heavily weighting poverty levels using the Colombia’s national tariff system in the subprojects screening process through the Ventanilla Unica and during the allocation distribution at the National level after the Audiencias Públicas\. As indicated by the PAD, all subprojects were directed to low income, small municipalities, rural areas, and poor areas within intermediate cities\. Results of the evaluation carried out during project preparation and the final independent project evaluation showed that nearly 100 percent of the potential direct beneficiaries lived within Stratas 1, 2, and 3, which are considered poor in Colombia\. Based on a desktop evaluation, the Project effectively targeted small and medium sized municipalities: 32 subprojects were in municipalities with a population ranging from 12,500 to 70,000, 42 subprojects in municipalities with less than 12,500 people, 15 subprojects in rural areas, and only 12 subprojects had municipalities with more than 70,000\. 39\. The Project directly improved access to WSS services to 1\.5 million customers located in urban and rural communities through the provision of capital investment subsidies\. The Project financed a total of 87 subprojects, benefitting 91 municipalities distributed throughout 22 departments\. Figure 1 indicates the number of subprojects based on the type of benefits\. The water supply works included rehabilitation and construction of water networks, intake structures, pump stations, and water treatment plants\. Most of the sewerage improvement works were centered on rehabilitating and expanding sewer networks and to a minor extent the construction of wastewater treatment plant (the Project only financed four WWTPs)\. Figure 1\. Number of Subprojects versus Type of Benefit 40\. The Project exceeds the target values for water supply and rural areas; however, the sewerage indicators were not achieved\. The improved access sewerage indicator is expected to reach target by mid- 2012\. This result is understandable given that the first priority for operators and customers in a constrained economic environment is water supply\. The ICR rates the access part of the PDO as substantial\. PDO: Contributed to a financially efficient and sustainable water sector 41\. The Project contributed to a financially efficient and sustainable water sector and supported the water sector institutional reform by enabling participation of the private sector in water services management, 11 providing technical assistance to less developed service providers, and by incorporating institutional reform and performance conditions in the investment agreements between the Ministry and the municipalities\. As a result, the Project introduced 10 specialized operators in 28 municipalities through the PME program\. Five of the 10 private operators operate on a regional level contributing to the Ministry’s initiative of consolidating service areas to increase efficiency\. Overall the PME is considered a success in Colombia based on its capacity to improve WSS service in low-income cities by transforming deficient public operators into customer-oriented, efficient and sustainable providers\.10 For small municipalities and rural communities that chose not to participate in the modernization process, the Project provided targeted technical assistance and institutional reform activities based on the utility level of institutional and financial development\. These activities included, among others, assisting in the creation of public companies, conducting tariff structuring studies, strengthening commercial management systems, and promoting programs for the reduction of non-revenue water\. There were 53 service providers that participated in technical assistance and institutional reform activities exceeding the target value for that indicator\. As result of the institutional strengthening activities, 19 public companies were created, 18 received targeted technical assistance on water enterprise aspects, and five achieved performance-related conditions\. While the unaccounted for water (UfW) losses were met in the municipalities that had this indicator as a condition, the collection ratio was not achieved from the sample data\. 42\. Another aspect of the water sector reform was to build a strong central coordination institution for sector development\. In that sense, the Ministry has increased its institutional and project management capacity through the execution of the Government Program, which included the 87 Bank-financed subprojects and 269 subprojects financed directly by the Government and municipalities\. The Ministry increased its staff from 5 to 30, designed instruments and procedures to ensure a transparent process in the transfer of subsidies, and acted as an effective interagency coordinator at the national and local levels\. The Ministry with the assistance of FONADE supervised 356 subprojects, managed technical and fiduciary aspects satisfactorily, gained extensive knowledge on social and environmental safeguards, and effectively responded to unforeseen difficulties\. The implementation setbacks did not allow the Ministry to achieve the Project’s schedule indicator; however, the achievements the Ministry made in light of the geographic dispersion and complex implementation arrangements are noteworthy\. 43\. Although most of the indicators were achieved, the ICR rates the second part of the PDO as modest based on the lack of performance and quality data to evaluate the component outcomes, few resources allocated to the local institutional strengthening considering the vast needs in small municipalities, and limited oversight due mainly to encounter setbacks with the water and sanitation works\. The Project spent US$ 500,000, or 20 percent of the estimated cost assigned at project appraisal, for the institutional strengthening activities directed to municipalities and water companies\. 3\.3 Efficiency 44\. Efficiency was built into the Project with the application of the Ventanilla Unica since it provided a mechanism to screen out projects that were not economically feasible by comparing proposed subprojects with unit costs per connection\. Furthermore, technical feasibility was evaluated based on the application of appropriate WSS solutions using Colombia’s technical norm for water and sanitation\. Overall the application of the Ventanilla Unica was successful; however, some faulty subprojects were not identified due mainly to the large number of proposals evaluated\. 10 Resuls of the PME have been document in 7077-CO ICR report and in the Bank publication, Charting a New Course: Structural Reforms in Colombia’s Water Supply and Sanitation 12 45\. The ex-ante internal economic rate of return (ERR) was calculated based on a sample of 6 subprojects (3 rural and 3 urban) selected during preparation, with an ERR ranging from 16\.5 to 203 percent and a net present value (NPV) ranging from US$94,400 to US$1\.4 million\. The ICR team conducted a cost-benefit analysis for six subprojects (2 rural and 4 urban) that represented different project types and regions\.11 Based on this sample, the ICR estimates an ERR range from 23 to 57 percent and a NPV from USD 159,000 to 17 million, showing results higher than those estimated at appraisal\. All subprojects in the ICR sample with the exception of Chiriguana wastewater are economically beneficial with an ERR higher that 20 percent\. The poor results in Chiriguana, a rural, low-income community, are due to the high investment cost for wastewater collection and treatment services and a technically and financially weak service provider\. At the time of the visit, the wastewater system was not in operation; the targeted population was not connected to the system\. The Ministry and the Municipality agreed on an action plan to revert the situation that is currently under implementation\. The Chiriguana case highlights the difficulties many small municipalities face when they are responsible for the operation and maintenance of wastewater systems and lack the technical, institutional and financial capacity necessary to sustain them\. The Project only financed four wastewater systems; therefore, the ICR considers that the five subprojects with positive results are more aligned to the overall Project as rehabilitation and construction of water mains, water treatment plants, and sewers were the core of the Project\. 46\. The economic study carried out during the ICR also showed that five service providers have increased key operational and institutional indicators (revenue collection rate, operating income to operating cost, UfW, and micro-metering)\. Please see Annex 3 for additional information on the economic and financial analysis\. 47\. Another factor that affects the efficiency is the time it took to implement the project\. The Project took almost 2 years longer to complete, while the objectives and target performance indicators remained the same\. Despite the mentioned shortcomings, the ICR considers that the overall the Project benefits exceed the costs associated with the Project and therefore rates efficiency as substantial\. 3\.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 48\. The ICR rates the overall outcome of the Project as moderately satisfactory\. Relevance of the objectives and efficiency is rated substantial\. While the objective related to improve access with focus on the poor has substantially been achieved, the objective related to the reform aspects of the project has been achieved modestly\. The Project was and remains relevant to the Government’s priorities and has had a positive impact on the lives of 1\.5 million people who are now receiving improved WSS\. The introduction of private operators, the creation of public service providers, and the strengthening of the Ministry contributed to the overall goal of more efficient and sustainable water systems\. This assessment is in line with an independent final project evaluation conducted by the Government of Colombia in which, after an evaluation of the PAD results framework, it concluded that the Project achieved its objectives satisfactorily\. However, there were moderate shortcomings, including implementation setbacks that caused a two year delay, lack of performance and quality indicators, and the Chiriguana wastewater case\. 11 The subprojects included (i) the optimization of a water distribution system; (ii) the construction of a main sewer collector and household connections; (iii) the construction of a new water supply system; (iv) the expansion of a water treatment plant and distribution networks; (v) the optimization of a water surface intake system; and (vi) the construction of a new water and sewerage systems (collection and treatment)\. 13 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 49\. The Project has had a dramatic impact on poverty\. Approximately 1\.5 million low-income people now have improved WSS services\. In particular, the number of households connected to the water distribution systems increased\. Higher connection rates do not only imply greater convenience and access to safe water, but also a reduction in the cost of water since people without access typically purchase water from tankers\. This is particularly true in Colombia where low-income households receive implicit subsidies through lower utility tariffs\. Employment derived from the large number of construction contracts also had a poverty impact in remote areas where few avenues for regular employment exist\. These types of projects offer the local people an attractive employment opportunity\. (b)Institutional Change/Strengthening 50\. The World Bank loan assisted the Ministry establish itself as the central coordinating institution for water sector investments and development\. Before the Project water sector development and investments were unsystematic; there were many institutions involved that had overlapping functions and abided by different “rules of the gameâ€? to access national funds\. In the Project a publicly disseminated set of procedures and instruments were designed and implemented to ensure the efficient and systematic use of grant transfers\. The same “rules of the gameâ€? were applied to the overall Program\. The Ventanilla Unica process has been extended to other programs in the Ministry creating a sensible and unified approach to screening investments\. 51\. The Project helped build a base of private operators who had experience working with smaller municipalities\. The Project also supported the creation of public companies and cooperatives, a first step in making water provision more efficient and sustainable in municipalities\. Under the Project, there were 10 private sector, long-term concession contracts that helped widen and strengthen the pool of competent operators in the sector\. The stability afforded by the long-term concession contacts (approx\. 10 years) helped to break down the traditional short-term, political cycle dependent view of water service delivery at the municipal level\. The 19 public enterprises established under this Project mark an improvement for local water management: financial accounting for water provision has been separated from other municipality activities, a permanent organizational structure has been formed, and national grants and programs sponsored by the Government are now more accessible\. (c) Other Unintended Outcomes and Impacts (positive or negative) 52\. The Audiencias Públicas represent a concerted effort by the Uribe Administration to extend the reach of the State to places that were not receiving public services due to decades of internal strife and violence\. This effort was part of the Uribe Administration’s Democratic Security Policy, which sought to increase State presence by improving access to social services and supporting economic development in order to break the cycle of guerrilla violence\. Under that context, The Project contributed to the Democratic Security Policy and the peace and prosperity process that is being consolidated under the current administration\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 53\. As part of the ICR preparation, a Bank mission visited six subprojects and conducted a stakeholder workshop in which the Ministry, FONADE, DNP, and the consulting group that conducted the independent evaluation participated\. The main findings are reflected in this document, especially in the implementation section\. During the subproject visits, Project beneficiaries expressed their satisfaction 14 with the service improvements\. Nevertheless, stakeholders also identified institutional and administrative deficiencies, particularly in small municipalities\. 4\. Assessment of Risk to Development Outcome 54\. To rate the risk to development outcome, the ICR considers the service providers’ capacity to operate and maintain the installed water and sanitation works and the policies currently in place to support sector development\. The evaluation of utility capacity is based on the experience and knowledge the Bank team has on the water sector in Colombia\. The subprojects are classified based on their risk levels to sustain the investments, as shown in Table 2\. The results indicate that 39 subprojects have a low risk, 40 moderate risk, and eight significant risk\. The total Project risk is considerate moderate\. Annex 10 presents a more detailed evaluation\. Table 2\. Assessment of Risk to Development Outcome Characteristics # of Level of subproj\. Risk Public companies in intermediate cities (pob >70,000) are usually known 11 Low to be more efficient and reliable and are more accessible to oversight and regulatory mechanisms\. Public or private operators in medium and small municipalities that are 10 Low known to be running efficient and reliable operations\. Public companies that have introduced private operators under the Project 18 Low Recently created cooperatives and public enterprises under the Project 19 Moderate Public companies that participated in the institutional program 15 Moderate Public companies that had good institutional indicators at the beginning 6 Moderate of the Project Projects run directly by municipalities that did not link an operator 8a Significant Total 87 Moderate a\. Three subprojects did not create public companies because they decided to join the PDA\. 55\. Colombia has a comprehensive water policy that separates service provision from policy-making, promotes private sector participation, and provides regulation and oversight\. However, small municipalities and rural communities (with low and moderate risk levels) still have weak operational and institutional indicators\. These weaknesses can be attributed in part to the complexity of the local institutional structures and the atomization of service providers outside large urban areas\. These have prevented the providers from benefiting from economies of scale and have limited the national government’s ability to promote policy incentives\. The weak local capacity became apparent during Project implementation, in particular with project designs and the handling of safeguards and construction permits, as well as during project completion in the case of the Chiriguana project and other two subprojects (Canalete and San Pelayo) visited by the independent evaluator\. 56\. The Government is promoting PDAs to accelerate expansion of coverage and improve the quality of service by: (i) improving coordination and providing technical assistance at the department level; (ii) formulating and promoting comprehensive investment plans with a regional impact; (iii) reducing fragmentation by utilizing economies of scale; and (iv) creating conditions for the entrance of specialized 12 operators in smaller municipalities\. There are six subprojects under the Project that have entered into a 12 The World Bank Group, Charting a New Course: Structural Reforms in Colombia’s Water Supply and Sanitation Sector, 2011\. 15 PDA, and it is expected that more municipalities involved in the Project will become part of this framework\.13 Despite the strong policy support from the National Government and the positive results of some PDAs, the PDA is a fairly new policy framework that still needs to demonstrate its overall achievements and therefore the ICR rating continues to be moderate\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 57\. The Project design was well aligned with the Government’s priorities, incorporated lessons learned from other operations, in particular the PME, and accurately identified main risks and included design features to mitigate them\. In particular, the Bank helped define the project review process (Ventanilla Unica), link access to capital funds with institutional reform conditions and support the implementation and oversight arrangement between MAVDT and FONADE\. This contribution was not only applied to the Bank-financed Project but to the entire Audiencias Públicas Program, thus contributing to the overall Program achievements and the government’s objective of having a centralized national agency to channel investment funds to local authorities\. The Ministry staff recognize the value added of the Bank’s participation during preparation\. 58\. On the other hand, the Bank could have emphasized technical assistance for the weaker municipalities to help them with the design of subprojects, project management and procurement aspects during implementation, and operation of the WSS systems after construction\. The Ministry also indicated that more technical guidance on the application of social safeguards under the Project at all levels would have helped them improve Project oversight\. The discrepancy between the PAD PDO and the legal agreement PDO is also seen as a shortcoming\. (b) Quality of Supervision Rating: Satisfactory 59\. The Bank provided considerable procurement, technical and managerial support to the MAVDT and FONADE during Project implementation\. The Bank regularly prepared aide-memoires and realistically rated the performance of the project in the ISRs\. The Bank conducted an extensive midterm review and helped design and implement a comprehensive action plan to promote conformity with social safeguards\. The Bank team participated in approximately 13 missions, which included site visits by safeguards specialists and engineers\. The Bank’s input to improve the Ventanilla Unica process and the water and sanitation norm were highly valued by the Ministry\. The team could have provided closer supervision and technical assistance of safeguard issues at the beginning of the Project\. Nevertheless, during and after the midterm review, the Bank proactively provided supports to address safeguard issues through guiding the design of the Social Remedial Plan and providing oversight\. (c) Justification of Rating for Overall Bank Performance 60\. Rating: The ICR rates the overall Bank performance as moderately satisfactory given that Bank performance during preparation was moderately satisfactory and during implementation was satisfactory\. 13 A report by Union Temporal Centro Nacional de Consultoria-ECONOSUL states that the majority of the municipalities (61%) planned to take part in the framework, or have already implemented a Plan Departamental\. 16 5\.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 61\. The DNP and the Ministry demonstrated strong commitment and ownership of the Project by actively participating in the allocation process of the Audiencias Públicas and the subsequent Project design\. MAVDT, with the assistance of FONADE, complied with Bank loan covenants and satisfactorily fulfilled its fiduciary duties in a timely manner\. Increasing the Ministry’s capacity by linking it with FONADE worked particularly well because FONADE conducted the administrative and construction management documentation and procurement of consultants and involved experienced construction supervisors\. MAVDT and FONADE’s efforts to follow up with the municipalities and to actively participate in resolution processes that arose during construction were key to the Project’s success\. MAVDT also demonstrated a strong commitment, evident by the rigorous review exercise conducted by engineers, in the implementation of the Ventanilla Unica\. The large number of projects (approx\. 550) and their geographical dispersion, however, made it very difficult for engineers to visit the sites and validate the information they had received\. As a result, some faulty projects passed through the filter\. The Ventanilla Unica has improved based on lessons learned during this Project, and its application has been extended to other Ministry programs\. In addition, the government adopted a series of resolutions and decrees to strengthen private sector participation and to incorporate environmental management in water and sanitation norms\. 62\. A shortcoming of the Project was the lack of environmental and social specialists at the beginning of the Project\. After the midterm review highlighted this issue, the Ministry hired social specialists to design and implement remedial action plans\. Another shortcoming was the lack of technical assistance to the low capacity municipalities during project preparation activities, such as design and engineering studies\. In addition, more follow-up and documentation of the institutional reform activities could have helped evaluate the actual performance improvement of the service providers\. A more specific M&E with baseline and quality indicators could have also helped evaluate the investment outcomes\. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 63\. The Project was primarily implemented by the service providers (municipalities), who were responsible for executing the water and sanitation works\. FONADE hired independent supervisors to oversee the works and paid the municipal contractors that had been approved by the supervisors\. As expected, the performance of the operators varied considerably depending on the institutional capacity of the service providers\. Many local authorities did not have the capacity to handle construction management issues\. This incapacity led to significant delays in Project progress and difficulties in the application of safeguards, but the authorities, for the most part, were able to overcome the challenges\. On the other hand, the increase of counterpart funds by US$13\.3 million and the local authorities’ strong commitment throughout the Project contributed to the overall achievement of the Project\. FONADE and the independent supervisors played an important role during the construction process, especially in the redesigning of subprojects and in ensuring that the completed works followed all agreed upon standards\. Furthermore, FONADE managed an internet-based project information system that allowed stakeholders to read detailed accounts of each of the subprojects\. The internet-based information system assisted in supervision of the Project and improved the Project’s transparency\. The ICR rates FONADE performance as satisfactory and the municipality performance as moderately satisfactory\. (c) Justification of Rating for Overall Borrower Performance 17 64\. Rating: The ICR rates the overall Borrower performance as moderately satisfactory given that both Borrower and Implementing Agencies' performances are rated Moderately Satisfactory\. 6\. Lessons Learned 65\. The World Bank support for traditional public works project can add value in the context of a broad strategic program\. During preparation, the Government solicited financial support and technical assistance from the Bank\. The Bank played a critical role in helping the Government overcome difficulties that arose from the Audiencias Públicas\. Specifically, the Bank helped design a framework around a national infrastructure program by (i) defining a technical screening and prioritization process, (ii) linking access to capital funds with institutional reform conditions, and (iii) supporting the implementation and oversight arrangement between MAVDT and FONADE\. These features were applied to the Bank-financed Project and the entire Audiencias Públicas Program\. The continuous engagement of the Bank through supervision was critical to ensure that the Project’s design features were implemented and that safeguard policies were carried out\. The Bank’s supervision also supported the mainstreaming of the implementation model within the Ministry\. 66\. Targeted technical assistance to less developed service providers should be included during all phases of project cycle\. Implementation setbacks during the Project were mainly due to low capacity at the municipal level to develop adequate engineering designs, to obtain construction permits, parcels, and easements, and to provide additional funds in timely manner\. Service providers with weak institutional capacity also faced operational challenges\. Projects should ensure that less developed service providers have targeted technical assistance to improve project designs and implementation\. Projects should also consider post-construction assistance to ensure proper O&M and the consolidation of institutional reforms\. 67\. Incorporating water and sanitation system assessments and comprehensive planning into demand-driven projects is essential\. The subprojects were selected by the community to solve specific problems\. This demand-driven selection process resulted in a piecemeal operation with subprojects financing components or parts of an overall system\. Challenges to this approach included difficulties in defining baselines and target quality indicators, a lack of coordination with components outside the subproject that are needed to have the system in operation, and missed opportunities to identify more efficient and cost-effective solutions\. To that end, there is a need to include technical assistance and policies that enable the execution of overall system assessments and planning in order to derive investment projects\. 68\. Institutional strengthening activities for service providers need to include targeted performance indicators and oversight\. In an innovative approach to institutional reform, the Project linked institutional reform activities with investments in works\. The institutional reform related activities were included as conditions in subproject contracts\. As a result, 10 specialized operators and 19 public companies were incorporated in the provision of WSS and technical assistance was provided to identify municipalities to take steps to improve financial viability and accountability and strengthen operation and implementation capacity\. Performance indicators and results, however, were not adequately documented during Project supervision\. There is a need to improve internal capacities at the utility level to collect and report performance indicators, as well as to increase oversight and technical assistance from the Ministry and the Bank to better measure project results and extract lessons learned\. 69\. Decentralized implementation at the municipal level still requires strong support from the national government\. The Ventanilla Unica process, overall construction management oversight, fiduciary management and technical assistance provided by the Ministry and FONADE were vital to ensuring Project completion\. The centralized structure provided clear and transparent rules of the game 18 and ongoing support to resolve difficulties\. A strong, centralized institutional arrangement for coordinating sector investments is necessary to support dispersed projects and implementers\. 70\. Social and environmental safeguard activities need to be integrated within overall project implementation and supervision activities\. The quality of preparation and attention to safeguards at appraisal was reasonably good; however, the Project encountered safeguard issues due to the low capacity at the local level and insufficient oversight\. To that end, the Bank and Borrower need to ensure that social and environment specialists are key members of the implementing unit, comprehensive training and instruments (e\.g\. environmental management plans in construction and supervision contracts) are specified and applied to all levels of the implementing structure (i\.e\. municipalities, construction supervisors and Government), and that specific monitoring indicators are included and follow-up during supervision\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners Refer to Annex 7 for Borrower’s comments on Draft ICR 19 Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Appraisal Actual/Latest Percentage of Components Estimate (USD Estimate (USD Appraisal millions) millions) 1\. Municipal Water Supply and Sewerage 92\.2 105\.2 Infrastructure 114  1\.A\.Water Supply and Sanitation Infrastructure 81\.6 94\.3 116  1\.B\. Construction supervision (interventorias) & Technical Assistance 8\.0 10\.4 130  1\.C\. Utility Reform & Development 2\.6 0\.5 18  2\. Program Management, Benchmarking, 1\.2 1\.5 Monitoring and Evaluation 123  2\.A Consultants 0\.94 1\.45 155  2\.B Administrative Cost 0\.07 0\.017 25  2\.C Travel Expenses and per diems 0\.2 0\.017 8  Total Baseline Cost 93\.4 106\.7 114 Physical Contingencies 0\.0 0\.0 Price Contingencies 0\.0 0\.0 Total Project Costs 93\.4 106\.7 114 Front-end fee IBRD 0\.4 0\.4 Total Financing Required 93\.8 107\.1 114 (b) Financing Type of Appraisal Actual/Latest Percentage of Source of Funds Co- Estimate Estimate Appraisal financing (USD millions) (USD millions) Borrower 23\.8 37\.1 156 International Bank for Reconstruction 70\.0 70\.0 100 and Development Total Financing Required 93\.8 107\.1 20 Annex 2\. Outputs by Component 1\. Component A: Municipal Water Supply and Sewerage Infrastructure\. The ouputs of this component is presented in two parts: (i) water supply and sanitation works and (ii) institutional strengthening for service providers\. 2\. Water Supply and Sanitation Works\. The Project directly improved the provision of water and sanitation services to 1\.5 million customers located in low-income areas\. The Project financed a total of 87 subprojects, benefitting 91 municipalities distributed throughout 22 departments\. There were 62 subprojects with only water supply works, 23 subprojects with only sanitation works and two subprojects with both water supply and sanitation works\. The water supply works included rehabilitation and construction of water networks, intake structures, pump stations, and water treatment plants\. Sanitation works included rehabilitation, construction, and expansion of sewer networks and to a minor extent the construction of wastewater treatment plant (the Project only financed four WWTPs)\. The Project financed 15 subprojects in 59 rural areas and 72 subprojects in peri-urban and urban areas\. The actual infrastructure cost corresponds to 88 percent of total Project cost and the construction of supervision contracts correspond to 10 percent of Project cost\. Under this component, the Project contracted 92 construction contracts and 19 supervisors (interventores)\. The table below shows a summary of the main investments\. Water and Sanitation Works\. Water Units Sanitation Units Water intakes 15 Main sewer collectors 15\.3 km Water Mains 296 km Sewer lines 84 km Sand removal tanks 16 Inspection Manholes 744 Storage and distribution tanks 32 Household connections 26,377 Pump stations 13 New WWTP 4 New water treatment plants 12 Optimization WWTP 1 WTP rehabilitation/expansion 15 Macro and micro meters 10 macro/5 micro Distribution networks 269 km Household connections 47,686 3\. A table at the end of this annex presents a description, main characteristics and beneficiaries for each subproject\. Data to track progress in achieving the objectives was produced by the MAVDT’s monitoring system\. The population numbers were obtained from the subprojects design information and were updated and verified by the project engineers and field contractors at subproject completion\. The population data represents the actual population estimated when subprojects were commissioned\. The table below shows a summary of the number of people reached by the Project\. The MAVDT’s monitoring system and the database prepared by the Bank team for the ICR are saved in the project files (WBdocs)\. 21 Summary Pop\. Pop\. Pop\. New Pop\. New Pop\. Total Improved Pop\. # of Improved Access Access Rural Pop\. Access Rural Rural Access Water Sanit\. (Sew\. Water (Benef\.) Water Sanit\. Areas Sanit\. Supply Conn\.) Supply Supply Total values with all subprojects completed 1,808,057 1,312,176 369,200 44,205 25,773 52,191 11,556 59 Values with subprojects completed at March 2011 1,513,510 1,152,027 239,200 44,205 25,773 47,793 11,556 57 Values of pending subprojects 294,547 160,149 130,000 0 0 4,398 0 2 4\. Utility Institutional Strengthening\. The Project included two mechanisms for institutional improvements of service providers: (i) the incorporation of private sector participation in the management and operation of WSS services through the Ministry’s Utility Modernization Program (PME or modernization) and (ii) targeted technical assistances for small towns and rural communities that chose not to participate in the PME process\. 5\. The Project introduced 10 specialized operators in 28 municipalities through the PME program\. Five of the 10 private operators operate on a regional level contributing to the Ministry’s initiative of consolidating service areas to increase efficiency\. Overall the PME is considered a success in Colombia based on its capacity to improve WSS service in low-income cities by transforming deficient public operators into customer-oriented, efficient and sustainable providers\. The modernization approach included: (i) technical assistance to prepare and carry out the documentation and procedures for incorporating the private sector in the management of the WSS; (ii) support to mayors in convincing the main actors (mainly municipal councils, governors and state governments, business community, community representatives community organizations and NGOs) to accept PSP in the utilities; and (iii) financial support to cover a portion of the required infrastructure investments which the private sector cannot provide\. 6\. For small municipalities and rural communities that chose not to participate in the modernization process, the Project provided targeted technical assistance and institutional reform activities based on the utility level of institutional and financial development\. During preparation three development levels were established to define what kind of technical assistance was more appropriate for each operator\. The levels were based on two indicators: billing collection rate and account receivables comparator\. The operators ranked in the lowest (first) level were eligible for capital funds only if institutional reform activities were included under the agreement\. For the second level, capital funds had to come along with programs that helped to improve operational indicators\. For the highest level, the operators did not have to undertake institutional development activities for accessing capital funds\. There were 53 service providers that participated in technical assistance and institutional reform activities exceeding the target value for that indicator\. The activities included, among others, assisting in the creation of public companies, conducting tariff structuring studies, strengthening commercial management systems, and promoting programs for the reduction of non-revenue water\. As result, 19 public companies were created, 18 received targeted technical assistance on water enterprise aspects, and five achieved operational 22 indicators (three companies had to lower water losses and two had to prepare water management plans required by the SSPD)\. The 19 public enterprises established under this Project mark an improvement for local water management: financial accounting for water provision has been separated from other municipality activities, a permanent organizational structure has been formed, and national grants and programs sponsored by the Government are now more accessible\. 7\. Consulting services were contracted to assist in the creation of public companies, conduct tariff structuring studies, and strength commercial management systems\. The Project spent US$ 500,000, or 20 percent of the estimated cost assigned at project appraisal, for the institutional strengthening activities directed to municipalities and water companies\. A table at the end of Annex 10 indicates the type of institutional strengthening condition applied to each subproject\. 8\. Component B\. Program Management, Benchmarking, Monitoring and Evaluation\. The Project financed consultant services and equipment to strengthen the capacity of Vice-ministry of Water to implement and supervise the Project and provide technical assistance to the participating municipal utilities\. Activities financed under this Component included: (i) goods and consultant services to conduct screening of subprojects, program implementation, evaluation and monitoring; (ii) to design and implement the Social Remedial Action Plan; and (iii) to conduct the Project final evaluation\. The Project invested US$ 1\.5 million on this component\. 23 Abbreviations: URB: Urban; R: Rural; WS: Water Supply; S: Sanitation; WTP: Water Treatment Plant; WWTP: Wastewater Treatment Plant\. Shaded cells represent the pending subprojects\. POP\. POP\. NEW POP\. TOTAL POP\. POP\. NEW IMPROVED ACCESS RURAL POP\. # OF POP\. IMPROVED ACCESS DEPARTMENT MUNICIPALITY PROJECT AREA TYPE ACCESS SANIT\. WATER RURAL RURAL (PROJECT ACCESS WATER WATER (SEWERAGE SUPPLY SANIT\. AREAS BENEF\.) SANIT\. SUPPLY SUPPLY CONNECT\.) SYSTEM IMPROVEMENT AND OPTIMIZATION OF THE AMAZONAS LETICIA WATER SUPPLY SYSTEM URB WS 19,460 19,460 IN THE MUNICIPALITY OF LETICIA – PHASE 1    OPTIMIZATION AND EXPANSION OF THE ANTIOQUIA TURBO URB WS 34,867 34,867 URBAN AQUEDUCT SYSTEM REPLACEMENT OF ANTIOQUIA TURBO WATER DISTRIBUTION URB WS PIPES IN URBAN AREA THIRD STAGE OF SAN ANTIOQUIA CONSTRUCTION OF THE URB S 4,390 3,526 864 JERÓNIMO SEWER SYSTEM    OPTIMIZATION AND EXPANSION OF THE ANTIOQUIA SANTAFE URB WS 13,757 13,757 URBAN WATER SUPPLY SYSTEM    OPTIMIZATION AND BAJO CAUCA: EXPANSION OF THE ANTIOQUIA URB WS 96,962 96,962 CAUCASIA URBAN WATER SUPPLY SYSTEM OPTIMIZATION AND BAJO CAUCA: EXPANSION OF THE ANTIOQUIA URB WS 4,500 4,500 TARAZÃ?, URBAN WATER SUPPLY SYSTEM    OPTIMIZATION AND BAJO CAUCA: EXPANSION OF THE ANTIOQUIA URB WS 12558 12558 ZARAGOZA URBAN WATER SUPPLY SYSTEM    CONSTRUCTION OF A WATER SUPPLY SYSTEM ANTIOQUIA SAN VICENTE IN SMALL RURAL TOWNS R WS 1,765 1,765 3 LA HONDA - LA FLORESTA - SANTA ANA 24  POP\. POP\. NEW POP\. TOTAL POP\. POP\. NEW IMPROVED ACCESS RURAL POP\. # OF POP\. IMPROVED ACCESS DEPARTMENT MUNICIPALITY PROJECT AREA TYPE ACCESS SANIT\. WATER RURAL RURAL (PROJECT ACCESS WATER WATER (SEWERAGE SUPPLY SANIT\. AREAS BENEF\.) SANIT\. SUPPLY SUPPLY CONNECT\.) SYSTEM CONSTRUCTION OF STORAGE AND FILTRATION TANKS, WATER MAIN NETWORKS, ANTIOQUIA SONSON R WS 2148 2,148 1 DISTRIBUTION AND WATER HOUSEHOLD CONNECTIONS FOR THE POPULATED CENTER OF THE TOWN OF LA DANTA CONSTRUCTION OF A SEWER NETWORK IN THE ATLANTICO LURUACO URB S 3,330 370 2,960 MUNICIPALITY OF LURUACO    CONSTRUCTION OF THE FIRST STAGE OF SEWER ATLANTICO REPELON SYSTEM IN THE URB S 12,506 9,952 2,554 MUNICIPALITY OF REPELON    CONSTRUCTION OF SEWER SYSTEM IN THE ATLANTICO CANDELARIA URB S 8,882 4,413 4,469 MUNICIPALITY OF CANDELARIA    CONSTRUCTION OF A MANATÃ? - REGIONAL WATER ATLANTICO URB WS 16,740 16,740 CANDELARIA SUPPLY SYSTEMS MANATI - CANDELARIA    CONSTRUCTION OF ATLANTICO SUAN SEWER WORKS IN THE URB S 8,817 4,357 4,460 MUNICIPALITY OF SUAN    CONSTRUCTION OF A REGIONAL WATER PALMAR DE ATLANTICO SUPPLY SYSTEM IN THE URB WS 22,841 22,085 756 VARELA REGION OF PALMAR DE VARELA    PIOJO - JUAN WATER SUPPLY DE ACOSTA - SYSTEMS IN PIOJO, JUAN ATLANTICO URB WS 24,992 24,992 USIACURI Y DE ACOSTA, USIACURI, TUBARA TUBARÃ?    CONSTRUCTION OF AN PUERTO INTERCEPTOR IN ATLANTICO URB S 6,191 6,191 COLOMBIA MALECON\. FIRST STAGE OF THE SECOND PHASE    25  POP\. POP\. NEW POP\. TOTAL POP\. POP\. NEW IMPROVED ACCESS RURAL POP\. # OF POP\. IMPROVED ACCESS DEPARTMENT MUNICIPALITY PROJECT AREA TYPE ACCESS SANIT\. WATER RURAL RURAL (PROJECT ACCESS WATER WATER (SEWERAGE SUPPLY SANIT\. AREAS BENEF\.) SANIT\. SUPPLY SUPPLY CONNECT\.) SYSTEM CONSTRUCTION OF A REGIONAL WATER SUPPLY SYSTEM IN LOS CARMEN DE BOLIVAR MONTES DE MARIA FOR URB WS 15,000 15,000 BOLIVAR THE CENTER AREAS OF CARMEN DE BOLIVAR MUNICIPALITIES\.    CONSTRUCTION OF A REGIONAL WATER SUPPLY SYSTEM IN LOS BOLIVAR SAN JACINTO MONTES DE MARIA FOR URB WS 21,218 21,218 THE CENTER AREAS OF THE SAN JACINTO MUNICIPALITIES    CONSTRUCTION OF REGIONAL WATER SUPPLY SYSTEM OF LOS SAN JUAN BOLIVAR MONTES DE MARIA PARA URB WS 13,450 13,450 NEPOMUCENO LAS CABECERAS MUNICIPALITY OF SAN JUAN NEPOMUCENO    REHABILITATION AND OPTIMIZATION OF THE BOLIVAR SANTA ROSA REGIONAL WATER URB WS 12551 12551 SUPPLY SYSTEM OF SANTA ROSA    REHABILITATION AND REPLACEMENT OF UPTAKE AND WATER TREATMENT SYSTEMS SAN AND OPTIMIZATION OF ESTANISLAO THE EXISTING WATER BOLIVAR URB WS 20,044 20,044 DE KOTSKA Y MAINS IN THE REGIONAL VILLANUEVA WATER SUPPLY SYSTEM IN THE MUNICIPALITIES OF SAN ESTANISLAO DE KOTSKA AND VILLANUEVA    CONSTRUCTION OF WWTP IN TUNJA A BOYACA TUNJA URB S 130000 130,000 MODEL OF 120 LPS - STAGE I    26  POP\. POP\. NEW POP\. TOTAL POP\. POP\. NEW IMPROVED ACCESS RURAL POP\. # OF POP\. IMPROVED ACCESS DEPARTMENT MUNICIPALITY PROJECT AREA TYPE ACCESS SANIT\. WATER RURAL RURAL (PROJECT ACCESS WATER WATER (SEWERAGE SUPPLY SANIT\. AREAS BENEF\.) SANIT\. SUPPLY SUPPLY CONNECT\.) SYSTEM CONSTRUCTION OF A RISARALDA, REGIONAL WATER CALDAS SAN JOSE Y URB WS 16,000 16,000 SUPPLY AQUEDUCT OF BELALCAZAR OCCIDENTE STAGE II    CONSTRUCTION OF A CAUCA ARGELIA WTP IN THE ARGELIA - URB WS 3,500 3,500 CAUCA SYSTEM    CONSTRUCTION OF A WTP, TOWN OF MANGO CAUCA ARGELIA R WS 1,200 1,200 1 MUNICIPALITY OF ARGELIA - CAUCA CONSTRUCTION OF AN AQUEDUCT IN THE TOWN CAUCA ARGELIA R WS 525 525 1 OF SAN JUAN DE LA GUADA CONSTRUCTION OF A RURAL WATER SUPPLY CAUCA ARGELIA R WS 1,050 1,050 1 SYSTEM IN THE TOWN OF PUERTO RICO CONSTRUCTION OF THE FIRST STAGE OF THE CAUCA ARGELIA R S 4,480 4,480 1 SEWER NETWORK IN THE TOWN OF EL PLATEADO CONSTRUCTION OF WORKS FOR THE EXPANSION OF THE RURAL WATER SUPPLY CAUCA CALDONO R WS 4,696 4,696 10 SYSTEM IN THE COLLECTIVES OF LA BUITRERA Y NUEVE VEREDAS CONSTRUCTION FIRST STAGE OF THE RURAL CAUCA CALDONO WATER SUPPLY SYSTEM R WS 2,317 2,317 13 OF THE EL PESCADOR (13 RURAL TOWNS) REHABILITATION AND OPTIMIZATION OF THE CAUCA CALOTO RURAL WATER SUPPLY R WS 5,430 5,430 1 SYSTEM OF CRUCERO DEL GUALI 27  POP\. POP\. NEW POP\. TOTAL POP\. POP\. NEW IMPROVED ACCESS RURAL POP\. # OF POP\. IMPROVED ACCESS DEPARTMENT MUNICIPALITY PROJECT AREA TYPE ACCESS SANIT\. WATER RURAL RURAL (PROJECT ACCESS WATER WATER (SEWERAGE SUPPLY SANIT\. AREAS BENEF\.) SANIT\. SUPPLY SUPPLY CONNECT\.) SYSTEM REHABILITATION OF SEWERS AND CONSTRUCTION WWTP CAUCA FLORENCIA URB S 1,579 1,579 FOR THE CENTER AREA OF THE FLORENCIA MUNICIPALITY\. OPTIMIZATION OF THE WATER SUPPLY SYSTEMS AND THE CAUCA FLORENCIA COMPLETION OF THE URB WS 1,152 1,152 WTP FOR THE FLORENCIA MUNICIPALITY    IMPROVEMENT OF THE DISTRIBUTION CAUCA MERCADERES NETWORKS IN THE URB WS 6,100 6,100 MUNICIPALITY OF MERCADERES    PROJECT WTP LAS GUACAS – PHASE I CAUCA POPAYAN URB WS 20,741 20,741 CONSTRUCTION AND OPTIMIZATION WATER SUPPLY NETWORKS TO CONNECT CAUCA POPAYAN URB WS 5,608 5,608 CIUDADELA LAS GUACAS WITH THE NEW WTP EXPANSION OF THE DISTRIBUTION NETWORK CESAR BOSCONIA URB WS 25,599 25,599 OF THE WATER SUPPLY SYSTEM    CONSTRUCTION OF THE WATER SUPPLY AND CESAR CHIRIGUANA SEWAGE SYSTEMS IN R WSS 1,143 1,111 32 1 THE TOWN OF LA AURORA OPTIMIZATION OF THE WATER MAINS OF THE CESAR PAILITAS URB WS 11,126 11,126 MUNICIPAL WATER SUPPLY SYSTEM    28  POP\. POP\. NEW POP\. TOTAL POP\. POP\. NEW IMPROVED ACCESS RURAL POP\. # OF POP\. IMPROVED ACCESS DEPARTMENT MUNICIPALITY PROJECT AREA TYPE ACCESS SANIT\. WATER RURAL RURAL (PROJECT ACCESS WATER WATER (SEWERAGE SUPPLY SANIT\. AREAS BENEF\.) SANIT\. SUPPLY SUPPLY CONNECT\.) SYSTEM OPTIMIZATION OF THE URBAN WATER SUPPLY SYSTEM AND THE CESAR RIO DE ORO CONSTRUCTION OF A URB WS 7,594 7,434 160 WATER MAIN BETWEEN THE EL SALOBRE INTAKE AND THE WTP    OPTIMIZATION OF THE CORDOBA CANALETE WATER SUPPLY SYSTEM URB WS 0 0 OF THE URBAN CENTER    OPTIMIZATION OF THE CORDOBA MOÑITOS URB WS 5,400 5,400 WATER SUPPLY SYSTEM    OPTIMIZATION AND SAN EXPANSION OF THE CORDOBA BERNARDO POTABLE WATER URB WS 8,459 8,459 DEL VIENTO TREATMENT PLANT OF THE MUNICIPALITY    FINANCING WORKS IN THE ACTION PLAN THAT ARE PART OF THE MOMIL CHIMA PROCESS OF HIRING A PURISIMA, SAN SPECIALIZED OPERATOR ANDRES DE CORDOBA WHO WOULD HELP URB WS 99,500 99,500 SOTAVENTO, IMPROVE THE WATER SAN ANTEROY SUPPLY AND SEWER LORICA SYSTEMS IN THE ERCA REGION’S MUNICIPALITIES    CONSTRUCTION OF A SEWER SYSTEM ON THE CORDOBA MONTERIA URB S 42,839 42,839 LEFT MARGIN OF THE CITY OF MONTERIA OPTIMIZATION OF THE PUERTO CORDOBA WATER SUPPLY SYSTEM URB WS 3,539 3,259 280 ESCONDIDO IN THE URBAN CENTER    CONSTRUCTION OF THE UPTAKE, WATER MAINS PUERTO CORDOBA AND WTP IN THE NEW URB WS 13,425 13,175 250 LIBERTADOR WATER SUPPLY SYSTEM IN PUERTO LIBERTADOR    REGIONAL WATER CORDOBA SAN PELAYO SUPPLY SYSTEM OF SAN URB WS 6,991 6,991 PELAYO    29  POP\. POP\. NEW POP\. TOTAL POP\. POP\. NEW IMPROVED ACCESS RURAL POP\. # OF POP\. IMPROVED ACCESS DEPARTMENT MUNICIPALITY PROJECT AREA TYPE ACCESS SANIT\. WATER RURAL RURAL (PROJECT ACCESS WATER WATER (SEWERAGE SUPPLY SANIT\. AREAS BENEF\.) SANIT\. SUPPLY SUPPLY CONNECT\.) SYSTEM CONSTRUCTION OF A REGIONAL WATER SUPPLY SYSTEM IN COTORRA (Abrojal, Los CORDOBA COTORRA URB WS 15,037 15,037 Gomez, El paso de las Flores, Los Cedros, La Culebra, Las Arepas, Trementino and Moralito) REGIONAL WATER SUPPLY STSEM IN TOWNS LOS MORALES IN CGTO LOS LORICA (El Carito, La CORDOBA MORALES EN Subida, Los Monos, Los R WS 12,442 12,442 11 LORICA Morales, Mata de caña, Rabogacho, Sarandelo, La Peinada, Rodeito, Recula and Tierralta)    CONSTRUCTION OF AN CUNDINAMAR PULI URBAN WATER SUPPLY URB WS 1,417 907 510 CA SYTEM – PHASE 1    CONSTRUCTION OF A CUNDINAMAR CAQUEZA Y REGIONAL WATER R WS 2250 2,250 1 CA CHIPAQUE SUPPLY SYTEM IN FRUTICAS - PHASE I CONSTRUCTION OF THE FIRST PHASE OF THE MASTER PLAN FOR A CUNDINAMAR LA MESA SEWER SYSTEM IN THE URB S 15,014 11,986 3,028 CA URBAN CENTER OF THE MUNICIPALITY OF LA MESA    CONSTRUCTION OF A WATER SUPPLY SYSTEM IN THE RURAL TOWNS OF CUNDINAMAR LA SALDA, MALBERTO, TOCAIMA R WS 6,316 6,316 9 CA VILA, ALTO DE LA VIGA, ASOMADERO, EL VERDAL, CAPOTES, LA MATA Y MORRO AZUL) 30  POP\. POP\. NEW POP\. TOTAL POP\. POP\. NEW IMPROVED ACCESS RURAL POP\. # OF POP\. IMPROVED ACCESS DEPARTMENT MUNICIPALITY PROJECT AREA TYPE ACCESS SANIT\. WATER RURAL RURAL (PROJECT ACCESS WATER WATER (SEWERAGE SUPPLY SANIT\. AREAS BENEF\.) SANIT\. SUPPLY SUPPLY CONNECT\.) SYSTEM COMPLETION OF THE FIRST PHASE OF THE CUNDINAMAR CONSTRUCTION OF THE ZIPAQUIRA URB S 75,324 75,324 CA MUNICIPALITY OF ZIPAQUIRA’S MASTER SEWER SYSTEM PLAN CONSTRUCTION OF SEWERS FOR THE VILL SAN JOSE DEL ANDREA-SAN JORGE GUAVIARE URB S 3,811 0 3,811 GUAVIARE AREA AND A WATER MAIN IN SAN JOSE DE GUAVIARE    CONSTRUCTION OF WASTEWATER TREATMENT HUILA NEIVA CONSTRUCCION URB S 38,000 38,000 COLECTOS ON THE MARGIN OF THE RIO LAS CEIBAS OPTIMIZATION OF THE WATER SUPPLY NETWORKS IN THE LA GUAJIRA FONSECA URB WS 26,855 26,855 URBAN ZONE, THE CENTER AREA, THE ALTO PRADO AND EL CAMPO    OPTIMIZATION OF THE WATER SUPPLY SAN JUAN DEL LA GUAJIRA NETWORK OF THE URB WS 25,000 25,000 CESAR URBAN ZONE, CENTER AND 20 DE JULIO    REPAIR OF THE WATER MAIN CHORRERAS BARRANCAS , LA GUAJIRA FONSECA - BARRANCAS, URB WS 25,484 0 25,484 HATO NUEVO NEW REGIONAL WATER SUPPLY SYSTEM    CONSTRUCTION OF A NEW WTP OF THE REGIONAL GRAVITY AQUEDUCT OF THE MUNICIPALITY OF LA GUAJIRA DIBULLA URB WS 11,500 0 11,500 DIBULLA AND THE TOWNS OF LA PUNTA, LOS REMEDIOS, LAS FLORES, CAMPANA NUEVO AND VIEJO    31  POP\. POP\. NEW POP\. TOTAL POP\. POP\. NEW IMPROVED ACCESS RURAL POP\. # OF POP\. IMPROVED ACCESS DEPARTMENT MUNICIPALITY PROJECT AREA TYPE ACCESS SANIT\. WATER RURAL RURAL (PROJECT ACCESS WATER WATER (SEWERAGE SUPPLY SANIT\. AREAS BENEF\.) SANIT\. SUPPLY SUPPLY CONNECT\.) SYSTEM CONSTRUCTION OF SEWERAGE NETWORKS LA GUAJIRA RIOHACHA URB S 3,065 0 3,065 IN THE NEIGHBORHOOD OF BUENOS AIRES REDUCE VULNERABILITY LA GUAJIRA RIOHACHA OF THE WATER SUPPLY URB WS 86,902 86,902 SYSTEM OPTIMIZATION OF THE MAGDALENA ARACATACA WATER SUPPLY SYSTEM URB WS 25277 25277 OF THE MUNICIPALITY    OPTIMIZATION OF THE WATER SUPPLY SYTEM MAGDALENA EL RETEN URB WS 15915 15915 OF THE MUNICIPALITY OF LA CABECERA    OPTIMIZATION OF THE POTABLE WATER MAGDALENA FUNDACION DISTRIBUTION NETWORK URB WS 13848 13848 OF THE MUNICIPALITY OF LA CABECERA    CONSTRUCTION OF THE POTABLE WATER DEPARTAMENT TREATMENT PLANT - META URB WS 51,322 51,322 O PHASE I, REGIONAL WATER SUPPLY SYSTEM OF ARIARI    CONSTRUCTION OF THE PRINICPAL SEWER OF NARIÑO EL TAMBO THE SEWER SYSTEM OF URB S 1,214 964 250 THE MUNICIPALITY OF TAMBO    OPERATIONAL OPTIMIZATION OF THE NARIÑO LOS ANDES URB WS 4,754 4,754 WATER SUPPLY SYSTEM OF THE MUNICIPALITY    CONSTRUCTION OF A NARIÑO CUMBAL WATER SUPPLY SYSTEM URB WS 9,482 9,482 IN THE URBAN CENTER    REPLACEMENT OF THE DISTRIBUTION NETWORK FO THE WATER SYPPLY NARIÑO SAMANIEGO URB WS 7,625 6,860 765 SYSTEM OF THE MUNICIPALITY OF CABECERA    32  POP\. POP\. NEW POP\. TOTAL POP\. POP\. NEW IMPROVED ACCESS RURAL POP\. # OF POP\. IMPROVED ACCESS DEPARTMENT MUNICIPALITY PROJECT AREA TYPE ACCESS SANIT\. WATER RURAL RURAL (PROJECT ACCESS WATER WATER (SEWERAGE SUPPLY SANIT\. AREAS BENEF\.) SANIT\. SUPPLY SUPPLY CONNECT\.) SYSTEM WATER INTAKE STRUCTURE LAS NARIÑO PASTO PIEDRAS FOR THE URB WS 72,300 72,300 WATER SUPPLY SYSTEM OF PASTO CONSTRUCTION OF THE WATER SUPPLY AND SEWER NETWORKS FOR NORTE DE HERRAN THE RESETTLEMENT URB WSS 2,457 2,457 SANTANDER AREA IN THE URBAN CENTER OF THE MUNICIPALITY CONSTRUCTION OF A SEWER NETWORK IN THE NORTE DE LOS PATIOS MIRADOR - VIDELSO AND URB S 1,470 1,470 SANTANDER SUR DEL MUNICIPIO SECTORS CONSTRUCTION OF THE FIRST STAGE OF THE NORTE DE OCAÑA INTERCEPTOR OF AGUAS URB S 14,900 14,900 SANTANDER NEGRAS DEL RIO CHUIQUITO CONSTRUCTION OF A WATER PUMP STATION THAT GUARANTEES A QUINDIO ARMENIA SUPPLY OF RAW WATER URB WS 315,914 315,914 TO THE WATER TREATMENT PLANT THAT SERVICES ARMENIA OPTIMIZATION OF THE WATER SUPPLY SYSTEM SAN ANDRES PROVIDENCIA URB WS 1,618 1,618 OF LA ISLA DE PROVIDENCIA CONSTRUCTION OF A WWTP IN THE MUNICIPALITY OF VALLE VALLE SAN SANTANDER DE SAN JOSE TO URB S 5,432 5,432 JOSE IMPROVE WATER QUALITY IN THE FONCE RIVER PUENTE NEW WWTP RIO SUAREZ- SANTANDER URB S 10,088 10,088 NACIONAL PUENTE NACIONAL 33  POP\. POP\. NEW POP\. TOTAL POP\. POP\. NEW IMPROVED ACCESS RURAL POP\. # OF POP\. IMPROVED ACCESS DEPARTMENT MUNICIPALITY PROJECT AREA TYPE ACCESS SANIT\. WATER RURAL RURAL (PROJECT ACCESS WATER WATER (SEWERAGE SUPPLY SANIT\. AREAS BENEF\.) SANIT\. SUPPLY SUPPLY CONNECT\.) SYSTEM CONSTRUCTION OF THE MAIN SEWER IN THE SANTANDER CHIPATA URBAN CENTER OF THE URB S 1,413 1,413 MUNICIPALITY OF CHIPATA CONSTRUCTION OF A STORMWATER SEWER SANTANDER CHIPATA URB S 1,158 1,158 NETWORK IN THE URBAN CENTER CONSTRUCTION OF SANTANDER MALAGA WATER MAINS JAIMITO URB WS 80,000 80,000 (CONCEPCION) OPTIMIZATION AND EXPANSION OF THE SUCRE CHALAN R WS 3,897 3,897 WATER SUPPLY SYSTEM OF CHALAN 1  CONSTRUCTION OF THE NORTHERN TOLIMA LIBANO URB S 5,550 5,238 312 INTERCEPTOR, QUEBRADA SAN JUAN CONSTRUCTION OF THE REGIONAL WATER TOLIMA ORTEGA SUPPLY SYSTEM, OLAYA R S 7,044 7,044 7,044 HERRERA, CANALIES, BALSILLAS AND GUAPI 4  34 Annex 3\. Economic and Financial Analysis (including assumptions in the analysis) 1\. This annex consists of two analyses: (i) the economic and financial analysis of the project; and (b) the institutional strengthening of the operators\. Both analyses were based on the study of a sample of subprojects implemented under the program\. The sample consisted of seven subprojects: five corresponded to water projects (optimization, and expansion), one of sewerage projects; and one included water and sewerage\. In the economic analysis, the two subprojects in Popayan were evaluated as one project\. 2\. Results of the economic analysis show that all projects, but one, are economically feasible, with returns of USD 33 million and a profit of 27 %\. Financially the project is feasible as well with returns of USD 10 million\. Results on the institutional strengthening analysis show that all utilities, which are operating the investment have improved key operational indicators\. A\. Economic and Financial Analysis of the Project 3\. For the evaluation of the project a sample of seven sub-projects was selected\. This sample consisted of water and sewerage projects, which included optimization, expansion, and construction of new systems\. 4\. The economic and financial analysis for each sub-project was based on actual investment and operating costs, as well as actual benefits\. Some of the projects are just starting, so expected benefits and costs were included in this evaluation\. All costs and benefits were transformed to 2004 prices to make them comparable with results obtained at PAD\. The 12% discount rate used during appraisal was also used for this evaluation, and so the 30-year lifetime of the project\. 5\. Costs\. The real investment cost of the sub-projects selected for the sample was COP 28,135 million (about USD 11 million)\. Municipality Department Project Investment Millon es COP (000 USD) Santa Fe de Optimization and expansion of urban water Antioquia Antioquia system 1,345 513 San Jeronimo Antioquia Optimization and expansion of sewerage system 1,128 430 Regional water system for La Honda, La San Vicente Antioquia Floresta, Santa Ana 870 332 Water Treatment Plant for the North Area of Popayan Cauca Popayan city\. 5,090 1,941 Popayan Cauca Water system for the housing project las Guacas 1,393 531 Chiriguana Water and Sewerage Systems in the village (La Aurora) Cesar (Corregimiento) of la Aurora 2,653 1,012 Water intake of Las Piedras stream for the water Pasto Narino system of the city of Pasto\. 15,656 5,971 Total 28,135 10,729 6\. The following table shows the investment cost per person\. Chiriguana’s costs were broken down by type of works implemented, i\.e\., water, sewerage, and wastewater treatment\. The number of 35 beneficiaries in Chiriguana is different depending on the type of investment\. For water and sewerage the works were implemented just in La Aurora village; while wastewater treatment works were extended to cover La Aurora and also Ojo de Agua village\. The unitary costs includes the actual beneficiaries for each type of work\. Investment per Works person USD Santa Fe de Antioquia Water 27 San Jeronimo Sewerage 313 San Vicente Water 195 Popayan Water 8 Popayan (Housing Project Las Guacas) Water 103 Total (water Chiriguana (La Aurora) sewerage and 1,192 WW treatment) Water Water 192 Sewerage Sewerage 618 Wastewater Treatment WW treatment 239 Pasto Water 23 7\. For the economic evaluation, the flow of financial costs was transformed to economic using the conversion factors to eliminate market distortions\. This evaluation applied the same conversion factors used for the appraisal\. 8\. Benefits\. The benefits were estimated for each sub-project in correspondence with the works implemented\. For water components, there were two type of benefits: reducing or eliminating rationing, and connecting new customers\. For sewerage services, there were two type of benefits, as well: improving of wastewater treatment; and connecting new customers to sewerage system\. 9\. Financial Benefits were estimated as the increase of revenues resulting from new customers or from current customers when improving the service and increasing their consumption\. Increase in revenues was estimated based on current bills paid by customers\. For some of the beneficiaries the bills increased when rationing was eliminated and consumption went higher\. In some cases there was an additional benefit when operating costs decreased due to the project\. 10\. Economic Benefits were estimated as follows: for water, as the avoided cost for the population caused by the project\. For sewerage economic benefits were estimated as the increase in the properties value due to the project\. 11\. Benefits obtained with each of the sub-projects included in the sample are explained in more detail in the following paragraphs: 12\. Santa Fe de Antioquia\. The project consisted of optimization and expansion of the water system\. The works included replacement of pipelines and installation of a storage tank\. With these works the improvements occurred on the quality of water provided, and also on the continuity of the water supplied\. Water interruptions were eliminated and new customers could be added to the system\. This was very important for the municipality given that the main economic activity is the tourism\. During the weekends and holiday the municipality doubles the population and so its water requirement\. Before the project, the 36 operator had to restrict the supply in certain areas of the city due to lack of appropriate hydraulic infrastructure\. Currently the service is provided 24/7 in all areas\. 13\. Rationing costs were estimated, as the savings the population will have for not having to store water any longer\. Revenues were estimated based on current tariffs charged by the operator\. Operating costs were based on current costs\. It is expected a reduction of operating costs on about 10% due to the reduction of occurrences of broken pipes\. 14\. San Jerónimo\. The project consisted of optimization and expansion of the sewerage system\. The works on optimization consisted on expanding the main collectors to clean up the creek El Caminito\. This creek was the receptor body of wastewater discharges, which produced a bad odor and deteriorated the quality of life of the population living nearby\. The works of sewerage service expansion consisted on secondary network to connect 196 households, 15\. The benefits of the project were estimated as the increase on the property value of the houses along the creek (305 households), as well as the houses that got connected to the system (196 households)\. According to the beneficiaries, the houses increased in about 30% the market price and the average price on the houses in the area is between USD 20,000 to USD 50,000\. 16\. The investment and operating costs were based on the actual values\. 17\. San Vicente\. This subproject consisted of the construction of a Regional Water System for three rural villages (La Honda, La Floresta, Santa Ana) in the municipality of San Vicente\. The beneficiaries have operated the system for four years and according to the community, the quality of the service is excellent with 24/7 supply\. The community is in charge of the operation, maintenance, and billing\. The community establishes on a regular basis the monthly bill, which consists of a fixed rate for 20 cubic meter per household per month and a variable rate for each cubic meter over this quota\. The service is 100% metered and most of the households keep consumption below the 20 cubic meters to avoid high charges\. There is a sense of rationality on water-usage and the revenue collection rate is close to 100%\. 18\. Before the project, there was no water service available to the population\. Water was found in creeks nearby, and population transported it through artisanal hoses\. The quality of the water was not good and the availability was sporadic\. 19\. Financial Benefits were estimated using the actual tariffs and costs for the community\. Economic benefits were estimated using the cost of storing water, which is about USD1/cubic meter\. 20\. Popayan\. This subproject consisted of the expansion of the water treatment plant\. The objective was to connect new customers in the North part of the city, which has grown at a higher pace than the rest of the city\. The new customers have high demand for water, as they are mostly commercial, industrial, and high-income residential users\. With the project the treatment plant will have enough capacity for serving the new area in the North and also for improving and guaranteeing water 24/7 for the rest of the city\. 21\. The expanded capacity of the water plant will allow optimizing the distribution system, reducing electricity costs by eliminating some of the pumping\. It is estimated that operating costs will decrease by around 3%\. Other benefits included the increase of customers and reduction of water intermittence\. 22\. Another subproject of the sample is the water system for the housing project of Las Guacas\. This project consisted in the construction of pipelines required to connect 1,042 households, to the water system of the city of Popayan\. The benefits will be those that come along with the expansion of the water 37 system, in both economic and financial terms\. Benefits and costs associated with the connection of these new customers were included in the Popayan project\. 23\. Pasto\. This subproject consisted of the optimization of a new water source to include in the production system\. With the new intake EMPOPASTO, the water utility will be able to supply the water demand that comes along with the growth of the city, as well as to reduce the vulnerability that the infrastructure faces with eruptions of the Volcano Galeras\. The works corresponded to the first of two- phases\. The first phase increased the intake capacity by 250 lps, which helped improving the efficiency of the distribution system by decreasing the electricity costs\. The second phase will expand the system for 25,000 new customers and will be able to supply the water required for the next 20 years\. 24\. The benefits of the first phase consisted on reducing operating costs and improving reliability of the current water system\. 25\. Chiriguana\. This subproject consisted of the construction of water and sewerage systems including wastewater treatment\. The water investment was carried out for the rural village of La Aurora in the municipality of Chiriguana, Department of Cesar; the sewerage and wastewater treatment lagoon were expanded to serve not only La Aurora but also the rural village of Ojo de Agua The beneficiaries of La Aurora are 850 inhabitants, which previously had no access to neither water nor sewerage services\. The size of Ojo de Agua village is similar to La Aurora with about 1,000 inhabitants\. The community will operate the systems\. At the time of this evaluation the works were completed, but the service had not been handled to the community\. The municipality in charge of the project had not given training to local beneficiaries and was not paying much attention to the project\. The National Government gave a timetable to the municipality to comply with its obligations of making sure the project started operations and was well operated by the community\. 26\. For this evaluation, benefits were estimated assuming that the community will take charge and will operate the service as it was planned\. Financial benefits were calculated using the water and sewerage tariff charged to the lowest income group (strata 1) of residential users in the capital city of the Department (Valledupar)\. The economic cost was estimated as the avoided costs of storing water\. For the sewerage system and wastewater treatment a 15% increase on the property value was included\. The property value of the houses is about USD 10,000 as the community is very poor and isolated\. 27\. Results\. The results are presented in financial and economic terms\. 28\. Financial Results\. When investment costs are included the financial results show that all projects but Santa Fe de Antioquia and Popayan show losses\. The returns shown by Santa Fe de Antioquia (USD 1\.7 million) and Popayan (USD 1\.6 million) are enough to compensate the losses in all other projects, resulting in a net profit of USD 480 thousand and an internal rate of return of 12\.4%\. 38  FINANCIAL RESULTS Net Present of Flows (000 USD) Net IRR Costs Benefits Benefits (%) Santa Fe de Antioquia 1,290 2,994 1,704 31% San Jeronimo 488 274 (214) 4% San Vicente 542 145 (398) n\.a Popayan 13,322 14,931 1,609 18% Pasto 12,137 10,831 (1,306) 9% Chiriguana: Water 185 25 (160) n\.a Sewerage-WW treatment 770 13 (756) n\.a Total Chiriguana 955 39 (916) n\.a Total 28,733 29,213 480 12\.4% 29\. However, the investment cost is paid by the Government and not by the operators and therefore is to be excluded from the financial analysis of the operators and included in the fiscal analysis\. When investment is not included, all the projects, but Chiriguana, get a total profit of USD 10 million\. The Chiriguana project is not profitable given that tariffs for the lowest income beneficiaries do not cover operating costs for water, sewerage, and wastewater treatment\. FINANCIAL RESULTS WITHOUT INVESTMENT COSTS Net Present of Flows (000 USD) Net Costs Benefits Benefits Santa Fe de Antioquia 835 2,994 2,158 San Jeronimo 107 274 167 San Vicente 112 145 32 Popayan 11,132 14,931 3,798 Pasto 6,850 10,831 3,981 Chiriguana: Water 45 28 (17) Sewerage-WW treatment 18 13 (4) Total Chiriguana 63 42 (21) Total 19,099 29,216 10,117 30\. Economic Results show high returns, as expected at appraisal\. The net benefit is US$ 33 million and return of 27% in total\. All the subprojects in the sample have returns higher than 20% but the sewerage and wastewater treatment investments in Chiriguana, The water subproject in Chiriguana shows profits of USD 159 thousand and 23% economic returns\. 39  ECONOMIC RESULTS Net Present of Flows (000 USD) Benefit Net ERR Costs s Benefits (%) Santa Fe de Antioquia 1,122 6,362 5,239 57% San Jeronimo 424 1,279 855 55% San Vicente 472 835 363 26% Popayan 11,590 28,629 17,039 24% Pasto 10,559 20,219 9,659 28% Chiriguana: Water 165 324 159 23% Sewerage-WW treatment 664 182 (482) n\.a Total Chiriguana 828 506 (323) 5% Total 24,996 57,829 32,833 27% 31\. Chiriguana shows very poor results in the sewerage and wastewater treatment investment given that: (a) the investment cost per connection was much higher than the expected benefits; (b) the community belongs to the lowest income level strata, living in a rural area where the lack of sewerage and wastewater treatment has not affected much their lives; and (c) most of the houses do not have sanitary facilities and the cost of installing them and adjusting their in-house connections to the sewerage network is beyond their reach\. The municipality needs to get involved with the community and offer additional subsidy and credit lines to make the service accessible to the community and make it operative\. B\. Institutional Strengthening Analysis 32\. During preparation three development levels were established to define what kind of investment was more appropriate for each operator\. The levels were based on three indicators: billing collection rate, account receivables comparator, and ratio of operating income to operating costs\. The operators ranked in the lowest level were eligible only for investments, which came along with institutional reform and compliance of existing regulations\. For the second level the investments had to come along with programs that helped to improve operational indicators\. For the highest level, the operators did not have to undertake institutional development activities for financing the projects\. 33\. The sample chosen included the three levels\. ï‚ Chiriguana and San Vicente were in the lowest level, as they did not have any operator, the municipality was in charge of the service, yet it did not provide it to the population\. For this kind of situation, the investment consisted of building the infrastructure complementing it with a series of activities that enhanced the institutional capacity of the operators\. Activities such as: creation of a water utility, separately from the municipality; training; compliance with tariff regulation; elaboration of the master plans, etc, were enforced\. The results are shown in San Vicente, where the community is in charge of operating and managing the service, are impressive and the community is very proud and satisfied with the service\. Chiriguana, on the other hand, does not show any results yet as the infrastructure is implemented, but the community is only in the process of starting the operation with the utility recently created\. ï‚ San Jerónimo and Santa Fe de Antioquia were in stage 2 and improved significantly their indicators\. ï‚ Pasto and Popayan were in stage 3\. The investments were implemented as expected and the targets have been complied\. In both of these utilities, the operation indicators improved, even farther than the levels shown on the baseline, which was very good in some cases\. 40  Revenue Operating collection income/Ope rate rating cost UFW Micro metering Baseline 2010 Baseline 2010 Baseline 2010 Baseline 2010 Santa Fe Antioquia n\.d 99% 1\.77 2\.72 18% 16% 88% 100% San Jeronomio 32% 100% 1\.29 1\.12 n\.d 26% n\.d 100% San Vicente n\.a 90% n\.a 1\.01 n\.a 18% n\.a 100% Chiriguana n\.a n\.a n\.a n\.a n\.a 18% n\.a n\.a Popayan 96% 97% 1\.03 1\.22 45% 42% 96% 97% Pasto n\.d 88% 1\.04 1\.14 39% 100% n\.d\. Not available n\.a Not applicable Data Source: ï‚ San Vicente information gathered at field visit ï‚ UFW Santa Fe de Antioquia\. and San Jerónimo: SUI\. The information corresponds to 2009 instead of 2010 ï‚ Other from the database provided by the Minister\. 41 Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Lending Oscar E\. Alvarado Sr Water & Sanitation Spec\. SASDU Luiz C\. Gazoni Consultant LCSFM Menahem Libhaber Consultant LCSUW Patricia Lopez Martinez Sr Financial Analyst LCSUW Luis M\. Schwarz Senior Finance Officer CTRFC David N\. Sislen Sector Leader LCSSD Cristina Velazco-Weiss Program Assistant MDD Supervision/ICR Ana Maria Aristizabal Consultant LCSUW Daniel J\. Boyce Country Program Coordinator SACNA Greg J\. Browder Lead Water and Sanitation Spec LCSUW Claudia Mylenna Cardenas Garcia Consultant LCSFM Jeannette Estupinan Financial Management Specialist LCSFM Joseph Paul Formoso Lead Finance Officer CTRDM Natalie Giannelli Junior Professional Associate LCSUW Clara Hortensia Gomez Hernandez Consultant LCSUW Henry Laino Consultant LCSUW Menahem Libhaber Consultant LCSUW Patricia Lopez Martinez Sr Financial Analyst LCSUW Jose M\. Martinez Senior Procurement Specialist LCSPT Jesus Martinez E T Consultant LCSPS Alejandro Meleg Consultant LCSUW Jean-Roger Mercier Consultant IPN Luz Meza-Bartrina Sr Counsel LEGAF Kirsten L\. Oleson Environmental Spec\. LCSEN Diana Ortiz Zuluaga Consultant LCSUW Gabriel Penaloza Procurement Analyst LCSPT Kennan W\. Rapp Social Development Spec\. LCSDE Ernesto Sanchez-Triana Lead Environmental Specialist SASDI Luis M\. Schwarz Senior Finance Officer CTRFC Carlos A\. Uribe E T Consultant LCSUW Carlos Vargas Bejarano Consultant LCSUW Meike van Ginneken Sr Water & Sanitation Spec\. AFTUW Patricia Acevedo Language Program Assistant LCSUW 42 (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 3 16\.75 FY04 37 180\.28 FY05 36 226\.63 Total: 76 423\.66 Supervision/ICR FY04 -0\.65 FY05 1 19\.94 FY06 13 63\.79 FY07 16 126\.72 FY08 34 168\.54 FY09 18\.18 98\.92 FY 10 29\.12 153\.63 FY 11 17\.91 78\.42 FY 12 3\.85 26\.03 Total: 133\.06 735\.34 43 Annex 5\. Beneficiary Survey Results Not Applicable 44 Annex 6\. Stakeholder Workshop Report and Results Not Applicable 45 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR Comments sent by the Project Coordinator in the Ministry of Housing, Cities and Territory\. Comments were sent on March 22, 2012\. The translated version is included below\. 1\. The draft of the ICR reflects the principal aspects of the Project and its results\. The Project responded to the objectives agreed upon between the National Government and the World Bank to increase the level of coverage and the quality of services especially in rural and poor areas\. The Project contributed to the achievement of the goals of the Government in the provision of potable water and sewerage\. The goals in the PAD were met, reflecting adequate planning of the program\. The World Bank’s resources complemented the resources provided by the Government which superseded the counterpart amount agreed upon in the loan contract\. 2\. The Program also helped connect private operators with 28 municipalities whose size and complex operations permitted the entrance of private operators\. For those municipalities whose size and location did not call the attention of private operators, the Project supported the creation of public companies in 19 of the 87 subprojects\. 3\. The implementation of the Project took more time than predicted as a result of delays in the execution of works because of difficulties in getting right of way permits, technical adjustments and land issues generated by a lack of project planning by the municipalities\. 4\. The Project’s financial and institutional aspects were properly prepared and supervised by the Bank and Ministry staff\. Nevertheless, as a result of the lack of clarity on safeguards during the preparation of the Project and an unclear involuntary resettlement policy framework, the Ministry did not comply with all policies\. As a result, a remedial action plan was created\. Although the Ministry complied with the RAP satisfactorily, it had a high cost for the nation\. 5\. The Bank’s staff support throughout the Project phases was very important for the Project’s execution and should be highlighted\. 46 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders Not Applicable 47 Annex 9\. List of Supporting Documents WORLD BANK (2005), Project appraisal document on a proposed loan in the amount of US$70 million to the Republic of Colombia for a Water and Sanitation Sector Support Project WORLD BANK (2007), Implementation completion and results report-Guidelines WORLD BANK (2005), Loan agreement document WORLD BANK (to 2011), Implementation Status and Results (ISR) reports WORLD BANK (to 2011), Aide Memoires WORLD BANK (2011), Implementation completion report (IBRD-7077) on a loan in the amount of US$35\.69 million to the Republic of Colombia for a Water Sector Reform Assistance Project\. WORLD BANK (2010), Charting a New Course: A Structural Reforms in Colombia’s Water Supply and Sanitation Sector\. WORLD BANK (2012), ICR Project Data Base, Excel Spreadsheet\. WORLD BANK (2012), Social Safeguards ICR Report\. WORLD BANK (2012), Environmental Safeguards ICR Report\. MVCT (2011), Presentación Cierre del Credito 7281-CO, Excel Spreadsheet (MAVDT Monitoring System\. MVCT (2011), Resumen Ejecución Costo Real BIRF 7281-CO, Excel Spreadsheet MVCT (2011), Resumen Fortalecimiento Institucional, Excel Spreadsheet MVCT (2011), Informe Fortalecimiento Institucional MVCT (2011), Informe sobre el Estado de las Salvaguardas Sociales\. Consorcio OTSCORPSA/Soluciones Ambientales AP&ALTDA (2012), Programa de Apoyo al Sector de Agua Potable y Saneamiento Básico, Evaluación Final\. 48 Annex 10\. Assessment of Risk to Development Outcome 1\. To rate the risk to development outcome, the ICR considers the service providers’ capacity to operate and maintain the installed water and sanitation works and the policies currently in place to support sector development\. The evaluation of utility capacity is based on the experience and knowledge the Bank team has on the water sector in Colombia and the type of institutional development conducted under the Project\. The subprojects are classified based on their risk levels to sustain the investments, as shown in the table below\. The results indicate that 39 subprojects have a low risk, 40 moderate risk, and eight significant risk\. The total Project risk is considerate moderate\. The table at the end of the annex shows the level of risk and type of institutional strengthening for each subproject\. Assessment of Risk to Development Outcome Characteristics # of Level of subproj\. Risk Public companies in intermediate cities (pob >70,000) are usually known 11 Low to be more efficient and reliable and are more accessible to oversight and regulatory mechanisms\. Public or private operators in medium and small municipalities that are 10 Low known to be running efficient and reliable operations\. Public companies that have introduced private operators under the Project 18 Low Recently created cooperatives and public enterprises under the Project 19 Moderate Public companies that participated in the institutional program and that 15 Moderate are known to be performing moderately\. Public companies that did not participate in the institutional program due 6 Moderate to good indicators\. Projects run directly by municipalities that did not link an operator 8a Significant (public or private) Total 87 Moderate a\. Three subprojects did not create public companies because they decided to join the PDA\. 49 Subproject Summary and Risk Analysis Abbreviations: URB: Urban; R: Rural; IS: Institutional Strengthening; PME: Modernization; NC: Without Condition; UfW: Unaccounted for Water; PGR-SSPD: Water Management Plans Requested by the SSPD; PO: Private Operator; CPC: Creation of Public Company; CPC/PDO: Public company was not created but municipality entered into a PDA\. Notes: The PME contract that Aguas de la Costa had in San Juan Nepomuceno was terminated\. TYPE OF DEPARTMENT MUNICIPALITY PROJECT AREA OPERATOR INST\. RISK Analysis STRENGH\. IMPROVEMENT AND OPTIMIZATION OF THE WATER SUPPLY SYSTEM IN EMPUAMAZONAS AMAZONAS LETICIA URB PME L THE MUNICIPALITY OF LETICIA – S\.A\. ESP PHASE 1 OPTIMIZATION AND EXPANSION OF AGUAS DE URABÃ? ANTIOQUIA TURBO URB PME L THE URBAN AQUEDUCT SYSTEM S\.A\. ESP REPLACEMENT OF WATER AGUAS DE URABÃ? ANTIOQUIA TURBO DISTRIBUTION PIPES IN URBAN URB PME L S\.A\. ESP AREA THIRD STAGE OF CONSTRUCTION ANTIOQUIA SAN JERÓNIMO URB PME L OF THE SEWER SYSTEM REGIONAL OPTIMIZATION AND EXPANSION OF OCCIDENTE S\.A\. ESP ANTIOQUIA SANTAFE THE URBAN WATER SUPPLY URB PME L SYSTEM OPTIMIZATION AND EXPANSION OF BAJO CAUCA: ANTIOQUIA THE URBAN WATER SUPPLY URB PME L CAUCASIA SYSTEM OPTIMIZATION AND EXPANSION OF REGIONAL DEL BAJO CAUCA: ANTIOQUIA THE URBAN WATER SUPPLY URB BAJO CAUCA S\.A\. PME L TARAZÃ?, SYSTEM ESP OPTIMIZATION AND EXPANSION OF BAJO CAUCA: ANTIOQUIA THE URBAN WATER SUPPLY URB PME L ZARAGOZA SYSTEM 50  TYPE OF DEPARTMENT MUNICIPALITY PROJECT AREA OPERATOR INST\. RISK Analysis STRENGH\. CONSTRUCTION OF A WATER SUPPLY SYSTEM IN SMALL RURAL ANTIOQUIA SAN VICENTE R ASOC\. USUARIOS CPC M TOWNS LA HONDA - LA FLORESTA - SANTA ANA CONSTRUCTION OF STORAGE AND FILTRATION TANKS, WATER MAIN NETWORKS, DISTRIBUTION AND ANTIOQUIA SONSON R ASOC\. USUARIOS CPC M WATER HOUSEHOLD CONNECTIONS FOR THE POPULATED CENTER OF THE TOWN OF LA DANTA CONSTRUCTION OF A SEWER ATLANTICO LURUACO NETWORK IN THE MUNICIPALITY URB PME L OF LURUACO CONSTRUCTION OF THE FIRST ATLANTICO REPELON STAGE OF SEWER SYSTEM IN THE URB PME L MUNICIPALITY OF REPELON CONSTRUCTION OF SEWER SYSTEM REGIONAL DEL SUR ATLANTICO CANDELARIA IN THE MUNICIPALITY OF URB DEL ATLÃ?NTICO S\.A PME L CANDELARIA ESP CONSTRUCTION OF A REGIONAL MANATÃ? - ATLANTICO WATER SUPPLY SYSTEMS MANATI - URB PME L CANDELARIA CANDELARIA CONSTRUCTION OF SEWER WORKS ATLANTICO SUAN URB PME L IN THE MUNICIPALITY OF SUAN CONSTRUCTION OF A REGIONAL PALMAR DE AGUAS KAPITAL S\.S ATLANTICO WATER SUPPLY SYSTEM IN THE URB PME L VARELA ESP REGION OF PALMAR DE VARELA PIOJO - JUAN DE WATER SUPPLY SYSTEMS IN PIOJO, ACOSTA - REGIONAL ARCOS ATLANTICO JUAN DE ACOSTA, USIACURI, URB PME L USIACURI Y S\.A\. ESP TUBARÃ? TUBARA 51  TYPE OF DEPARTMENT MUNICIPALITY PROJECT AREA OPERATOR INST\. RISK Analysis STRENGH\. CONSTRUCTION OF AN PUERTO ATLANTICO INTERCEPTOR IN MALECON\. FIRST URB NC L/PO COLOMBIA STAGE OF THE SECOND PHASE CONSTRUCTION OF A REGIONAL WATER SUPPLY SYSTEM IN LOS CARMEN DE BOLIVAR MONTES DE MARIA FOR THE URB IS (Partial) S BOLIVAR CENTER AREAS OF CARMEN DE BOLIVAR MUNICIPALITIES\. CONSTRUCTION OF A REGIONAL WATER SUPPLY SYSTEM IN LOS BOLIVAR SAN JACINTO MONTES DE MARIA FOR THE URB IS (Partial) S CENTER AREAS OF THE SAN JACINTO MUNICIPALITIES CONSTRUCTION OF REGIONAL WATER SUPPLY SYSTEM OF LOS SAN JUAN AGUAS DE LA BOLIVAR MONTES DE MARIA PARA LAS URB PME M NEPOMUCENO COSTA S\.A\. ESP CABECERAS MUNICIPALITY OF SAN JUAN NEPOMUCENO REHABILITATION AND OPTIMIZATION OF THE REGIONAL BOLIVAR SANTA ROSA URB PME L WATER SUPPLY SYSTEM OF SANTA ROSA REHABILITATION AND REPLACEMENT OF UPTAKE AND WATER TREATMENT SYSTEMS AND GISCOL S\.A\. ESP SAN ESTANISLAO OPTIMIZATION OF THE EXISTING BOLIVAR DE KOTSKA Y WATER MAINS IN THE REGIONAL URB PME L VILLANUEVA WATER SUPPLY SYSTEM IN THE MUNICIPALITIES OF SAN ESTANISLAO DE KOTSKA AND VILLANUEVA 52  TYPE OF DEPARTMENT MUNICIPALITY PROJECT AREA OPERATOR INST\. RISK Analysis STRENGH\. CONSTRUCTION OF WWTP IN TUNJA BOYACA TUNJA URB NC L/PO A MODEL OF 120 LPS - STAGE I RISARALDA, SAN CONSTRUCTION OF A REGIONAL CALDAS JOSE Y WATER SUPPLY AQUEDUCT OF URB EMPOCALDAS NC L BELALCAZAR OCCIDENTE STAGE II CONSTRUCTION OF A WTP IN THE CAUCA ARGELIA URB NC M ARGELIA - CAUCA SYSTEM CONSTRUCTION OF A WTP, TOWN CAUCA ARGELIA OF MANGO MUNICIPALITY OF R ASOC\. USUARIOS CPC M ARGELIA - CAUCA CONSTRUCTION OF AN AQUEDUCT CAUCA ARGELIA IN THE TOWN OF SAN JUAN DE LA R IS M GUADA CONSTRUCTION OF A RURAL CAUCA ARGELIA WATER SUPPLY SYSTEM IN THE R IS M TOWN OF PUERTO RICO CONSTRUCTION OF THE FIRST CAUCA ARGELIA STAGE OF THE SEWER NETWORK IN R IS M THE TOWN OF EL PLATEADO CONSTRUCTION OF WORKS FOR THE EXPANSION OF THE RURAL CAUCA CALDONO WATER SUPPLY SYSTEM IN THE R ASOC\. USUARIOS CPC M COLLECTIVES OF LA BUITRERA Y NUEVE VEREDAS CONSTRUCTION FIRST STAGE OF THE RURAL WATER SUPPLY CAUCA CALDONO R ASOC\. USUARIOS CPC M SYSTEM OF THE EL PESCADOR (13 RURAL TOWNS) 53  TYPE OF DEPARTMENT MUNICIPALITY PROJECT AREA OPERATOR INST\. RISK Analysis STRENGH\. REHABILITATION AND OPTIMIZATION OF THE RURAL CAUCA CALOTO R ASOC\. USUARIOS CPC/IS M WATER SUPPLY SYSTEM OF CRUCERO DEL GUALI REHABILITATION OF SEWERS AND CONSTRUCTION WWTP FOR THE CAUCA FLORENCIA URB NC M CENTER AREA OF THE FLORENCIA MUNICIPALITY\. OPTIMIZATION OF THE WATER SUPPLY SYSTEMS AND THE CAUCA FLORENCIA URB NC M COMPLETION OF THE WTP FOR THE FLORENCIA MUNICIPALITY IMPROVEMENT OF THE CAUCA MERCADERES DISTRIBUTION NETWORKS IN THE URB IS M MUNICIPALITY OF MERCADERES PROJECT WTP LAS GUACAS – CAUCA POPAYAN PHASE I CONSTRUCTION AND URB NC L OPTIMIZATION WATER SUPPLY NETWORKS TO CAUCA POPAYAN CONNECT CIUDADELA LAS GUACAS URB NC L WITH THE NEW WTP EXPANSION OF THE DISTRIBUTION CESAR BOSCONIA NETWORK OF THE WATER SUPPLY URB IS M SYSTEM CONSTRUCTION OF THE WATER CESAR CHIRIGUANA SUPPLY AND SEWAGE SYSTEMS IN R ASOC\. USUARIOS CPC M THE TOWN OF LA AURORA OPTIMIZATION OF THE WATER CESAR PAILITAS MAINS OF THE MUNICIPAL WATER URB IS M SUPPLY SYSTEM 54  TYPE OF DEPARTMENT MUNICIPALITY PROJECT AREA OPERATOR INST\. RISK Analysis STRENGH\. OPTIMIZATION OF THE URBAN WATER SUPPLY SYSTEM AND THE CESAR RIO DE ORO CONSTRUCTION OF A WATER MAIN URB NC M BETWEEN THE EL SALOBRE INTAKE AND THE WTP OPTIMIZATION OF THE WATER CORDOBA CANALETE SUPPLY SYSTEM OF THE URBAN URB CPC/PDA S CENTER OPTIMIZATION OF THE WATER CORDOBA MOÑITOS URB COOPERATIVA CPC M SUPPLY SYSTEM OPTIMIZATION AND EXPANSION OF SAN BERNARDO CORDOBA THE POTABLE WATER TREATMENT URB CPC/PDA S DEL VIENTO PLANT OF THE MUNICIPALITY FINANCING WORKS IN THE ACTION MOMIL CHIMA PLAN THAT ARE PART OF THE PURISIMA, SAN PROCESS OF HIRING A SPECIALIZED AGUAS DEL SINÚ CORDOBA ANDRES DE OPERATOR WHO WOULD HELP URB PME L S\.S ESP SOTAVENTO, SAN IMPROVE THE WATER SUPPLY AND ANTEROY LORICA SEWER SYSTEMS IN THE ERCA REGION’S MUNICIPALITIES CONSTRUCTION OF A SEWER CORDOBA MONTERIA SYSTEM ON THE LEFT MARGIN OF URB NC L/PO THE CITY OF MONTERIA OPTIMIZATION OF THE WATER PUERTO CORDOBA SUPPLY SYSTEM IN THE URBAN URB IS M ESCONDIDO CENTER CONSTRUCTION OF THE UPTAKE, ADMON PÚBLICA PUERTO WATER MAINS AND WTP IN THE CORDOBA URB COOPERTIVA CPC M LIBERTADOR NEW WATER SUPPLY SYSTEM IN AGUALCAS PUERTO LIBERTADOR 55  TYPE OF DEPARTMENT MUNICIPALITY PROJECT AREA OPERATOR INST\. RISK Analysis STRENGH\. REGIONAL WATER SUPPLY SYSTEM CORDOBA SAN PELAYO URB CPC/PDA S OF SAN PELAYO CONSTRUCTION OF A REGIONAL WATER SUPPLY SYSTEM IN CORDOBA COTORRA COTORRA (Abrojal, Los Gomez, El paso URB APC CPC M de las Flores, Los Cedros, La Culebra, Las Arepas, Trementino and Moralito) REGIONAL WATER SUPPLY STSEM IN TOWNS LOS MORALES IN LORICA CGTO LOS (El Carito, La Subida, Los Monos, Los CORDOBA MORALES EN R IS M Morales, Mata de caña, Rabogacho, LORICA Sarandelo, La Peinada, Rodeito, Recula and Tierralta) CONSTRUCTION OF AN URBAN CUNDINAMARCA PULI URB SERVIPULI S\.A\. ESP CPC M WATER SUPPLY SYTEM – PHASE 1 CONSTRUCTION OF A REGIONAL CAQUEZA Y CPC In CUNDINAMARCA WATER SUPPLY SYTEM IN R S CHIPAQUE progress FRUTICAS - PHASE I CONSTRUCTION OF THE FIRST PHASE OF THE MASTER PLAN FOR A CUNDINAMARCA LA MESA SEWER SYSTEM IN THE URBAN URB NC L CENTER OF THE MUNICIPALITY OF LA MESA 56  TYPE OF DEPARTMENT MUNICIPALITY PROJECT AREA OPERATOR INST\. RISK Analysis STRENGH\. CONSTRUCTION OF A WATER SUPPLY SYSTEM IN THE RURAL TOWNS OF LA SALDA, MALBERTO, CUNDINAMARCA TOCAIMA VILA, ALTO DE LA VIGA, R NC L/PO ASOMADERO, EL VERDAL, CAPOTES, LA MATA Y MORRO AZUL) COMPLETION OF THE FIRST PHASE OF THE CONSTRUCTION OF THE CUNDINAMARCA ZIPAQUIRA URB UfW L MUNICIPALITY OF ZIPAQUIRA’S MASTER SEWER SYSTEM PLAN CONSTRUCTION OF SEWERS FOR SAN JOSE DEL THE VILL ANDREA-SAN JORGE GUAVIARE URB NC M GUAVIARE AREA AND A WATER MAIN IN SAN JOSE DE GUAVIARE CONSTRUCTION OF WASTEWATER TREATMENT CONSTRUCCION HUILA NEIVA URB UfW L COLECTOS ON THE MARGIN OF THE RIO LAS CEIBAS OPTIMIZATION OF THE WATER SUPPLY NETWORKS IN THE URBAN LA GUAJIRA FONSECA URB NC L/PO ZONE, THE CENTER AREA, THE ALTO PRADO AND EL CAMPO OPTIMIZATION OF THE WATER SAN JUAN DEL LA GUAJIRA SUPPLY NETWORK OF THE URBAN URB NC L/PO CESAR ZONE, CENTER AND 20 DE JULIO REPAIR OF THE WATER MAIN BARRANCAS , CHORRERAS FONSECA - LA GUAJIRA URB NC L/PO HATO NUEVO BARRANCAS, NEW REGIONAL WATER SUPPLY SYSTEM 57  TYPE OF DEPARTMENT MUNICIPALITY PROJECT AREA OPERATOR INST\. RISK Analysis STRENGH\. CONSTRUCTION OF A NEW WTP OF THE REGIONAL GRAVITY AQUEDUCT OF THE MUNICIPALITY LA GUAJIRA DIBULLA OF DIBULLA AND THE TOWNS OF URB IS M LA PUNTA, LOS REMEDIOS, LAS FLORES, CAMPANA NUEVO AND VIEJO CONSTRUCTION OF SEWERAGE LA GUAJIRA RIOHACHA NETWORKS IN THE NEIGHBORHOOD URB PGR-SSPD L/PO OF BUENOS AIRES REDUCE VULNERABILITY OF THE LA GUAJIRA RIOHACHA URB PGR-SSPD L/PO WATER SUPPLY SYSTEM OPTIMIZATION OF THE WATER MAGDALENA ARACATACA SUPPLY SYSTEM OF THE URB AGUAS CAPITAL NC L/PO MUNICIPALITY OPTIMIZATION OF THE WATER MAGDALENA EL RETEN SUPPLY SYTEM OF THE URB COOPERATIVA CPC M MUNICIPALITY OF LA CABECERA OPTIMIZATION OF THE POTABLE WATER DISTRIBUTION NETWORK MAGDALENA FUNDACION URB UfW L/PO OF THE MUNICIPALITY OF LA CABECERA CONSTRUCTION OF THE POTABLE WATER TREATMENT PLANT - PHASE SOCIEDAD POR META DEPARTAMENTO URB CPC M I, REGIONAL WATER SUPPLY ACCIONES SYSTEM OF ARIARI CONSTRUCTION OF THE PRINICPAL NARIÑO EL TAMBO SEWER OF THE SEWER SYSTEM OF URB ASOC\. USUARIOS CPC M THE MUNICIPALITY OF TAMBO 58  TYPE OF DEPARTMENT MUNICIPALITY PROJECT AREA OPERATOR INST\. RISK Analysis STRENGH\. OPERATIONAL OPTIMIZATION OF JUNTA NARIÑO LOS ANDES THE WATER SUPPLY SYSTEM OF URB CPC M ADMINISTRADORA THE MUNICIPALITY CONSTRUCTION OF A WATER NARIÑO CUMBAL SUPPLY SYSTEM IN THE URBAN URB IS M CENTER REPLACEMENT OF THE DISTRIBUTION NETWORK FO THE NARIÑO SAMANIEGO URB IS S WATER SYPPLY SYSTEM OF THE MUNICIPALITY OF CABECERA WATER INTAKE STRUCTURE LAS NARIÑO PASTO PIEDRAS FOR THE WATER SUPPLY URB NC L SYSTEM OF PASTO CONSTRUCTION OF THE WATER SUPPLY AND SEWER NETWORKS NORTE DE COOPERATIVA\. EL HERRAN FOR THE RESETTLEMENT AREA IN URB CPC M SANTANDER TAME HERRAN THE URBAN CENTER OF THE MUNICIPALITY CONSTRUCTION OF A SEWER NORTE DE NETWORK IN THE MIRADOR - LOS PATIOS URB NC L/PO SANTANDER VIDELSO AND SUR DEL MUNICIPIO SECTORS CONSTRUCTION OF THE FIRST NORTE DE STAGE OF THE INTERCEPTOR OF OCAÑA URB NC L SANTANDER AGUAS NEGRAS DEL RIO CHUIQUITO CONSTRUCTION OF A WATER PUMP STATION THAT GUARANTEES A QUINDIO ARMENIA SUPPLY OF RAW WATER TO THE URB NC L WATER TREATMENT PLANT THAT SERVICES ARMENIA 59  TYPE OF DEPARTMENT MUNICIPALITY PROJECT AREA OPERATOR INST\. RISK Analysis STRENGH\. OPTIMIZATION OF THE WATER SAN ANDRES PROVIDENCIA SUPPLY SYSTEM OF LA ISLA DE URB NC S PROVIDENCIA CONSTRUCTION OF A WWTP IN THE ESP VALLE DE SAN MUNICIPALITY OF VALLE DE SAN SANTANDER VALLE SAN JOSE URB JOSE SA ESP CPC M JOSE TO IMPROVE WATER QUALITY ESVALLE IN THE FONCE RIVER PUENTE NEW WWTP RIO SUAREZ-PUENTE SANTANDER URB NC M NACIONAL NACIONAL CONSTRUCTION OF THE MAIN SANTANDER CHIPATA SEWER IN THE URBAN CENTER OF URB IS M THE MUNICIPALITY OF CHIPATA CONSTRUCTION OF A SANTANDER CHIPATA STORMWATER SEWER NETWORK IN URB IS M THE URBAN CENTER CONSTRUCTION OF WATER MAINS SANTANDER MALAGA URB IS M JAIMITO (CONCEPCION) ESP DE ACUEDUCTO OPTIMIZATION AND EXPANSION OF ALCATARILLADO Y SUCRE CHALAN THE WATER SUPPLY SYSTEM OF R CPC M ASEO DEL CHALAN MUNICIPIO DE CHALAN SA ESP CONSTRUCTION OF THE NORTHERN TOLIMA LIBANO INTERCEPTOR, QUEBRADA SAN URB IS M JUAN CONSTRUCTION OF THE REGIONAL WATER SUPPLY SYSTEM, OLAYA TOLIMA ORTEGA R ASOC\. USUARIOS CPC M HERRERA, CANALIES, BALSILLAS AND GUAPI 60  IBRD 39061 SAN ANDRÉS Y 75°W 70°W PROVIDENCIA Puerto Bolívar 12°35’ A San Andres J IR Ríohacha UA San 1 Providencia G 6 LA Andres Santa Marta 13°20’ Barranquilla 0 2 12°30’ MILES 0 2 AT L Ã? N T I C O MILES 8 COLOMBIA A Cartegena Valledupar N 81°40’ 81°22’ LE DA 10°N CESAR Lago de C a r ibb e an Maganqué AG 3 4 Maracaibo M Sincelejo Sea PA NA El Baneo SU SU Monteria M C CR AR Acandí 1 NORTE DE E E Ocaña A SANTANDER LÃ?V Turbo A D OB 3 R\.B\. DE BO C ÓR 5 Cúcuta 10 VENEZUELA uca Ca Bucaramanga Yarumal le na Arauca da Socorro ANTIOQUIA Ma g ARAUCA CÃ? Atra 9 ER AND Casanare SANT to YA PA C IF IC Medellin 5 Puerto BO Carreño OC E AN Quibdo Chiquinquirá 1 CASANARE Puerto CHOCÓ S Nueva LDA 1 Tunja CA Manizales CUNDINA- Yopal 5°N RISARALDÃ? Santa Rita 5°N Cartago Pereira MARCA BOGOTÃ? VICHADA Atacavi 5 ta Armenia Me QUINDIO San Pedro 1 Ibaque Giradot Gaviotas Villavincencio Chaviva a da Vich MA Buenaventura Buga VALLE DEL L I2 DISTRITO Puerto TO Palmira CAPITAL Inirída CAUCA Cali M E TA San Juan de Arama 1 Neiva Guaviare GUAINÃ?A CAUCA 13 HUILA San José Mapiripana Tabaquén Guapí Popayan 1 del Guaviare Brujas San Vicente Garzon del Caguán Calamar Patía Tumaco Neg Florencia G U AV I A R E NARIÑO ro 1 San Rafael 5 Miraflores Mitu Pasto Cagu Mocoa Vau pés án Yavarate Ipiales PUTUM CAQUETÃ? VA U P É S Puerto AY Asis O Macujer Puerto Huitoto 0°N E C U A DOR Puerto Leguízamo 0°N Puerto Lérida Pizarro 0 80 160 240 320 Kilometers Caq u etá Puerto Santander 0 40 80 120 160 200 Miles Locas de Ptu Cahuinari ma y o La Pedrera AMAZONAS El Encanto COLOMBIA 1 BRA ZI L WATER AND SANITATION SECTOR SUPPORT PROJECT PERU This map was produced by the Map Design Unit of The PROJECT DEPARTMENTS RIVERS World Bank\. The boundaries, colors, denominations and 13 NUMBER OF PROJECTS DEPARTMENT any other information shown BOUNDARIES Leticia on this map do not imply, on CITIES AND TOWNS the part of The World Bank Group, any judgment on the INTERNATIONAL legal status of any territory, DEPARTMENT CAPITALS BOUNDARIES or any endorsement or acceptance of such NATIONAL CAPITAL 75°W 70°W boundaries\. FEBRUARY 2012

REVIEW

P008520

 ICRR 11341 Report Number : ICRR11341 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 08/19/2002 PROJ ID : P008520 Appraisal Actual Project Name : Kyrgyz Rural Finance Project Costs 20\.9 21\.95 Project US$M ) (US$M) Country : Kyrgyz Republic Loan /Credit (US$M) Loan/ US$M ) 16\.0 15\.9 Sector (s): Board: RDV - Micro- and Cofinancing 2\.6 3\.0 SME finance (94%), US$M ) (US$M) Central government administration (6%) L/C Number : C2959; CQ026 Board Approval 97 FY) (FY) Partners involved : SDC, EU and Japan Closing Date 06/30/2001 06/30/2001 Prepared by : Reviewed by : Group Manager : Group : Anthony J\. Christopher D\. Gerrard Alain A\. Barbu OEDST Blackwood 2\. Project Objectives and Components a\. Objectives Under the government's strategy to provide financial services to rural communities on a commercially sustainable basis (SAR para\. 2\.18) the project had two primary objectives : (i) In the short term , to establish an interim institutional arrangement, namely the Kyrgyz Agricultural Finance Corporation (KAFC), for lending to the agricultural and agribusiness sectors, and (ii) For the medium and long term , to lay the foundation for community -based and managed rural financial institutions for the rural population \. In addition the project had a crucial sub -component (improving the policy environment for rural credit ), without which the project objectives were unachievable, which should have had the rank of an objective but was not even reflected in the Loan Agreement\. b\. Components There were three components: • Kyrgyz Agricultural Finance Corporation (KAFC) (US$13\.0 million base cost): (a) financing of sub-loans for farm restructuring, agribusiness, privatization and development of a rural private sector; (b) TA for development entrepreneurs, and (c) goods for KAFC; • Small Farmers Credit Outreach Program (SFCOP) (US$2\.00 million): Administered by KAFC this program would: (a) test specific mechanisms for credit delivery to poor households; (b) develop farmer organizations to facilitate access of poor households to financial services; (c) provide TA for implementation; and (c) finance sub-loans to members of farmer organizations \. • Institutional and Policy Framework (US$4\.5 million, incl\. TA listed above): (i) Institutional development: (a) revision of KAFC’s charter, adoption of appropriate corporate and management structures, and development of operational policies and procedures; and (b) establish the legal framework for farmer organizations to develop into fully fledged RFIs; (ii) Technical assistance (TA) to assist institutional development \. (iii) Policy changes to reduce credit market distortions and phase out government budgetary allocations to agricultural credit\. c\. Comments on Project Cost, Financing and Dates IDA funds not required for the third component (as government obtained grant funding ) were used for KAFC sub-loans\. 3\. Achievement of Relevant Objectives: The project experienced both substantial achievement and failures against relevant objectives, with some significant development shortfalls which require attention (under the follow-up project?)\. (a) KAFC met the quantitative target of the first objective (which was phrased in general nonspecific terms ) by providing credit to a large part of the farming community while easily exceeding relevant indicators (number of clients, average loan size and recovery rates )\. Not surprisingly, and contrary to the interim concept of the appraisal plan, KAFC appears to be consolidating for the long run, possibly through privatization \. (b) KAFC’s attempt to promote group lending operations on a pilot basis (SFCOP) for poor households did not succeed as neither a workable model nor substantial farmer organizations materialized \. 4\. Significant Outcomes/Impacts: Despite some notable shortfalls, as the ICR puts it : "the project is a good example of a practical, innovative, stop -gap model to fill a complete absence of financial intermediation \.Tens of thousands of poor, small -scale farmers \. in all corners of the country were able to access commercial credit [?] for the first time\." The reach of KAFC credit seems extraordinarily high by normal experience : the ICR refers to 30,000 beneficiaries and about 15,000 borrowers (excl\. 3,250 repeat borrowers) compared with about 23,000 private farms and about 2,000 family and collective farms -- coverage of perhaps half the farming community \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): (a) KAFC lending has been far from "commercially-based" since the government subsidies to KAFC have been very large, especially free capital (incl\. buildings and government receivables ), interest free loans and Government bearing the foreign exchange risk of the IDA loan when inflation has averaged 25 per cent\. It lent at well below market rates (according to beneficiary interviews ), contrary to the project’s policy objective of reducing credit market distortions, and its profit margins have been extraordinarily large as a result \. Not surprisingly no commercial banks were tempted during the project to compete for KAFC’s customers (the "crowding out" problem of traditional agricultural credit systems), although interest is now developing \. However the conditions of the IDA credit did require that all on-lending interest rates equalled the (high) inflation rate\. (b) By type of credit (recurrent) and beneficiaries (mostly primary producers) KAFC’s loan portfolio was much less diverse than planned (which partly explains it exceeding indicators )\. Borrowers were mostly farmers (compared with the broader clientele envisaged at appraisal to strengthen and deepen the rural economy ), although KAFC has started lending for agro-processing, agri-business and non-agricultural activities in rural areas \. Over 80 per cent was short term loans for farm working capital (incl\. some triple repeaters) with most of the balance for livestock purchase (with arguably little capital creation - land purchase was as usual not eligible ), whereas the project design allowed for initial emphasis (only for two years) on seasonal lending in favor of farm restructuring and improvements, equipment purchase, agribusiness (modernization, rehabilitation and expansion ), and for privatization\. Hence the portfolio has had narrower development impact than intended despite reaching a high proportion of farming families \. (b) The effectiveness of social collateral provided by group membership under the SFCOP component, as a means of supplying credit to otherwise high risk assetless poor borrowers, was not tested \. All SBCOP loans were made directly to individual group members with full physical collateral (and moreover the small amount of group development achieved is considered unsustainable )\. Thus such loans would not have reached the poorer families (who were the targets of the group approach ) and in any case the SFCOP borrowers would mostly have qualified for regular loans from KAFC\. The SFCOP component was thus in competition with KAFC ’s main lending operations without any extra social benefits, and there was little incentive for KAFC staff to promote SFCOP lending \. (c) The large amount of TA had limited impact : it was not all relevant nor attuned to the absorptive capacity of KAFC; the most relevant TA, for credit management, was not effective; the KAFC operational manual was not completed satisfactorily; and the assistance provided for group lending was neither relevant nor effective \. This poor record was partly because TA was funded by cofinancier grants (instead of IDA funds) at the behest of the Borrower and KAFC, and these activities were not closely managed \. (d) Credit market distortions were increased temporarily during an election and as a result the IDA credit was suspended for four months in 2000\. (No information in the ICR on compliance with Bank safeguard policies \.) 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Satisfactory Although a highly relevant need was filled (quite easily) there was much of high relevance not achieved, especially institutionally, as described in Section 5\. Institutional Dev \.: Substantial Modest KAFC is supposedly a temporary agency, was established prior to the project, still needs improvement, and the SBCOP component achieved little\. Much of the ID work was to be driven by TA inputs which were generally poor\. No information provided on the policy sub -component\. Sustainability : Likely Likely The rating refers to the benefits for the bulk of expenditure, for farm sub -loans for recurrent costs, not to ID benefits, nor to the few farmer groups which are unsustainable\. In any case KAFC  repayments are at over 80 per cent and reflows are being relent\. 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: (a) Filling a credit vacuum in the short term through sub -market rates through a subsidized line of credit under a monopoly parastatal agency makes it difficult to avoid the long term development flaws of traditional credit programs \. These problems may constrain future attempts to move towards viable market based rural finance institutions \. (b) A conventional public credit agency is not a competent or objective agency to be charged with social organization as a precursor of RFIs\. (c) Technical assistance components must be carefully designed in consultation with all stakeholders, carefully managed and implemented in a flexible way if they are to be effective and avoid wasted effort \. (d) Medium and long term investment lending, and lending to business enterprises, requires different skills and more effort than simple lending for operating capital, and therefore needs to be driven by specific programs and institutional arrangements\. 8\. Assessment Recommended? Yes No Why? Possibly together with the second project \. The ICR does a nice job of describing the experience, but it was not as satisfactory as the ICR suggests \. A lot did not happen, was done poorly (social organization and TA) or is not well reported\. 9\. Comments on Quality of ICR: Satisfactory, incl\. being frank about most of the project ’s deficiencies, but could have been improved \. It lacks clarity in places probably because of the confusing project objectives statements \. It overstates the significance of the success of KAFC in getting out numerous working capital loans (with a ready market in a credit drought ) and the positive demonstration value of the project to commercial banks (for the future), as KAFC is far from being a commercial bank\. And finally it omits information on the achievement (or lack thereof) of the important policy objectives in the third component \.

REVIEW

P115737

 ICRR 13396 Report Number : ICRR13396 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 09/01/2010 PROJ ID : P115737 Appraisal Actual Project Name : Mongolia-developmen Project Costs (US$M): US$M ): 40\.0 43\.9 t Policy Credit Country : Mongolia Loan /Credit (US$M Loan/ ): US$M): 40\.0 40\.0 Sector Board : EP US$M ): Cofinancing (US$M): 0\.0 3\.9 Sector (s): Banking (36%) Mining and other extractive (24%) Central government administration (24%) Other social services (16%) Theme (s): Macroeconomic management (40% - P) Public expenditure financial management and procurement (20% - S) Standards and financial reporting (20%) Other public sector governance (10%) Social safety nets (10% - S) L/C Number : C4618 Board Approval Date : 06/25/2009 Partners involved : Australian Trust Fund Closing Date : 11/01/2009 10/30/2009 Evaluator : Panel Reviewer : Group Manager : Group : Mauricio Carrizosa Kris Hallberg Ali Khadr IEGCR 2\. Project Objectives and Components: a\. Objectives: The overall development objective of the Development Policy Credit (DPL) was to assist the government in managing the downturn triggered by the collapse of the copper price \. The set of reforms selected by the DPL covered fiscal policy, social protection, the financial sector, and the mining sector, with the following specific expected results in each area: : Fiscal Policy and Management :: (i) a more sustainable fiscal framework to manage the volatile mining revenues \. Although the program document does not state this as a PDO in the Credit and Program Summary, it articulates it as one of the expected results of this component (para\. 92); (ii) improve capital budget planning and execution, and protect the maintenance of basic infrastructure ;  Social Protection : (iii) better protection of the poor, particularly during the downturn; Financial Sector : (iv) strengthen confidence in the financial sector; Mining Sector : The program document states that the formal PDO for mining is to "clarify the mining policy framework"\. However, "clarifying mining policy" is really an input, not a result or objective \. Moreover it lacks any specificity \. The program document also indicates (para\. 141) the following expected results : (v) new mining projects utilize the draft model investment agreement; (vi) responsible mining practices are followed in both large and small -scale mining; (vii) industry compliance with modern taxation practice and to reduction of tax disputes; and (viii) compliance with the Extractive Industries Transparency Initiative (EITI), on transparency and accountability in the extractive sector\. These are more specific and more closely aligned with outcome indicators (investment agreements, cadastre regulations, monitoring of mining practices, and EITI compliance ), although the latter are also inputs, not outcomes or objectives\. 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 loan supported reforms as follows : A\. Fiscal Policy and Management (specific objectives i and ii): short term actions covering budget and investment planning and capital maintenance expenditures, and medium term actions covering fiscal, budget, and social transfers legislation \. B\. Social Protection (specific objective iii): reintroduce targeting of the Child Money Program (CMP) towards the poor, consolidate social transfer programs, and adjust the size of the social transfer to ensure both fiscal responsibility and adequacy in terms of impact on the poor \. C\. Financial Sector: (specific objective iv): actions covering failed-bank resolution; enhanced oversight of liquidity, asset quality, foreign currency risk and off -balance sheet transactions; contingency planning against various scenarios, and well-sequenced capital increases \. D Mining Sector (specific objectives v to viii ): adopt a draft model investment agreement; clarify legislation and/or regulations on equity participation, mining cadastre licenses, mining management, mining closures, small mining operations, and uranium mining processing and marketing; and validate compliance with the EITI program\. The interventions consisted of eight prior actions that were met \. Component A \. Fiscal policy and management Prior Action 1\. Improve budget planning and screening, as demonstrated by the exclusion of 30 projects without feasibility studies from the 2009 budget, as amended in March\. Prior Action 2\. Protect capital expenditures for the maintenance of basic infrastructure in the transport, education and health sectors, as evidenced by : (i) the increase in the ratio of capital repairs to new investments from 2\.5 percent (in the original approved budget for 2009) to 3\.4 percent (in the amended budget for 2009); and (ii) the allocation of MNT 12\.4 billion for that purpose\. Component B \. Social protection Prior Action 3\. Prepare (Ministry of Social Welfare and Labor ) a time-bound action plan to clean its roster of beneficiaries of the CMP, in order to reduce leakage to the non -poor and improve its targeting on the poor \. Component C \. Financial sector Prior Action 4\. Prepare (Bank of Mongolia, BoM) an action plan for the restructuring /resolving of the bank currently under conservatorship, on the basis of the bank ’s portfolio diagnostic and audit carried out by an internationally reputable auditor \. Prior Action 5\. Issue (BoM) a decree requiring that all banks report on a daily basis on key indicators regarding their liquidity and asset quality \. Prior Action 6\. Establish (BoM) a crisis management and systemic risk monitoring task force with adequate functions and powers, qualified staff and sufficient resources to carry out its mandate \. Component D \. Mining Prior Action 7\. Develop and adopt (Ministry of Mineral Resources and Energy ) model investment agreements for the mining sector, clarifying Mongolia ’s mining policy, including taxation and the state ’s capital participation, and incorporating responsible mining practices consistent with the Equator Principles \. Prior Action 8\. Transfer sufficient resources to the Mongolia EITI Secretariat in order to finance an independent validation of EITI compliance\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project cost and financing includes the Bank loan amount ($40 million) and a grant from the Australian Trust Fund (TF095001 in the amount of AUD$4\.7 Million equivalent to US$3\.9 Million) administered by the Bank, released and disbursed in October 2009, but to which the ICR makes no reference \. 3\. Relevance of Objectives & Design: Relevance of Objectives\. The DPL was primarily motivated by the impact of the global financial crisis on Mongolia's economy, including a 60 percent decline in the price of copper during the second semester of 2008 and a decline in the GDP growth rate from 9 percent in 2008 to 2\.7 percent in 2009\. These impacts had adverse effects on Mongolia's fiscal accounts that the Government sought to redress (Objectives i and ii)\. Furthermore, a component of the fiscal adjustment was to target Mogolia's universal transfer system to the poor both to better protect the poor during the downturn (Objective iii) and to contain public expenditure as part of the needed fiscal adjustment (Objective i)\. In response to the failure of a major commercial bank that triggered a run on its deposits and to the possible adverse effects of the downturn on banks, the Government sought to improve confidence in the financial system (Objective iv)\. Finally, the Government sought to clarify certain elements of its mining policy, although it did not articulate (in its Letter of Development Policy ) the objectives of this effort \. The program document suggests that the objective may be to redress conditions allowing the mining sector to lead the recovery from the crisis (para\. 27)\. The DPL objectives were aligned with the three strategic areas indicated by the Interim Strategy Note (ISN) issued in April 2009: a) macro and fiscal sustainability (covering objectives i, ii and iv ); b) protection of the poor and vulnerable (Objectve iii); c) and transparent and prudent mining investments and a better investment climate (Objectives v to viii)\. With objectives addressing well -identified development challenges and consistent with the ISN issued at about the same time, relevance of objectives is rated substantial \. Relevance of Design\. Prior actions (see section 2C) suggest a degree of government commitment to these objectives\. Concomitant technical assistance intended to address institutional capacity gaps in the design and implementation of planned policies also contributed to relevance of design \. However, the prior actions supported by the DPL, although standard and critical, were far from sufficient for achieving objectives i to iv \. The Bank designed this loan as a "one-off" operation, with a possible follow-up operation as the needed follow up actions or reforms became better articulated, implemented and /or approved, including e\.g\., a better fiscal framework to manage volatile mining revenues and temper their procyclical effects and stronger social protection actions (than just improving measurement of the poor ) to provide better protection of the poor \. Furthermore, the  relevance of mining reforms was uncertain since the reforms were also the objectives, with no clear statement of what the higher order expected outcomes were \. Given the insufficiency of the of the reforms, relevance of design is rated modest\. 4\. Achievement of Objectives (Efficacy): Fiscal Policy and Management Objective (i) a more sustainable fiscal framework to manage the volatile mining revenues , The program document states this objective in the expected results of this component but does not define outcome indicators \. A standard set of outcome indicators for fiscal sustainability includes : a) the nonmineral primary balance, which the IMF estimated to increase from -15\.1 percent of GDP in 2008 to -12\.9 percent in 2009; and b) public debt, which the IMF estimated to increase from 33\.8 percent of GDP in 2008 to 53\.4 percent in 2009\. Renewed concerns regarding fiscal sustainability emerged in the first quarter of 2010, as higher mining-related revenues triggered concomitant increases in expenditures, with public debt now projected to increase to 66\.2 percent of GDP in 2010\. Structural reform legislation in support of this objective was submitted to parliament and approved (Fiscal Responsibility), submitted but not yet approved (Social Transfers) or not yet submitted (Organic Budget Law) \. With (a) progress achieved in reducing the primary fiscal balance in 2009; (b) concerns arising on the evolving fiscal stance in 2010; (c) increasing debt in 2009 and 2010; and (d) progress towards a better fiscal framework, efficacy in achieving this objective is rated substantial \. Objective (ii) a better planned and executed public investment program, including protection of the capital maintenance expenditures of basic infrastructur e; The program document defined two outcome indicators : a) number of projects without feasibility studies in the 2009 budget reduced by 30 projects (valued at MNT 19\.8 billion); and b) 2009 budget outturn has maintained allocation for repairs and maintenance of basic infrastructure at MNT 12\.4 billion\. Furthermore, the Program document suggests that part of the strategy was to reduce total government investment\. The latter declined from 10\.4 percent of GDP in 2008 to 7\.6 percent in 2009 and IMF expects it to decline further to 6\.0 percent in 2010\. The July revision of the 2009 budget accumulated a below-target reduction of MNT 16\.3 billion in projects without feasibility studies and the public investment plan (PIP) for 2010 removed most projects without feasibility studies\. The 2009 budget outturn for repairs and maintenance of basic infrastructure was slightly below target at MNT 11\.6 billion and the 2010 budget increased the allocation to MNT 17\.4 billion (in 2009 prices), or 3\.9 percent of government investment, higher than in 2009 (2\.5 percent)\. With (a) reductions in total capital outlays (as a percent of GDP), (b) considerable containment in the value of investments without feasibility studies and (c) progress on increasing maintenance expenditures (slightly below than target in 2009 but significantly higher in the revised 2010 PIP), efficacy in achieving this objective is substantial \. Social Protection Objective (iii) better protection of the poor, particularly during the downturn \. This objective was to be achieved by moving from untargeted, universal transfers to transfers targeted towards the poor, while ensuring fiscal sustainability\. The IMF estimated that total transfers increased from 10\.2 percent of GDP in 2008 to 12\.5 percent in 2009 and projected an expansion to 13\.8 percent in 2010\. Transfers will remain universal until 2010, but are expected to become targeted to the poor in 2011, following approval of a new Social Transfers Law later this year\.With transfers remaining untargeted and increasing in 2009 and 2010, but a targeting law submitted for approval later this year, the efficacy in achieving this objective is rated modest\. The outcome indicator defined by the program document (At least 75 percent of the surveys to collect household level data for the national beneficiary database based on a proxymeans -test formula have been completed ) was not met\. As indicated before, a draft Social Transfers Law was submitted to Parliament but did not yet pass \. A Proxy Means Testing method and formula have been developed but were not yet approved \. Prior action 3 (to clean the roster of CMP beneficiaries ) became irrelevant when the CPM was cancelled \. Financial Sector Objective (iv) strengthen confidence in the financial sector ; The introduction of deposit insurance in November  2008 and Central Bank liquidity support contributed to strengthen confidence, with broad money recovering from 37\.7 percent of GDP in 2008 to 47\.6 in 2009 (it was 52\.0 percent in 2007) and Moody's upgrading its B2 Bank deposit rating from negative to stable in November 2009\. More recently, Bank supported actions that improved monitoring of liquidity and asset quality, enforcement of prudential regulations, and resolution of failing banks are contributing to sustain confidence, particularly as concerns have emerged with deterioration of asset quality \. With some of the progress in confidence attributable to DPL supported reforms, the efficacy in achieving this objective is modest\. Mining Sector Objective v) new mining projects utilize the draft model investment agreement \. Signing of the major Oyu Toigoi project investment agreement with the new model agreement indicates this objective was achieved \. Accordingly, efficacy in achieving this objective is rated high\. Objective vi) responsible mining practices are followed in both large and small -scale mining \. There is incipient progress in monitoring for compliance with responsible mining practices \. Hence, the efficacy in achieving this objective is modest\. Objective vii) industry compliance with modern taxation practice and to reduce tax disputes \. There is no evidence on the extent of industry compliance with modern taxation practice or on the reduction of tax disputes \. Hence, the efficacy in achieving this objective is not rated \. Objectiveviii) compliance with the Extractive Industries Transparency Initiative (EITI), on transparency and accountability in the extractive sector \. The independent EITI validation report noted that Mongolia made good progress against the work plan and completed all core activities, although validation was still pending as of May, 2009\. Accordingly, effficacy in achieving this objective is rated substantial \. 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: As discussed above (Sections 3 and 4) objectives were relevant to country conditions and Bank strategy and policies/reforms were relevant, albeit hardly sufficient, to stated project objectives \. Achievement of results varied from modest on social protection, financial sector confidence, and supervision of mining practices, to substantial on fiscal sustainability, public investment planning and EITI compliance, to high on enabling mining investment agreements\. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: Weakening government commitment to follow up reforms, higher mineral prices and increased fiscal transfers through the Human Development Fund pose some threat to the development and consolidation of a more sustainable fiscal framework\. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: The DPL addressed relevant objectives with reforms /policies that were relevant to those objectives, provided appropriate coverage of structural, macroeconomic, financial (banking), and social protection aspects, and was complemented with relevant technical assistance \. Relevance of design was somewhat compromised by reforms that, while relevant, were insufficient or quite uncertain for a "one off" operation in terms of the stated objectives pursued by the operation \.The bank supervised relevant developments through periodic updates and briefs, increasing their frequency from a quarterly to a monthly basis, and coordinated well with the IMF and other donors\. at -Entry :Satisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Satisfactory c\. Overall Bank Performance :Satisfactory 9\. Assessment of Borrower Performance: Despite good ownership and commitment, Government and implementing agency performance (covering the Ministry of Finance, Ministry of Social Welfare and Labor, Central Bank, and Ministry of Mineral Resources and Energy) has been subject to two constraints \. The first is expenditure pressures, covering both capital and social expenditures, that have limited progress on fiscal performance \. The second is implementation capacity in some areas\. 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\. M&E design was appropriate in that it envisaged restructuring of Bank TA projects to improve monitoring and feedback on economic policy and more specifically a project to strengthen statistical capacity in the areas covered by the project \. However, the outcome indicators were often removed from the stated objectives\. For example, the outcome indicator for the objective of protecting the poor during the downturn was completion of at least 75 percent of the surveys to collect household level data for the national beneficiary database based on a proxymeans -test formula\. The latter is hardly an indicator of the extent of protection of the poor\. M&E Implementation\. Data collection was better on fiscal and banking issues, although more DPL -specific data on capital expenditures was limited in quality and frequency and better information is needed on bank asset quality\. Data on the impact of social transfers on the poor was unavailable, pending the collection of survey data that was part of the DPL design \. Indicators of "reponsible mining practices" or of "compliance with modern taxation practice and reduction of tax disputes " were also unavailable\. The Bank's intended statistical strengthening project was approved in May 2009\. M&E Utilization\. The Bank, the IMF and the government used the available fiscal and banking data for their decision making (e\.g, actions upon data that alerted the authorities on the deteriorating situation of a bank )\. The increased frequency of the Bank's Economic Updates may have helped policymakers and the public to follow the crisis in more depth and contributed to enhanced awareness of the country ’s macroeconomic environment\. But with scant household data, it was difficult to monitor and assess impact of the crisis and of social transfers on the poor\. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Achievements were modest, not Satisfactory substantial, in fiscal policy and social protection objectives and substantial, not high, in mining sector objectives \. Risk to Development Moderate Moderate Outcome : Bank Performance : Satisfactory Satisfactory Borrower Performance : Satisfactory Moderately Borrower performance was adversely Satisfactory affected by expenditure pressures from higher mining revenues and some gaps in implementation capacity\. 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 experience with this project suggests the following lessons : (a) As expected, results remain subject to risks where prior and intermediate actions are critical but not sufficient to achieve objectives as formulated \. In this operation, risks to objectives materialized as commitment to better fiscal arrangements might have been somewhat weakened by the new affluence from higher mineral revenues\. (b) Related to lesson (a) above, the "one-off" or "single tranche" design of the operation, while understandable given the uncertainties of the government's reform program, implied that objectives should have been better tailored to what the implemented and the likely future reforms supported by the operation were to achieve with an acceptable degree of likelihood \. There is of course a minimal scope of reforms that would be needed to achieve objectives of any validity in terms of results on the ground \. (c) It is important to distinguish sharply between reforms and objectives \. Evaluation was rendered difficult for the mining sector, where neither the Letter of Development Policy nor the Program Document articulated clearly what was to be expected from "clarifying the mining policy framework "\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR meets formal reporting requirements and provides adequate information and analysis of context, implementation and outcomes\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P159669

FOR OFFICIAL USE ONLY Report No: ICR00005042 IMPLEMENTATION COMPLETION AND RESULTS REPORT IBRD-86050 AND IBRD-88690 ON A LOAN IN THE AMOUNT OF US$500 MILLION TO INDIA FOR THE FIRST AND SECOND PROGRAMMATIC ELECTRICITY DISTRIBUTION REFORM DEVELOPMENT POLICY LOAN FOR RAJASTHAN June 9, 2021 Energy and Extractives Global Practice South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\. Official Use  CURRENCY EQUIVALENTS (Exchange Rate Effective October 31, 2019) Currency Unit = Indian Rupee (INR) INR 71\.1 = US$1 FISCAL YEAR July 1–June 30 ABBREVIATIONS AND ACRONYMS ACoS Average Cost of Supply AMI Advanced Metering Infrastructure AMR Automatic Meter Reading ARR Average Revenue Realized AT&C Aggregate Technical and Commercial AVVNL Ajmer DISCOM or Ajmer Vidyut Vitran Nigam Ltd\. BPL Below Poverty Line CFL Compact Fluorescent Lamp CGFA Corporate Governance and Financial Accountability CPF Country Partnership Framework CPS Country Partnership Strategy DISCOM Distribution Company DPL Development Policy Loan EPI Employee Performance Incentive ERP Enterprise Resource Planning FRBM Fiscal Responsibility and Budget Management GoI Government of India (Central Government) GoR Government of Rajasthan GSDP Gross State Domestic Product IPF Investment Project Financing IT Information Technology JdVVNL Jodhpur DISCOM or Jodhpur Vidyut Vitran Nigam Ltd\. JVVNL Jaipur DISCOM or Jaipur Vidyut Vitran Nigam Ltd\. LED Light Emitting Diode MOP Ministry of Power MoU Memorandum of Understanding O&M Operations and Maintenance P4R Program-for-Results PFA Power for All PPA Power Purchase Agreement Official Use R-APDRP Restructured-Accelerated Power Development and Reform Program RERC Rajasthan Electricity Regulatory Commission RSEDMR Rajasthan State Electricity Distribution Management Responsibility RUVNL Rajasthan Energy Development Corporation Ltd\. or Rajasthan Urja Vikas Nigam Ltd\. UDAY Ujwal DISCOM Assurance Yojana (Program for the Financial Turnaround of DISCOMs) Regional Vice President: Hartwig Schafer Country Director: Junaid Kamal Ahmad Regional Director: Guangzhe Chen Practice Manager: Simon J\. Stolp Task Team Leader(s): Rohit Mittal ICR Main Contributor: Phillip Matthew Hannam Official Use  TABLE OF CONTENTS DATA SHEET \. 1 I\. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES \. 5 II\. ASSESSMENT OF KEY PROGRAM DESIGN AND OUTCOMES \. 11 III\. OTHER OUTCOMES AND IMPACTS \. 25 IV\. BANK PERFORMANCE \. 27 V\. RISK TO SUSTAINABILITY OF DEVELOPMENT OUTCOMES \. 31 VI\. LESSONS AND NEXT PHASE \. 32 ANNEX 1\. RESULTS FRAMEWORK \. 35 ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES \. 41 ANNEX 3\. BORROWER, CO-FINANCIERS, AND OTHER DEVELOPMENT PARTNERS’/STAKEHOLDERS’ COMMENTS \. 43 ANNEX 4\. SECTORS AND THEMES \. 44 ANNEX 5\. SUPPORTING DOCUMENTS \. 46 Official Use  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) DATA SHEET BASIC INFORMATION Program Series Project ID Short Name Full Name First Programmatic Electricity First Programmatic Electricity Distribution Reform P157224 Distribut Development Policy Loan for Rajasthan Rajasthan Electric Distribution Second Programmatic Electricity Distribution Reform DPL P159669 Reform 2 for Rajasthan Series Details (USD) Project ID Approved Amount Disbursed Amount P157224 250,000,000\.00 250,000,000\.00 P159669 250,000,000\.00 250,000,000\.00 Total 500,000,000\.00 500,000,000\.00 KEY_D PF_OPTI ONS_ TBL P157224 P159669 Policy-Based Guarantees No No Ln/Cr/TF IBRD-86050 IBRD-88690 Concept Review 16-Dec-2015 18-Jan-2017 Decision Review 16-Feb-2016 11-Dec-2017 Approval 25-Mar-2016 05-Jul-2018 Effectiveness 13-May-2016 01-Oct-2018 Original Closing 31-Mar-2017 30-Sep-2019 Actual Closing 31-Mar-2017 31-Oct-2019 Crisis or Post-Conflict No No Page 1 of 47 Official Use  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Regular Deferred Drawdown Option No No Catastrophe Deferred Drawdown Option No No Sub-National Lending Yes Yes Special Development Policy Lending No No Organizations Series Project Borrower Implementing Agency P157224 Republic of India Department of Energy, Government of Rajasthan P159669 Department of Economic Affairs, Energy Department, Government of Rajasthan, Ajmer, Ministry of Finance Jaipur and Jodhpur DISCOMs Program Development Objective (PDO) Program Development Objective (PDO) (From last operation in the series) The proposed second operation of the program will continue to support the Government of Rajasthan’s program for the turnaround of the distribution sector in Rajasthan under the 24x7 Power for All program\. The Program Development Objectives are to support the turnaround of the electricity distribution sector in Rajasthan, by (a) strengthening the governance framework, (b) enhancing policies torestructure its finances, and (c) improving its operational performance\. PROGRAM FINANCING DATA (USD) World Bank Administered Financing Approved Amount Actual Disbursed P157224 250,000,000 250,000,000 IBRD-86050 P159669 250,000,000 250,000,000 IBRD-88690 Total 500,000,000 500,000,000 RATINGS SUMMARY Page 2 of 47 Official Use  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Program Performance Overall Outcome Relevance of Prior Actions Achievement of Objectives (Efficacy) Moderately Satisfactory Satisfactory Moderately Satisfactory Bank Performance Satisfactory ACCOUNTABILITY AND DECISION MAKING At ICR: Regional Vice President Country Director Director Hartwig Schafer Junaid Kamal Ahmad Guangzhe Chen Practice Manager Task Team Leader(s) Simon J\. Stolp Rohit Mittal At Approval: P157224 Regional Vice President Country Director Director Annette Dixon Onno Ruhl Anita Marangoly George Practice Manager Task Team Leader(s) Julia Bucknall Demetrios Papathanasiou, Rohit Mittal P159669 Regional Vice President Country Director Director Ethel Sennhauser Junaid Kamal Ahmad Riccardo Puliti Practice Manager Task Team Leader(s) Demetrios Papathanasiou Rohit Mittal, Frederico Gil Sander Page 3 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Page 4 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) I\. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES A\. Context at Appraisal Context 1\. Efforts to alleviate poverty in Rajasthan are significant for all of India, as the nation’s sixth most populous state and the seventh largest state economy with a gross state domestic product (GSDP) of US$43 billion in 2012\. In the decade leading up to the Development Policy Loan (DPL) series initiated in 2015, Rajasthan’s economy grew faster than the nation as a whole, with an annualized rate of 7\.9 percent\. The state poverty rate also fell more rapidly than the national average, and economic growth was significantly more effective at reducing poverty in Rajasthan than at the all-India level\. 2\. In 2014, the Ministry of Power, Government of India (GoI), launched the ‘24 x 7 Power for All’ (PFA) program as a joint initiative between GoI and states/union territories to provide continuous, reliable power supply to all domestic, industrial, and commercial customers and adequate supply to agricultural customers, by 2019\. PFA was one of the six priority areas agreed between the Indian Prime Minister and the World Bank President in July 2014 for collaboration and engagement\. The PFA program set a broad power sector development agenda and addresses adequacy of generation, transmission and distribution capacity addition, affordable procurement and efficiency of electricity supply, financial measures to ensure liquidity of the utilities, loss reduction, modernization and automation of the power system to improve reliability and consumer satisfaction, and state coverage of the subsidies to the utilities up front\.1 Around the same time, the Government of Rajasthan (GoR) released a ‘Vision 2020’ that included goals for improving capacity and efficiency of the transmission and distribution sectors\. 3\. These strategies came at an important time because the electric power sector in Rajasthan faced serious structural financial challenges that risked its immediate and long-term health\. The distribution sector is at the heart of the structural deficit\. Rajasthan’s share of electricity consumed by categories of consumers that are subsidized is the highest in the country, including approximately 45 percent of electricity consumption going to agriculture\. Rajasthan’s distribution companies (DISCOMs) were also experiencing losses to theft and network inefficiency approaching 30 percent, while power costs were among the highest in the country owing to Rajasthan’s coal power stations being far from the coal mining regions of India and higher costs of transmission owing to a population density roughly half the national average\. 4\. From FY09 to FY14, annual revenue deficits ballooned by 130 percent, as the state delayed tariff adjustments even as generation and operational costs increased, such that only 50 percent of costs were recovered through electricity sales\. As deficits mounted, the DISCOMs) resorted to short-term borrowing with interest costs so high that debt service constituted INR 1\.81 per kWh sold in FY14 (compared to an average of INR 0\.44 per kWh nationally)\. By FY15, the accumulated revenue deficits of the DISCOMs in Rajasthan were ~INR 814 billion (US$13 billion), putting the DISCOMs in a position of unsustainable debt 1 Joint initiative of GoI and GoR (December 2014)\. ‘24x7-Power for All’\. Page 5 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) service levels\. The precarious situation of the Rajasthan DISCOMs2 effectively left no choice but for losses to be assumed by the state, else a broader crisis would ensue\. Financial institutions were reluctant to extend further financing owing to the risk of nonperforming loans, with potential collateral damage to generation and transmission sectors given the perceived risks of non-payment by the DISCOMs\. This impact could substantially hamper the power sector’s ability to serve rising demand during a period of rapid expansion of electricity services and industrialization\. 5\. The state had a history of assuming the debts of the DISCOMs as contingent liabilities\. The state’s financial support to the electricity distribution sector was in the form of (a) subsidies for supply of power to the agriculture sector, (b) interest subsidies for loans taken by DISCOMs, (c) equity support for capital investments, and (d) financial bailouts and rebalancing of debt-equity ratios\. In FY15, total public support to the power sector in the state amounted to 2\.4 percent of GSDP, eroding state efforts since 2005 to reduce the fiscal deficit\. 6\. Although Rajasthan’s DISCOMs had the most accumulated debt than any other state in India, the issue of financial insolvency of the distribution sector is not unique to Rajasthan and has been seen as the core challenge to the sustainability and viability of the Indian power sector for decades\.3 India’s DISCOMs have accumulated losses of INR 3\.8 trillion (US$61 billion), serving debts with interest rates as high as 14– 15 percent\. The financial distress was most directly attributed to non-revision of tariffs while costs increased, causing the gap between Average Cost of Supply (ACoS) and Average Revenue Realized (ARR) to swell to INR 2\.36 per kWh by FY15–FY16\. Rajasthan’s tariff increases had lagged those of other states whose distribution sectors were in better financial health\. Rationale 7\. In July 2015, the GoI requested US$500 million in World Bank financing for the GoR to help achieve long-term financial sustainability of the electricity distribution sector and ensure quality, affordable, and reliable power supply to all customers in Rajasthan\. The activities were to include reforms by the GoR to improve operational efficiency and financial sustainability of the power sector in Rajasthan in the long run\. While the initial financing request was for a significantly higher amount, it was subsequently scaled down based on discussions of the state with the GoI\. Even though the financing being sought from the World Bank was a small proportion of the needs of Rajasthan, the GoR saw the merit of having an independent third party to support the state during what promised to be a difficult journey of reforms and to enhance visibility of progress even if there were challenges\. This request for support came at a time of growing recognition by the state and the Ministry of Power (MOP) that comprehensive financial restructuring was needed and that such intervention could only be sustainable if accompanied by governance and operational reforms for the distribution sector\. 8\. While discussions between the GoR and the World Bank to support the state distribution sector were in progress, the GoI was preparing a broader financial bailout plan for the distribution sector, which 2 Distribution of electricity in Rajasthan is the responsibility of three state-owned companies: Jaipur Vidyut Vitran Nigam Ltd (JVVNL or Jaipur DISCOM), Jodhpur Vidyut Vitran Nigam Ltd (JdVVNL or Jodhpur DISCOM), and Ajmer Vidyut Vitran Nigam Ltd (AVVNL or Ajmer DISCOM)\. There are legally distinct from transmission and generation companies and an independent regulator (Rajasthan Electricity Regulatory Commission [RERC]) responsible for approving tariffs and oversight of regulatory obligations\. 3 Dubash, Navroz K\., ed\. 2018\. Mapping Power: The Political Economy of Electricity in India’s States\. Oxford University Press\. Page 6 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) was announced in November 2015 and was called Ujwal Discom Assurance Yojana (UDAY)\. UDAY was intended as a systemic intervention to alleviate the risk imposed by DISCOM insolvency on the financial sector and create levers for introducing commercial discipline in the sector\. The UDAY program included provisions for: (i) improving operational efficiencies, including reduction of losses and revenue requirements adjustments; (ii) improving optimization of power generation costs and price discovery by the DISCOMs; (iii) requiring state governments to absorb and restructure the majority of DISCOM debt through bond issuance that would lower interest payments by the DISCOMs; and (iv) making the contingent liabilities of the states to the DISCOMs explicit and mandating states to finance DISCOM deficits rather than allowing DISCOMs to resort to borrowings from financial institutions to cover losses\. 9\. As a concurrent subject under the Indian constitution, electricity is the domain of both central and state policy making\. Governance of the power sector in India has served important social objectives, including expanding access and providing electricity for water pumping in agriculture\. The structure of the Indian distribution sector has long left it substantively reliant on government support,4 owing to a nonviable operational and financial model from a commercial perspective\.5 Successive waves of reform have not forestalled the need for later relief, but each has moved the power sector toward more sustainable operation\. In 2001, Rajasthan implemented recommendations from the Ahluwalia Committee on a bailout of the distribution sector that converted arrears into state government bonds\. The GoI adopted the 2003 Electricity Act to increase the performance and efficiency of the power sector, including by permitting competition, increasing transparency through state electricity regulatory commissions, and moving toward sector cost recovery and commercial viability\. Less than a decade later, in 2012, the GoR had to assume 50 percent of the outstanding short-term liabilities of DISCOMs, amounting to US$3 billion, onto the state government’s balance sheet and recapitalized the companies through equity support\. This Scheme for Financial Restructuring of State Distribution Companies was not seen as effective in guarding against future DISCOM loss accumulation owing to inadequacy of a monitoring framework for efficiency improvement efforts, a failure to control the cost of power supply, and lack of managerial accountability\.6 10\. Based on earlier experience, UDAY was designed with substantive reform actions that had to accompany the financial assistance to mitigate the risks of moral hazard\.7 UDAY was to be implemented through tripartite memorandums of understanding (MoUs) between the GoI, the state, and DISCOMs that included several features to incentivize performance and discourage backsliding\. Only partially achieved through the prior schemes under UDAY, the financial liabilities of the DISCOMs were to be assumed directly by the states thus investing them in enhanced DISCOM performance\. UDAY also prohibited further commercial lending and high interest rates that accompany them, required review of long-term power purchase agreements (PPAs) and procurement through the power exchange to lower the cost of bulk power supply from generators to the DISCOMs; required heightened measures to reduce distribution 4 Former Planning Commission official, referenced in Dubash, Navroz K\., and Sudhir Chella Rajan\. 2001\. “Power Politics: Process of Power Sector Reform in India\.” Economic and Political Weekly (2001): 3367–3390\. 5 Khurana, M\., and S\. G\. Banerjee\. 2015\. “Beyond Crisis: The Financial Performance of India’s Power Sector \.” World Bank, Washington, DC\. 6 The inability for these conditions to remove moral hazard are noted in Pargal, S\., and S\. G\. Banerjee\. 2014\. More Power to India: The Challenge of Electricity Distribution\. Directions in Development - Energy and Mining\. Washington, DC: World Bank\. 7 The logic of moral hazard would hold that because the state would never allow the DISCOM to fail as its financial situation deteriorated, there would be weak incentive for the DISCOM to undertake costly substantive reforms that could forestall financial deterioration\. Page 7 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) losses and improve revenue recovery from power sales; and imposed penalties for noncompliance including ineligibility for central financing schemes made available by MOP\. 11\. The World Bank’s intention in supporting Rajasthan was to achieve long-term financial sustainability and included full implementation of UDAY in addition to technical and operational reforms that would forestall further financial deterioration and improve service with a long-term view to more modern, efficient, and sustainable operations\. 12\. The DPL series was designed to support the World Bank’s broader objectives under the Country Partnership Strategy (CPS) for India FY13–FY178 in terms of engagement to end poverty and boost shared prosperity in India\. The CPS included a focus on provision of electricity services to increase economic growth and opportunities for the poor, particularly in low-income states like Rajasthan\. Improving the financial performance of DISCOMs in one of India’s lowest income states would accelerate extension of energy access and improved power quality to the poor and facilitate the adoption of clean and distributed sources of power while also putting the DISCOMs on a sustainable footing whereby the state budget could make funds available for more poverty-targeted interventions\. Furthermore, the World Bank’s newer Country Partnership Framework (CPF) for India was under development during the period of the DPL series, and the operations are fully consistent with those priorities\. The CPF indicates the institution’s priority to “Increase access to sustainable energy” including by “redoubling efforts to carry through on state transmission and distribution (T&D) utility reforms and institutional strengthening to ensure increased access to reliable power in alignment with the GoI’s 24x7 Power for All Program\.” The logic for intervention on this issue notes that state government-owned DISCOMs are responsible for electricity supply disruptions and that these institutions carry financial losses that present risks across the sector\.9 The CPF priority is to improve institutional capacity and governance and then to “increase commercial orientation and management and accountability,” including by leveraging private finance for power sector development\. The program was focused on strengthening the institutional capabilities of the DISCOMs to meet future electricity service without long-term reliance on public support\. The DPL series also supported the World Bank’s efforts termed ‘State Partnership’ which sought to deepen relationships with the identified partner states and ‘Lighthouse India’, sharing good practices across India and to the region\. The World Bank was developing a state partnership with Rajasthan, involving World Bank senior management to initiate discussions and technical assistance on a portfolio of development challenges\. The GoR expressed that the power sector was an urgent priority\. 13\. In principle, through measures under UDAY and the actions that the World Bank was preparing to support, Rajasthan’s DISCOMs would be able to break even financially within three to four years, with only modest tariff increases\. The reality, however, was understood to be more complex, given the political headwinds surrounding tariff revisions needed to realize sustained positive financial returns, particularly bringing transparency around cross-subsidies to agricultural power consumption and controlling commercial losses (electricity theft)\. The DPL series made a strategic decision early on to couple technical improvements with strengthening the institutional and financial foundation in support of these broader reforms\. 8 Report 76176-IN, discussed by the Executive Directors on April 11, 2013\. 9 UDAY notifications, December 2015 and December 2017, as cited in CPF 2018\. Page 8 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Original Program Development Objective(s) (PDO) (as approved) 14\. The original Program Development Objective (PDO) at the time of the approval the first operation of the program was to ‘support the Government of Rajasthan (GoR)’s program for the turnaround of the distribution sector in Rajasthan under the 24x7 Power for All program’\. This first operation lays the foundation for legislative changes and institutional reforms to improve the sector’s governance, supports the financial restructuring of the sector, and backs actions necessary to improve operational performance\. Original Policy Areas/Pillars Supported by the Program (as approved) 15\. The policy areas of the GoR program that are supported by the proposed operation are (a) Strengthening Governance in the Rajasthan Electricity Distribution Sector; (b) Financial Restructuring and Recovery; and (c) Improving Operational Performance of Distribution Utilities\. B\. Significant Changes during Implementation Revised Program Development Objectives (PDOs) 16\. The second operation of the program maintained the focus from the first operation on supporting the GoR’s program for the turnaround of the electricity distribution sector in Rajasthan under the 24x7 PFA program, with no substantial change\. The second operation’s PDO was “to support the turnaround of the electricity distribution sector in Rajasthan, by (a) strengthening the governance framework, (b) enhancing policies to restructure its finances, and (c) improving its operational performance\.” Revised Policy Areas/Pillars Supported by the Program 17\. The three policy areas of the program are maintained without substantive change, though reframed as follows: (a) Strengthening the governance framework of the state-owned utilities (the change references a framework of legislation and institutional reforms that were implemented in the first operation) (b) Enhancing policies to restructure the finances of the electricity distribution sector (recovery was removed, which refers to reversing the financial deterioration of the utilities that had a crescendo in 2015 before the UDAY financial restructuring) (c) Establishing operational performance criteria, financial conditions, and management incentives for the sustainable financial recovery of the sector (includes additional modalities for improving operational performance)\. 18\. The program design built on progress since UDAY’s launch in late 2015 and early 2016\. It also built on another central scheme called the Restructured-Accelerated Power Development and Reform Program (R-APDRP), in addition to the GoR’s State Electricity Distribution Management Responsibility (RSEDMR) Act, which aims to reform the governance of DISCOMs and brings more public accountability to the sector and was enacted in March 2016\. Page 9 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) 19\. The design of the second operation articulates additional focuses on (a) reversing the financial deterioration of the utilities; (b) increasing access to electricity and improving services; and (c) achieving long-term reliability of electric power supply, with improved energy efficiency and its associated climate benefits\. Other Changes 20\. Other revisions are reflected in the Assessment of Key Program Design and Outcomes table, as follows\. Page 10 of 47 Official Use  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) II\. ASSESSMENT OF KEY PROGRAM DESIGN AND OUTCOMES Prior Actions Results Indicators DPL 1 DPL 1 Indicative Triggers DPL 2 Original DPL 1 Revised DPL 2 Policy Area A: Strengthening the Governance Framework in the Rajasthan Electricity Distribution Sector Prior Action 1: Indicative Trigger 1: Prior Action 1: Result Indicator 1: Rajasthan has issued Rajasthan has entered The GoR has entered into Appointment of Independent and notified the into MoUs with DISCOMs Memoranda of Understanding Directors in accordance with the Electricity Distribution setting out targets for key with each of the DISCOMs clause No\. 8 of the Ordinance/Act in Management performance indicators setting out targets for key each DISCOM: Responsibility regarding: AT&C10 losses; performance indicators • Baseline: 1 in FY15 Ordinance Feeder metering and regarding: (a) AT&C losses; (b) • Interim: 2 (September 2016) Consumer Indexing; energy accounting and auditing; • Target: As per provisions of Energy accounting and (c) billing and collection the Companies Act (Central auditing; and efficiency; and (d) filing of Act No\. 18 of 2013) by March performance evaluation revenue and/or tariff petitions 2017 for the DISCOMs for for FY17-18 • Current status (FY17): 2 FY17-18\. (Change from DPL 1) The (Achieved) revision elaborates on the key aspects of the UDAY MoUs\. The ordinance referenced in DPL 1, Prior Action 1 is the RSEDMR Act, which came into force in June 2016\.11 Prior Action 2: Indicative Trigger 2: Prior Action 2: Result Indicator 2: Result Indicator 1: The DISCOMs have The DISCOMs have The DISCOMs have approved a Implementation of EPI scheme: Incentive for Performance developed and obtained prepared and approved a Transfer Policy and • Baseline: 0 in FY15 during FY: approvals for their revised transfer and Performance Management • Interim: Incentive for • Baseline: 0 in FY15 Employee Performance promotion policy for its Policy, for their employees\. performance in FY16 • Target: Incentive for Incentive (EPI) schemes\. employees\. performance in FY19 10 AT&C = Aggregate technical and commercial\. 11 https://energy\.rajasthan\.gov\.in/content/dam/raj/energy/dept_of_energy/pdf/misc/RajStateElecDistMangAct2016\.pdf\. Page 11 of 47 Official Use  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Prior Actions Results Indicators DPL 1 DPL 1 Indicative Triggers DPL 2 Original DPL 1 Revised DPL 2 (Change from DPL 1) The disbursed (by September disbursed (by revision strengthened the prior 2016) September 2019) action to indicate a transfer and • Target: Incentive for • Current status: One of key performance indicator- performance in FY17 three DISCOMs based performance disbursed (by June 2017) disbursed incentive in management system is being FY19 put in place for employees\. Updated in DPL 2 as Results Indicator 112 (Partially achieved)13 Prior Action 3: Indicative Trigger 3: Prior Action 3: Result Indicator 3: Result Indicator 2: The DISCOMs have The DISCOMs have The DISCOMs have started the Date of availability of audited annual Date of availability of audited completed audited completed audited implementation of their accounts annual accounts financial statements for financial statements for Corporate Governance and • Baseline: December 31, 2015 • Baseline: December 31, FY 14-15\. FY 15-16\. Financial Accountability Plans, (delay of three months) 2015 (delay of three Indicative Trigger 4: duly adopted by their Boards of • Target: September 30, 2016 months) The DISCOMs have Directors, by publishing their (within six months of end of • Target: September 30, started the audited financial statements for FY) 2019 (within six months implementation of their FY16-17\. • Current status: Audited of end of FY, i\.e\. zero- Corporate Governance annual accounts for DISCOMs month delay) and Financial (Change from DPL 1) Through for FY17 were available • Current status: Audited Accountability (CGFA) the revision, Triggers 3 and 4 before September 30, 2017 annual accounts for Plan were merged and language DISCOMs for FY19 were strengthened to reflect adoption (Achieved) available before of CGFA Plan and that its September 30, 2019 implementation was initiated\. (Achieved) Policy Area B: Enhancing Policies to Restructure the Finances of the Rajasthan Electricity Distribution Sector Prior Action 4: Indicative Trigger 5: Result Indicator 4: Result Indicator 3: The Union Government, No additional Prior Action in Percentage of outstanding debt (as Annual loss of DISCOMs to be 12 Target was not achieved during DPL 1 but continued in DPL 2\. The FY16 incentive was not disbursed due to underattainment of AT&C loss reductions\. In FY17, the EPI scheme was not approved by the Government in time for implementation by the DISCOMs\. 13 Of the three DISCOMs, two did not have sufficient reduction in losses at overall DISCOM level (according to internal targets) to justify disbursement of the incentive\. Page 12 of 47 Official Use  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Prior Actions Results Indicators DPL 1 DPL 1 Indicative Triggers DPL 2 Original DPL 1 Revised DPL 2 Rajasthan and the The DISCOMs have DPL 2\. of September 30, 2015) of DISCOMs taken over and funded by DISCOMs have entered combined losses taken over by GoR State, as provided under UDAY into tri-partite MoUs (measured by Profit Trigger 5 had been kept during • Baseline: 0 as on September program providing for the before Taxes) for the DPL 1 approval to ensure that 30, 2015 • Baseline: 0 in FY15 implementation of period from 1st April, DISCOMs’ financial performance • Interim: 50% by June 30, • Target: 10% in FY19 UDAY program\. 2015 to 31st March, 2016progresses positively\. However, 2016 • Current status: 0 that do not exceed INR it is not relevant as a prior • Target: 75% by March 2017 100 billion action since the DISCOM’s • Current status: 75% (Not achieved) – Context financial performance continued changed during to improve in FY17 and losses (Achieved) implementation14 Indicative Trigger 6: reduced to INR 48\.12 billion\. Result Indicator 5: The DISCOMs have Trigger 6 moved to Policy Area Monthly Distribution Energy Audit published complete C, Prior Action 6 (DPL 2)\. reports generated and disclosed monthly energy audits for (expressed as % of feeders) 90% of their respective • Baseline: 0% in FY15 feeders at their websites • Interim: 20% by March 2016 and initiated the Loss- • Target: 90% by March 2017 Based Load Scheduling • Current status: 100% program (Achieved) Prior Action 5: Indicative Trigger 7: Prior Action 4: Result Indicator 6: Result Indicator 4: The DISCOMs have filed The DISCOMs have filed The DISCOMs have filed with Gap between Average Cost of Supply Gap between ACoS and ARR with RERC their annual with RERC their annual RERC their annual revenue (ACoS) and Average Revenue • Baseline: INR 3\.00/kWh revenue requirements revenue requirements requirements and tariff Realized (ARR) in FY15 and tariff petitions for and tariff petitions for petitions for FY17-18\. • Baseline: INR 3\.00/kWh in • Target: INR 0\.70/kWh in FY16\. FY17\. FY15 FY19 • Interim: INR 2\.40/kWh in FY16 14 None of the DISCOMs’ annual loss has been explicitly assumed by the State as mandated under UDAY\. The State has made a request to MOP to relax this provision under UDAY\. MOP has not responded on the request\. Page 13 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Prior Actions Results Indicators DPL 1 DPL 1 Indicative Triggers DPL 2 Original DPL 1 Revised DPL 2 • Target: INR 0\.70/kWh in FY17 • Current status: INR (Updated in DPL 2 as Results 1\.7/kWh in FY19 Indicator 4) Prior Action 6: Indicative Trigger 8: Prior Action 5: Result Indicator 7: (Partially achieved) – Rajasthan has set up the Rajasthan Energy Rajasthan Urja Vikas Nigam Ltd\. Power Purchases for DISCOMs Trajectory for attainment is Rajasthan Energy Development (‘RUVNL’) is operational and routed through Rajasthan Energy again in the right direction, Development Corporation Ltd\. is power purchases (including Development Corporation Ltd\. after backsliding in FY18\. Corporation Ltd operational renewable energy purchases) • Baseline: 0 in FY15 (Rajasthan Urja for DISCOMs are made through • Interim: 30% by September Vikas Nigam Ltd\.), a RUVNL 2016 company aiming to • Target: 90% by March 2017 bring transparency and (Change from DPL 1) The • Current status: 100% optimize power revision reflects the company purchases on behalf of name and strengthens the prior (Achieved) DISCOMs action to reflect the focus toward greening the energy mix\. Policy Area C: Improving Operational Performance of Distribution Utilities Prior Action 6: Result Indicator 8: Result Indicator 5: The DISCOMs have published AT&C losses (%): AT&C losses (%): completed periodic energy • Baseline: 29\.5% (Provisional) • Baseline: 29\.5% in FY15 audits of 90% of their respective in FY15 • Target: 17% that is, feeders at their websites and • Interim: 28% i\.e\. reduction of reduction of 12\.5 initiated, since December 2016, 1\.5 percentage points over percentage points over a Loss-Based Load Scheduling baseline by FY16 baseline by FY19 Program • Target: 23% i\.e\. reduction of • Current status (FY19): 6\.5 percentage points over 21\.2% Previously under Policy Area B, baseline by FY17 Indicative Trigger 6\. • Current status (FY17): 23\.78% (Partially achieved) The revision reflects that energy (Mostly achieved) audits will be done periodically Page 14 of 47 Official Use  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Prior Actions Results Indicators DPL 1 DPL 1 Indicative Triggers DPL 2 Original DPL 1 Revised DPL 2 (rather than monthly) and Results indicator was previously indicates when the loss-based associated with Prior Action 7\. load scheduling scheme has been initiated\. Prior Action 7: Indicative Trigger 9: Prior Action 7: Result Indicator 9: Result Indicator 6: The DISCOMs have The DISCOMs have The DISCOMs have Number of consumers put on pre- Number of consumers put on approved Business implemented a unified implemented a unified billing paid/ Advanced Metering pre-paid/ AMR/ AMI meters Plans for improved billing system including system including billing large Infrastructure (AMI)/ Automatic • Baseline: 0 in FY15 operational billing all Large and and medium industrial Meter Reading (AMR) meters • Target: 100,000 by performance and Medium Industrial consumers based on an • Baseline: 0 in FY15 September 2019 initiated their consumers based on an Automated Meter Reading • Interim: 20,000 by September • Current status (October implementation Automated Meter system\. 2016 2019): 120,00017 including on: Reading system\. • Target: 100,000 by March (a) Pre-paid (Change from DPL 1) 2017 (Target date revised in (Achieved) Metering Removes ‘all’ while reflecting DPL 2 as Results Indicator 615) Program for rollout of billing of large and Result Indicator 7: government medium industrial consumers\. Result Indicator 10: Number of LED lamps consumers; and Indicative Trigger 10: Prior action 8: Number of LED lamps distributed distributed (b) The Energy The DISCOMs have The DISCOMs have (a) started • Baseline: 0 in FY15 • Baseline: 0 in FY15 Efficiency started implementation implementation of their • Interim: 10,000,000 by March • Target: 16,000,000 by Lighting Program of their approved IT approved IT Roadmaps by 2016 September 2019 Roadmap including preparing detail project reports • Target: 15,000,000 by March • Current status: creation of an IT cadre for Enterprise Resources 2017 (Target date revised in 16,164,048 by March and filling 50% of the Planning (ERP) deployment and DPL 2 as Results Indicator 7) 2019 posts with IT (b) created an IT cadre and professionals\. started mapping IT Result Indicator 11: (Achieved) professionals accordingly\. Number of IT staff appointed • Baseline: 0 in FY15 Result Indicator 8: (Change from DPL 1) Percentage of positions filled in 15 The revision in target attainment date accounts for challenges experienced in tendering of smart meters\. 17 This includes 70,000 smart meters implemented by distribution franchisee CESC in Kota, Bharatpur, and Bikaner\. See National Smart Grid Forum (October 9, 2020)\. “Smart Meters (Nos\.) Installed in India\.” https://www\.nsgm\.gov\.in/en/content/sm-stats\. Page 15 of 47 Official Use  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Prior Actions Results Indicators DPL 1 DPL 1 Indicative Triggers DPL 2 Original DPL 1 Revised DPL 2 The revision reflects how the • Interim: 15 by September IT cadre in DISCOMs start of implementation of 2016 • Baseline: 0 in FY15 information technology (IT) road • Target: 30 by March 2017 • Target: 75% by map is being demonstrated and • Current status: 30 September 2019 (with filling of posts to be assessed as gender disaggregated part of the results indicator, (Achieved) data and target of 15% without being overly share of females in filled prescriptive\. Result Indicator 12: up positions) Number of consumers put on unified • Current status (March billing system 2019): 83\.9%, 24\.7% of • Baseline: 50% in FY15 which are female • Interim: 100% by December employees 2016 • Target: 100% by March 2017 (Achieved) • Current status: 100% Result Indicator 9: (Achieved) Number of unelectrified Households in State Result Indicator 13: • Baseline: 21,82,180 (as Number of villages remaining to be of October 10, 2017) electrified • Target: 7,50,000 (by • Baseline: 495 (April 2015) September 2019) • Interim: 250 (October 2016) • Current status (October • Target: 25 (March 2017) 2019): 0 • Current status: 0 16 (Achieved) – (Achieved) No households remain unelectrified in the state\. 16 Excludes remote villages that the state government has determined will not be electrified through grid extension\. Page 16 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) A\. Relevance of Prior Actions Rating: Satisfactory 21\. The World Bank’s support for the turnaround of the Rajasthan distribution sector built on the reform program of the GoR and the GoI centered on two key frameworks: (a) UDAY, which Rajasthan joined in January 2016, and (b) the RSEDMR Act, enacted in March 2016\. The World Bank’s intervention came at a crucial time for the sector’s stability and health and contributed toward a momentum for reform\. 22\. Policy areas\. The three policy areas supported under the program have a strong and direct link to attainment of the objective, and the prior actions and associated results indicators are relevant to the objective, with only minor issues in terms of indicator design\. Policy Area A sought to strengthen the governance framework of the distribution sector\. The unsustainable tariff structure and lack of employee incentives to identify and minimize losses ultimately eroded transparency and accountability in the sector that contributed to declines in its financial health\. Policy Area B sought to restructure the finances of the sector under the UDAY program, which was a necessary condition to stabilize the sector and avoid further losses\. This policy area contributes more directly to ‘rescue’ than immediately to ‘turn around’ but was indisputable as a necessary foundation before broader reform could be achieved toward long-term financial sustainability\. Finally, Policy Area C builds on the stabilizing benefits of Policy Area A (governance) and Policy Area B (restructuring) to address the longer-term issue of operational performance (in effect, cost recovery and service delivery)\. 23\. Policy Area A (Governance Framework) is supported by three prior actions in both DPL1 and DPL2\. 24\. The first prior action commits the GoR to the reform agenda, in DPL1 through notification of the Electricity Distribution Management Responsibility Ordinance and in DPL2 through MoUs with each of the DISCOMs with concrete and substantive expectations that relate directly back to the turnaround agenda\. The associated indicator (DPL1, Result Indicator 1) ensures appointment of independent directors in accordance with the implementation of the ordinance\. The results indicators included in the MoUs are also assessed by the World Bank under other prior actions\. 25\. The second prior action creates incentives for employee performance to work toward reduction in AT&C losses crucial to financial turnaround and sustainability of the DISCOMs\. In DPL1, the prior action rewarded all employees within the operations and maintenance (O&M) units working in subdivisions that achieved AT&C loss targets, with revision in DPL2 to assess attainment at a more aggregated level (distribution Circle or group of subdivisions)\. The associated indicator (DPL1, Result Indicator 2; DPL2, Result Indicator 1) simply measures whether the incentive is being disbursed in each of the three DISCOMs\. The program arose out of concerns that employees had been either ignoring or facilitating theft and insufficient efforts have been taken on this issue\. The incentive is intended to align employee interests with strategic and operational goals of the DISCOMs and therefore motivate nonperforming staff and increase theft mitigation actions\. Despite these intentions, the design of the prior action and the associated indicator have significant issues that follow the design of the EPI scheme\. First, the AT&C target requires collective effort by employees and the incentive is offered to all employees in areas where the target is achieved\. This creates a collective action problem, whereby individual staff could underperform but still be rewarded—which has the aggregate effect of demotivating individual action\. This raises Page 17 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) questions whether the incentive would substantively contribute to the intended AT&C loss reductions\. Second, while the intent is good, it is not clear whether the incentive is substantive enough to change behavior (putting aside the collective action issue) and therefore whether the incentive could be substantively attributed toward AT&C loss reductions and therefore the PDO\. 26\. The third prior action is for the DISCOMs to publish audited financial statements on time\. Such reports allow for the state to hold DISCOM management accountable, increase transparency on the accuracy of the reviews, and help the state monitor DISCOM progress toward turnaround\. During the implementation of DPL1, each of the DISCOMs’ boards of directors implemented CGFA Plans, which included a multitude of important features for financial management, timeliness in preparation of financial statements, and confidence in their reliability and accuracy\. The associated prior action in DPL2 sought to ensure that the audited financial statement requirement of the CGFA was being implemented, though it did not follow up on other action plan elements (DPL1, Indicative Trigger 4)\. The associated results indicators (DPL1, Result Indicator 3; DPL2, Result Indicator 2) are intuitive, reducing the delay from three to zero months\. 27\. Policy Area B focuses on policies to restructure sector finances\. It has three prior actions in DPL1, reduced to two in DPL2\. 28\. The first prior action (DPL1, Prior Action 4) sought to ensure that Rajasthan participated fully in the UDAY scheme, through which the state government took over 75 percent of the DISCOM liabilities totaling INR 805 billion or 9\.0 percent of the GSDP\.18 UDAY was operationalized through a tripartite MoU among the GoR, the GoI, and the respective DISCOMs\. The Rajasthan DPL series was at its preparation stage and pre-appraisal when UDAY was being rolled out, which allowed the team to engage substantively with the GoR on the program preparation\. The first associated indicative triggers under the prior action (DPL1, Indicative Trigger 5) provided for the DISCOMs to keep yearly losses at manageable levels (defined as below INR 100 billion) in FY16\. This amount was exceeded owing to higher AT&C losses than projected in the UDAY financial models alongside late-payment surcharges imposed by the generation companies\. However, these losses were more than halved by the time of preparing DPL2\. Furthermore, as formulated, the trigger was not an ‘action’ and so no associated prior action was included in DPL2\. The results indicator (DPL1, Result Indicator 4) measured the share of outstanding DISCOM debts assumed by the GoR, as a clear indication of whether the GoR was serving its obligation under UDAY\. Implementation was further monitored with an associated indicator in DPL2 (Result Indicator 3), measuring the share of continued loss taken over by the state\. This results indicator (DPL2, Result Indicator 3) may have been more effectively positioned as a prior action, framed as the GoR assuming some share of the DISCOM annual losses\. As discussed later in the Efficacy section, this may have allowed the World Bank to support dialogue between the state and DISCOMs to resolve the issue of non-attainment of this Indicator\.19 29\. The second prior action (DPL1 Prior Action 5; DPL2 Prior Action 4) provides for the DISCOMs filing annual revenue requirements and tariff petitions with the RERC\. Following years of non-increase in tariffs undermining financial performance of the DISCOMs, inclusion of this prior action in both operations of the series sought to increase transparency and ensure the regulator had an opportunity every year to 18Those liabilities outstanding as of September 30, 2015\. 19A second results indicator associated to DPL1 Prior Action 4 (Result Indicator 5) measured progress toward publishing of monthly energy audits\. This was supporting an indicative trigger (DPL1, Indicative Trigger 6), which was moved under Policy Area C in DPL2 (Prior Action 6)\. Page 18 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) consider tariff increases\. Although only a procedural step that does not assure a tariff revision, for several years, the DISCOMs were discouraged from submitting tariff revision petitions to RERC, contributing to the DISCOMs’ insolvency\. Submission to RERC is a necessary step toward tariff revision, and the associated result indicator (DPL1 Result Indicator 6; DPL2 Result Indicator 4) measures the closing of the gap between ACoS and ARR, which indicates the ability of the utility to recover its costs through appropriately structured tariffs (which follow a cost-plus methodology)\. 30\. The third prior action (DPL1 Prior Action 6; DPL2 Prior Action 5) is the creation (DPL1) of the Rajasthan Energy Development Corporation, also called Rajasthan Urja Vikas Nigam Ltd (RUVNL), and then sees that it is operating to serve its intended purpose of purchasing power on behalf of the DISCOMs (DPL2)\. The state through RUVNL made efforts to reduce power purchase costs to bring down the ACoS component of the ACoS-ARR gap\. The associated results indicator measures the share of power routed through RUVNL, which should lower ACoS (and thus the revenue gap) by regularizing and optimizing power purchase for the DISCOMs and thus bringing the costs of power supply down\. RUVNL was operational and routing 100 percent of power purchases by the time of preparation for DPL2\. An additional prior action was included in DPL2 that RUVNL would include renewable energy among its power purchases\. 31\. Policy Area C’s focus on operational performance includes one prior action under DPL1 and three associated to DPL2\. 32\. Prior Action 6 in DPL2 focuses on energy audits at the feeder level, with the objective of monitoring the distribution network to identify areas where high losses are occurring and cannot be accounted for\. This allows for identification of feeders with the highest loss levels, so efforts can be taken such as ‘Loss-Based Load Scheduling’ to implement load shedding on high-loss feeders, both to dis- incentivize theft and keep losses in check\. Since all users on a feeder would be affected, this would help create a social dynamic against theft and a heightened community-level vigilance\. Furthermore, the prior action requires the feeder meter information to be published online, with the hope this will create transparency and mobilize communities and the civil society to support norms against theft\. The associated indicators (DPL1 Result Indicator 8; DPL2 Result Indicator 5) help monitor the impact of these measures on AT&C losses, the reduction of which is a key part of the financial turnaround under the UDAY program\. 33\. Prior Action 7 under DPL1 sought for the DISCOMs to approve—and initiate implementation—of business plans for improving operational performance\. The business plans were to include provisions on pre-paid metering for government customers who as a customer group were the most delinquent in electricity payments and the deployment of an energy-efficient lighting initiative\. The energy efficiency program—to distribute LED lights through Energy Efficiency Services Limited—was intended to reduce power purchases and thus the financial loss associated with electricity sales\. This also reduced the needs for costly peaking power that was negatively affecting the ACoS-ARR gap\. 34\. Under DPL2, the remaining prior actions focused on other grid modernization efforts that would help in reducing AT&C losses while also promoting energy conservation and grid management\. This included the implementation of a unified billing system for large and medium industrial customers based on Automated Meter Reading (AMR) (DPL2, Prior Action 7)\. Such a system was expected to improve customer service and lock in revenue streams for the utility\. Page 19 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) 35\. Building on the IT reforms, DPL2 Prior Action 8 provided for the DISCOMs’ implementation of IT roadmaps including detailed project reports for ERP, as well as creation of an IT cadre with mapping of IT professionals\. This prior action related to the PDO because of the potential for distribution automation to reduce operating costs (and thus contribute to ACoS reduction) as well as enabling service modernization and digitization through a skilled IT workforce that ultimately improves efficiency, responsiveness of the system to service disruption, and the ability to adopt new cost-saving technologies such as distributed energy resources\. 36\. A number of results indicators monitored progress on these measures to automate billing processes and improve the efficiency of distribution\. The target for uptake of AMI/AMR is measured as the number of pre-paid meters, but it does not specify that these should be large and medium industrial customers (as intended in the prior action) nor does the number give an indication of penetration, as might ‘share of customers on pre-paid meters’\. It is not clear from the design of the indicator whether it is intended to include efforts by the distribution franchisees, which account for a large number of meters but are the intended actors for reforms under the DPL series\. Distribution of LED lamps suffers from the same issue as the meters in terms of indicating magnitude but not specifying what customers are intended to be covered in the accounting\. The other indicators, on staffing of the IT cadre, share of females hired into new positions, customers participating in unified billing system, and electrification of villages and households, are well designed and relevant to turnaround of the distribution sector\. 37\. The relevance of the prior actions to the objectives of the reform program are summarized through the Theory of Change in Figure 1\. Figure 1\. Theory of Change Connecting the Prior Actions of the Development Policy Financing with the Policy Areas Supporting the Turnaround of the Rajasthan Distribution Sector Page 20 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) 38\. In summary, the Program design is Satisfactory because, overall, the prior actions and results indicators have a strong and direct link to supporting the turnaround of the distribution sector\. This includes increasing the impetus for Rajasthan to translate UDAY into action at the state level, complementing state-level policy initiatives that help stabilize the finances of the sector, establishing governance structures to avoid backsliding, and addressing the abilities of the DISCOM to efficiently deliver on its core business\. By creating the conditions for a reversal in the financial deterioration of the sector, the policy areas allow for the distribution utilities to serve broader objectives for the World Bank’s support, including increasing access to electricity, improving the reliability of power supply, and increasing the energy efficiency of electricity service with its associated climate benefits\. 39\. The choice to exclude other relevant reforms considered during preparation as potentially fundamental to turnaround of the distribution sector in Rajasthan is also considered but with reasonable justification for their exclusion from the Program design\. The team made a choice to act quickly to build on political alignment and momentum for reform with the client\. The tradeoff in this approach was that deeper substantive changes would be deferred to later\. The means of impact by the operation included the ability to earn trust and demonstrate value to the client, which created openings for later pilots that have transformational potential in the sector\. The actions taken supported sector changes that were necessary for achieving turnaround of the distribution sector, as specified in the PDO; the question of whether the actions supported by the Program design were sufficient to achieve turnaround is separate\. B\. Achievement of Objectives (Efficacy) Rating: Moderately Satisfactory 40\. The PDO is formulated to indicate that the World Bank is supporting the GoR program for the turnaround of the distribution sector, rather than having ‘turnaround’ as the objective in itself\. This is not a semantic difference, as the operation recognizes that the foundation laid by the GoR program and World Bank support are necessary but not sufficient conditions for turnaround and that while financial sustainability could be attainable through the program alone, the risks were significant\. 41\. Based on the results indicators and other evidence, most of the DPL outcomes were achieved and prior actions implemented\. Shortcomings in each policy area – while consequential – are mitigated by the overall progress toward achievement of the objectives\. 42\. There was substantial progress under Policy Area A (Strengthening the Governance Framework)\. 43\. Independent directors were appointed in accordance with the enactment of the RSEDMR Act (DPL1 Result Indicator 1)\. The act has facilitated the introduction of good practices of corporate governance and accountability as well as strengthened the oversight mechanism for the functioning of the DISCOMs through replication of some of the best practices from the central level being followed by well-performing central public sector undertakings\. This includes signing of annual performance MoUs between the state government and the DISCOMs to set clear goals and objectives; induction of industry experts on the board of directors as independent directors; and bringing in additional public oversight over the sector through the RSEDMR Act that mandates the state government shall present a State Electricity Distribution Management Statement to the Rajasthan Legislative Assembly, containing the measures taken by the state government in relation to electricity distribution of the state every year\. Page 21 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) These are important initiatives that should yield results gradually as the different stakeholders realize the value of these changes\. 44\. The employee incentive for performance scheme (DPL1 Result Indicator 2; DPL2 Result Indicator 1) had not been approved in time for disbursement during the implementation of DPL1, and it was achieved for only one of three DISCOMs during DPL2\. Ajmer DISCOM and Jodhpur DISCOM fell short of their respective AT&C targets and therefore did not disburse the incentive\. It is not clear whether non- attainment is on account of the incentive design (as discussed earlier) or whether other factors affecting the overall non-attainment of AT&C losses contributed\. The DISCOMs made their audited annual accounts available without delays, as provided for in the CGFA Plans adopted by their boards (DPL1 Result Indicator 3; DPL2 Result Indicator 2)\. 45\. Two core indicators under Policy Area B (Financial restructuring) were not achieved, though with momentum in a positive direction\. 46\. The GoR assumed three-quarters of the outstanding debt held by the DISCOMs, implementing a key component of the UDAY program as formalized in the tripartite MoUs (DPL1 Result Indicator 4)\. In DPL2, the state was to continue taking on some of the DISCOMs’ liability for continued losses (DPL2 Result Indicator 3); however, the GoR is appealing to MOP to relax this provision of UDAY, leaving this target unattainable\. 47\. Auditing of distribution feeders was fully attained under DPL1 (Result Indicator 5), increasing the capability of the DISCOMs to monitor unaccounted-for losses across the network and to implement mechanisms to deter theft, such as the Loss-Based Load Scheduling Program\. 48\. A key metric of cost recovery, the ACoS-ARR gap (DPL1 Result Indicator 6; DPL2 Result Indicator 4), reflects in aggregate the totality of tariff revision, AT&C loss reduction, and power purchases reforms\. While the ACoS-ARR gap was cut nearly in half during implementation of the DPL series (Table 1), the gap is INR 1 per kWh higher than the target\. Tariff petitions were submitted to RERC (DPL1 Policy Area 5; DPL2 Policy Area 4); however, tariff revisions anticipated during project preparation were nonetheless not realized\. In September 2016, RERC announced a tariff hike amounting to nearly 10 percent across consumer categories (and 5\.5 percent for agriculture), as called for under the National Tariff Policy\.20 By February 2017, the state government had to roll back agriculture tariff revisions in face of farmer protests and agreed to provide an additional subsidy of INR 5 billion to the DISCOMs\. There was also an accelerated release of 200,000 agricultural connections under Rajasthan’s New Agriculture Connection Policy 2017\. 49\. Following the creation of RUVNL, the DISCOMs routed all their power purchases through the company (DPL1, Result Indicator 7), thus exceeding the target and increasing the efficiency of power purchases and contributing to the ACoS-ARR gap reduction\. 20Times of India\. 2016\. “Power Shock for Rajasthan Residents: Tariff up by 9\.6%\.” September 23, 2016\. https://timesofindia\.indiatimes\.com/city/jaipur/Power-shock-for-Rajasthan-residents-Tariff-up-by-9- 6/articleshow/54473780\.cms#:~:text=The%20power%20tariff%20for%20domestic,Rs%208%20per%20unit%20for\. Page 22 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Table 1\. Targeted, Revised, and Realized Gap between ACoS and ARR21 (INR/kWh) FY15 FY16 FY17 FY18 FY19 FY20E FY21E Base Case - DPL 1 (Program Document - Annex 7, Table 6) 2\.9 2\.4 0\.7 0\.1 0 -0\.1 -0\.1 Base Case - DPL 2 (Program Document - Table 8\.2) 3\.0 2\.6 1\.1 0\.7 0\.7 0\.3 0\.1 Actual/Revised - RTI Analysis (December 2019) 3\.0 2\.6 1\.1 1\.9 1\.7 50\. Indicators of improved operational performance under Policy Area C were mostly achieved\. 51\. Both UDAY and R-APDRP set targets of AT&C losses of 15 percent by FY19; however, the team, based on its own assessment and discussion with the client, set targets that were considered more attainable given the risks that efforts to control theft would face barriers: 23 percent by FY17 and 17 percent by FY19\. Initial progress gave the indication that even the 15 percent target was attainable, following years with nearly 4 percent year-on-year reductions\. The UDAY Monitoring Committee of MOP recognized Rajasthan as among the states with the highest reductions in AT&C losses and lauded its efforts to mobilize community participation in anti-theft vigilance\.22 However, several factors ultimately led to non-attainment of the AT&C target\. The likelihood of moving toward cost-reflective tariffs in Rajasthan was stalled by the 2018 Rajasthan Legislative Assembly Elections, which created political headwinds for tariff reforms, including through additional subsidy for new power connections and reducing fines and enforcement for power theft\.23 Consequently, there was backsliding on earlier progress in the form of reestablishing illegal connections and placement of illegal transformers\. While the FY17 target was nearly achieved (DPL1 Result Indicator 8), by FY19, progress had slowed and reversed, missing the target by a substantial margin (DPL2 Result Indicator 5)\. Losses crept high enough to compromise the potential for cost recovery according to the World Bank’s financial modeling\.24 The shift in momentum in the final year of implementation contributed to non-attainment of both the AT&C loss and ACoS-ARR gap targets\. 21 Difference in the FY15 figures for DPL1 and DPL2 is due to provisional figures reported during the preparation of DPL1 project documents\. 22 MOP\. 2019\. UDAY Newsletter\. January 2019\. https://www\.uday\.gov\.in/images/newsletter_jan_2019\.pdf\. 23 Hindustan Times\. 2017\. “Discom Losses down by INR 14,000 Crore in 4 Years: Minister\.” December 12, 2017\. https://www\.hindustantimes\.com/jaipur/discom-losses-down-by-14-000-crore-in-4-years-minister/story- pP0o7od8CX0rPCD5FpwlSO\.html\. 24 Program Document, DPL 1, Annex 7, Table 8, p\.78\. Page 23 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Table 2\. Targeted, Revised, and Actual AT&C Trajectories25 AT&C Losses (%) FY15 FY16 FY17 FY18 FY19 FY20E FY21E UDAY / R-APDRP target 15 Base Case - DPL 1 (Program Document - Annex 7, Table 4) 27\.2 24\.6 20\.1 17\.6 15 14 13\.5 Sensitivity - DPL 1 (Program Document - Annex 7, Table 7) 26\.2 24\.2 21\.2 Base Case - DPL 2 (Program Document - Table 8\.2) 29\.5 27\.7 23\.8 20\.5 17 15 14 Sensitivity - DPL 2 (Program Document - Table 8\.4) 23\.8 21 20 18 Actual/Revised - RTI Analysis (December 2019) 29\.5 27\.7 23\.8 20\.2 21\.2 52\. Substantial progress was made with smart meter implementation, meeting the target under DPL2 after postponing attainment from DPL1 (DPL1 Result Indicator 9; DPL2 Result Indicator 6)\. The meter deployment target is attainable only by including deployment by distribution franchisees\. However, the sector reforms were intended to benefit the health of the DISCOM itself—not its independently operating franchisees\. Therefore, the target should have differentiated the DISCOM and its franchisees\. 53\. The remaining results indicators under Policy Area C were achieved\. The target for distribution of LED lamps was exceeded but only after pushing the target into the period of DPL2 (DPL1 Result Indicator 10; DPL2 Result Indicator 7)\. The results indicator on staffing of the IT cadre was achieved both in terms of absolute number of staff as well as percentage of positions that are filled (DPL1 Result Indicator 11; DPL2 Result Indicator 8)\. In DPL2, the target for share of females hired as part of the target was also exceeded by 10 percent\. All consumers were put on a unified billing system by the end of 2016 (DPL1 Result Indicator 12), achieving the target early in the implementation period\. Assured revenue in combination with its reduced debt payments contributed to allowing the Rajasthan DISCOMs between FY17 and FY18 to make power supply payments on time, with the benefit of helping restore confidence in their status as off-takers\. The push to complete the electricity access agenda (DPL1 Result Indicator 13; DPL2 Result Indicator 9) ensured that no villages or households in the state remain without electricity at the end of the program\. 54\. In summary, the DPL series strengthened governance and incentives for operational performance, which were necessary preconditions for utility turnaround\. It did not fully achieve results indicators for financial restructuring\. However, the monitoring of these indicators under the program have made the impacts and drivers of backsliding more transparent\. Non-attainment of core diagnostics of turnaround— particularly cost recovery (a continued ACoS-ARR gap) and loss mitigation (AT&C losses remaining high)— are balanced against the recognized political risks assessed by the team and the positive progress relative to the situation during appraisal\. Finally, a key provision of UDAY intended to keep the state accountable for DISCOM losses (by assuming a share of the DISCOM annual losses as a direct liability) is currently facing an uncertain future in the discussion between the GoR and MOP\. 25Difference in FY15 figures for DPL1 and DPL2 is due to provisional figures reported during the preparation of DPL1 project documents\. Page 24 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) 55\. The rating of Moderately Satisfactory is on the basis that many of the targets were achieved, all with positive momentum, though with significant shortcomings\. C\. Overall Outcome Rating and Justification Rating: Moderately Satisfactory 56\. Without fundamentally addressing several of the structural issues underlying the sector and the risks for efficacy of several targets—particularly AT&C losses and tariff revision that would close the ACoS- ARR gap—it would be difficult to rate the operation as Satisfactory\. While these may be critical measures for ‘turnaround’, rescue of the Rajasthan DISCOMs was essential to avoid collateral damage throughout the power sector and for continued provision of quality electricity to support improved access and growth of the Rajasthan economy to alleviate poverty\. 57\. During implementation, the World Bank deliberated on whether the operation has gone far enough, acknowledging that despite evident progress in stabilizing the sector and achieving substantive reforms, there can be differing views about whether progress has been fast enough to avoid future bailouts and achieve sufficient progress on the underlying structural challenges to warrant support (a case of glass half full or half empty)\. Incentives to follow through on the UDAY framework were also questioned given the limited enforcement\. The accomplishments of the operation must be considered alongside the challenging multi-sectoral and electoral politics that complicate reform efforts in the Indian distribution sector\. 58\. The overall outcome rating is Moderately Satisfactory, considering the substantial relevance of the program’s prior actions to the achievement of turnaround, though these actions were neither sufficient for achieving the program’s anticipated outcomes nor were they fully achieved\. Nonetheless, the program made substantial progress toward attainment of the objectives and has provided a more stable foundation for further strengthening of the sector\. III\. OTHER OUTCOMES AND IMPACTS A\. Poverty, Gender and Social Impacts 59\. The operational design recognized the potential for impacts on poorer populations owing to the elimination of illegal connections to reduce AT&C losses, particularly in poorer rural areas where the highest-loss feeders are located\. This impact was expected to be offset by the ability of the financially stable DISCOMs to extend quality service at reasonable cost to the entire population, particularly the remaining poor and vulnerable groups that were without power (access has since been completed for all households)\. Furthermore, new or formalized connections were assessed to be affordable even for the lowest-consumption households\. 60\. The team also assessed potential impacts of tariff revision on “Below-Poverty-Households” (BPL) and low-consumption households\. The tariff structure was mostly progressive owing to a subsidy from the GoR for BPL households and those with consumption below 50 kWh per month, though that is offset by fixed charges affecting low-consumption households disproportionately\. The team expected any tariff increases to have a small effect on electricity expenditure, which constituted about 10\.7 percent of Page 25 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) household expenditure among the poor and was considered to be ‘moderately affordable’\. Nonetheless, measures were taken so that energy-efficient LED lighting would be made available with a subsidy through the program to offset the impacts of potential electricity cost increases on the poor\. 61\. The reliable and adequate supply of electricity was expected to have substantial benefits for women and girls, by enabling the use of appliances that reduce the burden of time-consuming household activities, increase opportunities for economic activity and girls’ education, and improve health and safety outcomes\. Furthermore, under the program, DISCOMs were to undertake outreach and direct recruitment activities to fill 15 percent of newly created IT positions with women; the target was exceeded\. B\. Environmental, Forests, and Natural Resource Aspects 62\. The DPL series was not expected to have significant adverse environmental impacts, and none materialized during implementation\. The team reviewed the relevant extant regulatory provisions and codes in India and finds that it either sufficiently mitigates potential for harm under any anticipated Program-supported activities or the Program supports the development of relevant regulatory initiatives,26 most notably the following: • Prior Action 4 (filing with RERC annual revenue requirements and tariff petitions) could lead to fuel switching; however, this was not seen as a risk given that electricity is not a key source of cooking energy in India\. In any case, tariff increases did not materialize\. • Environmental benefits were expected in terms of reduced local and global pollution from reductions in coal-fired power generation resulting from decreases in distribution losses from the start of the program, as well as energy conservation measures from LED bulbs\. LED lamps and energy-efficient street lighting were assessed to reduce peak capacity needs by 461 MW and reduce greenhouse gas emissions by 1\.8 million tons of CO2\. • The World Bank had several discussions between the DISCOMs and the Rajasthan State Pollution Control Board regarding the handling of mercury-bearing compact fluorescent lamp (CFL) bulbs, which would be replaced by LED bulbs through the program implementation\. The team explored options for exchanging the CFL bulbs when the LEDs were distributed or providing an incentive for consumers to return the bulbs for appropriate disposal\. The DPL1 Program Document indicates that discussions to assess recycling feasibility with a lamp manufacturer could inform policies for encouraging voluntary recycling\. • Reductions in AT&C losses mean that less electricity generation is needed to service the same amount of load, or conversely, to service more load with the same amount of electricity\. This results in more efficient and productive use of electricity and, while not the primary intention of the program, is a highly economic means of reducing carbon dioxide emissions\. The approaches for reducing AT&C losses have been integrated in other programs in Andhra Pradesh, Jharkhand, and West Bengal to avail these benefits\. 26 Program Documents (DPL 1, paragraphs 66–70; DPL 2, paragraphs 95–97)\. Page 26 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) C\. Institutional Change/Strengthening 63\. The Program included measures to strengthen the accountability, transparency, and performance incentives of Rajasthan DISCOMs\. Policy Area A specifically focused on governance and supported the implementation of RSEDMR, which had features that were first of their kind in India, while others caught up to the Rajasthan best practice\. This included actions to appoint independent directors for each DISCOM, creation of policy within each DISCOM that incentivizes performance and manages talent and commitment within the organization and provides for timely reporting of audited financial statements to increase transparency and accountability\. Policy Area B created a new institution (RUVNL) that had the authority to negotiate power purchases for the DISCOMs that has the potential to reduce supply costs\. D\. Other Unintended Outcomes and Impacts 64\. Strengthened engagement on the electricity-water-agriculture nexus\. The operation built trust for engaging in the complex electricity-water-agriculture nexus, which underlies the substantial subsidy requirements of the sector\. The World Bank carried out an analysis on four agriculture feeders to develop innovative business models to provide financially and economically viable solutions to address the challenges posed by the nexus using provisions of the KUSUM scheme\.27 The opening for this engagement in Rajasthan was aided by the institutional connections built during the DPL series and furthermore by stabilizing the DISCOMs so they would be in a position to work on challenging issues like agriculture that otherwise have chronic and lasting impacts for the sector\. 65\. Use of IT\. The World Bank leveraged the engagement to engage in digitalization as the future of the utility business and IT will play a central role in improving performance\. Some of the areas where it is expected to be used are energy auditing, automated meter reading and billing, electronic payments, consumer services through centralized customer care centers, ERP (already implemented in Transco and Detailed Project Report ready for DISCOMs), and social media for better outreach\. A clear road map that provides a short-, medium-, and long-term direction to the IT initiatives and how to integrate the same as well as creating an IT skill base in the DISCOMs are critical for smooth and successful future business operations\. This road map will be implemented through qualified IT officials inducted into the newly created IT cadre for DISCOMs\. It was important that the DPL program could help in supporting the reforms in this direction\. IV\. BANK PERFORMANCE Rating: Satisfactory 66\. In early meetings with the Rajasthan Chief Minister in September 2015, the World Bank team assessed the commitment and ownership of the Rajasthan political leadership to undertake deep systemic reforms in the power sector to bring about accountability and transparency, before further discussion on supporting the state and the sector\. Once that signal was available from the political and bureaucratic leadership, the World Bank moved quickly\. During preparations, the World Bank considered and excluded 27World Bank\. 2020\. “Rajasthan Water-Food-Energy Nexus (Grow Solar, Save Water, Double Farmer Income)\. World Bank, Washington, DC\. http://documents1\.worldbank\.org/curated/en/490261581497030796/pdf/Grow-Solar-Save-Water-Double- Farmer-Income-An-Innovative-Approach-to-Addressing-Water-Energy-Agriculture-Nexus-in-Rajasthan\.pdf\. Page 27 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) alternative program designs and prior actions, keeping focus on pragmatically achieving the objectives with the client’s goals in mind\. 67\. The review of possibilities for engagement to restore the financial health of the DISCOMs was extensive, and many linked up closely with the 10 ‘Target Areas’ (or sutras) that formed the main strategy between the GoR and DISCOMs,28 discussed further in annex 5\. The World Bank’s approach to the operational design considered these client target areas, balanced with the World Bank’s independent understanding of what could result in meaningful improvement and using the policy structures that were being implemented or which already existed\. 68\. At the time of initiating the operation, the World Bank team knew that UDAY was under development but not its full scope or timing of its announcement\. The team aligned the DPL with UDAY when narrowing its selection of prior actions and triggers for the operation\. The team’s view was that orientation of World Bank engagement through the operation should be on ensuring effective implementation and monitoring of the UDAY scheme, while adding certain features especially on corporate governance and performance management of utilities that make it ‘UDAY plus’\. 69\. The objectives of the UDAY scheme, and the World Bank’s operation in support of UDAY’s implementation, recognized the central political economy challenges of the distribution sector and sought to make substantive progress through solutions that were attainable given political realities but would create institutional and operational foundation for broader reform\. While the intent of UDAY was focused on immediate objectives to rescue the sector and make substantive reforms, it was widely understood that it was not a panacea for the risks and challenges facing the sector, even as it goes further than earlier DISCOM bailouts\. To increase revenue, given the challenges of increasing regulated tariffs, the operational design focused on reducing operational inefficiency of the DISCOMs, particularly AT&C losses\. 70\. The team recognized that the DPL program could be perceived as signaling the World Bank’s agreement with the UDAY approach which covers US$65 billion of accumulated debt to financial institutions and therefore could be of systemic importance in India\. The team’s conclusion was that the UDAY program represented an important innovation over prior programs and addressed important sectoral issues\. For instance, the team believed that DISCOM losses should be the responsibility of the state (at least those arising from delayed/non-payment of subsidies), so it is preferable to bring them ‘on the books’ and recognize them as direct liabilities rather than keeping the losses as contingent liabilities\. The state would therefore have a stronger incentive to limit the financial bleeding of the DISCOMs, so that other expenditures can be realized, including in social and infrastructure investments\. The team noted the relative strengths of UDAY and felt that its protections against moral hazard were sufficient to justify World Bank support while acknowledging that a single operation may not be able to fully mitigate the risk of future bailouts\. 71\. Results chain and other relevant topics for reform\. There were several areas of focus that were intentionally excluded from the DPL, despite their potential importance to the attainment of the PDOs\. The World Bank learned from power sector reform efforts in Rajasthan over a decade earlier that had 28 These are also discussed in detail in the DPL1 Program Document, paragraph 34\. Page 28 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) been overambitious in their objectives despite political headwinds\.29 The choice to exclude these areas of focus—despite work under way with World Bank grant funds—related to the risk that the World Bank’s association with particularly sensitive topics could have created more attention and risks for successful implementation\. This included provisions to (a) encourage private participation; (b) revise tariffs to improve cost recovery; and (c) address the nexus of power, water, and agriculture sectors for long-term viability of the distribution sector\. • Encouraging private participation\. The team debated whether a prior action on private participation should be included\. The GoR had been considering approaches to attract private partners in the Rajasthan DISCOMs including through franchisees, co-operatives, and private ownership\. The objective would have been to redistribute debt and liabilities while incentivizing performance improvements\. This suggestion builds on principally urban experience in Delhi, Mumbai, and Bhiwandi where DISCOMs were unbundled, privatized, or franchised, with subsequent achievement of significant efficiency improvements, with similar arguments of the Shunglu Commission Report that “Efficiency may well be a function of ownership\.” The Letter of Development Policy from the Rajasthan Government included reference to interest of the state government in inviting bids for distribution franchisees in both Phase 1 and Phase 2 of the DPL series, to “reap benefits of private sector efficiencies,” including for AT&C loss reduction\. The World Bank has a long history with power sector reform and privatization, the experience of which shows that reforms involving participation of the private sector, along with other features of the Washington Consensus, were not determinative of outcomes, which are more likely a function of targeted policy objectives\. Furthermore, distribution privatization operations have had a polarizing history in India,30 making it difficult for the World Bank to engage with clients on related reforms\. The program design acknowledged several of these lessons and alluded to key messages from contemporaneous analytical work under way at the World Bank to assess the conditions where distribution reform had been successful\.31 In Rajasthan, during the runup to the elections, the franchisee model for distribution was contentiously debated, including impacts on poorer consumers\. Any pressure on the state to pursue privatization had the potential to weaken its ability to credibly walk away from negotiation with a potential franchisee and therefore demand better terms\. Consequently, the World Bank team encouraged the GoR to learn from early experience with franchisees in Rajasthan awarded in Kota, Bharatpur, Bikaner, and Ajmer between 2016 and 2017 but without inclusion as a prior action\. • Tariff revision\. After consideration, the team made a choice to exclude any prior action related to tariff revision, opting instead (via DPL2 Prior Action 4) to support UDAY and RSEDMR provisions for regular filing of revenue petitions to the regulator, who would then decide whether they should be implemented\. In January 2016, the GoI issued an updated 29 World Bank Independent Evaluation Group\. 2007\. India - Rajasthan Power Sector Restructuring Project (English) – Implementation Completion Report Review\. http://documents\.worldbank\.org/curated/en/117391474850992418/India- Rajasthan-Power-Sector-Restructuring-Project\. 30 Dubash, Navroz K\., and Sudhir Chella Rajan\. “Power Politics: Process of Power Sector Reform in India\.” Economic and Political Weekly (2001): 3367–3390\. 31 Foster, Vivien, and Anshul Rana\. 2020\. Rethinking Power Sector Reform in the Developing World\. Sustainable Infrastructure\. Washington, DC: World Bank\. Page 29 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) ‘Tariff Policy Resolution’ with the same objective\. UDAY/RSEDMR/Tariff Policy would give more autonomy to the regulator in considering tariff petitions\. The World Bank’s decision not to more explicitly address tariff revision on Program design also considered analysis showing that tariff increases would have a small negative impact on the poor, though electricity would remain affordable and increases could be offset by measures encouraging energy-efficient LED lighting\. More importantly, the World Bank recognized that after implementing tariff increases in the past several years since 2012,32 Rajasthan had the highest tariffs in the country and that pushing for yet higher tariffs could be politically unsustainable\. An order increasing tariffs was issued in September 2016, obviated in part by subsequent additional subsidy to absorb the increase for agricultural consumers\. Despite this political environment around tariffs, the World Bank’s financial analyses that resulted in financial sustainability for the included tariff revisions in all scenarios (see annex 5, Table 5\.1)\. This analysis may have been overly optimistic, particularly as the magnitude of tariff increases in DPL2 were more modest than in DPL1 and reflected the souring political mood toward tariff revision given the forthcoming elections\. 72\. The complete disbursement of the operation and positive progress toward results indicators is a reflection of a pragmatic operational design that considered long-standing political and institutional barriers in risks to reform\. Risks were assessed during the operational design of DPL1, reassessed during DPL2, and targets adjusted accordingly\. The targets for ACoS-ARR gap and AT&C losses were relaxed between DPL1 and DPL2 to reflect the shifting political realities amid the state elections in 2018\. 73\. Monitoring arrangements and quality of supervision\. The Program Documents elaborate the monitoring, evaluation, and accountability frameworks in place for the operations\. Regular review was in place owing to (a) smart metering and performance incentives that enable continuous monitoring, though this refers to capabilities enabled through program implementation and not for monitoring the program itself; (b) GoR task force monthly meetings—though it is not clear whether there is interest in accountability and transparency at this level of oversight and furthermore the task force lost its influence following the 2018 state elections; (c) DISCOM management performance reviews, though this is not an independent review; and (d) UDAY oversight from MOP and Ministry of Finance, though presumably this relies on DISCOM and GoR reporting, which is not independent\. Perhaps recognizing the weakness of the monitoring ex ante, the DPL2 clarifies that “strengthening the monitoring and evaluation systems is an integral part of the proposed operation,” with the continuous monitoring capabilities listed above as the main intervention for achieving this\. The operation may have clarified the importance of regularized audits as part of the effort to achieve accountability\. 74\. In summary, the World Bank performance is assessed as Satisfactory\. The World Bank responded quickly to the needs of the sector and prepared a reform Program that made significant changes that put the Rajasthan DISCOMs on a more stable path to sustainable operations\. The results can reasonably be assumed to have substantive lasting impact on institutional strength and reduced losses\. The achievements of the program are proportionate with the magnitude of finance and nature of the instrument\. 32Rajasthan DISCOMs increased tariffs by 92\.5 percent between FY12 and FY15, following six years with no tariff revision despite operational and power purchase costs growing by 48 percent over the period\. Page 30 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) V\. RISK TO SUSTAINABILITY OF DEVELOPMENT OUTCOMES 75\. Due to the continued annual revenue shortfall of the DISCOMs and the inclination of the state government to exert influence on the regulator, the risk to financial sustainability remains Substantial\. 76\. UDAY’s enforcement mechanisms and incentives are intended to protect against further bank loans for future losses of the DISCOMs, preventing backsliding and reaccumulation of high-cost debt\. For instance, DISCOMs are no longer legally permitted to cover short-term losses by borrowing from commercial banks and therefore forced to borrow from the state government, which is itself tightly constrained on borrowing by the Central Government that has the ability to withhold fiscal transfers\. However, the question remains whether—in the local political context—this chain of consequences could credibly be expected to constrain future loss-making activity\. UDAY has added constraints to a sector already overconstrained by other political tradeoffs, which creates risks of potential backsliding\. Already, the GoR is appealing to MOP regarding the requirement under UDAY to assume part of the DISCOMs’ annual losses\. This suggests a willingness by the state to push back on tenets of UDAY and raises broader questions about the appetite for full implementation of the reform agenda\. Therefore, the risks of moral hazard raised in earlier programs involving state bailout of the distribution sector have not been fully mitigated\. 77\. Nonetheless, governance changes at the DISCOMs themselves supported by the Program are likely to be durable and will help increase the independence, transparency, and accountability of the distribution sector\. While this is a promising step, it remains to be seen whether independent directors at the DISCOMs will have an adequate role to steer further toward operational efficiency and cost recovery\. Other reforms will be resilient to any political shifts, including preparations for digitization and smart metering and energy efficiency and improving employee capacity at the DISCOMs\. 78\. The risks facing the distribution sector are exacerbated by COVID-19, which can suppress demand for electricity through economic disruption, increase poverty rates and reduce consumer ability to pay for power, and delay the state government’s priority on the reduction of AT&C losses and tariff revision\. Strengthening the financial position of the Rajasthan DISCOMs should enable them to sustain quality and reliable service despite disruption from COVID-19\. The GoI has committed more than INR 90,000 crore in stimulus to the public DISCOMs in May 2020 to weather the sector disruption\. As with UDAY and other support packages that preceded it, there are reform conditions on accepting these COVID-19 funds\. These include implementation of smart meters and assurances from state governments that loan amounts are paid monthly or quarterly, which are measures that the World Bank program has supported\. The package has also allowed one-time relaxation of working capital borrowings,33 though as the COVID-19 crisis persists, it is not clear how the pressures on the state government will limit its abilities to supplant future borrowing\. 79\. The COVID-19 disruption is expected to negatively affect the ability of the Rajasthan DISCOMs to generate net income (see annex 5, Table 5\.2)\. From a pre- COVID-19 starting point of net income from FY18 onward, a decrease in electricity sales of 10 percent to commercial and industrial consumers would 33Bhaskar, U\. 2020\. “Economic Stimulus INR 90,000 Crore Liquidity Injection for Fund-Starved Discoms\.”\. LiveMint\. May 13, 2020\. https://www\.livemint\.com/news/india/economic-stimulus-rs-90-000-crore-liquidity-injection-for-fund-starved-discoms- 11589369762139\.html\. Page 31 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) delay turnaround to net income to FY22\. If the decrease in sales is for all customers, the DISCOMs will experience net losses for the near future\. COVID-19 may also lead to de-prioritization of further reductions in AT&C losses, which could delay financial turnaround to FY23\. VI\. LESSONS AND NEXT PHASE A\. Lessons Learned 80\. Importance of sustained engagement\. Accessing the most intractable challenges of a sector are not attainable in short operational engagements\. There was a recognition that achieving turnaround of the distribution sector would require sustained engagement extending beyond political cycles and the time frame of a DPL and also that assistance was needed urgently\. It would have been helpful to create expectations with the client early on for a multiphase approach that may involve a DPL for quick engagement alongside complementary and longer-term support through a Program-for-Results (P4R), Investment Project Financing (IPF), or sustained technical assistance to help secure gains and mitigate risks of potential backsliding while also capitalizing on openings for more substantive and cross-sectoral reforms\. For instance, there was over a decade of discontinuity between the Rajasthan DPL series and earlier World Bank support to Rajasthan from 2001 to 2006 with similar objectives\.34 The first power sector operation in Rajasthan (Rajasthan Power Sector Restructuring Project) provided US$180 million for restoring the distribution sector’s creditworthiness and putting Rajasthan on a path to financial self- sufficiency by FY05 through an IPF operation with reform objectives\. Several of the operational strategies were the same, including reduction of theft through investments in loss mitigation schemes and improved management and operational efficiency (though involving privatization)\.35 The same issue underlying insolvency of the sector today was understood at that time, namely that “appropriate adjustments in agricultural tariffs [was needed] to ensure financial recovery of the power sector as well as restore financial balance\.” A continuous engagement may have yielded deeper results on the fundamental structural challenges of the sector\. 81\. Deep engagement enabled by deep state partnerships\. The World Bank committed substantial effort upstream of the DPL series to deepen and broaden its engagement with the GoR, including through the appointment of a state coordinator, to advance discussions of lending support in priority areas such as power\. The World Bank senior management and executive directors also invested in the state relationship, and this allowed for trust fund resources to be mobilized in support of upstream analysis to inform the DPL series design\. This state partnership approach facilitated the World Bank’s pipeline and portfolio development in the state and contributed to the successful implementation of operations such as the DPL series\. The positioning of the DPL series within a broader World Bank state partnership with Rajasthan has allowed for the World Bank’s visibility in the electricity sector reform effort to translate to other state-level sectoral DPLs that the World Bank may consider in partnership with India in the future\. 82\. Identifying windows of opportunity for reform\. The team believed that there was a window of opportunity for reform available through quick action\. While more substantive reforms may have been 34 World Bank\. 2007\. India - Rajasthan Power Sector Restructuring Project (English) - Implementation Completion Report\. http://documents\.worldbank\.org/curated/en/307891468260067359/India-Rajasthan-Power-Sector-Restructuring-Project\. 35 World Bank\. 2000\. Project Appraisal Document - Rajasthan Power Sector Restructuring Project (P038334) \. pp\.6\. Page 32 of 47 Official Use The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) possible via an operational design requiring more sustained engagement, there was also the risk that the window of opportunity could close and ultimately achieve fewer reforms\. The team therefore decided to capitalize on political momentum for reform within the state rather than holding the processing of the first DPL for an indeterminate period which could risk losing the state government’s trust and the prevailing appetite for reform at the time\. As a consequence of moving quickly, the types of reforms that were feasible tended to be technical rather than political in nature\. Given the scale of the challenge facing the Rajasthan distribution sector, the need for continued engagement was evident following the completion of the DPL series\. In principle, the potential for deepening and implementing further substantive reforms and guarding against backsliding risks could have been explored through follow-up technical assistance and follow-up IPF/P4R, but there too, the window of opportunity was uncertain\. When the team explored complementing the DPL series with additional technical assistance after the 2018 state elections, there was a change in priorities of the state government due to other emerging challenges, and this foreclosed the possibility of a third phase\. 83\. Strengthening progress on private participation\. The World Bank was able to support the client’s interest in exploring increased private participation for some distribution areas, even though this was not included as part of the operational design\. The World Bank’s indirect support was enabled in part by the client’s momentum in pushing reforms, including on private sector participation\. Consequently, even without an associated prior action or results indicator, there was significant progress on private participation during the implementation period, from which lessons can be derived for future operations\. DISCOMs have awarded distribution franchises in four towns to established private players—Kota and Bharatpur (under Jaipur DISCOM) in June 2016, Bikaner (under Jodhpur DISCOM) in February 2017, and Ajmer (under Ajmer DISCOM) in March 2017\. This covers around 5 percent of the consumer base of the DISCOMs, and the model has given encouraging positive results in addition to setting benchmarks in customer service which will have long-term effects on the distribution sector in Rajasthan\. Both public and private sector resources should be explored to improve sector performance for the benefit of customers\. 84\. Importance of quality client leadership in championing reform\. Momentum to reform can substantially be attributed to key leaders in the GoR, who worked closely with the World Bank, first, in conceiving an operational design that would strike the balance of political realism and substance and, second, in overcoming challenges to implementation\. The World Bank’s engagement with these leaders through the DPL can strengthen their position as ‘champions’ for approaching needed reforms\. Furthermore, working closely with leaders of reform also strengthens their ownership of the process, which can translate into more sustained and durable change, and potential for transferring best practices to other parts of an organization when those leaders move on\. 85\. DISCOM management needs to be politically savvy\. DISCOM management has to be adroit in navigating the politics of the electricity sector\. Efforts to improve DISCOM performance by bringing in professional managers with organizational expertise but no experience with the sensitive political context did not improve outcomes in Rajasthan\. While professional management skills are valuable, the key barriers to performance in Rajasthan DISCOMs were inherently political and not organizational\. Therefore, changes in management are only effective in conjunction with enabling conditions for reform\. In another example of the importance of political awareness in DISCOM management, the structured transfer policy’s intention to allocate personnel to positions where they will be most impactful was viewed Page 33 of 47 Official Use  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) suspiciously by staff as being used as a political tool and as rewarding (or punishing) performance\. These softer reforms can be impactful in the long term but must first overcome a trust barrier\. 86\. Addressing tariff revisions more explicitly\. Although the team chose not to address tariff revisions more explicitly as part of a prior action (discussed in the Bank Performance section), other approaches may have been appropriate and feasible\. For instance, while the operational design could not specify a magnitude or timeline for tariff revision—which is at the discretion of the independent regulator—DPL 2 could have considered a more explicitly articulated trigger relating to cost recovery through tariff revision\. This would have put the onus on the DISCOMs to not only file timely petitions to the regulators but also to ensure these petitions were moving the sector in the direction of cost recovery\. 87\. Addressing important cross-sectoral issues like ‘energy-water-agriculture’ nexus\. At the core of the distribution sector’s insolvency in India is the issue of subsidized provision of electricity to farmers for use in groundwater pumping for irrigation\. While this issue has put a strain on the power sector and state finances, it has also led to overextraction of groundwater and depletion of the groundwater table\. The energy-water-agriculture ‘nexus’ underlies the complex political economy of electricity tariffs\. In the years leading up to the DPL series, agricultural users accounted for 60–95 percent of the total subsidy to the power sector\.36 The agricultural sector has significant political power and capabilities for collective organizing that increase risk aversion among government officials\. The importance of agricultural electricity subsidies for sector finances was well understood by the GoR, the World Bank team, , distribution utilities, and the GoI, at the time of developing the Rajasthan DPL\. The challenge for the operational design was finding openings for making substantive progress in increasingly the solvency of the sector while being sensitive to the political economy of electricity in agriculture\. The team therefore chose to engage more on technical, operational, and organizational issues, where there was multi- stakeholder convergence for pursuing reform\. However, financial turnaround of the distribution sector is cross-sectoral by nature\. Deepening collaborations across global practices could help identify openings where progress is achievable on these cross-sectoral issues\. B\. Next Phase 88\. While the needs of Rajasthan’s public DISCOMs were particularly acute, the World Bank’s support for restoring the health of the distribution sector at the state level served to inform a broader dialogue at the national level\. 89\. This DPL series has national-level relevance to the current steps under consideration by the GoI in strengthening DISCOMs, and this is already evident from the fact that the program may include a component on ‘reform-linked investment programs’, where outcomes are defined against which to release the money instead of releasing the funds for investments\. The DPL series shows the value of components that are technical in nature and likely to be politically resilient, including timeliness of financial audits, independent directors, automated metering and billing, and energy auditing\. \. 36 Program Document, DPL2\. Table 3, p\.8\. Page 34 of 47 Official Use  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) ANNEX 1\. RESULTS FRAMEWORK A\. RESULTS INDICATORS Pillar: Strengthening the governance framework Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Appointment of Independent Text One Two Two Directors in accordance with the clause No\. 8 of the Ordinance/ 31-Mar-2015 31-Mar-2017 31-Oct-2019 Act in each DISCOM Comments (achievements against targets): The target has been achieved on completion of DPL1 and maintained till completion of DPL2 Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Incentive for Performance during Text No Yes Yes for 1 Discom and No for 2 FY Discoms 31-Mar-2015 31-Oct-2019 31-Oct-2019 Comments (achievements against targets): The incentive for FY19 was disbursed to employees in case of Jaipur Discom while the other two Discoms didn't disburse incentive as the overall AT&C loss levels didn't decrease in these two Discoms in line with internal targets\. Page 35 of 47  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Date of availability of audited Text With a three month delay Within six months of end of Audited annual accounts for annual accounts FY (i\.e\. no delay) DISCOMs for FY19 were available before September 30, 2019\. 31-Dec-2015 30-Sep-2019 30-Sep-2019 Comments (achievements against targets): Pillar: Enhancing policies to restructure finances Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Percentage of outstanding debt Percentage 0\.00 75\.00 75\.00 (as on September 30, 2015) of DISCOMs taken over by GoR 30-Sep-2015 31-Mar-2017 28-Feb-2017 Comments (achievements against targets): Achieved Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Power Purchases for DISCOMs Percentage 0\.00 90\.00 100\.00 managed by Rajasthan Energy Development Corporation Ltd\. 31-Mar-2015 31-Mar-2017 28-Feb-2017 Page 36 of 47  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Comments (achievements against targets): Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Gap between Average Cost of Text INR 3\.00/kWh INR 0\.70/kWh INR 1\.7/kWh Supply (ACoS) and Average Revenue Realised (ARR) 31-Mar-2015 31-Mar-2019 31-Mar-2019 Comments (achievements against targets): Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Annual loss of DISCOMs to be Percentage 0\.00 10\.00 0\.00 taken over and funded by the State, as provided under UDAY 31-Mar-2015 31-Mar-2019 31-Oct-2019 Program Comments (achievements against targets): Government of Rajasthan has requested Ministry of Power, GoI to relax the subject provision of UDAY but the request is yet to be accepted\. Pillar: Improving operational performance Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Monthly Distribution Energy Percentage 0\.00 90\.00 100\.00 Audit reports generated and disclosed (expressed as % of total 31-Mar-2015 31-Mar-2017 28-Feb-2017 Page 37 of 47  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) feeders) Comments (achievements against targets): Energy audit has been started on 100% feeders Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Aggregate Technical and Percentage 29\.50 17\.00 21\.20 Commercial (AT&C) losses 31-Mar-2015 31-Mar-2019 31-Mar-2019 Comments (achievements against targets): Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Number of consumers put on Percentage 50\.00 100\.00 100\.00 unified billing system 31-Mar-2015 31-Mar-2017 31-Mar-2017 Comments (achievements against targets): Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Number of consumers put on Number 0\.00 100,000\.00 120,000\.00 pre-paid/ AMI/ AMR meters 31-Mar-2015 31-Oct-2019 31-Oct-2019 Page 38 of 47  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Comments (achievements against targets): This includes 70,000 meters installed by a franchisee of one of the Discoms Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Number of LED lamps distributed Number 0\.00 16,000,000\.00 17,129,445\.00 31-Mar-2015 31-Oct-2019 04-Nov-2020 Comments (achievements against targets): The figure was 16,164,048 as of March 7, 2019 Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Number of IT staff appointed in Number 0\.00 30\.00 30\.00 DISCOMs 31-Mar-2015 31-Mar-2017 31-Mar-2017 Comments (achievements against targets): Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Percentage of positions filled in IT Percentage 0\.00 75\.00 0\.00 cadre in DISCOMs 31-Mar-2015 31-Oct-2019 31-Oct-2019 Comments (achievements against targets): Page 39 of 47  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Out of 617 sanctioned posts in IT cadre, 518 posts have been filled up\. Out of the filled posts, 127 posts (24\.5%) have female employees Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Number of villages remaining to Number 495\.00 25\.00 0\.00 be electrified 01-Apr-2015 31-Mar-2017 31-Mar-2017 Comments (achievements against targets): Achieved, all villages except 68 uninhabited villages electrified Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Number of unelectrified Number 2,182,180\.00 750,000\.00 0\.00 Households in State 10-Oct-2017 31-Oct-2019 31-Oct-2019 Comments (achievements against targets): Data Source is Ministry of Power's SAUBHAGYA portal Page 40 of 47  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES A\. TASK TEAM MEMBERS P157224 Demetrios Papathanasiou (Task Team Leader), Rohit Mittal (Co-Task Team Leader), Frederico Gil Sander (Team Member), Heenaben Yatin Doshi (Procurement Specialist), Savinay Grover (Financial Management Specialist), Boonsri Prasertwaree Kim (Team Member), Rinku Murgai (Team Member), Sheoli Pargal (Team Member), Mridula Singh (Social Specialist), Mohan Nagarajan (Team Member), Gaurav D\. Joshi (Environmental Specialist), Martin M\. Serrano (Team Member), Neetu Sharda (Team Member), Volker Treichel (Team Member), Kavita Saraswat (Team Member), Urmila Chatterjee (Team Member), Smriti Seth (Team Member), and Amol Gupta (Team Member) P159669 Rohit Mittal (Task Team Leader), Frederico Gil Sander (Co-Task Team Leader), Heenaben Yatin Doshi (Procurement Specialist), Savinay Grover (Financial Management Specialist), Gaurav D\. Joshi (Environmental Specialist), Martin M\. Serrano (Counsel), Neetu Sharda (Team Member), Kavita Saraswat (Team Member), Amol Gupta (Team Member), and Sutirtha Sinha Roy (Team Member) A\. STAFF TIME AND COST P157224 Staff Time and Cost Stage of Project Cycle No\. of staff weeks US$ (including travel and consultant costs) Preparation 72\.816 273,150\.57 FY16 3\.437 21,675\.03 FY17 \.375 2,135\.47 FY18 Total 76\.63 296,961\.07 Supervision/ICR 3\.100 7,543\.20 FY16 33\.432 143,507\.18 FY17 Page 41 of 47  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) 0 11\.49 FY18 Total 36\.53 151,061\.87 P159669 Staff Time and Cost Stage of Project Cycle No\. of staff weeks US$ (including travel and consultant costs) Preparation 72\.966 276,982\.53 FY16 20\.545 143,087\.65 FY17 51\.170 650,846\.15 FY18 \.638 22,895\.49 FY19 Total 145\.32 1,093,811\.82 Supervision/ICR 3\.100 7,543\.20 FY16 33\.432 143,507\.18 FY17 0 11\.49 FY18 34\.550 193,316\.10 FY19 17\.955 103,602\.89 FY20 Total 89\.04 447,980\.86 Page 42 of 47 The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) ANNEX 3\. BORROWER, CO-FINANCIERS, AND OTHER DEVELOPMENT PARTNERS’/STAKEHOLDERS’ COMMENTS Page 43 of 47  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) ANNEX 4\. SECTORS AND THEMES \. SECTORS AND THEMES P157224 Sectors Mitigation Co- Adaptation Co- Major Sector/Sector (%) benefits (%) benefits (%) SECTOR_TBL Energy and Extractives 100 29\.00 0\.00 Energy Transmission and Distribution 100 29 0 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Economic Policy 18 Fiscal Policy 18 Fiscal sustainability 18 Public Sector Management 82 Public Finance Management 18 Debt Management 18 Public Administration 64 Transparency, Accountability and Good Governance 50 State-owned Enterprise Reform and Privatization 14 Environment and Natural Resource Management 29 Climate change 29 Mitigation 29 P159669 Sectors Mitigation Co- Adaptation Co- Major Sector/Sector (%) benefits (%) benefits (%) SECTOR_TBL Page 44 of 47  The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) Information and Communications Technologies 6 3\.00 0\.00 ICT Services 6 50 0 SECTOR_TBL Energy and Extractives 94 47\.00 0\.00 Other Energy and Extractives 94 50 0 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Private Sector Development 13 ICT 13 ICT Solutions 13 Finance 13 Financial Stability 13 Financial Sector oversight and policy/banking regulation & restructuring 13 Human Development and Gender 13 Gender 13 Environment and Natural Resource Management 100 Climate change 50 Mitigation 50 Energy 100 Energy Efficiency 75 Energy Policies & Reform 88 Access to Energy 13 \. Page 45 of 47 The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) ANNEX 5\. SUPPORTING DOCUMENTS Table 5\.1\. Scenarios for Tariff Increases Considered during Project Preparation, Leading to Financial Turnaround Percent change (%) FY15 FY16 FY17 FY18 FY19 FY20E FY21E Base Case - DPL 1: Non-Agriculture Tariff Increases (Program Document - Annex 7, Table 4) * 16\.3% 10\.0% 8\.0% 0\.0% 8\.0% 5\.0% Sensitivity - Non-Agriculture Tariff Increases (DPL 1, Program Document - Annex 7, Table 7) * 16\.0% 8\.0% 4\.0% Base Case - DPL 1: Agriculture Tariff Increases (Program Document - Annex 7, Table 4) 14\.5% 6\.0% 4\.8% 0\.0% 0\.0% 4\.8% 3\.0% Base Case - DPL 2: Non-Ag Tariff Increases (Program Document - Annex 8, Table 8\.2 ) * 16\.3% 10\.0% 0\.0% 0\.0% 8\.0% 6\.0% Sensitivity - Non-Agriculture Tariff Increases (DPL 2, Program Document - Annex 8, Table 8\.4) 10\.0% 0\.0% 0\.0% 5\.0% Base Case - DPL 2: Agriculture Tariff Increases (Program Document - Annex 8, Table 8\.4) * 14\.5% 6\.0% 0\.0% 0\.0% 4\.8% 3\.6% Table 5\.2\. Targeted, Revised, and Realized Net Profit/Loss Scenarios of Financial Position: FY15 FY16 FY17 FY18 FY19 FY20E FY21E (Profit(+) or Loss(-) in billion INR) Base Model -124\.7 -96\.1 -17\.5 13\.1 13\.8 26\.4 28\.7 (DPL 1 Program Document - Annex 7, Table 6) Sensitivity - Slow AT&C loss reduction -101\.7 -30\.5 1\.0 (DPL 1 Program Document - Annex 7, Table 7) Sensitivity - Lower non-agriculture tariff increase -96\.1 -28\.6 -12\.4 (DPL 1 Program Document - Annex 7, Table 7) Base Model -124\.7 -112\.4 -48\.2 -30\.0 -32\.7 -9\.4 8\.1 (DPL 2 Program Document - Annex 8, Table 8\.3) Sensitivity - Slow AT&C loss reduction -48\.2 -31\.4 -41\.4 -20\.1 (DPL 2 Program Document - Annex 8, Table 8\.4) Sensitivity - Lower non-agriculture tariff increase -48\.2 -30\.0 -32\.7 -19\.4 (DPL 2 Program Document - Annex 8, Table 8\.4) Actual/ Revised (RTI International 2020) 21\.7 26\.1 50\.5 5\.6 Scenario 1: Delayed tariff increases 50\.5 5\.6 Scenario 2: Delayed reductions in AT&C loss 45\.0 -15\.1 COVID-19 (Scenario 3a): Decrease in sales to Commercial 50\.5 -2\.3 & Industrial consumers by 10% COVID-19 (Scenario 3b): Decrease in sales by 10% 50\.5 -33\.0 COVID-19 (Scenario 3c): Decrease in Sales by 10% and 50\.5 -35\.1 delayed reductions in AT&C losses The ‘Ten Sutras’ discussed as possible areas for engagement with the client under the reform program are as follows: (a) Customer service strategy\. Addressing the remaining access challenge; modernizing connection, billing, and payment IT processes; centralized customer care and call center; and better customer outreach Page 46 of 47 The World Bank First and Second Programmatic Electricity Distribution Reform DPL for Rajasthan (P157224 and P159669) (b) Loss reduction\. Universal metering for consumers and feeders and AMR system for high-value consumers, energy audit and accounting at feeder level, introducing distribution franchisee/public-private partnership in identified areas, network strengthening and optimization, loss-based feeder supply management, and aggressive vigilance drives (c) Cost optimization\. Review of power procurement policies and procedures and improvement of operational efficiency of generation companies (d) Improved revenue realization\. Aggressive arrear recovery drives and outsourcing of the disconnection of defaulting consumers (e) Demand-side management and energy efficiency\. Launch of energy-efficient street lighting program, replacement of incandescent bulbs with LEDs through the Energy Service Company (ESCO) model, replacement of old agriculture pump sets with energy-efficient ones, flattening of the load curve, and introduction of smart metering and time-of-day tariffs (f) Tariff measures\. Submission of timely and adequate tariff revisions to RERC and revision of electricity duty from per unit to ad valorem basis (g) Asset monetization\. Exploration of options including sale/lease of land and sale of unserviceable assets/equipment (h) Disinvestment and private participation\. Options for strategic disinvestment of state-owned generation, sale of loss-making assets, and selective use of the distribution franchisee model (i) Employee engagement\. Improved communications, results and performance monitoring, assessment of training and capacity needs, accountability for results, and performance incentives (j) Sustained support from the state government\. Relying on the GoR for continued financial support and the GoI for a Financial Restructuring Plan\. Page 47 of 47

REVIEW

P151077

Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00005448 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBDR 8564-GA) ON A INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT LOAN IN THE AMOUNT OF EUR 89\.2 MILLION (US$ 100 MILLION EQUIVALENT) TO THE GABONESE REPUBLIC FOR THE INFRASTRUCTURE AND LOCAL DEVELOPMENT PROJECT II September 27, 2021 Urban, Resilience and Land Global Practice Africa West Region  CURRENCY EQUIVALENTS (Exchange Rate Effective {Sept 27, 2021}) Currency Unit = Central African CFA Franc (XAF) XAF 560\.36 = US$1 XAF 655\.47 = EUR 1 FISCAL YEAR July 1 - June 30 Regional Vice President: Ousmane Diagana Country Director: Abdoulaye Seck Regional Director: Simeon Kacou Ehui Practice Manager: Sylvie Debomy Task Team Leader(s): Dina Nirina Ranarifidy ICR Main Contributor: Nadim Saghir  ABBREVIATIONS AND ACRONYMS ADM Accredited Decision Maker CDP City Development Plan CMU Country Management Unit CN-TIPPEE National Commission for Labor Intensive Small-Scale Public Infrastructure Works COVID-19 Coronavirus Disease 2019 CPS Country Partnership Strategy E&S Environmental and Social ERR Economic Rate of Return ESIRT Environmental and Social Incident Response Toolkit ESMF Environmental and Social Management Framework ESMP Environmental and Social Management Plan FM Financial Management FY Fiscal Year GDP Gross Domestic Product GoG Government of Gabon GRM Grievance Redress Mechanism HDI Human Development Index HSE Health Safety and Environment IBRD International Bank for Reconstruction and Development ICR Implementation Completion and Results Report ILDP Infrastructure and Local Development Project ISR Implementation Status Reports M&E Monitoring & Evaluation MoE Ministry of Economy MTR Mid-Term Review NDP Neighborhood Development Plan NPV Net Present Value O&M Operations & Maintenance OP & BP Operations Procedures & Bank Procedures PAD Project Appraisal Document PDO Project Development Objective PIP Priority Investment Program PIU Project Implementation Unit PPA Project Preparation Advance PPSD Project Procurement Strategy for Development PS Permanent Secretariat RAP Resettlement Action Plan RED Roads Economic Decision RF Results Framework RPF Resettlement Policy Framework SCAP Safeguards Corrective Action Plan SCD Systematic Country Diagnostic SME Small and Medium Enterprises STEP Systematic Tracking of Exchanges in Procurement TA Technical Assistance TF Trust Fund ToC Theory of Change TPM Third-Party Monitoring TTL Task Team Leader XAF Centrical African Franc  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) \. 11 II\. OUTCOME \. 13 A\. RELEVANCE OF PDOs \. 13 B\. ACHIEVEMENT OF PDOs (EFFICACY) \. 13 C\. EFFICIENCY \. 16 D\. JUSTIFICATION OF OVERALL OUTCOME RATING \. 17 E\. OTHER OUTCOMES AND IMPACTS (IF ANY) \. 18 III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME \. 19 A\. KEY FACTORS DURING PREPARATION \. 19 B\. KEY FACTORS DURING IMPLEMENTATION \. 20 IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME \. 22 A\. QUALITY OF MONITORING AND EVALUATION (M&E) \. 22 B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE \. 23 C\. BANK PERFORMANCE \. 24 D\. RISK TO DEVELOPMENT OUTCOME \. 26 V\. LESSONS AND RECOMMENDATIONS \. 27 ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS \. 29 ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION \. 38 ANNEX 3\. PROJECT COST BY COMPONENT \. 39 ANNEX 4\. EFFICIENCY ANALYSIS \. 41  The World Bank Infrastructure and Local Development Project II (P151077) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P151077 Infrastructure and Local Development Project II Country Financing Instrument Gabon Investment Project Financing Original EA Category Revised EA Category Partial Assessment (B) Partial Assessment (B) Organizations Borrower Implementing Agency National Commission for Public Infras\. Works and GABONESE REPUBLIC Promotion of Small-Scale Enterprises (CN-TIPPEE) Project Development Objective (PDO) Original PDO <p>The project development objective is to improve access to urban infrastructure and services in selected underserviced neighborhoods and to build basic capacities for municipal management in target cities\.</p> Page 1 of 45  The World Bank Infrastructure and Local Development Project II (P151077) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 100,000,000 100,000,000 39,535,036 IBRD-85640 Total 100,000,000 100,000,000 39,535,036 Non-World Bank Financing 0 0 0 Borrower/Recipient 0 0 0 Total 0 0 0 Total Project Cost 100,000,000 100,000,000 39,535,036 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 10-Dec-2015 25-Apr-2016 03-Jun-2019 31-Jan-2021 31-Jan-2021 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 29-Jun-2019 29\.10 Change in Components and Cost Change in Procurement Change in Implementation Schedule KEY RATINGS Outcome Bank Performance M&E Quality Moderately Unsatisfactory Moderately Unsatisfactory Modest RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No\. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 27-Apr-2016 Satisfactory Satisfactory 1\.27 Page 2 of 45  The World Bank Infrastructure and Local Development Project II (P151077) 02 19-Oct-2016 Moderately Satisfactory Moderately Satisfactory 1\.27 03 05-May-2017 Moderately Satisfactory Moderately Satisfactory 5\.86 04 04-Dec-2017 Moderately Satisfactory Moderately Satisfactory 10\.87 05 15-Jun-2018 Moderately Satisfactory Moderately Satisfactory 20\.57 Moderately 06 07-Dec-2018 Moderately Unsatisfactory 29\.10 Unsatisfactory Moderately 07 10-Jun-2019 Moderately Unsatisfactory 29\.10 Unsatisfactory Moderately 08 17-Dec-2019 Moderately Unsatisfactory 29\.10 Unsatisfactory Moderately 09 25-Jun-2020 Moderately Unsatisfactory 29\.10 Unsatisfactory 10 21-Jul-2020 Unsatisfactory Unsatisfactory 29\.10 SECTORS AND THEMES Sectors Major Sector/Sector (%) Public Administration 14 Other Public Administration 14 Social Protection 17 Social Protection 17 Transportation 35 Urban Transport 35 Water, Sanitation and Waste Management 34 Other Water Supply, Sanitation and Waste 34 Management Page 3 of 45  The World Bank Infrastructure and Local Development Project II (P151077) Industry, Trade and Services 0 Other Industry, Trade and Services Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Private Sector Development 1 Enterprise Development 1 MSME Development 1 Finance 1 Financial Infrastructure and Access 1 MSME Finance 1 Public Sector Management 11 Public Administration 11 Administrative and Civil Service Reform 1 Municipal Institution Building 10 Urban and Rural Development 88 Urban Development 88 Urban Infrastructure and Service Delivery 44 Services and Housing for the Poor 44 ADM STAFF Role At Approval At ICR Regional Vice President: Makhtar Diop Ousmane Diagana Country Director: Elisabeth Huybens Abdoulaye Seck Director: Ede Jorge Ijjasz-Vasquez Simeon Kacou Ehui Practice Manager: Sameh Naguib Wahba Tadros Sylvie Debomy Mahine Diop, Deo-Marcel Task Team Leader(s): Dina Nirina Ranarifidy Niyungeko ICR Contributing Author: Nadim Saghir Page 4 of 45 The World Bank Infrastructure and Local Development Project II (P151077) Page 5 of 45  The World Bank Infrastructure and Local Development Project II (P151077) I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A\. CONTEXT AT APPRAISAL Country Context 1\. At appraisal (2015), Gabon was a country with relatively high gross domestic product (GDP) per capita driven by extractive industries\. Oil production had transformed the country over the past 40 years to one of Africa’s few middle-income countries\. The country’s population was about 1\.8 million, with a GDP per capita estimated at US$10,660\. Gabon was still largely dependent on natural resources, despite declining oil production and attempts at economic diversification\. 2\. In 2014, with a Human Development Index (HDI) of 0\.69, Gabon's human development was still not matching that of countries with similar income levels, while its inequality and unemployment remained high\. The 2005 national household survey had revealed an increase in the proportion of Gabon’s population living below the poverty line from 25 percent in 1997 to 33 percent in 2005 which remains around these levels in 2017 as no survey was conducted in between\. The country’s unemployment rate reached 27 percent in 2010, with youth and women the most affected\. 3\. Gabon had formulated a three-pronged strategy, the Gabon Strategic Development Plan that sought to leverage industry, sustainable natural resource management, and services to transform its economy into an emerging one by 2025\. The Government of Gabon (GoG) had announced in 2012 a new infrastructure plan, amounting to US$13 billion, and intended to be implemented between 2013 and 2016\. It was a global development strategy aiming to provide Gabon with the requisite infrastructure across the country, and to achieve socioeconomic development of its hinterland while initiating a diversification of its national economy\. 4\. Over the previous five years, the oil sector had accounted for an average of 80 percent of exports, 45 percent of GDP, and 60 percent of budget revenues\. However, Gabon was facing a decline in its oil reserves\. The drop in oil prices had caused a slowdown in GDP growth from 5\.6 percent to 4\.4 percent between 2013 and 2014 and to an expected 4\.1 percent in 2015\. This situation was mainly driven by negative growth in construction and public work, as a result of the fiscal impact of lower oil prices\. However, despite further decline, the government decided in 2015 to keep public investments at their 2014 level, focusing on priority infrastructure to maintain and increase the growth potential\. Sector Context 5\. Gabon is one of the most urbanized countries in Africa\. Since 2000, its urbanization rate has increased from 79 percent to 88\.1 percent in 2015,1 with an unevenly distributed urban network, and urban poverty close to its rural poverty numbers\. Across the country, urbanization has taken place without proper planning policies, resulting in inefficient cities, unplanned settlements on underserviced land and an increase in the 1 UN, World Urbanization data\. Page 6 of 45  The World Bank Infrastructure and Local Development Project II (P151077) number of poor urban households without access to basic urban services\. The risk of natural disasters such as coastal erosion and flooding was high, aggravated by a lack of storm water drainage, because development had often taken place in flood-prone areas\. Three quarters of the urban population live in these underserved areas characterized by poor access to basic services, houses built of makeshift materials, lack of land titles, high population density, poor urban mobility, and lack of wastewater/drainage and solid waste management systems\. 6\. Economic development of Gabon’s cities was hampered by lack of investments\. Despite the key role that cities were playing in the country’s economic growth, not enough investments had been done in the urban sector during the two previous decades\. Most of the funding for investments came from resources generated by the oil industry and did not follow proper planning and budgeting procedures\. The construction sector was characterized by a few large enterprises and limited competition, and Small and Medium Enterprises (SMEs) had limited access to contracts in the construction sector due their unfamiliarity with procurement and management procedures, and limited access to credit and information\. 7\. The decentralization process was partial and incomplete, almost 20 years after the enactment of the decentralization law of 1996, giving cities limited means and capacity to assert their prerogatives and execute their obligations\. A new decentralization law had been enacted in 1994, but the situation was characterized by: (i) government delay in transferring power and the resources needed for implementation by local governments; (ii) low institutional capacity of local governments in general; and (iii) a lack of defined urban policies and the failure by cities to enforce regulations in terms of land use and management of public investments\. In the absence of substantial decentralization, line ministries were, in fact, exercising the functions normally transferred to local governments\. Most cities were already overstaffed with unqualified personnel, and for some of the smaller provincial capitals, elected officials’ salaries constituted a large share of the payroll\. 8\. The project was a follow-up of the Local Infrastructure Development Project 1 (ILDP1, US$25 million), which closed in 2011\. It was responding to the strong demand from the GoG for continued support in urban infrastructure, particularly in areas covered by ILDP1, with demands from mayors and beneficiaries\. The ILDP1 initially covered six provincial capitals: Libreville, Lambaréné, Oyem, Mouila, Port-Gentil, and Franceville\. However, the provision of urban infrastructure and services was too limited in scope to substantially meet the huge demands\. In continuation of its predecessor, ILDP2 intended to support urban services’ delivery with a greater focus on building municipal management capacities in target cities\. It aimed to address the issue of access to basic services in specific underserved neighborhoods in the target cities and strengthen the capacity of the cities’ administrations to execute their mandate related to decentralized service delivery\. This dual approach built on synergies between investing in infrastructure, establishing a consultative budget and planning processes, while supporting increase in the cities’ own-source revenues and maintaining at least some urban infrastructure\. Page 7 of 45  The World Bank Infrastructure and Local Development Project II (P151077) Theory of Change (Results Chain) 9\. A project-specific theory of change (ToC) was not required during the appraisal of ILDP2, though the logic of causality was embedded in its core activities\. Combining both quality-at-entry considerations, as well as learning from project implementation, a ToC and results chain for all project components has been developed for this ICR, as illustrated in the following figure\. Figure 1: ToC for the Components 1 and 2 of the ILDP2 Problem Primary Activities Intermediary Outcomes Impacts Upgrading of urban roads Urban roads in target Number of people in underservices and under-integrated cities rehabilitated urban areas provided with Poor access to urban services in Access to priority access to all-season roads urban neighbourhoods urban infrastructure within a 500 m range Improvement of access Component 1 Other investment priorities: and services improved under the project drainage, water and sewerage, to urban infrastructure Neighbourhood Additional population with other municipal infrastructure and services in services and access to other selected underserviced infrastructures infrastructure and services neighbourhoods constructed based on Constructing/rehabilitating the NDPs Direct project beneficiaries basic neighbourhood services Job opportunities Number of female direct in target cities created in target cities beneficiaries TA for elaborating CDPs, CDPs and Master Number of NDPs for which Low capacity of cities and other stakeholders to improve Urban Master Plans, Plans developed and activities adopted are improving municipal revenue approved implemented under the and tax collection systems project at least at 80% access to infrastructure and services Municipalities’ performance Number of new urban TA for creating technical improved strategy developed services and supporting municipal organization Developed and Component 2 Deconcentrated Strengthening of the implemented capacity ministerial services capacity of target cities Building capacity of the building plans for strengthened and other stakeholders government and municipal staff in municipal deconcentrated ministerial Contract Increased municipal own management services opportunities for local source revenue as SMEs increased specified in the City Assessing the SME sector and Contracts providing training to SMEs Civil society empowered and Community engagement Building capacities of the civil strengthened in local in the project, recruited society in urban issues development community facilitators Project Development Objectives (PDOs) 10\. The Project Development Objectives were: “to improve access to urban infrastructure and services in selected underserviced neighborhoods and to build basic capacities for municipal management in target cities”\. 11\. The PDOs comprises two sub-objectives: Page 8 of 45  The World Bank Infrastructure and Local Development Project II (P151077) - Sub-objective 1: improving access to urban infrastructure and services in selected underserviced neighborhoods\. - Sub-objective 2: building basic capacities for municipal management in target cities\. Key Expected Outcomes and Outcome Indicators 12\. The expected outcomes and PDO-level indicators from the Project included the following: - People in urban areas provided with access to all-season roads within a 500m range under the project (Number) (Core)\. - Additional population provided with access to other infrastructure and services (Number)\. - Cities that implement the asset management plan as specified in the City Contracts (Number)\. - Subprojects with post-project community engagement or operation and maintenance (O&M) arrangements (Percentage) (Core)\. - Direct project beneficiaries (Number), of which female (Percentage) (Core)\. Components 13\. Component 1: Improving Urban Infrastructure to Increase Access to Services (Original allocation at approval: US$85\.5 million equivalent, of which US$1\.5 million is for the Project Preparation Advance [PPA]; revised allocation before closing: US$77\.5 million)\. 14\. The objective of this component was to increase access to infrastructure and services in underserviced neighborhoods and assure better integration of these neighborhoods into the urban fabric\. The component has two subcomponents (US$84 million equivalent): (i) Priority Investment Program (PIP)\. Investments in improving connectivity and primary infrastructure in target cities through, inter alia; (a) upgrading of selected urban roads; (b) financing of other urban priorities as determined by the City Development Plan (CDP) for each target city, including drainage, water and sewerage, and other municipal infrastructure; and (c) road rehabilitation works in Oyem\. (ii) Neighborhood Investments\. Constructing and/or rehabilitating basic service investments and infrastructure as determined on the basis of the Neighborhood Development Plan (NDP) for each selected neighborhood within target cities, including, inter alia: (a) access roads; (b) water and sanitation works; (c) secondary drainage systems; (d) health centers and schools; (e) local markets; (f) public spaces; and (g) street lighting\. 15\. Component 2: Building Institutional Development to Strengthen the Capacity of the Urban Sector (Original allocation at approval: US$10 million equivalent; revised allocation before closing: US$15 million)\. 16\. This component aimed to strengthen the capacity of target cities and other stakeholders in municipal management\. The component has four subcomponents targeting specific groups of stakeholders\. The program Page 9 of 45  The World Bank Infrastructure and Local Development Project II (P151077) of activities was developed based on the organizational and financial diagnostics of target cities carried out during project preparation\. (i) Local government strengthening\. Providing technical assistance to target cities for, inter alia: (a) elaboration of CDPs, to determine investment priorities and needs in target cities; (b) elaboration of NDPs, to determine investment priorities in selected neighborhoods; (c) elaboration of Urban Master Plans, to guide long-term urban development objectives in target cities; (d) enhancement of revenue collection and financial management (FM) through the improvement of systems for revenue and tax collection; (e) establishment of municipal technical services, including municipal asset management system; (f) support to municipal organization; and (g) handling of specific demands from municipalities, including asset management, FM, and urban planning\. (ii) Government strengthening\. Carrying out a program of activities to build the capacity of the government and deconcentrated ministerial departments through, inter alia: (a) training, technical assistance and provision of equipment and goods for assistance in municipal management; (b) development of a training cycle in municipal management; (c) elaboration and operationalization of rules and procedures governing decentralization and local government finance and conducting public consultations; (d) organization of training and workshops on these rules and procedures; (e) preparation of an FM manual for local governments; (f) carrying out of a feasibility study on transfer mechanism to local governments; (g) assistance in development of an national urban sector strategy and review of sector legislation; and (h) development of a national solid waste management strategy\. (iii) Strengthening the Borrower’s SME sector through, inter alia: (a) carrying out of a study on the SME sector dynamics and financing environment; and (b) provision of training to SMEs in technical areas such as bid preparation, general company finances, site management, labor-intensive construction techniques, environmental and social safeguard management, and social awareness and responsibilities\. (iv) Strengthening civil society through, inter alia: (a) recruitment of community facilitators to support local communities’ involvement in the urban sector development process and elaboration of NDPs; (b) training in urban development issues, management of neighborhood infrastructure and equipment; and (c) support for the establishment of collaboration mechanisms between community-based organizations and target cities\. 17\. Component 3: Management, coordination, monitoring and evaluation of the Project (Original allocation at approval: US$4\.25 million equivalent; revised allocation before closing: US$7\.25 million)\. 18\. This component supported implementation of all project activities in accordance with the Bank’s policies and guidelines\. It supported the Borrower in the areas of project coordination, supervision, FM, procurement, monitoring and evaluation (M&E), communication, audits, and preparation and supervision of implementation of the safeguard instruments, preparation of related surveys, including through the provision of training, operating costs, goods, and services for the required purpose\. Fixed costs were shared with three other Bank- funded projects implemented by the National Commission for Public Infrastructure Works and Promotion of Small-Scale Enterprises while ILDP2 covered specific costs related to project implementation\. Page 10 of 45  The World Bank Infrastructure and Local Development Project II (P151077) B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) Revised PDOs and Outcome Targets 19\. The PDO was not revised, however its outcomes targets were revised through a restructuring approved by the World Bank on June 29, 2019\. 20\. Following the 2019 project restructuring, the scope of the originally planned activities was reduced\. This was primarily done in Component 1, i\.e\. removing infrastructure investments in three cities (Franceville, Lambaréné, and Oyem), but retaining activities under Component 2 in all originally planned cities\. This was in line with the GoG’s request to restructure, in large part due to the slow disbursement rate of 13 percent at the time, and the risk of not completing the project’s objectives by project closing\. Revised PDO Indicators 21\. The PDO indicators were revised according to the reallocation of resources\. The table below presents the indicators with formally revised targets\. Targets for other indicators have not been formally revised in the Result Framework (RF)\. Table 1 – Indicators with formally revised targets Unit of Original Formally Revised Actual Achieved Indicator Name Baseline Measure Target Target at Completion Cities that implement asset management Number 0\.00 8\.00 5\.00 0\.00 plan as specified in the City Contracts 01-Oct-2015 16-Feb-2016 17-Jul-2019 01-Feb-2021 (Number) Neighborhood Development Plans for Number 0\.00 18\.00 0\.00 0\.00 which activities adopted for funding by ILDP2 are implemented at least 80 01-Oct-2015 01-Oct-2015 17-Jun-2019 01-Feb-2021 percent (Number) Municipalities that increase municipal Percentage 0\.00 8\.00 5\.00 0\.00 own source revenue as specified in the 01-Oct-2015 01-Oct-2015 17-Jun-2019 01-Feb-2021 City Contracts (Number) Revised Components 22\. The description of activities in the Components was not revised during restructuring\. However: (i) cities benefiting from physical investments under Component 1 was limited to six cities (Koulamoutou, Libreville, Makokou, Mouila, Port-Gentil, and Tchibanga) of the nine initially planned\. All activities under Component 2 were maintained for all targeted cities\. 23\. As a result of the restructuring, the available amount (US$18 million) associated with the drop of activities under Component 1 in two cities was distributed between Components 1, 2 and 3 as follow: Page 11 of 45  The World Bank Infrastructure and Local Development Project II (P151077) Table 2 - Restructuring - revised financing by component (US$ million) Component Parent (PAD) After restructuring 1\. Urban infrastructure and services 85\.50 77\.50 2\. Institutional support and capacity building 10\.00 15\.00 3\. Management, coordination, M&E 4\.25 7\.25 4\. Front-end fees 0\.25 0\.25 Total 100\.00 100\.00 Other Changes 24\. Disbursement projections were adjusted after the June 2019 Mid-term Review (MTR), to accommodate implementation delays\. Projections were changed to US$6 million in 2019, US$5 million in 2020, and US$1 million 2021\. 25\. The overall risk rating remained unchanged, however the Institutional Capacity for Implementation and Sustainability was increased from Substantial to High, to reflect the reality on the ground and challenges to deliver\. The rating of the other risk categories remained unchanged\. 26\. Procurement plan and implementation schedules under the restructured project were also adjusted and revised to speed up implementation\. This included: (i) the preparation of a Project Procurement Strategy for Development (PPSD); and (ii) the repackaging of works to attract larger and more qualified firms\. An implementation plan had also been set up to ensure closer monitoring and enhanced accountability of the PIU\. Rationale for Changes and Their Implication on the Original Theory of Change 27\. The project’s restructuring was conducted during the June 2019 MTR, to respond to significant implementation challenges including: (i) lengthy delays in the delivery of physical infrastructure with the priority investment plan (roads) delivered in only one city out of nine; (ii) insufficient quality control and a lack of accountability from the PIU CN-TIPPEE, resulting in shortfalls and inconsistencies in fiduciary and technical reports; (iii) insufficient diligence in contract management resulting in ineligible expenditures; (iv) lack of monitoring of the Health, Safety and Environment (HSE) situation on work sites resulting in recurring accidents on project sites\. 28\. Consequently, these challenges translated in a low disbursement rate at the time of MTR: out of the total loan amount, only 28 percent was disbursed from the Bank – out of which only 13 percent of that was fully utilized by the GoG against project activities\. 29\. As noted previously, the outcome targets were revised to reflect the reduced scope of activities under Component 1 and the reallocation of budgets between the project’s components\. Page 12 of 45  The World Bank Infrastructure and Local Development Project II (P151077) II\. OUTCOME A\. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating 30\. The relevance of the PDO is rated as Substantial\. 31\. Towards the closing of ILDP1, the GoG sought support for continued Bank support on urban infrastructure, with a request to extend the initial geographic scope; such request was further reinforced during the preparation of the 2012-2016 Country Partnership Strategy (CPS, Report No\. 67343-GA), which highlighted the Bank’s support to the 2012 Gabon Strategic Development Plan: (i) increase Gabon’s competitiveness and employment; and (ii) address vulnerability and resilience\. The 2014 Human Investment Strategy aimed to reduce inequalities in access to social and public services to reduce marginalization and to improve economic and social integration of rural and urban pockets of poverty\. 32\. The Project was substantially consistent with the the Bank’s current 2020 Systematic Country Diagnostic (SCD, Report No\. 150048-GA) for Gabon found that the PDO’s relevance was still a critical need and one that has been recognized by the GoG in its continued engagement with the Bank, by: (i) improving access to urban services in underserviced and under-integrated urban neighborhoods, and (ii) promoting the capacity of municipalities and other stakeholders (e\.g\., SMEs) to improve access to infrastructure and services\. 33\. While government leadership has had difficulties with being been able to bring forward these stated priorities to fruition during project implementation, the Bank has continued to provide extensive technical assistance support during the implementation period and beyond\. The intended project activities under ILDP2 remain an important and highly relevant development priority for the country of Gabon\. The demand for them can be seen by the new project under preparation which will build upon on the lessons learnt under the ILDP2 and continue to provide Gabon with the necessary urban development\. B\. ACHIEVEMENT OF PDOs (EFFICACY) Assessment of Achievement of Each Objective/Outcome 34\. The project had significant shortcomings in delivering intended outcomes\. With low disbursement at 39\.5 percent and the financial implementation rate at 16 percent, weak implementation by the PIU hampered the overall achievement of ILDP2’s results\. Despite the 2019 restructuring which focused the project’s physical investments on a limited geographic scope and scaled up investments in the cities that had more of a need, the project did not achieve its PDO\. Page 13 of 45  The World Bank Infrastructure and Local Development Project II (P151077) 35\. The Project met or closely met 3 out of the 5 PDO indicator targets, and 3 out of the 8 intermediate results indicator targets (Table 3)\. On PDO indicators 1, 2 and 4, beneficiaries directly reached amounted to 44,604 (of whom 49 percent were female), while 18,301 people in urban areas were provided with access to all-season roads (87 percent achieved)\. Achievement of the PDOs related to capacity building (PDO indicators 5, 6 and 7) remains very limited, with many of the corresponding intermediate indicators not achieved at all\. Table 3: ILDP2 Results Achievement2 No\. PDO Indicators Target Actual Achievement Achievement Rate Improve access to urban infrastructure and services in selected underserviced neighborhoods 1\. Direct project beneficiaries (Number) 44,000 44,604 101% 2\. ➢ Of whom Female beneficiaries (Percentage) 48% 49% 102% 3\. Number of people in urban areas provided with access 21,000 18,301 87% to all-season roads within a 500-meter range under the project (Number) 4\. Additional population provided with access to other 23,000 10,000 43% infrastructure and services (Number) Build basic capacities for municipal management in target cities 5\. Sub-projects with post-project community engagement 85 40 47% or O&M arrangements (Percentage) 6\. ➢ Sub-projects that are expected to have a 36 12 33% mechanism for post-completion operation (Number) 7\. Cities that implement asset management plan as 8 0 0% specified in the City Contracts (Number) No\. Intermediate Results Indicators Target Actual Achievement Achievement Rate Component 1: Improving urban infrastructure to increase access to services 1\. Roads rehabilitated, Non-rural (Km) 8km 12km 150% 2\. Person-days of employment created (Number) 902,000 184,050 20% Component 2: Building institutional development to strengthen the capacity of the urban sector 3\. Neighborhood Development Plans for which activities 18 0 0% adopted for funding by ILDP2 are implemented at least 80 percent (Number) 4\. Cities developing and implementing capacity building 8 5 63% plans for staff (Number) 5\. New urban sector strategy developed (Number) 1 0 0% 6\. Municipalities that increase municipal own source 8 0 0% revenue as specified in the City Contracts (Number) 7\. Recruiting at least 40% of community facilitators from 40% 50% 125% female members of community (Percentage) Component 3: Project management, coordination, monitoring and evaluation of the project 8\. Grievances registered related to delivery of project 90% 100% 111% benefits addressed (Percentage) 2 Project Implementation Status Reports (ISRs)\. Page 14 of 45  The World Bank Infrastructure and Local Development Project II (P151077) 36\. In addition to the results achieved under the project’s indicators, ILDP2 did manage to produce some key investments across cities, as well as having an impact beyond the project’s results framework\. This is summarized as per the following (see Annex 1, Section B for a detailed breakdown across components)\. 37\. Objective/Outcome 1: To improve access to urban infrastructure and services in selected underserviced neighborhoods\. The objective of this component was to increase access to infrastructure and services in underserviced neighborhoods and to assure better integration of these neighborhoods into the urban fabric\. 38\. The project did manage to achieve its beneficiaries count as per Table 3 notes, through building paved roads in six cities: Mouila (1 885 meters), Tchibanga (1 848 meters), Makokou (2 360 meters), Libreville (2 601 meters), Port-Gentil (1 063 meters) et Oyem (1 703 meters), as well as a water drainage canal in Port -Gentil Port-Gentil (1 097 meters)\. It is estimated that the completed trunk roads benefited 18,301 people\. In addition, roads were rehabilitated in: Oyem (1,703 Km), Libreville (2,169 Km), Port-Gentil (1,063 Km), Mouila (1,885 Km), Tchibanga (1,848 Km), Makokou (2,360 Km), Port-Gentil (drainage canal 1,097 Km)\. 39\. In addition to the direct beneficiaries of Component 1 investments in the cities of Mouila, Tchibanga, Makokou, Libreville, Port-Gentil and Oyem, the project also financed capacity building activities in 2020 that benefited 778 people, including 160 women (20\.5 percent)\. 40\. Objective/Outcome 2: Build basic capacities for municipal management in target cities\. Although many shortcomings emerged, as noted under Table 3, there were still subprojects that were identified and proposed by the municipalities as part of the Local Development Plan (PDL) prepared for each commune\. It is expected that their management and the maintenance will be the responsibility of each beneficiary commune\. For each city, consultants produced 10 summary Neighborhood Development Plan (NDP) reports for their northern zones and 11 summary NDP reports for their southern zones\. The project also carried out a training plan on the understanding and use of NDPs, and all participating stakeholders responsible for the monitoring, maintenance and governance of infrastructure assets\. 41\. The project did not implement the training plans of the municipalities\. However, other capacity building activities were carried out for municipal staff: a structural audit of municipal staff, computer equipment for the creation of Municipal Technical Units, and various training workshops\. A new National Urban Development Strategy was not developed within the framework of the project, but the project contributed to the development of urban planning tools, namely: Local Development Plans (LDPs), Neighborhood Development Plans (NDPs), and Urban Master Plans for the communes\. 42\. Further evidence for the above outcomes could be found in the progress reports provided the PIU\. However, as the M&E section notes, there were many weaknesses in the reporting process between the field, the local committee, and the PIU\. A third-party verification agent during implementation and at the end of the project would have been beneficial for further review of these outcomes\. Justification of Overall Efficacy Rating Page 15 of 45  The World Bank Infrastructure and Local Development Project II (P151077) 43\. The overall efficacy of the PDO’s objectives and outcomes is rated as Modest, when considered against the Project’s dual objectives to: (i) improve access to urban infrastructure and services in selected underserviced neighborhoods and (ii) build basic capacities for municipal management in targeted cities\. 44\. This is even more pronounced despite the project being restructured and the outcome targets revised downwards, but most ultimately these targeted were not achieved\. C\. EFFICIENCY Assessment of Efficiency and Rating 45\. Economic efficiency\. The project’s ex-ante economic analysis was based on the Roads Economic Decision (RED) model to quantifying time-savings and reduced vehicle maintenance cost from road upgrading, based on traffic counts, and expected evolution in traffic patterns\. The investment of US$13\.3 million discounted at 12 percent to improve 8\.8 kilometers of roads in Libreville, Port-Gentil, and Oyem was projected to reap positive benefits with an overall Net Present Value (NPV) of US$3\.1 million with an average Economic Rate of Return (ERR) of 15\.2 percent\. Although additional roads investments were planned and were realized during project implementation, the economic analyses were neither carried out for the additional roads built during implementation nor at closing to be able to evaluate the economic performance of the project\. Yet, three ex- post impacts were quantified and include: a re-run of the RED model for the roads identified and achieved during the Project; (ii) the cost-effectiveness of road length (iii) and the impact on the GDP of the labor hired by the Project\. The same hypotheses were considered to re-run the RED model except for the discount rate while the actual road length and the costs per kilometer were adjusted and show positive results in terms of an overall NPV of US$5\.45 million discounted at 6 percent against an ex-ante of less than US$3\.1 million (see Annex IV)\. Similarly, at ex-ante, the weighted cost per km built amounted at US$1\.65 million whereas the total weighted cost per km achieved by project closing amounts to US$1\.13 million excluding Oyem roads\. This was notably due to more efficient implementation in Libreville thanks to more geographically focused physical investments and accessibility of works sites when compared to Koulamoutou, for instance\. Finally, although the number of workers hired by the Project represented 1/5th of the initial target, their impact on the local economy benefited low-income communities\. 46\. Design efficiency\. Although the project was a follow up to the ILDP1, the project suffered from: (i) design flaws due to deficiencies in collecting the needed data to justify and prioritize the extension of the road geographical coverage; (ii) inadequate institutional arrangements for project implementation as there was resistance to accept the change in norms regarding roles and responsibility in the administration\. Due to its multi-sectoral nature, the project was placed under the tutelage of the Ministry of Economy; the lack of involvement/ownership of a technical line ministry may have limited the provision of quality inputs on the initial design, especially on the technical components\. A steering committee which comprised several technical ministries, including urban planning and infrastructure, was set up at appraisal - but did not fulfill its role; (iii) and a weak results framework that affected the M&E arrangements, such as the information trickling from Page 16 of 45  The World Bank Infrastructure and Local Development Project II (P151077) communities to the PIU did not occur in the community-selected roads activities\. Component 1 was straightforward and consisted mainly of urban roads and drainage improvement whereas Component 2 consisted mainly of consulting services, institutional capacity building, urban planning, as well as fiscal collection and allocative efficiencies, especially with regards to the maintenance of new assets\. The stalled reform process and deficient institutional arrangements and supervision mechanisms initial project hampered the initial project activities, resulted in serious delays and in the cancelation of 59\.5 percent of the initial investment envelop\. The design did not properly account for the administrative resistance to institutional change at the central and local levels\. 47\. Implementation efficiency\. The project was affected by exogenous factors (decline in the oil price since 2016) and endogenous factors (growing fiscal deficits and near-term debt non-repayment risk, depreciation of XAF vis-a-vis the US dollar between February 2018 and June 2020 (-13 percent), economic sluggishness since 2016 as well as political and social unrest) factors that exacerbated the early delays in contracting and in disbursement processing stemming from the dual institutional set up that was characterized by poor line ministries’ coordination\. Yet, the COVID-19 pandemic had minor bearing on the final achievements, as most deliverables due between mid-2020 and early 2021 were canceled, or not achieved due to earlier accumulated delays (Section IV and Annex I)\. The scaling up of all-weather roads to nine cities had to be revised downward after the first restructuring whose request from GoG coincided with the MTR and the start of the economic downturn\. Most Component 2 activities fell short from achieving substantive results, with several big-ticket studies (totaling US$ 2\.5 million) canceled due to procurement issues\. Yet, Component 1 exceeded its targets at a lower cost due to two factors: (i) the all-weather road works in the secondary and less dense cities were much easier to implement than initially assessed and were easily scaled up; and (b) due to a price per kilometer benchmark for large cities set at XAF 1 billion per kilometer at appraisal\. This benchmark proved to be over- priced for secondary cities while the depreciation of the XAF had also some bearings on the actual price per kilometer\. Still, the maintenance of the new assets remains unsure and most probably unsustainable in the future unless sufficient budgets are earmarked by cities in the future\. 48\. Administrative efficiency\. The project required targeted administrative spending and World Bank implementation support for: (i) project preparation, where the World Bank cost reached about US$339,000 (0\.3 percent of the initial investment, see Annex 2); (ii) project supervision, where the World Bank cost reached about US$715,000 (1\.8 percent of the disbursed funds, see Annex 2) while project coordination to improve fiduciary arrangements needed careful and continuous support; Despite this considerable expenditure and support, the project had a partial successful outcome\. 49\. The discussion above confirms that even after the first restructuring, the project’s implementation efficiency had not improved\. The efficiency of the project is therefore rated Modest\. D\. JUSTIFICATION OF OVERALL OUTCOME RATING Page 17 of 45  The World Bank Infrastructure and Local Development Project II (P151077) 50\. The overall outcome rating of is rated as Moderately Unsatisfactory, when considered against the justification on efficiency and efficacy of the project\. The operation remains relevant to Gabon’s development objectives and the World Bank’s strategy in Gabon and Africa, however the PDO was not substantially achieved, and most indicator targets were not met\. E\. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender 51\. The project was classified as gender informed, with gender-specific actions to be undertaken during project implementation\. By improving access to basic services through improvements in urban roads connectivity, it largely benefited women because they were assessed as being the most affected by poor mobility and lack of access to basic services\. 52\. The results framework was disaggregated by gender-concerning direct project beneficiaries, such as 49 percent (about 22,000) of direct beneficiaries were female (against a target of 48 percent), while 50 percent (against a target of 40 percent) of community facilitators were female members\. 53\. However, over the course of the project, no impact assessment or final satisfaction survey was carried out to precisely assess the impact on women\. Moreover, during implementation, insufficient attention was paid to women’s participation in neighborhood development committees and other community development processes as specified in the PAD\. Institutional Strengthening 54\. Through Component 2, the project aimed to contribute to the institutional strengthening of the participating municipalities (sub-component 2\.1), through the provision of capacity building and technical assistance\. These have been made based on previous diagnostics that identified the areas of need\. Despite falling short from achieving the expected results, there are still a few noteworthy achievements that directly contributed to institutional strengthening\. These include capacity building, reinforcement of technical services, and various trainings and technical support related to the implementation of decentralization laws\. Poverty Reduction and Shared Prosperity 55\. The Project made some contributions to improved living conditions in low-income communities, but not as intended\. It contributed to the reduction of urban poverty by providing a better access to urban infrastructure and services that are key to improving living and health conditions of the poor, while strengthening the involvement of community-based organizations in the implementation of activities\. The Project interventions did manage to contribute to reducing the gap in service delivery between wealthy and low-income neighborhoods, Page 18 of 45  The World Bank Infrastructure and Local Development Project II (P151077) and the strengthening and involvement of local construction firms has helped to support local economic development\. Other Unintended Outcomes and Impacts 56\. There were no unintended outcomes and impacts\. III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A\. KEY FACTORS DURING PREPARATION 57\. Paradigm shift from ILDP1\. The first ILDP (appraisal April 4, 2005; closing December 31, 2011) performed relatively well\. Its ICR outcomes rating was Moderately Satisfactory, and the Implementing Agency’s Rating was Satisfactory\. In addition, part of the ILDP1 activities were dedicated to strengthening the GoG’s administrative capacity in procurement and contract management (construction and public works), as well as building the capacities of SMEs in public works and construction contracts with the public sector\. That project was built upon the WB-financed Pilot Community Infrastructure and Capacity Strengthening Project, focusing on building community infrastructure in selected underserved neighborhoods and supporting SMEs\. This shows the longstanding involvement of the Government (and CN-TIPPE) in this type of Bank-financed projects\. 58\. Despite these previous successes, the preparation of the ILPD2 had been cautious, with the overall risk rating Substantial\. ILDP1 was smaller in scale and budget, as its main activities targeted a total of six neighborhoods in six different municipalities for a total loan amount of US$25 million, four times smaller than ILDP2\. In addition, ILDP1 was also more complex than ILDP1 because: (i) the project introduced municipal contracts which set a contractual arrangement between the Government and municipalities\. This defined the reciprocal engagements in terms of infrastructure investments and improvements that the municipalities would commit to undertake, in return for their own municipal management\. This was intended to initiate a paradigm shift by supporting municipalities in playing a more central role in the then ongoing decentralization process and providing the GoG with updated planning documentation and long-term urban strategies; (ii) investments in neighborhood infrastructure and basic services were included, as well as much larger and more diverse activities related to institutional support and capacity building (including numerous activities dedicated to municipal capacities strengthening)\. Based on the project’s achievements under Component 2, it seems that the PIU wished to perpetuate in ILDP2 only local infrastructure and SME support projects that they were used to, explains their resistance to new type of activities under Component 2, which was outside their core expertise\. 59\. The definition of the project’s scope lacked a deep assessment of needs and implementation capacities of the municipalities\. Instead, cities were selected by the GoG who was willing to extend ILDP1 geographical coverage (6 cities) to the rest of the provincial capitals\. Moreover, at the time of appraisal, the Bank did not have all the necessary data (on urban dynamics and trends, poverty, access) to assess the relevance and realism of this coverage\. This assessment was also not a part of the PPA-financed activities, which would have allowed for Page 19 of 45  The World Bank Infrastructure and Local Development Project II (P151077) necessary adjustments to be made before implementation\. In fact, the PAD does not mention the need for additional studies during project preparation to refine the choice of cities\. B\. KEY FACTORS DURING IMPLEMENTATION 60\. Risk assessment and mitigation measures\. The project’s overall risk was rated Substantial at appraisal, which was consistent with the previous experience with ILDP1, although the ILDP2 was to be implemented by the same implementing agency, which was also implementing three other Bank-financed projects3\. As a result, the CN- TIPPEE key staff was overstretched across the four Bank-financed engagements, which impacted project delivery\. To ensure smooth implementation of activities, the PIU’s key staff was strengthened with dedicated staff including a project coordinator, a senior procurement specialist, a social development specialist and a monitoring and evaluation expert\. The creation of an inter-ministerial steering committee was also planned, as well as a coordination committee with women and youth in each city\. The project also included capacity building activities for SMEs in the public works sector, which was expected to contribute to mitigating the risks associated with implementation\. 61\. Institutional and project management capacity\. The capacity of the PIU to prepare and implement a much larger World Bank project than they were accustomed to was relatively low\. The CN-TIPPE did not have previous experience in implementing projects beyond basic service delivery\. The Bank’s recommendation to hire PIU dedicated staff was not fully implemented, with some key personnel not hired or hired only after the MTR\. Moreover, there was a lack of capacity of local governments to contribute to the implementation of project investments in accordance with the agreements between the GoG and the municipalities\. The establishment of municipal technical units was recent (under the previous ILDP1) in some cities, with only one successful experience in Port-Gentil\. As a result, the project was delayed during the first three years: (a) the PIU lacked staff specialized in procurement, project management, and worksite supervision; (b) the process of preparing and approving project documents was prolonged due to low quality of feasibility studies, basic and detailed designs, and cumbersome government procedures; and (c) inexperience of government agencies in mobilizing community participation and implementing the GRMs\. 62\. Deficient institutional arrangements and implementation supervision mechanisms\. The project did not benefit from high-level support from the GoG which would have also helped address some critical challenges such as administrative delays in approving project documents\. In addition, there was insufficient coordination between the PIU and the Ministry of Economy (MoE), and among the different line ministries; a steering committee was established but did not fulfill its intended role\. Furthermore, the project was led by the MoE — a decision made jointly during preparation, given the multidisciplinary nature of ILDP2\. However, the lack of leadership from a technical ministry and the blurred lines of reporting between the PIU and the MoE contributed to the project’s shortcomings and underperformance\. 63\. The Mid-term Review (MTR) and restructuring\. The June 2019 MTR corroborates the moderately unsatisfactory implementation of ILDP2 and the relevance of the July 2019 restructuring: (i) appraisal targets were not being 3 Access to Basic Services in Rural Areas and Capacity Building Project (P144135), Gabon Statistical Development Project (P157473) and e Gabon (P132824)\. Page 20 of 45  The World Bank Infrastructure and Local Development Project II (P151077) achieved; (ii) disbursements were low at 28 percent, and the financial implementation rate was at 16 percent; (iii) there was significant risks of not completing the planned work before closing\. As confirmed at project closing, the MTR highlighted the weak implementation performance of the PIU, hampering the achievement of the project objectives\. Therefore, some important recommendations were made to address the implementation challenges identified, including rigorous planning of works and implementation of health, safety, and environmental measures, as well as contract management and procurement procedures\. However, the late scheduling of the MTR - eighteen months before project closing – affected the actual implementation of the MTR key recommendations\. An earlier MTR may have helped address some of the deep-rooted challenges that have emerged in the first two years of implementation\. 64\. Following a year of discussions due to strong resistance from the PIU to project restructuring, on May 31, 2019, one week before the MTR workshop (June 7, 2019), the Ministry of Economy (MoE) notified the World Bank about the need to restructure the Project\. On July 10, 2019, the amendment to the financing agreement was signed by both parties, thus endorsing the restructuring of the project\. One reason for this resistance was that the project was hosted by a non-technical ministry, which made dialogue difficult\. The other reason was that the PIU perceived it as a reflection of its weak implementation capacity\. And a third reason was the political impact of focusing physical investments in 6 cities (thus removing 3 cities), since the Project's activities were highly expected by the populations of the target cities\. 65\. The MTR was thus carried late, in large part due to it being the client’s obligation to organize it\. And in this specific case, the period originally planned for the MTR was on the one hand due to delays at the onset of the project, and on the other hand, the organization of the MTR coincided with the discussions surrounding the restructuring which proved to be arduous and time-consuming\. 66\. The MTR tried to reassess the scope of the project, i\.e\. question the relevance and practicality of the choice of 9 target cities based on the conclusions of the 2017 poverty study\.4 It was proposed then to reduce the number of cities to 6, including 3 cities where contracts were already underway\. These were the 3 poorest cities with the highest basic infrastructure deficits, and those which had not received investments in the first ILDP\. Given the poor performance of the project, it might have been more appropriate to focus investments on a limited number of cities/sites\. This would have therefore limited the selection to the 3 cities where contracts were already underway, although this may have been a challenging decision for the Government\. 67\. Persistent shortcomings in procurement and contract management\. Implementation was affected by significant issues with payment of contract amendments and delayed renewal of personnel contracts, resulting from the lack of planning and anticipation of project activities\. Contracts were not well monitored or enforced, resulting in non- compliance with deadlines, budget overruns (despite continued recommendations made in the Aide Memoires) and complaints from contractors\. One key recommendation of the MTR was to hire a contract management firm to support the PIU in project management including procurement, work supervision, and compliance with safeguards\. This recommendation was ultimately not implemented by the PIU\. 4 Gabon Poverty Profile 2017, Damien Echevin, CRCHUS, Sherbrooke university\. Page 21 of 45  The World Bank Infrastructure and Local Development Project II (P151077) 68\. Non-compliance with safeguards procedures\. The implementation of Bank safeguards policies was a challenge throughout during project implementation\. Several problems persisted at the construction sites, despite close monitoring by the Bank and guidance to the PIU\. The most significant of these were insufficient site safety measures, the recurrence of accidents on sites, and the failure to follow accident reporting procedures\. Regarding social safeguards, community and civil society organizations were not involved in the implementation of the activities as envisioned at project appraisal, and gender issues were not systematically considered\. IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A\. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 69\. The project’s result framework aimed to establish clear links between the PDO and the project interventions, with clearly identified targets\. It should be noted that the RF did not disaggregate targets by gender when applicable, and that the RF was revised during the restructuring\. The project also put in place appropriate basic arrangements for data collection and reporting: Local Development Committees were responsible for collecting and compiling data to assess progress according to the M&E framework and the CN-TIPPEE was responsible for consolidating data from the local committees, conducting periodic monitoring of implementation progress and compliance of the World Bank policies and procedures, and quarterly reporting the progress, including updates to the results framework included in the project appraisal document\. The CN-TIPPEE was also expected to have a strong field presence and closely follow construction works, safeguards compliance, and other issues for immediate feedback to the World Bank\. However, beneficiary surveys and impact assessments were not performed at the beginning nor at the closing of the project\. M&E Implementation 70\. In contrast to the expectations set forth during the design of M&E, project monitoring was not conducted on a regular basis\. The monitoring and evaluation indicator values were not systematically collected by the local development committees and consolidated by the PIU as planned in the PAD\. Instead, there were many weaknesses in the reporting process between the field, the local committee, and the PIU\. The capacity of local committees was not strong enough to support the implementation of the M&E framework\. The MTR noted the need for hiring a new project coordinator to improve project performance and monitoring, but even after the restructuring and the reinforcement of GoG’s ownership and commitment, the necessary changes concerning M&E were not made after all\. Also, the restructuring paper did not fully explain what the new revised targets to the intermediate outcome indicators would entail, in order to reflect the reallocation of funds that occurred\. Page 22 of 45  The World Bank Infrastructure and Local Development Project II (P151077) M&E Utilization 71\. The original results indicators and dialogue with the client were used to inform the MTR, together with the observed and documented implementation constraints formed the basis for the restructuring in 2019\. The PDO had not been revised, nor had the Intermediate Results indicators\. However, the expected main outcome targets were adjusted to reflect the reallocation of funds\. The same PDO and results indicators were then used to monitor implementation progress and results in the remaining period through the end of the project\. Concerning the field work, weekly site reports were made\. However, a satisfaction survey and a final impact assessment were not carried out after project closing\. Justification of Overall Rating of Quality of M&E 72\. Based on the above assessments of M&E design, implementation, and utilization the overall quality of M&E is rated as Modest due to adequate design of the M&E system but significant implementation shortcomings\. B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE 73\. Environmental and Social\. The performance is rated Moderately Unsatisfactory, due to the failure to address several urgent recommendations of the successive support missions\. 74\. Three environmental and social safeguard policies were triggered under ILDP2: i) OP/PB 4\.01 Environmental Assessment; ii) OP/PB 4\.11 Physical Cultural Resources; iii) OP/PB 4\.12 Involuntary Resettlement\. An Environmental and Social Management Framework (ESMF) was prepared, and a Resettlement Policy Framework (RPF) was elaborated and validated in early August 2015\. A Grievance Redress Mechanism (GRM) was also prepared and partially implemented with 83 complaints received by the end of the project and 90% of them being treated\. 25 Abbreviated EIES and 12 RAPs were elaborated, and 25 ESMPs prepared before the commencement of works\. Around 447 PAPs (around 313 households) received cash compensation for loss of income, crops or portions of land during the implementation of the various sub-projects\. 75\. Non-compliance with the Bank’s environmental and social safeguards standards unfortunately resulted in recurring accidents on the works sites\. Between March 2019 and October 2020, 26 accidents were reported to the Bank, with a security level classified from indicative to serious\. As per standard procedures, ESIRT was triggered twice, and the corresponding detailed incident reports were shared with senior management\. The investigations revealed that the root causes of the accidents stemmed from lack coordination/communication on accidents, lack of preliminary analysis of activities risk level, non-availability of on-site information and safety equipment\. 76\. Financial Management\. Performance is rated as Unsatisfactory, due to the persistent weaknesses in the internal control system, notably delays in the justification of advances in the Designated Account, previous balances in third parties’ accounts and shortcomings in the budget planning and monitoring\. Further, the project took long Page 23 of 45  The World Bank Infrastructure and Local Development Project II (P151077) time to provide supporting documents for potential irregular expenses amounting over 1 865 014 760 XAF (US$3 466 986) identified during the last in-depth review performed in December 2019\. The residual FM risk is Substantial\. 77\. Procurement\. The residual risk is rated Substantial and performance Unsatisfactory at the project closing\. Procurement under the project endure the following key challenges: (i) cancellation of a large number of contracts had hampered the PDO and lowered the expected results; (ii) lack of diligence in the management of contracts that caused unpredicted delays during the contract execution; and (iii) the resistance of the PIU to execute procurement using the STEP platform\. At project closing, STEP was not fully updated\. C\. BANK PERFORMANCE Quality at Entry 78\. The Bank's performance in ensuring quality in the identification, preparation, and appraisal of the project is rated Moderately Unsatisfactory\. 79\. While the project was consistent with the strategic goals of the Bank and the GoG, ILDP2 was designed based on the lessons from the previous project (ILDP1) and carried out consultations at different levels of national and local government\. The ILPD2 supervision team included key team members from ILPD1, thus ensuring operational continuity\. There were nevertheless significant shortcomings in the quality of the project preparation and appraisal\. 80\. With hindsight, shortcomings in preparation and appraisal occurred with respect to the following specific aspects: delayed completion of detailed baselines and feasibility studies for some activities led to a miscalculation of funds allocation and implementation delays in numerous sites which was raised during the MTR\. The lack of action to generate and collect updated and reliable data on Gabon such as urbanization dynamics, state of infrastructure (quality and coverage) or poverty trends led to a non-data-based selection of target cities which were partially based on political considerations\. Moreover, while the analysis at entry recognized the importance of institutional and capacity building, this was not translated into a well-defined, realistic program linked to the PDO, while the targets were unrealistically ambitious\. 81\. The main gap in quality at entry was lack of assessment of client capacity for implementation of a complex infrastructure project like ILDP2 which led the Bank to underestimate the implementation period and level of technical assistance required for infrastructure sub-projects\. The project implementation arrangements were built on the previous ILDP1 implementation arrangements – which relied on the Permanent Secretariat (PS) of the National Commission for Public Infrastructure Works and Promotion of Small-Scale Enterprises (CN-TIPPEE), a national steering committee and city-level implementation arrangements – and these arrangements were generally reused for ILDP2\. However, implementation pace was slow because of the overestimation of client capacity to take complex decisions in a timely fashion and to manage high value contracts, resolve disputes and mitigate the various project-site incidents; however, underestimation of time required for implementation resulted in under budgeting project support, in addition to the PIU implementing 3 other Bank projects simultaneously, and was partially responsible for the low performance ratings throughout ILDP2\. It should be Page 24 of 45  The World Bank Infrastructure and Local Development Project II (P151077) noted, however, that the implementation capacity in Gabon was weak, therefore very limited options in terms of choice of PIU\. The option of relying on CN-TIPPEE was deemed to be the most realistic, given its past involvement in World Bank-financed local development projects –albeit in different scale than the then proposed ILPD2\. Quality of Supervision 82\. The Bank's performance in ensuring quality of supervision is rated as Moderately Satisfactory based on the following assessment\. 83\. In view of several quality of entry challenges, the team actively provided close support to the PIU with 15 implementation-support missions conducted during the lifetime of the project, complemented with several technical field missions, including safeguards-dedicated missions\. The project had 4 Task Team Leaders (TTLs) over its lifecycle, either based across West Africa or Washington, DC\. The core team included procurement, financial management, safeguards, and communication – all of them were based in Gabon and nearby Cameroon\. The Bank team offered technical assistance and policy advice based on international best practices\. They also provided consistent support to the PIU through training workshops across key technical areas, such as engineering, public procurement, contract management, financial management and reporting, risk management and audit, monitoring of projects, ethics, and integrity in public procurement\. 84\. The task team provided timely supervision to comprehensively address the safeguards non-compliance issues\. Several safeguards’ missions were conducted to review implementation of HSE measures, identify roots causes of accidents, brief the PIU E&S specialists on the ESIRT and OHS requirements on the worksites\. A Safeguards Corrective Action Plan (SCAP) was developed for the project, in collaboration with the PIU, and updated throughout the project cycle\. Furthermore, the missions visited the accident sites held working sessions with contractors and supervision consultants and arranged individual interviews with the victims\. Finally, the task team prepared a comprehensive investigation report regarding these accidents, that was shared with the GoG\. 85\. The CMU has been very active in supporting the Bank team to mitigate the impact of the difficult relationship between the PIU and the Ministry\. The CMU was strongly involved in convincing the GoG of the opportunity to restructure, and in improving the dialogue between stakeholders\. The task team, in addition to making extensive suggestions during supervision support missions, provided technical support, including analytical studies to support scaling down of activities, and close guidance on the implementation of social and environmental safeguards 86\. While ISRs, Aide-Memoires and the MTR reflect a focus of Bank supervision on development impact and contain at times candid assessments of bottlenecks around project management and capacity to implement, monitoring of project indicators suffered from significant quality issues, a concern also raised by the CMU\. A better performing Bank supervision would have been more meticulous in verifying project results independently\. This could have led to a timelier reaction to shortfalls and better project outcomes\. The restructuring of the project at MTR tried to install more realistic objectives, how to deal with lack of quality control by the client, and the recurring project-site accidents, however this seemed too late, as seen in the subsequent missions that took place after\. Page 25 of 45  The World Bank Infrastructure and Local Development Project II (P151077) 87\. The Bank team's margin of maneuver was, however, limited to address the blurred lines of reporting between the PIU and MoE that resulted in internal disagreements and miscommunication\. The MoE repeatedly raised the issue about the lack of timely reporting by the PIU on the challenges encountered during project implementation\. This resulted in the MoE not being notified on time and failing to enforce recommended actions in timely fashion\. Even on several occasions, the MoE communicated directly with the Bank to inquire about status of project activities, bypassing the traditional link with the PIU\. This complicated collaboration between the PIU and the MoE on the one hand, and the difficult working relationship between the Bank and the PIU on the other, prompted the Bank team to work directly with the MoE, with the close guidance and engagement of the CMU\. 88\. One of the most critical points seems to have been the client’s failure to implement some key recommendations from the MTR, including the recruitment of two contract management firms to support the implementation of infrastructure activities and safeguards measures\. The Bank had used appropriate means to draw the client’s attention to the situation, namely multiple reminders that appear in the Aide-Memoires and the MTR\. However, the fact that the MTR was done only 18 months before the project closing limited the opportunity to implement the numerous recommendations that were made\. Justification of Overall Rating of Bank Performance 89\. Based on the considerations above, the Bank’s overall performance is rated Moderately Unsatisfactory\. Despite the Bank teams proactive support to the GoG on technical and operational aspects of the project during implementation, the lack of in-depth assessment of client capacity and project complexity at preparation stage resulted in persistent challenges during implementation\. D\. RISK TO DEVELOPMENT OUTCOME 90\. Sustainability of investments\. While there is a sense of ownership, with some success in capacity built at the municipal level (government staff), there still runs the risk of this capacity not being maintained when funding ceases\. The long-term sustainability of investments was considered in the project design, through capacity building and decentralization strengthening activities\. Activities in Component 2 were designed, among other objectives, to ensure that municipal services in the target cities, ministerial services, civil society, and the private sector had the necessary capacity in municipal management\. The involvement of communities in the preparation and implementation of the project was also expected to be strengthened to ensure ownership and appropriate utilization and maintenance of the investments\. The insufficient implementation of the activities of this component thus represents a significant risk that the infrastructure investments that have been implemented will not be sustainable over time\. 91\. The technical and financial ability of the GoG to maintain the project’s assets is a risk\. Sustaining any achievements post-completion remains vulnerable to institutional weaknesses, external shocks and the continued lack of technical and financial autonomy\. Page 26 of 45  The World Bank Infrastructure and Local Development Project II (P151077) V\. LESSONS AND RECOMMENDATIONS 92\. Lesson 1\. Proper baseline studies, in-depth assessments of client implementation capacity and updated urbanization data could have helped make the project design more robust and realistic\. The Project was found to be too ambitious with regards to the expected outcomes, namely due to the lack of baseline studies and various assessments at appraisal\. As a result, several key activities remain outstanding after project closure, including the achievement of PDO target outcomes (38 percent for Component 1, 25 percent for Component 2), use of project funds (62 percent unspent)\. There was weak performance of the PIU in monitoring of field work, and insufficient involvement of the steering committee to implement successive recommendations of the Bank team\. Still, capacity building was included in the project activities and planned to be performed in parallel with the urban infrastructure investments\. Recommendation: the persistent shortcomings were not directly related to the number of cities, but rather to the broad range of activities and the large envelope\. It could be recommended for future projects that the envelope be limited based on the level of risk and the assessment of implementation capacity of the client\. It could also be recommended to keep the number of components and activities the lowest possible and focus investments on activities that have already been successfully implemented in the same context\. In addition, during the preparation, it is important to make sure that the project is mainly implemented by a technically competent ministry\. 93\. Lesson 2\. Readiness should have been assessed and ensured during preparation\. The lack of technical and operational readiness for infrastructure design and implementation at appraisal caused delays in implementation that were never overcome during implementation\. The operational timeline set out also underestimated the time required to take sequential steps, conduct technical reviews and carry out the required iterations to design, implementation and adjust the Project as it was carried out\. Ensuring that key contracts reached advanced stages of procurement prior to approval, while efficient and effective studies were conducted, would have streamlined the implementation of Component 1\. Recommendation: Recognizing the issues surrounding the Project early on and setting a more realistic implementation tempo for the Project could have reduced frustration and repeated contract extensions during Project implementation\. In addition, ensuring that the systems and capacity required to manage the operational complexity of the Project are in place at approval and throughout implementation is essential to ensuring adequate project implementation\. It is critical to ensure that factors such as the number of large contracts and coordinating entities matches with the government’s institutional capabilities and interests and ensure assessment of the market to enable successful procurement of key contracts\. Ensuring that arrangements are in place to take measures and decisions required to accelerate project implementation, address contractual disputes and to respond to evolving technical complexity of implementation is essential for infrastructure projects\. 94\. Lesson 3\. Implementation arrangements could be tailored to address the specific challenges that confronted the project during its life cycle\. A key reason for the underperformance of ILDP2 was the was lack of adequate capacity in project management, notably the chronic understaffing and underqualification of the PIU at national and local levels\. This negatively impacted all other aspects of the operation from safeguards compliance to procurement efficiency and the technical quality of outcomes\. Furthermore, some key recommendations (such as the hiring of a contract management firm) following the MTR were disregarded by the PIU, which exacerbated delays in the completion of infrastructure investments, and in the cancellation of US$ 2\.5 million for studies planned for the institutional strengthening component\. Finally, the results framework showed very limited Page 27 of 45  The World Bank Infrastructure and Local Development Project II (P151077) commitment from the PIU and the GoG in the implementation of Component 2 activities (performance had been rated Moderate Unsatisfactory since June 2018 and downgraded to Unsatisfactory in May 2020), without the Bank being really able to enforce key recommendations\. Recommendation: It would be beneficial to strengthen the preparation and implementation of project activities and complement the Bank task team’s efforts with as much technical assistance as necessary\. The Bank could also engage early on with the GoG about the opportunity to explore alternative options to support the PIU, with Technical Assistance (TA) or third-party monitoring where relevant\. 95\. Lesson 4\. Strong political commitment and implementation arrangements that foster stakeholder coordination are crucial for successful implementation\. Constant, close, and efficient communication, coordination, and information-sharing with the involved parties and beneficiaries are particularly important during project implementation\. This includes a locally established GRM, which allows teams to be more responsive and manage the expectations of community members throughout implementation\. Recommendation: To implement large-scale infrastructural and urban governance projects, it is crucial to secure political buy-in, including having on-board a strong technical line ministry, and to fully align with the Government’s priorities, timeline, institutional capacity, and other ongoing initiatives in the country\. In this respect, establishing formal mechanisms for collaboration at the design stage can greatly accelerate implementation\. The steering committee should aim to go to the highest levels of government possible, with the guidance from the CMU, to avoid low-level political and institutional conflicts\. 96\. Lesson 5\. Using independent verification agent tools for better M&E and to provide credibility\. While the Bank team did propose to have an independent consultant to review the adequacy of supervision and results being achieved under the project, it seemed that the working environment in Gabon is not conducive to have these kinds of arrangements, especially with the Government having to use its own resources for that, Recommendation: It is encouraged that in challenging projects like ILDP2, the Bank team should have proceeded with directly hiring a third-party monitor: (i) for assessing and monitoring infrastructure works under Component 1, (ii) to assess the project during MTR, and (iii) to assess the performance of the PIU\. Having such a close third party working between the Bank and GoG would have been important in providing more credibility and transparency on both sides\. 97\. Lesson 6\. Involving communities and municipalities during decision-making and implementation\. The lack of involvement of communities and municipalities hampered ownership and influence on how the project was implemented\. Recommendation: It is important to ensure clarity of ownership and management arrangements of all community and local administrations’ assets under the Project, to ensure their adequate future operations and maintenance\. Use of existing community and municipal leadership, ensuring that they are consulted at various stages of the subproject cycle, that is, identification, design, implementation, quality assurance, and impact evaluation\. Communities and municipalities need to be engaged throughout project implementation, including in the monitoring of the implementation of project activities\. \. Page 28 of 45  The World Bank Infrastructure and Local Development Project II (P151077) ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS A\. RESULTS INDICATORS A\.1 PDO Indicators Objective/Outcome: Improve access to urban infrastructure and services in selected underserviced neighborhoods Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of people in urban Number 0\.00 21000\.00 18,301\.00 areas provided with access to all-season roads within a 500 01-Oct-2015 16-Feb-2016 01-Feb-2021 meter range under the project Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Additional population Number 0\.00 23000\.00 10,000\.00 provided with access to other infrastructure and services 01-Oct-2015 16-Feb-2016 01-Feb-2021 (Number) Page 29 of 45  The World Bank Infrastructure and Local Development Project II (P151077) Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Direct project beneficiaries Number 0\.00 44000\.00 44,604\.00 01-Oct-2015 16-Feb-2016 01-Feb-2021 Female beneficiaries Percentage 48\.00 48\.00 49\.00 Comments (achievements against targets): Objective/Outcome: Build basic capacities for municipal management in target cities Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Sub-projects with post- Percentage 0\.00 85\.00 40\.00 project community engagement or O&M 01-Oct-2015 16-Feb-2016 01-Feb-2021 arrangements (%) Sub-projects that are Number 0\.00 36\.00 12\.00 expected to have a mechanism for post- completion operation Page 30 of 45  The World Bank Infrastructure and Local Development Project II (P151077) Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Cities that implement asset Number 0\.00 8\.00 5\.00 0\.00 management plan as specified in the City Contracts 01-Oct-2015 16-Feb-2016 17-Jul-2019 01-Feb-2021 (Number) Comments (achievements against targets): A\.2 Intermediate Results Indicators Component: Component 1: Improving urban infrastructure to increase access to services Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Roads rehabilitated, Non- Kilometers 0\.00 8\.80 12\.10 rural 01-Oct-2015 01-Oct-2015 01-Feb-2021 Comments (achievements against targets): Indicator Name Unit of Measure Baseline Original Target Formally Revised Actual Achieved at Page 31 of 45  The World Bank Infrastructure and Local Development Project II (P151077) Target Completion Person-days of employment Number 0\.00 902000\.00 184,050\.00 created (Number) 01-Oct-2015 01-Oct-2015 01-Feb-2021 Comments (achievements against targets): Component: Component 2: Building institutional development to strengthen the capacity of the urban sector Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Neighborhood Development Number 0\.00 18\.00 0\.00 0\.00 Plans for which activities adopted for funding by ILDP2 01-Oct-2015 01-Oct-2015 17-Jun-2019 01-Feb-2021 are implemented at least 80 percent (Number) Comments (achievements against targets): Due to the delay in implementation Component 1 activities, and the focus on roads works, the implementation of the Neighborhood Restructuring Plans (PACQs) were canceled during the 2019 restructuring\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Cities developing and Number 0\.00 8\.00 5\.00 Page 32 of 45  The World Bank Infrastructure and Local Development Project II (P151077) implementing capacity 01-Oct-2015 01-Oct-2015 01-Feb-2021 building plans for staff (Number) Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion New urban sector strategy Number 0\.00 1\.00 0\.00 developed (Number) 01-Oct-2015 01-Oct-2015 01-Feb-2021 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Municipalities that increase Percentage 0\.00 8\.00 5\.00 0\.00 municipal own source revenue as specified in the 01-Oct-2015 01-Oct-2015 17-Jun-2019 01-Feb-2021 City Contracts (Number) Comments (achievements against targets): Indicator Name Unit of Measure Baseline Original Target Formally Revised Actual Achieved at Page 33 of 45  The World Bank Infrastructure and Local Development Project II (P151077) Target Completion Recruiting at least 40 percent Percentage 0\.00 40\.00 50\.00 of community facilitators from female members of 01-Oct-2015 01-Oct-2015 01-Feb-2021 community (Percentage) Comments (achievements against targets): Component: Component 3: Project management, coordination, monitoring and evaluation of the project Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Grievances registered related Percentage 0\.00 90\.00 100\.00 to delivery of project benefits addressed (%) 01-Oct-2015 01-Oct-2015 01-Feb-2021 Comments (achievements against targets): Page 34 of 45  The World Bank Infrastructure and Local Development Project II (P151077) B\. KEY OUTPUTS BY COMPONENT Objective/Outcome 1: To improve access to urban infrastructure and services in selected underserviced neighborhoods 1\. Access to all-season road in urban Paved roads were built in six cities: Mouila (1 885 meters), Tchibanga (1 848 areas meters), Makokou (2 360 meters), Libreville (2 601 meters), Port-Gentil (1 063 Outcome Indicators 2\. Access to other infrastructure and meters) et Oyem (1 703 meters), as well as a water drainage canal in Port- services Gentil Port-Gentil (1 097 meters)\. It is estimated that the completed trunk roads benefit 18,301 people\. 1\. Length of non-rural road rehabilitated The number of jobs created cumulatively since the delivery of the first works Intermediate Results 2\. Number of jobs created (Oyem in 2018); it does not include the worksites that did not provide Indicators information to the supervisory missions\. 1\. Roads are rehabilitated in selected Roads have been rehabilitated in selected cities: Oyem (1,703 Km), Libreville cities (2,169 Km), Port-Gentil (1,063 Km), Mouila (1,885 Km), Tchibanga (1,848 Km), Key Outputs by Component 2\. Neighborhood services and Makokou (2,360 Km), Port-Gentil (drainage canal 1,097 Km)\. (linked to the achievement of infrastructure are constructed the Objective/Outcome 1) 3\. Jobs opportunities are created for the local workforce Objective/Outcome 2: To Build basic capacities for municipal management in target cities 1\. Post-project community engagement, The sub-projects were identified and proposed by the municipalities as part of post-completion O&M mechanisms the Local Development Plan (PDL) prepared for each commune but have not 2\. Implementation of city’s asset been implemented\. It is expected that their management and the maintenance Outcome Indicators management plans will be the responsibility of each beneficiary commune\. City contracts have been signed with all municipalities in the project\. They include the objectives concerning the management of infrastructure assets\. Page 35 of 45  The World Bank Infrastructure and Local Development Project II (P151077) Only the municipality of Port-Gentil has an asset management plan (since PDIL1), but its implementation is not yet effective\. 1\. Number of successfully implemented For each city, the Consultant produced summary NDP reports and then final NDPs PACQ reports: 2\. Number of capacity building plans for • 10 summary NDP reports are available for the northern zone: Libreville (4), municipal staff developed and Oyem (2), Makokou (2), Lambaréné (2) implemented • 10 final NDP reports are available for the North zone: Libreville (4), Oyem (2), 3\. Number of new urban strategies Makokou (2), Lambaréné (2) developed • 11 summary NDP reports are available for the South zone: Port gentil (3), 4\. Number of municipalities with Franceville (2), Mouila (2), Koula-Moutou (2), Tchibanga (2) increased own source revenue • 11 final NDP reports are available for the South zone: Port gentil (3), 5\. Female community facilitators Franceville (2), Mouila (2), Koula-Moutou (2), Tchibanga (2) recruited Intermediate Results The project has carried out a training plan on the understanding and use of Indicators NDPs\. These trainings concerned all stakeholders responsible for the monitoring, maintenance and governance of infrastructure assets\. 108 participants attended the NDP training sessions, including 24 women (22\.22%)\. The project did not implement the training plans of the municipalities\. However, other capacity building activities were carried out for municipal staff: a structural audit of municipal staff, computer equipment for the creation of Municipal Technical Units, various training workshops\. 6 community facilitators were recruited by the project, including 3 women (50%)\. 1\. CDPs and Master Plans are developed A new National Urban Development Strategy was not developed within the Key Outputs by Component 2\. Performance of municipalities is framework of the project, but the project contributed to the development of (linked to the achievement of improved, regarding service delivery and urban planning tools, namely: Local Development Plans (LDPs), Neighborhood the Objective/Outcome 2) urban management Development Plans (NDPs), and Urban Master Plans for the communes\. Page 36 of 45 The World Bank Infrastructure and Local Development Project II (P151077) 3\. Deconcentrated ministerial services In addition to the direct beneficiaries of Component 1 investments in the cities and civil society are strengthened of Mouila, Tchibanga, Makokou, Libreville, Port-Gentil and Oyem, the project also financed capacity building activities in 2020 that benefited 778 people, including 160 women (20\.57%)\. This brings the number of beneficiaries to 39678 people\. Page 37 of 45  The World Bank Infrastructure and Local Development Project II (P151077) ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A\. TASK TEAM MEMBERS Name Role Preparation Mahine Diop, Deo-Marcel Niyungeko Task Team Leader(s) Kouami Hounsinou Messan Procurement Specialist(s) Enagnon Ernest Eric Adda Financial Management Specialist Sung Heng C\. Kok Shun Team Member Antoine V\. Lema Social Specialist Emmanuel Ngollo Social Specialist Aissatou Diallo Team Member Rick Emery Tsouck Ibounde Team Member Christian Vang Eghoff Team Member Maya Abi Karam Counsel Dina Nirina Ranarifidy Team Member Sonia Vanecia Boga Team Member Gyongshim An Team Member Supervision/ICR Dina Nirina Ranarifidy, Patrice Joachim Nirina Rakotoniaina Task Team Leader(s) Lova Niaina Ravaoarimino, Rose Caline Desruisseaux- Procurement Specialist(s) Cadet, Lanssina Traore Henie Dahlia Takodjou Meku Financial Management Specialist Celestin Adjalou Niamien Financial Management Specialist Cyrille Valence Ngouana Kengne Environmental Specialist FNU Owono Owono Social Specialist Page 38 of 45  The World Bank Infrastructure and Local Development Project II (P151077) Gyongshim An Team Member Sylvie Munchep Ndze Procurement Team Alphonse Soh Team Member Olivia D’aoust Team Member Seraphine Nsabimana Team Member Antoinette Pongui Procurement Team Rahmoune Essalhi Procurement Team Emmanuel Ngollo Environmental Specialist Philippe Lindou Environmental Specialist Sung Heng C\. Kok Shun 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 FY15 17\.291 100,953\.08 FY16 29\.708 237,142\.09 FY17 \.125 607\.25 Total 47\.12 338,702\.42 Supervision/ICR FY16 0 3,347\.35 FY17 22\.287 129,745\.83 FY18 30\.087 170,603\.18 FY19 33\.244 239,716\.72 FY20 29\.352 171,950\.21 Total 114\.97 715,363\.29 ANNEX 3\. PROJECT COST BY COMPONENT Page 39 of 45  The World Bank Infrastructure and Local Development Project II (P151077) Amount at Revised Amount after Actual at Project Percentage of Components Approval Project Restructuring Closing (US$M) Approval (%) (US$M) (US$M) Component 1: Improving urban infrastructure to 85\.50 77\.50 31\.5 increase access to services Component 2: Building institutional development 10\.00 15\.00 4\.5 to strengthen the capacity of the urban sector Component 3: Project management, coordination, monitoring 4\.25 7\.25 3\.5 and evaluation of the project Front-end Fees 0\.25 0\.25 0\.25 100 Total 100\.00 100\.00 39\.5 39\.5 Page 40 of 45  The World Bank Infrastructure and Local Development Project II (P151077) ANNEX 4\. EFFICIENCY ANALYSIS Ex-Ante Economic Analysis 1\. The economic analyses of additional road investments under component 1 that were supposed to be carried out during project implementation by using the Roads Economic Decision (RED) model were not achieved\. The economic screening methodology (cost-effectiveness) to support decision-making and carry out the revenue generating activities (such as markets) was also not achieved\. Tangible and intangible benefits were supposed to accrue during and after project implementation but were not consistently monitored\. At any rate, the Project was supposed to contribute to the development of economic activities and improved access to services in the selected neighborhoods by rehabilitating/constructing roads and storm drainage systems and other socio-economic infrastructure\. It was also expected that the Project will contribute to the following quantifiable and non-quantifiable benefits: (1) saved time and money; (2) improved service levels; (3) revitalizing the construction sector; (4) job creation, particularly for young people; (5) creation of micro- economic activities and increased revenues; (6) better knowledge of the tax base in neighborhoods, which will allow the targeted cities to increase their revenues; (7) increased urban mobility; (8) protection against national disasters; (9) increased 14 social cohesion in project neighborhoods stemming from the process to prepare and implement NDPs; and (10) increased investments in housing improvements by residents of beneficiary neighborhoods\. These benefits were supposed to be capture at the MTR but were never achieved to better gauge the economic impact of the Project\. 2\. Although the economic analysis methodology was not developed in the ILDP2 PAD Annex, the RED model was included in the project files which allowed to derive the ex-ante benefits that were broken down for road improvements in the three cities\. It is worth mentioning that the RED model only relies on new vehicles to quantify time-savings but more importantly reduced vehicle maintenance cost from road upgrading, based on traffic counts, and expected evolution in traffic patterns\. 3\. It is also important to mention that the financial costs of the project were considered as economic costs and were therefore not adjusted for taxes and distortions as, usually, the economic analysis gauges the project on its own merits, i\.e\., adjusted investments that will have an economic impact while customs, taxes, VAT, which should be subtracted from works, equipment, services and salaries (PIU), are collected by the Government and are allocated according to government priorities\. Moreover, price distortions, especially for the price of gas in oil producing countries that is usually subsidized does not reflect the international or border price of oil and its derivatives\. Hence, the ex-post analysis will not adjust financial process into economic prices\. 4\. The ex-ante economic analyses for Component 1 yielded a Net Present Value (NPV) of US$2\.4 million over 20 years although a US$3\.1 million5 was reported, a positive economic rate of return (ERR) of 15\.2 percent discounted at 12 percent\. The results of the ex-ante analysis by road in Libreville, Port-Gentil, and Oyem show large variations by cities and are illustrated in Table 4\. Since 2016, the World Bank6 has adopted a 6 percent instead of a 12 percent discount rate for the economic analysis that is reported in Table 4 and results are much higher with an NPV reaching US$12\.1 million\. 5 A small difference was noted when the ex-ante results were revised\. 6 World Bank (2016)\. Page 41 of 45 The World Bank Infrastructure and Local Development Project II (P151077) Table 4: Ex-Ante Cost/Benefit Economic Analysis Results City Road Road Cost (US$ Cost/km NPV@12% NPV@6% ERR Weight\. Length million) US$/km (US$ (US$ ERR million) million) Transfo-PK7 1,600\.0 2\.85 1,784 -0\.627 0\.653 Libreville PK8-Bissegue 2 1,000\.0 2\.23 2,230 -0\.490 0\.391 8% PK8-Nzeng Along 1,250\.0 2\.68 2,141 -0\.821 0\.076 6% Subtotal 3,850\.0 7\.76 2,015 -1\.938 1\.120 7% 7\.7% Port- Mini-prix 1 750\.0 1\.34 1,784 Combined Combined Gentil Mini-prix 2 600\.0 1\.07 1,784 Subtotal 1,350\.0 2\.41 1,784 -0\.698 -0\.061 6% 6\.0% A-B-D-E 913\.5 1\.41 1,545 1\.978 3\.989 31% Oyem B-C-D 789\.0 1\.22 1,545 2\.371 4\.526 37% E-G 874\.1 1\.35 1,545 0\.194 1\.043 14% F-C 591\.0 0\.91 1,545 0\.800 1\.797 24% F-E 410\.6 0\.63 1,545 -0\.343 -0\.219 1% Subtotal 3,578\.1 5\.53 1,545 5,000 11\.074 21% 23\.6% Total 8,778\.1 13\.29 12\.133 12% 15\.4% Note: figures in red have been adjusted after revising the ex-ante economic analysis\. Source: ILDP2 project files of the PAD (2016)\. Ex-Post Economic Analysis 5\. The ex-post economic analysis proved challenging as the M&E did not produced the required data to carry out an economic analysis and compare the before and after results\. Moreover, the road scope has completely changed, and no counting of vehicles was performed after selecting the new roads and at closing to be able to carry out the ex-post analysis\. 6\. Given the lack of data at the end of the Project, only three ex-post analyses were carried out based on the following data: • The ex-ante analysis was re-run by assuming the same ex-ante hypothesis in terms of time- savings, reduced vehicle maintenance cost from road upgrading, same traffic counts, and same expected evolution in traffic patterns\. Hence, only the actual cost per km and the upgrading achieved were changed while the investments were discounted at 6 percent\. • The cost effectiveness of cost per km was carried out for the initial roads that were achieved as the new roads are benchmarked vis-a-vis the Project overall average cost per km\. • The impact of the labor-intensive employment generated additional income was carried out by calculating the multiplier effect in the targeted cities\. Ex-Ante Benefits Page 42 of 45  The World Bank Infrastructure and Local Development Project II (P151077) 7\. Ex-post Economic Analysis for Achieved Roads that Were Appraised\. The ex-post analysis based on the RED model provide better results for the roads appraised and built during the Project when discounted at 6 percent\. Indeed, the roads in Libreville provide an a greater NPV of US$5\.38 million and an ERR exceeding 100 percent\. Similarly, the roads in Port-Gentil also provide better results where the ex-ante negative NPV becomes positive with US$0\.68 million with even a greater ERR of 7 percent\. Although data on Oyem roads built was not readily available by the end of the project, overall, the roads identified at appraisal and built during the Project have a combined NPV of US$5\.45 million (Table 5)\. Table 5: Ex-Ante Cost/Benefit Economic Analysis Results City Road Ex-Ante Ex-Post Cost/km NPV@ 6% ERR Weight\. Cost/km NPV@6% ERR Weight\. US$ (US$ ERR US$ million (US$ ERR million million) /km million) /km Libreville Transfo-PK7 1\.784 0\.653 9% 1\.94 >100% PK8-Bissegue 2 2\.230 0\.391 8% 3\.44 >100% Subtotal 2\.015 1\.120 7% 8\.6% 0\.255 5\.38 Port- Mini-prix 1 1\.784 Combined Combined Gentil Mini-prix 2 1\.784 Subtotal 1\.784 -0\.061 6% 6\.0% 1\.654 +0\.068 7% Oyem A-B-D-E 1\.545 3\.989 31% B-C-D 1\.545 4\.526 37% Subtotal 1\.545 8\.515 34% 33\.8% Total 12\.133 12% 15\.4% Note: figures in red have been adjusted after revising the ex-ante economic analysis\. Source: ILDP2 project files of the PAD (2016)\. 8\. Cost-Effectiveness of Road Length\. The cost-effectiveness analysis usually sets the target and determines the mean and both flows are discounted\. In this particular case, a full-fledged cost-effectiveness analysis is not carried but only a comparison of cost per km for the different roads built under the Project is carried out\. Incidentally, road ex-post costs are combined per city and could not be disaggregated\. At ex-ante, the weighted cost per km built amounted at US$1\.65 million whereas the total weighted cost per km achieved by project closing amounts to US$1\.13 million excluding Oyem roads\. Moreover, when comparing the ex-ante weighted cost per km built (US$1\.65 million) to the weighted cost per km additional roads considered during implementation (US$1\.68 million), they are quasi equivalent (Table 6)\. Table 6: Ex-Ante and Ex-Post Cost-effectiveness of Road Length City Road Ex-Ante Ex-Post Road Cost (US$ Cost/km Road Length Cost (US$ Cost/km Length million) Million (km) million) Million US$/km (km) US$/km Libreville Transfo-PK7 1\.6 2\.85 1\.784 1\.86 Page 43 of 45 The World Bank Infrastructure and Local Development Project II (P151077) City Road Ex-Ante Ex-Post Road Cost (US$ Cost/km Road Length Cost (US$ Cost/km Length million) Million (km) million) Million US$/km (km) US$/km PK8-Bissegue 2 1\.0 2\.23 2\.230 2\.26 PK8-Nzeng Along 1\.25 2\.68 2\.141 Cancelled Subtotal 3\.85 7\.76 2\.015 4\.12 1\.05 0\.255 Port- Mini-prix 1 0\.75 1\.34 1\.784 Combined Combined Combined Gentil Mini-prix 2 0\.60 1\.07 1\.784 Subtotal 1\.35 2\.41 1\.784 1\.10 1\.81 1\.65 A-B-D-E 0\.91 1\.41 1\.545 0\.91 Oyem B-C-D 0\.79 1\.22 1\.545 0\.79 E-G 0\.87 1\.35 1\.545 Cancelled F-C 0\.59 0\.91 1\.545 Cancelled F-E 0\.41 0\.63 1\.545 Cancelled Subtotal 3\.58 5\.53 1\.545 1\.20 NA NA Initial Road Weighted Total 8\.78 13\.29 1\.654 6\.92 Lot 1 0\.26 Lot 2 0\.29 Lot 3 0\.23 Mouila Lot 4 0\.34 Lot 5 0\.08 Subtotal 1\.20 3\.27 2\.74 Lot 1 0\.33 Lot 2 0\.54 Tchibaga Lot 3 0\.99 Subtotal 1\.85 2\.57 1\.39 Lot 1 0\.60 Lot 2 1\.37 Makokou Lot 3 0\.39 Subtotal 2\.36 2\.85 1\.21 Koula-Moutou Subtotal 0\.15 0\.61 4\.08 Add-on Road Weighted Total 5\.55 9\.30 1\.68 Total Achieved 12\.48 12\.16 1\.13 Source: ILDP2 project files of the PAD (2016) and ISRs\. 9\. Economic Multiplier Effect due to Labor-Income Activities\. Labor-intensive employment created of 184,050 persons/day instead of 902,000 persons/day targeted at appraisal\. A multiplier effect, which is caused by additional funds from investments resulting in a proportional increase in the overall income of the economy, Page 44 of 45  The World Bank Infrastructure and Local Development Project II (P151077) is used to have the net effect on the GDP\. It is assumed that persons employed belong to low-income households and accumulate very little wealth\. The aggregate marginal propensity to consume out of transitory income ranges between 0\.2-0\.4 and is consistent with most of the large estimates of the marginal propensity to consume (MPC) reported in empirical studies in low-income countries\.7 Therefore a midpoint MPC is used to derive the net effect on GDP that is considered as a benefit to the economy and the person-day of employment is derived from the GDP per day as value added labor as actual salaries paid during project implementation were not readily available by project closing\. The number of days is equally annualized over year 2 to year 7\. 10\. The calculation of the multiplier formula is as follows: k = 1 / (1 – MPC), where: k is the multiplier; MPC is the marginal propensity to consume\. 11\. The total net effect of the multiplier on GDP amounted to US$615,758 from 2015 to 2020\. 12\. The Economic Multiplier Effect due to Labor-Income activities was not calculated ex-ante but was carried out at ex-post to evaluate the impact\. The initial salary per day was set at US$4 per labor/day although the average salary per day based on the actual Gross Domestic Product provides a much higher salary\. The former was adopted for the ex-post while the latter for the ex-post analysis\. Although the actual target represents 1/5th of the planned target in terms of labor/day achieved, the multiplier effect provides a slightly higher net effect on GDP ex-post when compared to GDP ex-ante: US$5\.5 million vs\. US$5\.1 million (Table 7)\. Table 7: Ex-Ante and Ex-Post Economic Multiplier Effect due to Labor-Income Activities Ex-Ante Amount Amount Amount Amount Amount Amount Total 2015 2016 2017 2018 2019 2020 Expenditure - 721,600 721,600 721,600 721,600 721,600 MPC 0\.30 0\.30 0\.30 0\.30 0\.30 0\.30 Multiplier (K) 1\.43 1\.43 1\.43 1\.43 1\.43 1\.43 Change in Real GDP - 1,030,857 1,030,857 1,030,857 1,030,857 1,030,857 5,154,286 GDP/Capita US$ 7,385 6,984 7,230 7,957 7,767 7,421 GDP/Capita/Day US$ 4\.00 4\.00 4\.00 4\.00 4\.00 4\.00 Employment Man/days 180,400 180,400 180,400 180,400 180,400 902,000 Ex-Post Amount Amount Amount Amount Amount Amount Total 2015 2016 2017 2018 2019 2020 Expenditure - - - 634,350 1,648,628 1,575,183 MPC 0\.30 0\.30 0\.30 0\.30 0\.30 0\.30 Multiplier (K) 1\.43 1\.43 1\.43 1\.43 1\.43 1\.43 Change in Real GDP - - - 906,215 2,355,183 2,250,262 5,511,660 GDP/Capita US$ 7,385 6,984 7,230 7,957 7,767 7,421 GDP/Capita/Day US$ 20\.23 19\.14 19\.81 21\.80 21\.28 20\.33 Employment Man/days 29,100 77,475 77,475 184,050 Reference: Carroll, Christopher, Jiri Slacalek, Kiichi Tokuoka and Matthew N\. White\. 2017\. “The Distribution of Wealth and the Marginal Propensity to Consume\.” Quantitative Economics (2017) June 3, 2017, World Bank\. 2021\. World Development Indicators\. Washington, D\.C\. 7 Carrol et al\. (2017)\. Page 45 of 45

REVIEW

P106870

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) Report Number : ICRR0020563 1\. Project Data Project ID Project Name NI Comm\. and Family Health Care P106870 Services Country Practice Area(Lead) Additional Financing Nicaragua Health, Nutrition & Population P146880 L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IDA-48300,IDA-53680,IDA- 30-Sep-2015 21,000,000\.00 H6220,TF-97259 Bank Approval Date Closing Date (Actual) 07-Dec-2010 31-May-2016 IBRD/IDA (USD) Grants (USD) Original Commitment 21,000,000\.00 398,000\.00 Revised Commitment 31,000,000\.00 398,000\.00 Actual 30,849,460\.81 398,000\.00 Prepared by Reviewed by ICR Review Coordinator Group Maria De Las Mercedes Judyth L\. Twigg Joy Behrens IEGHC (Unit 2) Vellez 2\. Project Objectives and Components a\. Objectives As stated in the Financing Agreement and the Project Appraisal Document (PAD), the original objectives of the project were to: (i) improve the access to, and the quality of, preventive and promotion health and nutrition services among poor and vulnerable populations in the Recipient’s territory; (ii) strengthen the operational capacity of the Ministry of Health (MOH) through the rehabilitation of health centers; and (iii) ensure financial support in case of a public health emergency\. Page 1 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) An Additional Financing (AF) in January 2014 slightly modified the third PDO to read “(iii) ensure financial support in case of a public health alert or public health emergency\." The declaration of a public health alert would allow the rapid mobilization of national resources in response to a foreseen public health situation, unlike the procedure to declare a public health emergency, which is governed by article 21 of Law No\. 423, and entails more time for preparedness in case of an epidemiological health situation (Report No: 82587-NI)\. Since the project revised its objectives and also modified key outcome targets in 2014, a split rating will be performed (see Section 2e)\. 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 23-Jan-2014 PHEVALUNDERTAKENLBL c\. Will a split evaluation be undertaken? Yes d\. Components The project had three components as stated in the PAD: Component 1\. Expansion of Coverage of Health Services in the Target Municipalities and in the Indigenous Territories of Alto Wangki and Bokay (US$9 million at appraisal; US$12 million with AF at closure)\. This component aimed to finance capitation payments to ensure access by eligible beneficiaries to health services, through expanded coverage, standardization, and improved quality of health services, and implementation of the Community and Family Health Model (Modelo de Salud Familiar y Comunitario - MOSAFC, a new model based on provision of basic health and nutrition services focused on health promotion, prevention, and selective curative services; management of resources and supervision of services based on Municipal Health Networks (MHNs); and financial protection of all citizens, regardless of their contributive or noncontributive status)\. The 32 targeted municipalities were prioritized by the MOH according to the: (i) percentage of the population living in extreme poverty; (ii) percentage of pregnant women receiving four prenatal checkups; (iii) percentage of institutional births; (iv) average number of gestation months when women receive the first medical consultation; and (v) occurrence of maternal deaths (obstetric and non-obstetric)\. Component 2\. Institutional Strengthening of Ministry of Health, Rehabilitation of Health Care Networks and Contingent Financing of Public Health Emergencies (US$10 million at appraisal; US$16\.8 with AF at closure)\. This component contained two sub-components: Subcomponent 2\.1\. Institutional Strengthening, Rehabilitation, and Equipment for the Ministry of Health\. This subcomponent was to improve the essential public health functions of the MOH and to rehabilitate Page 2 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) municipal and national health care facilities, and included: (a) strengthening of the supervision and management capacities of the MOH and selected Local Systems of Integrated Health Care (Sistema Local de Atencion Integral de Salud - SILAIS) for the overall coordination, supervision, and implementation of the MOSAFC; (b) acquisition of equipment and rehabilitation of facilities in the MHNs for the implementation and execution of the MOSAFC; (c) replacement of medical and non-medical equipment required to re-establish the operating capacity of Nicaragua’s National Health Networks; (d) establishment of two regional repair units for medical and non-medical equipment to serve the immediate repair needs of SILAIS and MHNs; and (e) implementation of the Indigenous Peoples’ Planning Framework (IPPF) to ensure that health services are culturally adapted to the needs and practices of the relevant Indigenous Peoples communities\. Subcomponent 2\.2\. Establishment of a Contingency Fund for a Public Health Emergency\. This subcomponent was to facilitate the use of critical resources in the event that a public health emergency (and, post-restructuring, also a public health alert) was officially declared through a Health Ministerial Resolution\. Financing was intended to be disbursed once a Public Health Emergency had been declared by the MOH\. Component 3\. Strengthening of Ministry of Health’s Capacity to Administer, Supervise and Evaluate the Implementation of Health Services (US$2 million at appraisal; US$2\.2 million with AF at closure)\. This component aimed to strengthen the Ministry of Health’s capacity for administering, supervising and evaluating the activities referred to in Component 1, including carrying out an internal technical audit, an external annual technical audit to validate the number of eligible beneficiaries receiving services and the achievement of performance goals, the annual project external financial audit, and the 2011 Nicaraguan Demographic and Health Survey (Encuesta Nicaragüense de Demografía y Salud)\. Revised components Project components were revised during the 2014 AF in order to better support the expansion and scaling up of the project\. Component 1: The financing of capitation payments covered 34 new municipalities\. The project ended up supporting 66 municipalities, which accounted for 43% of total municipalities in Nicaragua\. Component 2: Subcomponent 2\.1 added new activities: (f) the implementation of hospital waste management plans in selected hospitals; and (g) the carrying out of repair and maintenance activities of medical and non-medical equipment\. A new subcomponent (2\.3) was also added, contributing to the attainment of the Millennium Development Goal (MDG) 5 -- Improve Maternal Health -- with emphasis on adolescent health, and the sexual and reproductive health of women between 10 and 64 years of age\. This subcomponent aimed at strengthening the MOH’s capacity to implement the National Sexual Reproductive Health Strategy and to develop a cervical cancer prevention program\. Page 3 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) Component 3: Activities were added to support the analysis and dissemination of the results of the Nicaraguan Demographic and Health Survey\. e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Costs: Original project costs were estimated at US$ 21 million\. In 2014, the project was scaled up to expand health service provision to additional municipalities\. Total project costs amounted to US$ 31 million at project closure\. Financing: Originally, project costs were financed through an International Development Association (IDA) Grant of US$ 11 million, and an IDA Credit of US$ 10 million\. In January 2014, an AF was approved for US$10 million (IDA Credit 53680)\. The AF was an expression of the Government's interest to extend the benefits of the project to other poor municipalities\. Additional needs related to the institutional strengthening of the MOH and SILAIS were supported by five trust funds, four Bank-executed and one Recipient-executed, with an actual disbursement of US$630,800\. Borrower Contribution: There was no borrower contribution\. Dates: The project was restructured five times over the course of its implementation\. 1) In December 2012, the project underwent a full level 2 restructuring that dropped one PDO indicator from the Results Framework and added other indicators to better measure the provision of health care and align the indicators with official data from the National Statistical System (Report No: 71701-NI)\. 2) In January 2014, an Additional Financing (AF) was approved to finance the costs associated with scaling up of the project\. The original project included 32 municipalities, and the AF added 34 new municipalities\. The restructured project also added institutional strengthening activities at the national and local levels to contribute to progress toward achieving MDG5, modified Objective 3, and revised PDO indicator targets in the Results Framework (Report No: 82587-NI)\. 3) In September 2014, the project underwent a full level 2 restructuring to reallocate funding among categories in response to a public health alert declared in the country associated with chikungunya fever\. 4) In March 2015, another restructuring extended the Closing Date to January 29, 2016\. 5) In December 2015, a final restructuring extended the Closing Date to May 31, 2016\. The restructuring with AF in January 2014 introduced changes in one project objective and outcome targets, warranting a split outcome rating\. The project objectives will be assessed in two phases weighted by disbursement shares: i) from appraisal to Jan 2014; and ii) from Jan 2014 to closing date\. Page 4 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) 3\. Relevance of Objectives & Design a\. Relevance of Objectives The project’s objectives were highly relevant during the entire project life\. Access, quality, and utilization of health care services by poor and vulnerable populations remain a development challenge in Nicaragua\. Geographic barriers to access, lack of essential medicines, and perceptions of poor quality hinder the uptake of health services by the most vulnerable populations\. The MOSAFC community health model, implemented by the government since 2007, follows Nicaragua’s Primary Health Care Strategy and ensures free, universal access to health care services\. MOSAFC focuses on health promotion and disease prevention for mothers and children, indigenous groups, adolescents, and senior citizens\. Thus, the objectives were closely aligned with the government’s National Human Development Plan (NHDP) 2009–2011, which emphasized the importance of preventive health care services in improving maternal health (MDGs)\. The objectives were also consistent with the World Bank’s Country Partnership Strategy in effect at appraisal (FY2008–2012), which underlined the need for pro-poor investment in delivery of basic services in Nicaragua, and at closure (FY2013–2017), which focuses on improving maternal and child health, including reducing chronic malnutrition, through support to the new community and family health model\. Nicaragua has endured epidemiological emergencies in the past, such as the A/H1N1 flu pandemic and dengue epidemic, that have strained the financial and institutional resources of the government and have threatened gains in poverty reduction (PAD, p\. 1)\. The project's third objective, although framed in terms of inputs (availability of funds), was also relevant from a financial protection perspective, and the contingent fund allowed for the government's rapid response in the event of a public health emergency\. Rating Revised Rating High High b\. Relevance of Design The activities proposed by the project were logically linked to its objectives\. Project activities focused on financing capitation payments linked to results to ensure the provision and availability of preventive health services\. About 20% of the capitation amount was to be disbursed according to the quantity of services provided, and another 20% according to quality targets\. This performance-based approach to financing MHNs provided incentives to improve coverage and quality of health services\. In addition, MHN staff with satisfactory annual evaluations had the opportunity to participate in career training (i\.e\. training on national protocols regarding management of pregnancy, childbirth, HIV/AIDS and chronic diseases), obtain promotions where available, and access additional benefits such as improvements in basic equipment and facility upgrades for their entire health teams\. To further improve quality of services and strengthen the operational capacity of the MOH, the project design included the rehabilitation and upgrading of medical and non-medical equipment of health facilities, the establishment of regional maintenance centers, staff training, and improvements in hospital waste management\. Quality improvements were expected to result in increased demand for health care services and Page 5 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) thus increase effective coverage\. The government’s interest in expanding the benefits of the project to other poor municipalities led to the AF in 2014\. Once the project was closed, the government extended the capitation financing modality to all municipalities in the country, keeping the project design relevant beyond the project life\. Rating Revised Rating Substantial Substantial 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective Improve the access to, and the quality of, preventive and promotion health and nutrition services among poor and vulnerable populations in the Recipient’s territory\. Rationale Outputs: The project financed the provision of health promotion and disease prevention services in a total of 66 selected municipalities, using a results-based approach based on capitation payments linked to performance targets\. Agreements (Acuerdos Sociales por la Salud y el Bienestar – ASSBs) between the SILAIS and MHN encompassed 4 functional areas: i) stewardship role of MOH; ii) health service provision function of SILAIS; iii) management of health services and allocation of physical and financial resources among health units; and iv) and citizen participation/social audit (ICR, p\. 29)\. Regarding the latter, the project supported biannual participatory meetings of Citizen Councils, who were responsible for monitoring: i) the provision of health services, ii) the achievement of health indicator targets, and iii) the efficient use of funds\. These ASSBs developed by the project were later implemented in the rest of municipalities not reached by the project, thus being a positive unintended result of the project\. Activities towards improvement of quality of services included: - The development and implementation of the National Strategy for the Integral Development of Adolescent Health (2012-2017)\. - Training of health staff in the following areas: cito-technology (50 staff); basic colposcopy technique (18 staff); integration between traditional and Western medicine (1803 staff); internship program in cervical cancer prevention (7 staff)\. - A diagnostic on traditional medicine and its integration with health systems, and development of a guideline on integration between traditional medicine and Western medicine\. - Training for health unit managers (39 participants) in comprehensive care of adolescents\. - 108 events in maternal houses to train 916 adolescents in reproductive health\. Page 6 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) Intermediate outcomes: In the 32 original project municipalities: • The percentage of pregnant women receiving four prenatal checkups in targeted MHNs increased from 50% at baseline to 74%, almost achieving the original target of 75%\. • The percentage of institutional deliveries in targeted MHNs increased from 72% at baseline to 93% in 2016, exceeding the original target of 90%\. • The percentage of post-partum women receiving postnatal care within ten days of delivery in targeted MHNs increased from 32% at baseline to 65% in 2016, exceeding the original target of 55%\. • The percentage of children less than one-year-old immunized with the Pentavalent vaccine in targeted MHNs achieved full coverage (100%) in 2016, exceeding the original target of 98\.5%\. At the 2014 AF restructuring, new targets were set for the 34 additional municipalities\. Moreover, some indicators had disaggregated sub-targets (AF1 and AF2) to account for different baseline values\. Intermediate outcome indicators in the additional municipalities evaluated at the 32 original municipalities’ targets show that: • The percentage of pregnant women receiving four prenatal checkups decreased from 74% in 2012 to 70% in 2016, not achieving the original target of 75%\. • The percentage of institutional deliveries increased from 73% in 2012 to 78% in 2016, but it did not achieve the original target of 90%\. • The percentage of post-partum women receiving postnatal care within 10 days of delivery increased from 50% in 2012 to 73% in 2016, exceeding the original target of 55%\. • The percentage of children less than one-year-old immunized with the Pentavalent vaccine achieved 97% coverage in 2016, but it was not sufficient to meet the original target of 98\.5%\. Outcomes: The original PDO indicator was replaced by several outcome indicators related to access to health care services and to behavior change among adolescents: • In 2016, the percentage increase in first time consultations provided during the year was 29% in the original municipalities, 31% in group 1 of additional municipalities (AF1), and 26% in group 2 of additional municipalities (AF2), all exceeding the original target of 20%\. • The percentage increase in follow-up health care consultations provided during the year by each health facility in 2016 reached 32% in the original municipalities, and 69% in group AF1 and 74% in group 2 of the additional municipalities (AF2), all exceeding the original target of 30%\. • The pregnancy rate among adolescent women decreased from 27\.5% in 2009 to 24% in 2016 in the original municipalities, and 22% in the 34 additional municipalities, exceeding the original target of 25\.5%\. The project's original municipalities achieved most of the original outcome targets\. The additional municipalities also met most of the original outcome targets\. The intermediate outcome and outcome indicators reasonably measured quality of health care services, access, and utilization\. Therefore, despite the lack of data on a control group of municipalities not supported by the project, it is plausible that the observed increases in access and quality are a result of the project's activities\. Poor and vulnerable Page 7 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) populations were effectively selected through the targeting strategy that chose participating municipalities\. Rating Substantial PHREVDELTBL PHINNERREVISEDTBL Objective 1 Revision 1 Revised Objective This project objective did not change during the project's lifetime\. However, one PDO outcome target was revised, and new targets were introduced in 2014 AF for the additional municipalities\. Revised Rationale Intermediate outcomes: In the additional municipalities: • The percentage of pregnant women receiving four prenatal checkups decreased from 74% in 2012 to 70% in 2016, not achieving the revised target of 76%\. • The percentage of institutional deliveries increased from 73% in 2012 to 78% in 2016, exceeding the revised target of 75%\. • The percentage of post-partum women receiving postnatal care within ten days of delivery increased from 50% in 2012 to 73% in 2016, exceeding the revised target of 55%\. • The percentage of children less than one-year-old immunized with the Pentavalent vaccine achieved 97% coverage in 2016, slightly exceeding the revised target of 96%\. A new intermediate indicator showed that: • The percentage of health units with inter-sectoral plans for comprehensive development of adolescent health in all project municipalities reached 56%, exceeding the 2014 target of 25%\. Outcomes • The percentage increase in first-time consultations during the year changed from 5% in 2012 to 31% in 2016 for group AF1 of additional municipalities, and from 14% in 2012 to 26% in 2016 in group AF2\. Both groups exceeded the revised targets of AF1 9% and AF2 18%\. • The percentage increase in follow-up health care consultations during the year by each health facility also exceeded the revised targets (AF1 32%; AF2 51%)\. For group AF1 it increased from 23% in 2012 to 69% in 2016, and for group AF2 from 47% in 2012 to 74% in 2016\. • The pregnancy rate among adolescent women declined to 24% in 2016 in the original municipalities, achieving the less ambitious revised target of 27%\. For the additional municipalities, the pregnancy rate among adolescent women declined to 22% in 2016, exceeding the revised target of 25%\. Revised Rating High Page 8 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) PHEFFICACYTBL Objective 2 Objective Strengthen the operational capacity of the MOH through the rehabilitation of health centers\. Rationale Outputs: The Project strengthened the operational capacity of the MOH and the SILAIS by signing and maintaining health management agreements between the SILAIS and the municipalities, providing medical and nonmedical equipment to the SILAIS, implementing mobile regional maintenance centers for medical equipment, and establishing health waste management processes in selected hospitals\. It also provided training for health network personnel, including in areas such as management and supervision\. -Medical equipment was purchased and installed in 9 SILAIS, 35 health centers, 133 health posts, and 36 hospitals (180% achievement of planned outputs)\. -Non-medical equipment was purchased and installed in 3 SILAIS and 9 hospitals (100% achievement of planned outputs)\. -Preventive and corrective equipment maintenance was established in 12 hospitals and a National Maintenance Center\. -288 staff were trained on preventive and corrective maintenance of medical equipment during 7 training events, which exceeded the target of 45 staff trained at 2 events\. -176 maternal houses were furnished and equipped\. -The National Household Survey in Demography and Health (ENDESA) was implemented\. -4 project technical audits and 5 financial audits were conducted\. -Health staff were trained in the following areas: hospital management (159 staff); project M&E (40 staff); advanced MS Excel software (75 staff); communicative English (25 staff); environmental health (4050 staff in 9 SILAIS); and hospital waste management (staff in 9 hospitals)\. Intermediate outcome indicators show that: • By 2016, 9 hospitals had implemented the waste management plan satisfactorily, exceeding target of at least 3\. • 2 mobile regional maintenance centers for medical and nonmedical equipment were implemented, achieving the target\. In the original municipalities: • All evaluated ASSBs were assessed as satisfactory by social consultations, exceeding the 85% original target\. • 12 hospitals in the national health networks and 32 municipal health networks completed the process of replacing medical and nonmedical equipment required to re-establish operating capacity, achieving the original targets (12 hospitals and 32 MHNs)\. In the additional municipalities: • All evaluated ASSBs were assessed as satisfactory by social consultations, exceeding the original and revised targets (of 85% and 75%, respectively)\. Page 9 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) • 16 hospitals in the national health networks and 34 municipal health networks completed the process of replacing medical and nonmedical equipment required to re-establish operating capacity, achieving the original and revised targets\. A new intermediate indicator showed that: • None of the target municipalities implemented more than 50% of their health care quality improvement plans by the project closing date (targets were set at 20 original and 17 additional municipalities)\. The ICR explains that municipal plans were included in a national strategic plan for quality that is part of a Bank- financed follow-on project (Nicaragua Strengthening the Public Health Care System, P152136)\. Outcomes: • In 2016, 78% of the ASSBs evaluated by the MOH in original municipalities were in compliance according to an external audit, not achieving the target of 85%\. However, additional municipalities achieved the original target\. • Ninety-one percent of the original municipalities and 85% of the additional municipalities met at least 7 of 10 performance goals established in their ASSBs (e\.g\. institutional delivery rates), achieving the original target of 85%\. According to the borrower’s comments (ICR, p\. 86), the few municipalities that underperformed targets experienced shortcomings such as large geographic distance to health facilities (demand barrier); understaffed health units (health system capacities); and mismatch of population data provided by INIDE and the actual population (HMIS)\. Rating Substantial PHREVDELTBL PHINNERREVISEDTBL Objective 2 Revision 1 Revised Objective This project objective did not change during the project's lifetime, but outcome targets were revised to account for municipalities added at the 2014 AF\. Revised Rationale Outcomes: • In 2016, 85% of the additional municipalities had evaluated ASSBs that were in compliance according to an external audit, exceeding the 2014 target of 75%\. • 85% of the additional municipalities met at least 7 of 10 performance goals established in their ASSBs, achieving the revised target of 84%\. Revised Rating Page 10 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) Substantial PHEFFICACYTBL Objective 3 Objective Ensure financial support in case of a public health emergency\. Rationale Outputs: The project created a contingency fund for a public health emergency to enable the MOH to draw on these resources in the event a health alert was activated\. Outcomes: According to the ICR, one sanitary alert related to dengue fever was successfully managed in 2012, one related to chikungunya in 2014, and one related to chikungunya and dengue in 2015, triggering the Bank to disburse a total of US$2\.5 million from project funds (US$1 million for the 2012 and 2014 alerts, and US$ 0\.5 million for the 2015 alert)\. The ICR states that the fast use of funds prevented disease that could have reached a significant percentage of the population, and that the government had all appropriate mechanisms in place to issue these sanitary alerts\. The original project lacked a formal PDO-level indicator to measure achievement of this objective\. Rating Substantial PHREVDELTBL PHINNERREVISEDTBL Objective 3 Revision 1 Revised Objective The AF in January 2014 slightly modified this objective to read “(iii) ensure financial support in case of a public health alert or public health emergency\." Revised Rationale Outputs and Outcomes are as stated above\. The ICR added an indicator to measure achievement of the revised third objective: • 100% of government requests for financial support, in case of a health alert or public health emergency, were fulfilled\. The government considers that the World Bank financing contributed efficiently to put in place public health actions to prevent a rise in the number of dengue and chikungunya cases and prevent related mortality (ICR, p\. 67)\. Page 11 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) Revised Rating Substantial PHREVISEDTBL 5\. Efficiency Cost-effectiveness: Three cost-benefit analyses (CBA) were conducted at project design, AF, and at project completion\. The ex-ante CBA was based on a subset of project costs and measurable economic benefits resulting from components 1 and 2a\. The expected project benefits included in the analysis were: (1) Reduction in maternal and infant deaths: Based on international literature on the effect of preventive care on maternal and child health (also used in the CBA of the Bolivia project P101206), the CBA assumed that about 20% of deaths would be avoided, and that 25% of nationwide live births would occur in project target areas\. The monetary value of a life saved was estimated by lifetime earnings based on the average gross national income per capita in 2008 (US$1080), an employment rate of 38% for mothers, and a life work span of 32 years\. Similarly, the income stream for children accounted for 60 years (with zero income during the first 12 years), but did not consider the employment rate\. The CBA estimated that the project would avert 8 maternal and 245 child deaths through 2020\. (2) Cost savings in purchasing new medical and nonmedical supplies resulting from the creation of regional maintenance centers, assumed at 0\.7% of the MOH budget by the end of the project's lifetime (about US$1\.39 million, of a total public health budget of US$199\.6 million)\. (3) Cost savings in MOH drug expenditures of 0\.4% due to the shift in service delivery focus from curative to preventive services\. (4) Cost savings from decentralization, assumed to be 1% of the MOH budget\. On the cost side, the analysis included the costs of components 1 and 2a over four years, and also recurrent costs that the MOH was expected to assume after project completion, estimated at 14% of total project investments\. The results of the CBA at appraisal indicated that the project had a NPV of US$196,804 (using a discount rate of 12%), US$828,453 (using a discount rate of 10%), and US$ 1\.55 million (using a discount rate of 8%), and an IRR of 13%\. The analysis does not provide a strong justification for the assumptions of cost savings (benefits 2-3-4)\. A back-of-the-envelope calculation suggests that maternal and infant deaths avoided account for only 23% of the present value of total benefits (US$17,426,970)\. On the other hand, not all project costs were considered, so results could be overestimated\. The CBA of the project's AF also considered the AF costs and benefits generated under Components 1, 2\.1, and 2\.3\. Like the ex-ante analysis, this CBA included: (1) the economic benefits of maternal and child deaths avoided (assuming that project areas covered 20% of 2011 live births, that project interventions would avoid 20% of maternal and child deaths, an average annual income of US$1560, and an employment rate of 46% of mothers)\. But unlike the PAD, the AF analysis also included: (2) savings in household health expenditures due to increased health care coverage, estimated at US$18 per capita per year (equivalent to a full package of health care services)\. The inclusion of this benefit, however, did not seem to be consistent with the PAD's counterfactual scenario, i\.e\. in the absence of the project, the MOH would have still provided the Page 12 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) package of services with a greater emphasis on outpatient and curative services (without the additional component of promotion and prevention) (PAD, p\. 51)\. Finally, the AF analysis also considered: (3) savings in maintenance costs resulting from investments in advanced new equipment, ranging from 2\.5% to 0\.5% of the investment over the first five years\. This element appeared to counter the benefit of switching expensive new equipment purchases for cheaper equipment repairs, as suggested by the PAD’s CBA\. The AF CBA included direct investment costs of component 1 (US$3 million = US$3\.6 x 415,380 beneficiaries in two years), components 2\.1 and 2\.3 focusing on investment in fixed assets (US$ 6\.8 million), and MOH recurrent costs estimated at 14% of total investments\. Assuming a lower discount rate of 10%, the NPV of the AF was US$17,837,000, and the IRR was 20%\. The CBA at completion included maternal and child deaths averted; excluded costs savings in public expenditures related to equipment repair, drug expenditures, and decentralization efficiencies (because those savings did not occur); and included a reduction in medicine and consultation expenditures for 60% of households in the poorest income quintile for a total of US$12,351,678 and US$5,504,856, respectively\. The estimated NPV is US$4\.4 million or US$12\.2 million (discount rate not reported), and the IRR is 8% or 13\.5%\. according to scenarios based on different time horizons\. Since different benefit categories were considered, these results are not strictly comparable to the analyses at appraisal and AF\. Despite the CBA's optimistic results, it should not be surprising that interventions designed to reach remote areas tend to be more costly, ceteris paribus benefits\. Yet modest value for money results should not prevent the Bank from investing in those areas, provided that the proposed intervention is the least-cost option\. Other aspects of efficiency: Project preparation was handled in an efficient manner\. Preparation and appraisal took eight months from concept review to appraisal (a relatively short time frame compared with the 18-month average for a typical HNP project), the project became effective four months after Board approval, and the first disbursement took place one month after effectiveness\. The project’s efficiency increased over time in terms of improvements in the cost-beneficiary ratio\. While the AF restructuring doubled the scope of the project, total costs increased less than proportionally (by 47%, from US$ 21 to 31 million)\. The project executed and disbursed 150% of the original grant and credit amounts with only eight months of extension from the original closing date, to allow sufficient time for the government to complete the full installation and operationalization of medical and nonmedical equipment procured with the AF\. The ICR does not report shortcomings related to implementation efficiency\. 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 13 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) 0 Appraisal  13\.00 Not Applicable 0 ICR Estimate  8\.00 Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome Original objectives and original outcome targets (approval-Jan 2014): Satisfactory\. Relevance of objectives and design are rated high and substantial, respectively\. All three objectives were substantially achieved, and efficiency was substantial\. Revised objectives and revised outcome targets (Jan 2014-closing): Satisfactory\. Relevance of objectives and design remain the same\. One objective was highly achieved and the other two substantially achieved\. The efficiency rating remains Substantial\. These ratings are indicative of minor shortcomings in the project's preparation and implementation under both the original and revised objectives/targets, and therefore an overall Outcome rating of Satisfactory\. Restructuring Original (approval-Jan 2014) Revised (Jan 2014- Periods closing) Relevance Objectives High High Design Substantial Substantial Efficacy Objective 1: improve Substantial High access and quality of services among the poor and vulnerable Objective 2: Substantial Substantial strengthen operational capacity of MoH through rehabilitation Objective 3: ensure Substantial Substantial financial support in case of public health emergency/alert Efficiency SUBSTANTIAL SUBSTANTIAL Outcome Rating SATISFACTORY SATISFACTORY a\. Outcome Rating Page 14 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) Satisfactory 7\. Rationale for Risk to Development Outcome Rating The risk to development outcome is considered low\. Project outcomes are likely to be sustained in the future based on the following factors\. First, the government has scaled up the capitation payment model at the national level by establishing ASSB agreements with all 154 municipalities, thus showing a strong commitment to the project's design\. The same performance indicators developed under the project to measure MHN compliance are being used nationwide\. Innovations in terms of a culture of results introduced by the project are now part of the institutional structure of the central, regional, and local health systems in Nicaragua\. Second, the adoption of a standard set of 25 performance indicators to monitor and evaluate progress in all internal and external projects, as well as regular meetings with the donor community, will continue to increase coordination among multilateral agencies to maximize the effectiveness of support for the country’s health sector\. Third, the government continues to receive support from the World Bank\. In 2015, a new operation was approved (Nicaragua Strengthening the Public Health Care System, P152136) aiming at further strengthening access and quality of health services, adapting the public health system to the country’s changing epidemiological profile, and securing financial support in case of a public health alert or public health emergency\. a\. Risk to Development Outcome Rating Negligible 8\. Assessment of Bank Performance a\. Quality-at-Entry Originally, the project was designed as the third phase of an Adaptable Program Loan (APL), but during preparation the lending instrument was changed to a stand-alone Specific Investment Loan without modifying the development objectives\. Project preparation was done in a relatively short time compared to other projects in the health sector, and the project became effective soon after approval\. Key lessons were learned from previous health sector projects in the region (PAD, pp\. 11-12), particularly related to the incentive structures created by capitation payments and performance agreements, and risk analysis was sound and appropriate mitigation measures identified through an Operational Risk Assessment Framework (PAD, Annex 4)\. Implementation arrangements (including for M&E) involving MOH, SILAIS, and MHNs were well specified\. Page 15 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) However, the project’s results framework was incomplete, as it lacked a PDO indicator to measure achievement of objective 3\. Also, as acknowledged in the ICR, the original project design did not take into account recommendations resulting from the Quality Enhancement Review related to the need to expand the scope of the project, specify performance targets to evaluate agreements, and establish coordination mechanisms with other donors\. These recommendations were addressed later during implementation, including the redefinition of the results framework to better measure achievement of the project's objectives\. Quality-at-Entry Rating Moderately Satisfactory b\. Quality of supervision The ICR states that the project task team conducted 12 implementation support visits to Nicaragua and maintained regular communications with the country team to provide technical assistance in areas such as financial management, safeguards, and general operational aspects of the project\. The ICR also highlights the stability and skills of the World Bank task team as crucial for developing mutual confidence with the implementation unit and achieving efficient implementation of project activities\. During implementation, project supervision reports rated overall progress toward achievement of the PDOs as satisfactory\. The project’s mid-term review identified areas that could be improved, such as the need to adjust the value of the capitation payments through a costing exercise; an action plan to improve the quality of health services; a maintenance strategy for equipment and corresponding training; and a technical audit to verify performance targets and corroborate that monetary incentives were being implemented satisfactorily\. Appropriate action was taken on these recommendations\. The project task team supervised compliance of the social and environmental safeguards\. Quality of Supervision Rating Satisfactory Overall Bank Performance Rating Moderately Satisfactory 9\. Assessment of Borrower Performance a\. Government Performance The government’s commitment to the project was reflected in active participation of MOH authorities in preparation and design\. The government maintained open dialogue with stakeholders, and several consultations (including with indigenous people) took place during project preparation, enriching project design\. The AF was an expression of the interest of the government to extend the benefits of the project's design to other poor municipalities\. Sufficient human resources were deployed to implement and monitor project activities and manage financial Page 16 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) resources\. The government invested in strengthening staff capabilities as needed\. Regular meetings with project implementing units were held to evaluate progress and provide technical assistance\. There was effective coordination within the MOH to accelerate approval and implementation processes as necessary, and a technical committee was established to facilitate collaboration between central and local project implementing units and the SILAIS\. Government Performance Rating Satisfactory b\. Implementing Agency Performance The implementing agency was the Department of Planning and Development (Dirección General de Planeación y Desarrollo) of the MOH, and the Ministry of Finance was directly involved in the project’s monitoring\. The project was implemented by the MOH’s own technical directorates and technical staff at the central and local levels\. The implementing agency was efficient in spending the project’s resources; in particular, through the AF, 150% of the original financing amount was executed and disbursed with only eight months of extension from the original closing date\. The Social Agreements were not only expanded to 66 municipalities, but became mandatory for all 153 municipalities in the country\. Procurement and fiduciary arrangements were in compliance with the Bank’s standards (see Section 11b)\. A minor shortcoming was that the implementing agency was not able to contract a consultancy for the estimation and adjustment of capitation payments\. This consultancy was supposed to build a methodology to update the per capita payment that would be later used by the MOH\. The project continued to use the original capitation amount, updating values according to the Consumer Price Index (ICR, p\. 69)\. Implementing Agency Performance Rating Satisfactory Overall Borrower Performance Rating Satisfactory 10\. M&E Design, Implementation, & Utilization a\. M&E Design The original results framework included 4 PDO indicators and 12 intermediate outcome indicators\. Original key performance indicators and intermediate outcome indicators had complete baseline and target values where relevant, and the frequency, data sources, and responsibilities for data collection were clearly reported (e\.g\. MOH, SILAIS, independent firm)\. In general, the selected indicators were consistent with project’s objectives\. The main shortcoming in M&E design was the lack of definition of outcome indicators for objective 3\. (The Page 17 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) ICR added one indicator to measure this PDO after project closing\.) b\. M&E Implementation The results framework was adjusted twice to better align the indicators to the country’s data systems and cover the expanded scope of the AF\. After two years of project implementation, outcome indicators for objective 1 were replaced by indicators actually used to trigger capitation payments due to the need to align indicators with data from the National Statistical System\. With the AF, new target values were set for the newly added municipalities, and in some cases targets were defined for AF municipalities’ subgroups to account for heterogeneities in baseline values\. M&E activities were implemented by the MOH and the SILAIS, which kept records of progress on project indicators through regular visits to the project municipalities\. Independent audits supervised M&E arrangements, verifying the achievement of targets and producing regular reports\. c\. M&E Utilization The ICR states that the project's results framework and its indicators were included as part of MOH and SILAIS strategic planning after project closing\. These indicators were crucial to following up the municipal agreements with the MHNs, which are part of national health strategic planning (ICR, p\.14)\. The fact that results framework indicators were linked with capitation payments helped in the identification of underperformance, prompting MHN authorities to fix these problems in order to receive the payments\. M&E Quality Rating Substantial 11\. Other Issues a\. Safeguards The project triggered the Environmental Assessment (OP/BP 4\.01) and Indigenous Peoples (OP/BP 4\.10) safeguards\. It was rated Environmental Assessment category B\. An Environmental Management Framework and Indigenous Peoples Plan (IPP) were prepared in 2010 and later updated with the AF\. The environmental safeguard was triggered because the project supported minor rehabilitation works in national and municipal health facilities and improvements in health care waste management\. Environmental activities included the development of the Environmental Management Framework for the implementation of environmental safeguards in health infrastructure projects in the stages of construction and operation; the training of 4,050 people from nine hospitals in management of hospital waste and the installation of equipment with environmentally friendly technology; development of guidelines for hospital waste management elaborated by a consulting firm; and the strengthening of the Environmental Management Unit Page 18 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) to support the implementation of management plans in six SILAIS hospitals\. The Indigenous Peoples safeguard was triggered because the project targeted as beneficiaries the population of the indigenous territory of Alto Wangki and Bokay\. The activities of the Indigenous Peoples’ Planning Framework included the development of guidelines to harmonize Western and indigenous traditional medicine; the implementation of a Strategy for Integration of Natural Medicine and Complementary Therapies; capacity building for a total of 1,803 health workers in natural medicine and traditional and complementary therapies; and the inauguration of the Institute for Alternative Therapy in Managua\. The ICR (p\. 23) states that the project was in full compliance with environmental and social safeguards\. b\. Fiduciary Compliance Financial management: According to the ICR (p\. 13), the MOH complied with all World Bank fiduciary requirements\. The administration of the project had the necessary staff, and financial and audit reports were of appropriate quality, although sometimes submission was done with delay\. In some cases, project expenditures within SILAIS lacked supporting documentation, but this issue was monitored and later rectified\. Project administration was responsive in addressing internal control issues arising from supervision and audits\. Procurement: Procurement was conducted under full compliance with World Bank guidelines\. The project procurement unit had qualified staff, which was continually coached by Bank staff and participated in annual procurement trainings\. By the end of the project, the team had successfully accomplished 262 procurement processes, including 14 international public biddings for a total of US$10 million and 32 national public biddings for a total of US$4 million\. c\. Unintended impacts (Positive or Negative) The ICR mentions continuing education programs and staff training as unintended outcomes of the project, but these seem to be an example of implemented activities that were not originally planned\. d\. Other --- 12\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Page 19 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) Outcome Satisfactory Satisfactory --- Risk to Development Negligible Negligible --- Outcome Quality at Entry was Moderately Satisfactory, and Bank Supervision was Satisfactory\. According to Bank Performance Satisfactory Moderately Satisfactory IEG/OPCS harmonized guidelines, overall Bank Performance is the lower of the two ratings, as moderate shortcomings were present\. 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\. 13\. Lessons The ICR (pp\. 24-25) offers several lessons derived from the project's experience, including: • The development of culturally sensitive interventions, aimed at ensuring utilization of health services by indigenous populations, requires involvement of both the community and health care professionals\. A household survey on service satisfaction at the beginning of the project revealed that one of the main reasons for not using health services was the lack of cultural adaptation in service provision\. The task team worked closely with community and health practitioners from indigenous backgrounds to develop materials and documents for training and education on reproductive health that were translated to the language Miskito\. This ICRR adds: • Despite the overall positive experience with capitation payments linked to results, capitation payments cannot overcome all access and quality shortcomings in health service provision\. In this case, the government has recognized that some municipalities underperformed due to difficult access in some communities (demand barrier), understaffed health units (health system capacities), and mismatch of population data provided by INIDE and the actual population (HMIS)\. Page 20 of 21  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review NI Comm\. and Family Health Care Services (P106870) • Alignment of results framework indicators with results-based financing performance targets (associated with capitation payments) is an efficient way to monitor project progress towards objectives, as it uses already available information and does not require additional effort to collect new data\. It simplifies M&E activities appropriately, as long as the performance targets are adequate measures of the project's objectives\. 14\. Assessment Recommended? No 15\. Comments on Quality of ICR The ICR is clearly written and provides a candid description of the project's implementation and achievements\. This ICRR differs from the ICR in dividing the project into two phases instead of three\. The ICR's section on achievement of outcomes could have been organized by project objectives instead of by project phases, and the ICR could have added more narrative when describing achievements (i\.e\. using the actual indicators) instead of referring to particular indicators by number (i\.e\. KPI1, IO1)\. Also, the lessons learned could have been more closely derived from project implementation experience\. Finally, there is a mismatch in the Risk to Development Outcome rating in the main text (i\.e\. Moderate) and the Rating Summary (i\.e\. Low to Negligible)\. The TTL later confirmed that the intended rating of the ICR is Moderate\. a\. Quality of ICR Rating Substantial Page 21 of 21

REVIEW

P113374

 ICRR 13811 Report Number : ICRR13811 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 05/03/2014 Country : Benin Project ID : P113374 Appraisal Actual Project Name : Benin: Emergency US$M ): Project Costs (US$M): 9\.00 8\.69 Food Security Support Project L/C Number : Loan/ US$M): Loan /Credit (US$M): 6\.84 6\.53 Sector Board : Agriculture and Rural Cofinancing (US$M): US$M ): Development Cofinanciers : Board Approval Date : 10/25/2008 Closing Date : 10/15/2010 06/15/2011 Sector (s): Crops (94%); Public administration- Agriculture fishing and forestry (6%) Theme (s): Global food crisis response (100% - P) Prepared by : Reviewed by : ICR Review Group : Coordinator : Ebru Karamete George T\. K\. Pitman Christopher David IEGPS1 Nelson 2\. Project Objectives and Components: a\. Objectives: The project was prepared under Global Food Crisis Response Program \. The Emergency Project Paper (p\. v) states that the development objectives were : "to increase domestic production of cereals (maize and rice), in order to mitigate the short-term impact of increasing prices on households and to expand food crop farmers' access to agricultural inputs in the medium- and long-term"\. The Grant Agreement (p\.6) has an identical statement of objectives \. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components: 1\. Provision of fertilizer to enhance domestic food production in the short term (Appraisal Estimate: US$ 8\.20 million, Actual: US$ 7\.78 million)\. It was expected that this component would stimulate the crop supply response within the next two years \. The funds were to finance procurement, transport, storage and delivery of 8,500 tons of fertilizer to 50,000 producers of cereals covering 5,660 ha of rice and 48,340 ha of maize\. This was expected to increase food production by 60,000 tons\. It was expected that the government would recover 60% of the costs of fertilizer supply from year 1 and use this to provide 5,100 tons of fertilizer to 30,000 producers in 2010 (year 2) and generate an additional 36,000 tons of cereals from 32,000 ha\. 2\. Support to PMU and design of a new institutional mechanism to deliver inputs to food crop farmers  (Appraisal Estimate: US$ 0\.50 million, Actual: US$ 0\.91 million\.) A Transitory Working Group was established by the government to coordinate food emergency response \. The component was to build the capacity of the Group to enable them to design an innovative, market -based institutional mechanism to ensure delivery of agricultural inputs, as well as support for M&E, procurement and financial management activities\. The project financed also consultant services, training, equipment and office supplies and other institutional support \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Costs : Project cost that was estimated at appraisal was US$ 9\.00 million and the actual cost at closing was US$ 8\.69 million\. Financing : The project was financed by a US$ 6\.84 million grant from the Food Price Crisis Response Trust Fund \. At project closure US$ 6\.53 million was disbursed and US$ 0\.32 million was cancelled\. Borrower Contribution : The Borrower planned and contributed US$ 2\.16 million\. Dates: Dates The project's original closing date of December 15, 2010 was extended by 6 months to June 15, 2011 in order to be able to conduct a survey to assess achievement of objectives, as well as to carry out a technical audit of effectiveness of activities and fertilizer distribution mechanisms \. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: High The project development objectives were highly relevant to the country priorities and strategies \. The project was prepared under the Global Food Crisis Response Program of the Bank to support mitigation of the food price increase in the country\. In late 2007, the Government of Benin took a number of measures to contain prices that included price control mechanisms, reducing custom duties and establishing buffer stocks \. Also, in 2008 the government launched the Emergency Food Security Program aimed at enhancing domestic production of food staples and the project objectives were directly related to this program \. The Project development objectives were relevant to the Country Poverty Reduction Strategy (2007-09) as well as relevant to the Country Assistance Strategy (2009-2012), particularly to the Outcome 1\.3 that emphasized responding to rising food prices \. b\. Relevance of Design: Modest The statement of objectives was clear and measurable \. However, the results framework only partially presented a logical causal chain between the project activities and the expected attainment of the objective \. The objective of increasing domestic production of cereals (maize and rice), in order to mitigate the short-term impact of increasing prices on households was to be supported through provision of fertilizer under component 1\.This was highly relevant as improved fertilizer application had the potential to significantly increase crop yields \. The objective of expanding food crop farmers' access to agricultural inputs in the medium - and long-term term was not relevant to a short-term emergency project\. Project design addressed also two major concerns at appraisal \. First, there were substantial fiduciary risks and adequate provision was made to improve oversight and monitoring systems, including appointment of accounting staff and to upgrade monitoring and accounting systems \. Second, a Fertilizer Distribution Manual was to be produced within 45 days of project effectiveness to ensure that fertilizer delivery went according to plan and was accountable\. Even so, there were some design shortcomings – for example, there was no provision for sorting fertilizer inputs that were comprised of three distinctly different fertilizer mixes and warehouse facilities were inadequate : both these problems were fixed during implementation \. 4\. Achievement of Objectives (Efficacy): There were two objectives: (i) to increase domestic production of cereals (maize and rice), in order to mitigate the short-term impact of increasing prices on households and; (ii) to expand food crop farmers' access to agricultural inputs in the medium- and long-term\. Attribution of some outcomes is difficult \. There are a number of donors working in Benin assisting the agriculture sector and the ICR did not provide any information on how much additional production was achieved solely due to the project activities, and how much may have been spill -over from other donor activities \. (i) Increase domestic production of cereals (maize and rice ), in order to mitigate the short -term impact of increasing prices on households : Substantial The project outcomes are based on a survey during the 2010 cropping season conducted by the M&E Unit of the Ministry of Agriculture\. It covered the project area (i\.e\. 23 communes of the 77 in the country) and data were collected from randomly selected 2,604 beneficiaries and 1,700 non-beneficiaries of project interventions using questionnaires\. Outputs : 9,800 tons of fertilizer was procured, and this was 15% more than planned due to the fall in international fertilizer prices\. Fertilizer was distributed to 37,549 farmers growing maize and rice on 50,458 hectares\. The number of beneficiaries who actually received fertilizers was less than planned (37,543 vs\. 50,000)\. The reason was due to delayed fertilizer deliveries \. The fertilizer delivery was too late for use in the southern regions, and the later cultivation season in northern and central areas meant that the fertilizer was used there\. These regions have larger producers than in the south (about 1\.5–2 hectares higher than the national average of 1 hectare)\. Farmers had difficulty applying the recommended dose of fertilizer; a field survey showed that only 37% of farmers did so (ICR p\. 20)\. Based on farm survey data (ICR p\. 11), the without-project average rice yields ranged from 2 to 3 tons per hectare; with the project average yields ranged from 3 to 5 tons per hectare\. For maize, the without-project average yields range from 1\.2 to 1\.4 tons per hectare; and with the project average yields ranged from 2\.0 to 2\.5 tons per hectare\. Outcomes : The targeted incremental production of cereals for the 2 years of the project was 96,000 tons\. This was to be made up from crop production from the fertilizer input in year 1 plus an additional incremental production of 36,000 tons from the second year\. The second year’s production was to be enabled by a government input of fertilizer to be paid for by recovery of 60% of the costs of fertilizer supply from year 1 (see the Emergency Project Paper, p \. 3)\. The input of fertilizer was distributed 60% in the first year, 40% in year two\. Total production from both years using the initial fertilizer input was 64,757 ton and this exceeded the year 1 target of 60,000 tons\. The government did not recover sufficient costs (only 23%) from year1, and no fertilizer was made available for year 2 and production attributable to the recycling of the credit proceeds were consequently zero\. Thus, in terms of the two-year target, the achievement was 67%\. Achievements from the initial fertilizer input for each cop was : Baseline value for rice production in the targeted area was 42,000 tons and actual production was 52,860 tons, generating an additional production of 10,860 tons of rice\. Baseline value for maize in the targeted area was 45,000 tons and actual production was 99,897 tons, generating an additional production of 53,897 tons\. Prices declined on average over the period 2008 -2011 from CFAF 35,000 to CFAF 15,000 per 100kg bag for maize and from CFAF 44,000 to CFAF 25,000 for rice\. However, the changes in the national prices of maize and rice over the life of project changed due to a number of factors in addition to project inputs\. First, the project supported only 9% of national maize production in 2008 and 8% in 2011\. Conversely, the project produced 45% of rice production in 2008 (FAOSTAT, 2014)\. However, by 2011 national rice production had almost doubled and the project ’s share was only 24% of the total\. In addition, price changes may also have been the result of rice imports (the ICR reported on page 22 that in 2007 Benin imports of rice were among the largest in West Africa, and a significant volume of the imported rice was re-exported to Nigeria\.) Although the impact of the project on maize and rice prices is unclear, prices did go down \. Additionally,  the project had a substantial impact on participating farmers ’ incomes thus mitigating problems that higher food prices might have caused : Rice farmers’ net incomes increased from CFAF 40,600-63,100 to CFAF 91,380-234,350/ha\. Maize farmers’ net incomes increased from CFAF 14,000-39,000 to CFAF 53,000-112,060/ha\. ii) Expand food crop farmers' access to agricultural inputs in the medium (ii) term : Modest - and long -term: Outputs : A study on new input delivery mechanism was prepared and shared with stakeholders via a workshop \. The proposed new mechanism was a warehouse receipts system with a guarantee fund to allow farmers to access credits and enable them to buy their inputs using cash \. A study on fertilizer distribution was completed and a manual was produced \. Outcomes : There is no evidence to show that the project inputs expanded access to agricultural inputs in the medium-to long-term\. The new mechanism was planned to be tested in 3 provinces for 5 years before scaling-up at the national level and this was to be piloted under the Emergency Support to Enhance Food security Project, funded by European Union's Food Crisis Rapid Response Facility Trust Fund \. The new input delivery mechanism is to be implemented at national level under a separate Bank Project (ICR, p\. 6)\. 5\. Efficiency: Modest No cost benefit analysis was conducted at appraisal due to emergency nature of the project and short preparation time frame\. The ICR presented an ex-post economic analysis based on farm survey data \. The incremental benefit from additional rice and maize production was calculated at the farm level for the “with- projectâ€? and “without-projectâ€? scenarios through a farm budget analysis \. The increased benefits were derived from improved production as a result of increased access to inputs \. The details of the assumptions were not provided\. The mechanism used to increase food production was efficient \. Fertilizer increased crop yields and farmers’ incomes\. Rice yields increased form 2-3 tons/ha to 3-5 tons/ha\. Farmers’ net incomes increased from CFAF 40,600-63,100 to CFAF 91,380-234,350/ha\. Maize yields increased from 1\.2-1\.4 tons/ha to 2\.0-2\.5 tons/ha\. Farmers’ net incomes increased from CFAF 14,000-39,000 to CFAF 53,000-112,060/ha\. Subsidy may have increased the fertilizer uptake : The government provided a 40 % subsidy on fertilizer prices (project prices was CFAF 235/kg and the market price was CFAF 363/kg) and farmers were given access to credit to buy fertilizer \. Even at the full unsubsidized market price, producers' net income remained positive (CFAF 52,124-195,350/ha for rice producers and CFAF 5,400-63,948/ha for maize) because incremental benefits from higher yields offset costs of buying at fertilizer at market prices \. This raises a question about how efficient the subsidy was\. There is no information in the ICR on the relative importance of price vs greater availability in farmer’s decision-making on the use of fertilizer\. However, the project team clarified that, due to cash constraints, the volumes of fertilizers which farmers accessed were less than the application rates recommended by extension services \. There were operational /administrative inefficiencies \. Although the bidding documents for fertilizer procurement were prepared during project preparation, it took 6 months to complete the tender process and to have the fertilizer delivered in the country \. Due to these delays, 22,602 producers received fertilizer during the 2009/10 growing season (target 50,000) and another 14,491 producers were served during the 2010/11 cropping season (target 30,000)\. The delayed inputs led to a potential production loss of about 42,000 tons\. Fertilizer credit recovery was inefficient \. In the first year the recovery rate was 22\.6 % (Feb 2010) and this precluded purchase by government of fertilizer for the second year \. While credit recovery improved to 82\.6% by the end of the project, it was too late to be used for fertilizer purchase during the life of the project\. Credit recovery was slow due to (i) reluctance of some farmers to pay back the subsidy which they thought was a reward for political services; (ii) posting of government personnel to other areas  slowed down the credit handling process; and (iii) government offices in remote locations had difficulty in depositing recovered funds in the specified bank branches that were often far away, and this increased costs and made handling credit risky \. 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: Relevance of objectives is rated high, while relevance of design is rated modest due to the weak linkage between project activities and the second objective \. The first objective to increase domestic production of cereals was substantially achieved and the higher incomes resulting from increased productivity may have mitigated the short-term impact of increasing prices on households \. The impact of the project’s incremental production on cereal prices is questionable due to the small -scale of the project compared with total national production and exogenous factors \. There is no information about the expansion of access to agricultural inputs in the medium- and long-term\. Efficiency was rated modest primarily due to costly administrative delays and initially poor cost-recovery\. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: In terms of economic and financial risk, the fertilizer subsides impose a financial burden for the government budget, and more sustainable and market -based approaches in providing input to the producers are needed\. The new input delivery mechanism at the time the ICR was to be tested as a pilot and it was still unclear if this mechanism would be scaled-up nationally\. Other risks such as social and environmental risk to development outcome are moderate, as the project helped to increase household food security by increasing production in line with agreed environmental safeguard procedures\. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: a\. Quality at entry: The project was prepared as an emergency operation under the Global Food Crisis Response Program and project preparation was very rapid (3 months until board approval)\. The design was based on delivery of fertilizer to rice and grain producers quickly in order to increase production \. The main challenge was to acquire a large amount of fertilizer under emergency conditions \. The bidding documents were prepared during the project’s preparatory phase\. International Competitive Bidding was selected as the appropriate means of expediting the delivery of products and ensuring fair competition in an emergency context \. However, appraisal was over-optimistic on the time the ICB contacts would come into effect : 2 months was planned but it actually took about 6 months\. As a result the fertilizer was utilized on a more restricted area than planned and over two years instead of the one planned \. An institutional mechanism was also aimed for sustainable input delivery in the medium to long term \. However, the causal chain between the objectives and the components was not established for the institutional objective over which the project had little control as it was independently implemented\. The main risks identified were on financial management, transparency, and capacity for M&E\. Measures were correctly identified and put in place to mitigate these risks \. While the poor capacity for M&E was addressed, project design had weak outcome indicators that could did not  measure intended outcomes (e\.g\. project impact on price reduction, as well as the medium -term objective of expanding farmers’ access to inputs\.) The project implementation arrangements were sound \. Transitory Working Group quickly became the Project Management Unit and was supported by Grassroots Initiative Financing Agency on financial management and procurement\. Inclusion of producers' organizations and the private sector in the project steering committee was important as these stakeholders contributed to the fertilizer distribution arrangements made at preparation\. at -Entry Rating : Quality -at- Moderately Satisfactory b\. Quality of supervision: Although originally envisaged to be completed within two months, the ICB process took almost six months, from launching the bidding process to approval and signing of contracts, including the required Bank clearances and no objections, as well as delivery to Benin \. Owing to this delay, procurement performance was initially rated as marginally satisfactory \. Two supervision missions were conducted and task management was transferred to field based staff allowing constant interaction between the project and the Bank team \. The team facilitated support from staff on safeguards, financial management and procurement \. However, between December 2009 and March 2011 no supervision missions were carried out because the project TTL left the bank, and it took a long time to assign a new TTL\. In addition, the team failed to resolve design issue within the results and M&E frameworks because the short project schedule precluded restructuring \. Quality of Supervision Rating : Moderately Satisfactory Overall Bank Performance Rating : Moderately Satisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: The government's reaction to food crisis was prompt \. It launched its food security program and mobilized resources for the program through this project \. Furthermore, the government quickly established the PMU and the Project Steering Committee that was made up of representatives from Ministry of Economy and Finance, Ministry of Livestock and Fisheries, farmers' organizations and producers' organizations and private input dealers\. The government fully provided counterpart funding to finance project activities, although with some delays\. Strikes of government works reportedly had a negative impact on some project activities \. The mechanism to recover fertilizer costs was not very well suited as the geographic location of banks was not aligned with the distribution of government offices collecting the cash from farmers \. Government Performance Rating Satisfactory b\. Implementing Agency Performance: The Project Management Unit was responsive to the Bank requests to provide information and to implement supervision mission recommendations \. Project funds provided incremental support in terms of equipment and technical assistance to Project Management Unit to strengthen its capacity \. Despite considerable concerns about fiduciary risks at appraisal the PMU produced regular, timely financial reports and unqualified audits following capacity -building inputs under the project \. The PMU overcame the warehousing and sorting problem (ICR para 16) that could have created a bottleneck is distribution of fertilizer \. However, the reallocation of field staff who had a good understanding of the project ’s philosophy, implementation mechanism and procedures slowed down the recovery of input credits \.  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 system was not well designed\. There was no indicator tried to measure project ’s impact on reducing prices, and no indicator to monitor expansion of farmers access to more inputs in the medium term \. It is not clear how baseline figures were established \. b\. M&E Implementation: It took longer than planned to get the system working and no revisions to the outcome indicators to monitor impact of project activities on prices were made \. The Regional Center to Promote Agriculture carried out monitoring rice and maize productivity activities in the field \. Project activities were monitored regularly by the M&E unit\. A single formal survey was carried out at project closing \. c\. M&E Utilization: Implementation progress and results achieved were summarized in quarterly reports sent to Ministry of Agriculture and other stakeholders \. No information is provided by the ICR on what actions were taken by government\. On the Bank’s side, the M&E highlighted the low cost recovery and prompted a strong follow -up by the Bank\. M&E Quality Rating : Modest 11\. Other Issues a\. Safeguards: The project was classified as Category B under OP 4\.01 Environmental Assessment and the Bank ’s Pest Management Policy (OP 4\.09) was triggered\. A Partial Environmental Assessment was required \. The Environmental and Social Management Framework (ESMF) took considerably longer to prepare than the anticipated three months after project effectiveness \. Once adopted in late 2009 the safeguard performance rating of the project was upgraded from Marginally Satisfactory to Satisfactory \. The ESMF was updated in 2010 to include mitigation measures on small irrigation and post -harvest infrastructure, which helped implementation of Emergency Support to Enhance Food Security Project that is built on this project and managed by the same Project Management Unit\. 154 employees of Regional Center to Promote Agriculture, producer organizations representatives and municipal officers were provided with safeguards training \. b\. Fiduciary Compliance: The Project Management Unit was responsible for the financial management of the project with assistance from the Grassroots Initiative Financing Agency \. Interim Financial Reports were prepared quarterly and received no comments from the Bank\. Project funds supported training of PCU staff on financial management and procurement, development of a financial management manual, and an upgrade of the accounting software used to help track use of Grant funds on a quarterly basis \. The ICR(p\. 8) reported that Audits of 2009, 2010 and 2011 were unqualified\. A consultant was hired to conduct an external audit of the designated account and the report was due to be submitted by December 30, 2011\. The project team subsequently stated that : "The report of the external audit of the designated account was submitted to the Bank \. No irregularities were found and the financial management was satisfactory and compliant to Bank standards and procedures \." Fertilizer procurement was through international competitive bidding \. The original plan of completing this procurement, from launching the bidding process to signing of contract, was 2 months; in practice actual process took 6 months\. The ICR (p\. 8) reported that final review of procurement system showed that filing of  procurement documents as well as procurement plan were sound \. c\. Unintended Impacts (positive or negative): d\. Other: 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately The objective of increasing domestic Satisfactory production of cereals (maize and rice) was substantially achieved, while achievement of the second objective to expand farmers' access to agricultural inputs in the medium- and long-term was rated modest due to lack of evidence\. Efficiency is rated modest due to administrative inefficiencies \. Risk to Development Moderate Moderate Outcome : Bank Performance : Satisfactory Moderately There were delays and shortcomings in Satisfactory the results framework as well as long gaps in supervision missions and M&E issues were not addressed in a timely way\. Borrower Performance : Satisfactory Moderately The low collection rate of farmers’ Satisfactory credit pay back precluded government purchase of fertilizer for the second year\. Delays in administration were caused by staff transfers \. 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 lesson identified by the ICR with some rewording is as follows : Project implementation plans should consider the fact that major procurement of goods takes time \. Thus emergency projects, rather than trying to change the procurement procedures, could consider differing implementation arrangements to enable quick realignment with actual inputs \. In this project, it took 6 months to procure fertilizer through international competitive bidding, although only 3 months was envisaged\. The project responded by revising the target area to suit the agricultural season \. IEG also finds that: For emergency projects, objectives need to be time bound and simple \. In this case there was a disconnect between the stated objectives and the project design, because the objectives included medium to long-term goals of expanding farmers' access to inputs that could not to be achieved under  this project\. 14\. Assessment Recommended? Yes No Why? To verify the ratings and document lessons \. 15\. Comments on Quality of ICR: The ICR provided a good narration of implementation progress and challenges \. However, the following points needed attention: (i) The ICR failed to consider the disconnect between project development objectives and project design\. (ii) the section on risk to development outcome did not consider the risk from not being able to implement the institutional mechanism developed by the project, or the risks to sustainable input delivery mechanisms\. (iiii) the use of evidence to rate project achievements had shortcomings as it ignored attribution issues\. The ICR could have provided more evidence to support some of the lessons drawn \. There are a few contradictions in the text, and some of the ICR' statements about appraisal do not quote the facts correctly : for example, on how long the procurement process was expected to be, and what the overall production would be \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P002587

 Gezira rehabilitation project Report No: ; Type: Report/Evaluation Memorandum ; Country: Sudan; Region: Africa; Sector: Irrigation & Drainage; Major Sector: Agriculture; ProjectID: P002587 June 30, 1995 Sudan: Gezira Rehabilitation Project (Credit 1388-SU) The Implementation Completion Report (ICR) on the Sudan Gezira Rehabilitation project (Credit 1388-SU, approved in FY83) was prepared by the FAO/World Bank Cooperative Programme and the Middle East and North Africa Regional Office\. The Borrower contributed to the ICR by preparing a Project Completion Report\. This comprehensive project, designed to rehabilitate the Region's largest irrigation project, was prepared in FY81 and FY82\. Effectiveness was delayed two years by a search for cofinancing, eventually contributed by the Arab and Saudi Funds for Development, Japan, Italy and the United Kingdom\. The project's 20 components included the: improvement of the Gezira irrigation, drainage, and pumping systems; rehabilitation of the infrastructure including roads, communication network, railway, staff housing, and ginneries; provision of critical inputs such as farm machinery; improvement of farmer training, research, and extension; and support to improve health through schistosomiasis control and sanitary systems\. Project implementation was complicated by suspension of lending by the Arab and Saudi Funds and subsequently by IDA when the borrower did not service its debt\. After Arab and Saudi funding were suspended, IDA agreed to reallocate its credit to complete the rehabilitation of the aging Sennar Dam, but this work had not been completed when the IDA credit was canceled with about 11 percent undisbursed\. However, many major works and programs were completed, including, at half of estimated cost, the successful control of schistosomiasis, a debilitating and ultimately lethal liver disease, and drinking water programs\. In contrast, dam rehabilitation, canal cleaning and rehabilitation of structures to regulate water flow in the canals were not implemented and road, telecommunications and ginnery renovation each proved several times more costly than anticipated\. Studies cost US$25 million, ten times the appraisal estimates\. Benefits were far below expectations\. Area and cropping intensity grew only modestly\. Plagued by uncontrollable infestations of white flies, by low prices paid by the government monopoly purchasing agency, and by economic distortions, farmers switched their land and efforts from cotton to lower-valued food crops\. Nevertheless, owing to Gezira's immense sunk costs, the ICR's re-estimate of the economic internal rate of return—19 percent—and its rating of project outcome as satisfactory are plausible\. The Operations Evaluation Department (OED) endorses them\. The ICR rates sustainability as likely\. However, owing to non-implemented works, canal siltation, weed growth, and the decrepitude of the Sennar Dam, OED rates sustainability as uncertain\. Though the principal project institution has ceased to exist, cost recovery is far below public operation and maintenance costs, and important works were not completed or started, the ICR rates institutional development as substantial\. OED considers negligible more appropriate\. In agreement with the ICR, OED rates all aspects of IDA and Borrower performance as satisfactory, although inadequate preparation of some components is noted\.

REVIEW

P102284

Document of The World Bank Report No: ICR00003894 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-44700 TF-93574) ON A CREDIT IN THE AMOUNT OF SDR 18\.5 MILLION (USD 30\.0 MILLION EQUIVALENT) AND A MULTI-DONOR TRUST-FUND GRANT IN THE AMOUNT OF USD 124\.37 MILLION EQUIVALENT TO THE KINGDOM OF CAMBODIA FOR A SECOND HEALTH SECTOR SUPPORT PROGRAM December 29, 2016 Health, Nutrition and Population Global Practice East Asia and Pacific Region  CURRENCY EQUIVALENTS (Exchange Rate Effective March 29, 2008 [PAD]) Currency Unit = KHR KHR 3,950 = USD 1\.00 USD 1\.00 = SDR 0\.61 (Exchange Rate Effective June 30, 2016 [Closure]) Currency Unit = KHR KHR 4,057 = USD 1\.00 USD 1\.00 = SDR 0\.71 FISCAL YEAR January 1 – December 31  ABBREVIATIONS AND ACRONYMS 3YRPs Three-Year Rolling Plans AF Additional Financing AOP Annual Operational Plans CBO Community Based Organizations CDHS Cambodia Demographic Health Survey CSES Cambodia Socio Economic Survey DBF Department of Budget and Finance DPs Development Partners DPHI Department of Planning and Health Information HCMC Health Center Management Committees HEF Health Equity Fund H-EQIP Health Equity and Quality Improvement Project HMIS Health Management Information System HSP2 Second Health Strategic Plan HSP3 Third Health Strategic Plan HSSP Health Sector Support Project HSSP2 Second Health Sector Support Program ICR Implementation Completion and Results Report IDA International Development Association IPD Inpatient Department ISR Implementation Status and Results Report JAPR Joint Annual Performance Review JPIG Joint Partnership Interface Group M&E Monitoring and Evaluation MBPI Merit-Based Performance Incentive MDTF Multi Donor Trust Fund MOH Ministry of Health MTR Mid-Term Review NAHC National Annual Health Congress NGOs Non-Governmental Organizations NNP National Nutrition Plan NPV Net Present Value NSDP National Strategic Development Plan ODs Operational Districts ODO Operational District Office OPD Outpatient Department PAD Project Appraisal Document PDO Project Development Objective PHD Provincial Health Department POC Priority Operating Cost PR Project Restructuring RF Results Framework RGC Royal Government of Cambodia RH Referral Hospital RMCH Reproductive Maternal and Child Health RTC Regional Training Center SAO Special Operating Agency SDGs Service Delivery Grants SWAp Sector-Wide Approach SWiM Sector-Wide management Senior Global Practice Director: Timothy Grant Evans Global Practice Manager: Toomas Palu Task Team Leader: Somil Nagpal ICR Team Leader: Somil Nagpal  CAMBODIA Second Health Sector Support Program CONTENTS Data sheet \. iii A\. Basic Information\. iii B\. Key Dates \. iii C\. Ratings Summary \. iv D\. Sector and Theme Codes \. iv E\. Bank Staff \. v F\. Results Framework Analysis \. v G\. Ratings of Project Performance in ISRs \. xix H\. Restructuring (if any) \. xx I\. Disbursement Profile \. xxii 1\. Project Context, Development Objectives and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes \. 5 3\. Assessment of Outcomes \. 14 4\. Assessment of Risk to Development Outcome\. 29 5\. Assessment of Bank and Borrower Performance \. 30 6\. Lessons Learned \. 33 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 34 Annex 1\. Project Costs and Financing \. 35 Annex 2a\. Outputs by Component \. 37 Annex 2b\. Indicators by PDO \. 47 Annex 3\. Economic and Financial Analysis \. 56 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 59 Annex 5\. Beneficiary Survey Results \. 60 Annex 6\. Stakeholder Workshop Report and Results\. 60 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 61 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders \. 68 Annex 9\. List of Supporting Documents \. 71 Project documentation: \. 71 Additional References: \. 72 MAP \. 73  Data sheet A\. Basic Information Cambodia Second Country: Cambodia Project Name: Health Sector Support Program Project ID: P102284 L/C/TF Number(s): IDA-44700, TF-93574 ICR Date: 12//2016 ICR Type: Core ICR ROYAL Lending Instrument: SIL Borrower: GOVERNMENT OF CAMBODIA USD 30\.00M (IDA) Original Total and USD 80\.00M Commitment: (MDTF) USD 30\.00M (IDA) USD 28\.17M (IDA) Revised Amount: and USD 124\.37 Disbursed Amount: USD 124\.37M (MDTF) (MDTF) Environmental Category: B Implementing Agencies: MINISTRY OF HEALTH (MOH) Cofinanciers and Other External Partners: AUSTRALIA: Australian Agency for International Development (AusAID) / Department of Foreign Affairs and Trade (DFAT) UK: British Department for international Development (DFID) KOREA: Korea International Cooperation Agency (KOICA) GERMANY: Kreditanstalt für Wiederaufbau (KfW) UNFPA UNICEF B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 07/16/2007 Effectiveness: 01/19/2009 01/19/2009 10/11/2010 (PR1) 09/24/2012 (PR2) 10/01/2013 (AF1) Appraisal: 05/02/2008 Restructuring(s): 06/04/2014 (PR3) 09/11/2014 (AF2) 10/30/2015 (AF3) Approval: 06/19/2008 Mid-term Review: 09/14/2011 11/14/2011 Closing: 06/30/2014 06/30/2016 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: 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: Moderately Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Moderately 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 Quality at Entry Project at any time Yes None (QEA): (Yes/No): 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) Central government administration 24 24 Compulsory health finance 4 4 Health 44 44 Other social services 4 4 Sub-national government administration 24 24 Theme Code (as % of total Bank financing) Administrative and civil service reform 17 17 Child health 17 17 Health system performance 33 33 Participation and civic engagement 16 16 Population and reproductive health 17 17 E\. Bank Staff Positions At ICR At Approval Vice President: Victoria Kwakwa James W\. Adams Country Director: Ulrich Zachau Ian C\. Porter Global Practice Manager: Toomas Palu Fadia M\. Saadah Task Team Leader: Somil Nagpal Toomas Palu ICR Team Leader: Somil Nagpal ICR Primary Author: Patrick Eozenou F\. Results Framework Analysis Project Development Objectives (from the Legal Agreement) To support the implementation of the Government's Health Strategic Plan 2008-2015 in order to improve health outcomes through strengthening institutional capacity and mechanisms by which the Government and Program Partners can achieve more effective and efficient sector performance\. Revised Project Development Objectives (as approved by original approving authority) The three Project Restructurings (PR1, October 2010; PR2, September 2012; PR3, June 2014) and the three Additional Financings (AF1, October 2013; AF2, September 2014; AF3, October 2015) retained the original PDO\. (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 Outcome Percentage of births delivery by trained personnel indicator 1 Value 58\.0 85\.0 87\.0 85\.2 (quantitative or qualitative) (2008, NSDP) (2008, NSDP) (2015, AF3) (2016, NAHC) Date achieved 12/31/2008 12/31/2013 06/30/2016 05/31/2016 Comment (incl\. Target 98 percent achieved\. The original target (85 percent) was achieved in % achievement) 2014\. The target was revised to 87 percent after AF3\. Outcome Percentage of births delivery by trained personnel at health facility indicator 2 Value 39\.0 80\.0 85\.0 80\.35 (quantitative or qualitative) (2008, NSDP) (2008, NSDP) (2015, AF3) (2016, NAHC) Date achieved 12/31/2008 12/31/2013 06/30/2016 05/31/2016 Comment (incl\. Target 95 percent achieved\. The original target (80 percent) was achieved in % achievement) 2014\. The target was revised to 85 percent after AF3\. Outcome Percentage of currently married women using a modern contraceptive indicator 3 method Value 26\.0 49\.0 39\.0 41\.0 (quantitative or qualitative) (2008, NSDP) (2008, NSDP) (2014, AF2) (2016, HMIS) Date achieved 12/31/2008 12/31/2013 12/31/2015 12/31/2015 The NSDP target was revised in 2014 down to 39 percent because the original target was deemed overly ambitious and to align the target with that of the Comment (incl\. government’s own strategic plan\. This indicator was then dropped from the % achievement) PDO indicators in 2014 at AF2 because the data was assessed as non-reliable\. The HMIS actual value in 2015 exceeds the revised target (105 percent achieved)\. Outcome Percentage (and number) of children under one year immunized with DPT- indicator 4 HepB3 Value 84\.0 95\.0 98\.0 94\.8 (quantitative or qualitative) (2008, HSP2) (2008, HSP2) (2015, AF3) (2016, NAHC) Date achieved 12/31/2008 12/31/2013 06/30/2016 05/31/2016 Target 96 percent achieved\. The original indicator “percentage of children under 1 fully immunized” was Comment (incl\. revised after PR1 to “percentage (and number) of children under one year % achievement) immunized with DPT-HepB3”\. The baseline (84 percent) and target value (95 percent) were updated at AF1 to be consistent with the 2008 HSP2\. The end target value was further revised at AF3 after the project extension to 98 percent\.  Outcome Percentage of HIV+ pregnant women receiving Antiretroviral drugs for indicator 5 PMTCT Value 27\.0 68\.0 58\.0 (quantitative or - qualitative) (2008, HSP2) (2008, HSP2) (2016, HMIS) Date achieved 12/31/2008 12/31/2013 - 12/31/2015 Comment (incl\. This indicator was dropped in 2014 at AF2 because the Project did not finance % achievement) HIV/AIDS interventions covered by other donors\. Outcome TB cure rate indicator 6 Value 90\.0 >85\.0 >85\.0 89\.0 (quantitative or qualitative) (2008, HSP2) (2008, HSP2) (2014, AF1) (2016, HMIS) Date achieved 12/31/2008 12/31/2013 12/31/2014 12/31/2015 Comment (incl\. This indicator was dropped in 2014 at AF2 because the Project did not finance % achievement) TB interventions covered by other donors\. Outcome Number of malaria cases treated at public health facilities per 1,000 indicator 7 population Value 4\.1 3\.7 2\.9 2\.26 (quantitative or qualitative) (2010, JAPR) (2010, JAPR) (2014, AF1) (2016, HMIS) Date achieved 12/31/2008 12/31/2013 12/31/2014 12/31/2015 The end target was revised downward in 2013 at AF1 because the original target was assessed as overly ambitious and to align the target with that of the Comment (incl\. % achievement) government’s own strategic plan\. The indicator was then dropped in 2014 at AF2 because the Project did not finance Malaria interventions covered by other donors\. Outcome Percentage (and number) of children age 6-59 months who receives two indicator 8 doses of Vitamin A supplement every 6 months (R1, R2) Value 89\.0 96\.0 96\.0 81\.5 (quantitative or qualitative) (2008, HSP2) (NNP) (2015, AF3) (2016, NAHC) Date achieved 12/31/2008 12/31/2014 06/30/2016 05/31/2016 This indicator was added in 2010 at PR1 and revised from “Percentage (and Comment (incl\. number) of children aged 6–59 months who received 2 doses of vitamin A % achievement) supplement within the last 12 months” to “Percentage (and number) of children age 6-59 months who receives two doses of Vitamin A supplement every 6 months (R1, R2)” in 2015 at AF3\. Outcome Percentage of children aged 12-59 months who received mebendazole indicator 9 Value 71\.0 90\.0 97\.0 (quantitative or - qualitative) (2010, JAPR) (2010, JAPR) (2016, HMIS) Date achieved 12/31/2008 12/31/2013 12/31/2015 Comment (incl\. This indicator was added in 2010 at PR1and then dropped in 2014 at AF2 % achievement) because coverage is similar to Vitamin A coverage\. Outcome Percentage of pregnant women receiving iron folate supplementation indicator 9 Value 80\.0 90\.0 85\.0 82\.17 (quantitative or qualitative) (2008, HSP2) (2010, JAPR) (2015, AF3) (2016, HMIS) Date achieved 12/31/2008 12/31/2013 06/30/2016 12/31/2015 Target 97 percent achieved\. Comment (incl\. % achievement) This indicator was added in 2010 at PR1 and revised in 2014 at AF3 to align the target with that of the government’s own strategic plan\. Outcome Percent of poor population covered by Health Equity Funds indicator 10 Value 57\.0 100\.0 100\.0 (quantitative or NA qualitative) (2008, DPHI) (2015, AF3) (2016, NAHC) Date achieved 12/31/2008 - 06/30/2016 05/31/2016 Target 100 percent achieved\. Comment (incl\. % achievement) This intermediary result indicator was added in 2010 at PR1 and then moved to PDO in 2014 at AF2\. (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Strengthened Health Service Delivery Indicator 1 Percentage of population with access to full MPA This indicator was dropped in 2010 at PR1\. Project Results Indicators were Comment (incl\. % achievement) streamlined at the request of MoH to focus on key Project-related outcomes which were measurable using existing MoH systems\. Indicator 2 Percentage of population with access to at least CPA2 This indicator was dropped in 2010 at PR1\. Project Results Indicators were Comment (incl\. % achievement) streamlined at the request of MoH to focus on key Project-related outcomes which were measurable using existing MoH systems\. Indicator 3a Consultations (new cases) per person per year (all) Value 0\.54 0\.6 (quantitative or - - qualitative) (2010, JAPR) (2010, JAPR) Date achieved 12/31/2008 12/31/2013 - - Comment (incl\. This indicator was dropped in 2014 at AF2 because the Project was not % achievement) accountable for all consultations, just priority groups\. Indicator 3b Consultations (new cases) per person per year (under 5 years old) Value 1\.1 1\.5 1\.52 (quantitative or - qualitative) (2010, JAPR) (2010, JAPR) (2016, NAHC) Date achieved 12/31/2008 12/31/2013 - 05/31/2016 Comment (incl\. % achievement) Target surpassed Percentage (and number) of pregnant women attending at least 2 antenatal Indicator 4 care consultation Value 81\.0 94\.0 90\.0 93\.0 (quantitative or qualitative) (2008, NSDP) (2008, NSDP) (2015, AF3) (ISR, Seq\. 11) Date achieved 12/31/2008 12/31/2013 06/30/2016 05/31/2016 Comment (incl\. Target surpassed\. % achievement) The target for this indicator was revised in 2015 at AF3\. Indicator 5 Percentage of deliveries by C-section Value 2\.0 3\.2 (quantitative or - - qualitative) (2008, NSDP) (2008, NSDP) Date achieved 12/31/2008 12/31/2013 - - Comment (incl\. This indicator was dropped in 2014 at AF2 to avoid creating incentives for % achievement) unnecessary procedures\. Indicator 6 Case detection rate of smear (+) pulmonary TB (%) Value 69\.0 70\.0 (quantitative or - - qualitative) (2008, NSDP) (2008, NSDP) Date achieved 12/31/2008 12/31/2013 - - Comment (incl\. This indicator was dropped in 2014 at AF2 because the Project does not finance % achievement) TB interventions\. Percentage of families living in high malaria endemic areas (<1km from Indicator 7 forest) of 20 provinces have sufficient (1 net / 2 persons) treated bed nets (LLIT / ITN) Value 75\.0 90\.0 (quantitative or - - qualitative) (2008, JAPR) (2011, NSDP) Date achieved 12/31/2008 12/31/2013 - - Comment (incl\. This indicator was dropped in 2014 at AF2 because the Project did not finance % achievement) Malaria interventions covered by other donors\. Indicator 8 DHF case fatality rate reported by public health facilities Value 0\.68 <0\.6 0\.5 0\.25 (quantitative or qualitative) (2008, NSDP) (2011, NSDP) (2015, AF3) (2016, NAHC) Date achieved 12/31/2008 12/31/2013 06/30/2016 05/31/2016 Comment (incl\. % achievement) Target surpassed\. Percentage of children under 5 years with pneumonia receiving correct Indicator 9 antibiotic treatment at public facilities Value 48\.0 65\.0 (quantitative or - - qualitative) (CDHS, 2005) (2008, HSP2) Date achieved 12/31/2005 12/31/2013 - -  This indicator was revised from “Percentage of children under 5 years with cough or difficulty breathing who sought treatment by public health provider [IMCI-CS]” to “Percentage of children under 5 years with pneumonia receiving Comment (incl\. % achievement) correct antibiotic treatment at public facilities” in 2010 at PR1\. The indicator was then dropped in 2014 at AF2 because measurement is conducted only every five years\. Percentage of children under 5 years with diarrhea having received ORT Indicator 10 and Zinc at public health facilities Value 58\.0 95\.0 (quantitative or - - qualitative) (CDHS, 2005) Date achieved 12/31/2005 12/31/2013 - - This indicator was revised from “Percentage of children with diarrhea having received ORT” to “Percentage of children under 5 years with diarrhea having Comment (incl\. received ORT and Zinc at public health facilities” in 2010 at PR1\. % achievement) The indicator was then dropped in 2014 at AF2 because measurement is conducted only every five years\. Indicator 11 Percentage of disease outbreak responses in timely manner Value NA (quantitative or NA - - qualitative) Date achieved - - - - Comment (incl\. % achievement) This indicator was dropped in 2010 at PR1\. Indicator 12 Percentage of adults with diabetes treated at public health facilities Value 3\.5 0\.55 (quantitative or - - qualitative) (2008, NSDP) (2008, NSDP) Date achieved 12/31/2008 12/31/2013 - - This indicator was revised from “Incidence of diabetes reported from public health facilities” to “Percentage or number of adults with diabetes treated at public health facilities” in 2010 at PR1\. Comment (incl\. % achievement) The indicator was then dropped in 2014 at AF2 because the Project did not cover treatment of diabetes at all public health facilities nor as part of HEF package\. Indicator 13 Percentage of Essential Drugs (15 items listed) at HCs that faced stock- outs  Value 12\.87 <5 (quantitative or - - qualitative) (2010, JAPR) (2008, NSDP) Date achieved 12/31/2008 12/31/2013 - - Comment (incl\. The indicator was then dropped in 2014 at AF2 because it was not within % achievement) control of the project\. Indicator 14 Percentage of Government health expenditure at provincial level and below Value 29\.8 (quantitative or NA - - qualitative) (2008, DBF) Date achieved 12/31/2008 - - - Comment (incl\. The indicator was then dropped in 2014 at AF2 because it was not within % achievement) control of the project\. Indicator 15 Percentage of referral hospitals implementing Health Equity Funds Value 61\.0 85\.0 100 (quantitative or NA qualitative) (2008, DPHI) (2015, AF3) (2016, NAHC) Date achieved 12/31/2008 - 06/30/2016 05/31/2016 Target surpassed\. The indicator was revised in 2010 at PR1 from “Coverage (OD and population) Comment (incl\. % achievement) of HEFs” to “Percentage of referral hospitals implementing Health Equity - Funds”\. The target for this indicator was set in 2015 at AF3 (85 percent)\. Indicator 16 Percentage of Health Centers implementing Health Equity Funds Value 13\.0 61\.0 91\.0 (quantitative or NA qualitative) (2008, DPHI) (2015, AF3) (2016, NAHC) Date achieved 12/31/2008 06/30/2016 05/31/2016 Target surpassed\. The indicator was revised in 2010 at PR1 from “Coverage (OD and population) Comment (incl\. % achievement) of HEFs” to “Percentage of referral Health Centers implementing Health Equity Funds”\. The target for this indicator was set in 2015 at AF3 (61 percent)\. Indicator 17 Number of cases receiving Health Equity Fund assistance Value 152,000 8,464,456 (quantitative or NA 6,800,000 qualitative) (2016, NAHC) Date achieved 12/31/2008 - 06/30/2016 05/31/2016 Comment (incl\. % achievement) Target surpassed\. Number of Outpatient Department visits (OPD) receiving Health Equity Indicator 18 Fund assistance Value 312,713 2,098,272 (quantitative or NA 5,500,000 qualitative) (2016, NAHC) Date achieved 12/31/2009 - 06/30/2016 05/31/2016 Target surpassed Comment (incl\. % achievement) 7,346,365 by 05/31/2016 (Source: 2016 NAHC) Number of Intpatient Department visits (IPD) receiving Health Equity Fund Indicator 19 assistance Value 102,205 159,996 (quantitative or NA 720,000 qualitative) (2016, NAHC) Date achieved 12/31/2009 - 06/30/2016 05/31/2016 Comment (incl\. Target surpassed % achievement) 869,743 by 05/31/2016 (Source: 2016 NAHC) Indicator 20 Number of deliveries receiving Health Equity Fund assistance Value 15,629 230,348 (quantitative or NA 190,000 qualitative) (2016, NAHC) Date achieved 12/31/2008 - 06/30/2016 05/31/2016 Target surpassed Comment (incl\. % achievement) 230,348 by 05/31/2016 (Source: 2016 NAHC) Indicator 21 Number of individuals insured under CBHI schemes Value 79,873 (quantitative or NA - - qualitative) (2008, NSDP) Date achieved 12/31/2008 - - - Comment (incl\. The indicator was dropped in 2014 at AF2 because Project does not support % achievement) CBHI, just HEFS\. Indicator 22 Government health expenditure per capita Value 7\.75 USD per cap\. (quantitative or NA - - qualitative) (2008, HSP2) Date achieved 12/31/2008 - - - Comment (incl\. The indicator was dropped in 2014 at AF2 because it was not within control of % achievement) the project\. Ratio of MOH secondary midwives per 10,000 population per location * Country ratio Indicator 23 * Provincial average * Provincial median Value * Country ratio: 1\.35 (quantitative or * Provincial average: 1\.40 NA - - qualitative) * Provincial median: 1\.74 Date achieved 12/31/2009 - - - Comment (incl\. The indicator was dropped in 2014 at AF2 because no target values and a better % achievement) indicator for secondary midwives was proposed (Indicator 24)\. Indicator 24 Percentage of health center having at least one secondary midwife Value 56 85 85 100 (quantitative or qualitative) (2014, AF2) (2014, AF2) (2015, AF3) (2016, HMIS) Date achieved 12/31/2008 12/31/2014 06/30/2016 05/31/2016 Comment (incl\. Target surpassed % achievement) The indicator was added in 2014 at AF2\. Indicator 25 Number of HC with staffing level recommended by MPA Guidelines Value (quantitative or NA NA NA NA qualitative) Date achieved - - - - Comment (incl\. % achievement) The indicator was dropped in 2010 at PR1\. Indicator 26 Number of RH with staffing level recommended by CPA Guidelines Value (quantitative or NA NA NA NA qualitative) Date achieved - - - - Comment (incl\. % achievement) The indicator was dropped in 2010 at PR1\. Indicator 27 Percentage of external funds for health included in AOPs Value (quantitative or NA NA NA NA qualitative) Date achieved - - - - The indicator was revised in 2010 at PR1 from “Percentage of external funds for health included in 3YRPs and AOPs” to “Percentage of external funds Comment (incl\. for health included in AOPs”\. % achievement) The indicator was dropped in 2014 at AF2 (Very process oriented and data not available)\. Indicator 28 Percentage of RH, ODO and PHD offices with computerized HMIS Value (quantitative or NA NA NA NA qualitative) Date achieved - - - - Comment (incl\. % achievement) The indicator was dropped in 2010 at PR1\. Indicator 29 Percentage of functioning HCMCs Value (quantitative or NA NA NA NA qualitative) Date achieved - - - - Comment (incl\. The indicator was dropped in 2014 at AF2 (not within control of the project and % achievement) data not available)\.  Percentage of private entities licensed: - Polyclinics Indicator 30 - Consultation cabinets - Maternity clinics - Dental clinics - Pharmacies… Value 56\.0 (quantitative or >95\.0 - - qualitative) (2010, JAPR) Date achieved 12/31/2008 12/31/2014 - - Comment (incl\. % achievement) The indicator was dropped in 2014 at AF2 (not supported by the Project)\. Indicator 31 Percentage of licensed private Pharmacies and Depots Value (quantitative or NA 100% - - qualitative) Date achieved - 12/31/2014 - - Comment (incl\. The indicator was added in 2013 at AF1 and dropped in 2014 at AF2 (not % achievement) supported by the Project)\. Technical content and results-focus of AOP process improves based on Mid- Indicator 32 Term Review (MTR) and Final Evaluation\. Value Improvement (quantitative or PAD Assessment since Mid Term - - qualitative) Review Date achieved - 12/31/2014 - - Comment (incl\. % achievement) The indicator was dropped in 2014 at AF2 (no specific way to measure)\. Number and percentage of MOH central institutions and provinces Indicator 33 submitting AOP and 3YRPs according to schedule and in MOH format Value 79% (quantitative or >95% - - qualitative) (2008) Date achieved 12/31/2008 12/31/2014 - - Comment (incl\. The indicator was dropped in 2014 at AF2 (very process oriented and levels % achievement) already very high)\. AOP resource allocation of program budgets reflecting HSP2 and JAPR Indicator 34 priorities (1\. RMCH; 2\. CDs; and 3\. NCDs)  MCH: 3\.9% MCH: Increase Value CDs: 20\.2% CDs: Maintain (quantitative or - - qualitative) NCDs: 0\.5% NCDs: Increase Date achieved 12/31/2008 12/31/2013 - - Comment (incl\. % achievement) The indicator was dropped in 2014 at AF2 (No targets\. Relevance not clear)\. Rate of Program execution for Indicator 35 ï‚ pooled DP ï‚ Government funds ï‚ pooled DP: NA Value 95% ï‚ Government (quantitative or - - qualitative) funds: 105% 95% (2009, JAPR) Date achieved 12/31/2008 12/31/2014 - - Comment (incl\. The indicator was dropped in 2014 at AF2 (regularly monitored as part of % achievement) implementation support)\. Indicator 36 Share of operating cost budget reaching contracting ODs Value (quantitative or 0 40% - - qualitative) Date achieved 12/31/2008 12/31/2013 - - Comment (incl\. The indicator was dropped in 2014 at AF2 (difficult to measure, not entirely in % achievement) control of the project, and adds relatively little value)\. Proportion of ODs implementing SDGs and internal contracting meeting at Indicator 37 least 80% of their performance targets Value (quantitative or 0 100% 100% 100% qualitative) Date achieved 12/31/2008 12/31/2014 06/30/2016 06/30/2016 Target achieved Comment (incl\. 100% of ODs implementing SDGs and internal contracting meeting at least 80% % achievement) of their performance target by 03/30/2014 (ISR Seq\. 8) and also by 06/30/2016 (ISR Seq\. 11) Financial Management Improvement Plan (FMIP) developed and Indicator 38 Implemented Value FMIP (quantitative or NA - - qualitative) implemented Date achieved - 12/31/2014 - - Comment (incl\. The indicator was dropped in 2014 at AF2 (very process oriented and no longer % achievement) relevant)\. Indicator 39 Number of MOH staff receiving POC payments financed by the program\. Value (quantitative or 0 NA - - qualitative) Date achieved 12/31/2008 - - - Comment (incl\. % achievement) The indicator was dropped in 2014 at AF2 after the POC scheme was cancelled\. Annual health planning summits (JAPR and JAPA) conducted with wide Indicator 40 stakeholder participation Value JAPA and JAPR (quantitative or NA - - qualitative) conducted Date achieved 12/31/2014 - - Comment (incl\. % achievement) The indicator was dropped in 2014 at AF2\. Percentage of HSP2 indicators that have Indicator 41 * baselines * targets Value 70\.6% 100% (quantitative or - - qualitative) NA TBD Date achieved 12/31/2008 12/31/2014 - - Comment (incl\. % achievement) Indicator dropped at AF2\. Indicator 42 Selected key HSP2 indicators disaggregated by location and sex Value (quantitative or NA NA - - qualitative) Date achieved - - - - Comment (incl\. % achievement) Indicator dropped at AF2\.  Indicator 43 Health personnel receiving training through the program (number) Value 166,042 (quantitative or NA NA NA qualitative) (ISR Seq\.11) Date achieved - - - 12/31/2015 Although no target was explicitly established, this indicator is considered Comment (incl\. % achievement) “achieved” since December 2015 with 166,042 health personnel trained (Source: ISR Seq\.11, 06/20/2016) Health facilities constructed, renovated, and/or equipped through the Indicator 44 program\. Value (quantitative or 0 506 699 699 qualitative) Date achieved (12/31/2007) (12/31/2015) 06/30/2016 06/30/2016 Target surpassed 699 by 05/31/2016 (ISR, Seq\. 11), including: * 53 additional delivery rooms * 15 referral hospitals Comment (incl\. % achievement) * 1 LINAC * 1 clean room * 103 solar lighting * 193 water improvement * 263 sanitation improvement G\. Ratings of Project Performance in ISRs Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 04/03/2009 Satisfactory Satisfactory 1\.56 2 03/25/2010 Satisfactory Moderately Satisfactory 2\.87 3 03/01/2011 Satisfactory Moderately Satisfactory 11\.58 4 03/24/2012 Moderately Satisfactory Moderately Satisfactory 11\.58 5 02/06/2013 Moderately Satisfactory Moderately Satisfactory 16\.33 6 10/22/2013 Moderately Satisfactory Moderately Satisfactory 17\.74 7 04/27/2014 Moderately Satisfactory Moderately Satisfactory 25\.46 8 11/22/2014 Satisfactory Satisfactory 25\.46 9 06/05/2015 Satisfactory Satisfactory 27\.57 10 01/29/2016 Moderately Satisfactory Satisfactory 27\.57  H\. Restructuring (if any) ISR Ratings at Amount Disbursed at Restructuring Board Approved Restructuring Reason for Restructuring & Restructuring Dates PDO Change Key Changes Made (USD millions) DO IP Level 2 Restructuring (PR1) RGC decision to cancel the MBPI scheme and to replace it with the establishment of POC\. 10/11/2010 S MS 2\.87 No changes proposed in the PDO\. The Results Framework is updated to reflect agreements with the MOH and HSSP2 partners\. Level 2 Restructuring (PR2) Amendment of the Grant Agreement to reflect the full availability of trust fund resources under Australian Agency for International Development (AusAID) and the United Kingdom Department for 09/24/2012 MS MS 11\.58 International Development (DFID)\. No changes proposed in the PDO or in the Results Framework\. The financing percentage for POC is changed to reflect the fact that POC payments under HSSP2 have been stopped as of July 1, 2012 Additional Financing (AF1 / P146271) Scale up of the project following additional receipts from DFID and AusAID into the Multi Donor Trust Fund (MDTF) for a total 10/01/2013 MS MS 16\.33 amount of USD 13\.44 million, raising the total MDTF envelope to USD 99\.5 million\. The AF is used to support the scale up of existing activities\. No changes proposed in the PDO or in the Results Framework\. Level 2 Restructuring (PR3) 06/04/2014 MS MS 25\.46 Request from RGC to extend the closing date from June 30, 2014  to December 31, 2015, to allow adequate time for implementation completion of the civil works and delivery of medical equipment\. The Financing and Grant Agreements are amended to reflect this change\. No changes proposed in the PDO or in the Results Framework\. Additional Financing (AF2 / P150472) Additional donor receipts into the MDTF (from the Government of Australia and the Korea International Cooperation Agency (KOICA)\. These funds provide additional grant financing of USD 12\.69 million increasing the total 09/11/2014 MS MS 25\.46 MDTF envelope to USD 112\.23 million and the total financing envelope for HSSP2 to USD 142\.23 million\. The PDO remains unchanged\. The Results Framework is revised to include only targets that can be attributed to the Program’s activities and that can be measured\. Additional Financing (AF3 / P154911) Additional donor receipts into the MDTF (from the Governments of Australia and Germany)\. These funds provide additional grant financing of USD 12\.69 million increasing the total MDTF envelope to USD 124 million and the total financing envelope for 10/30/2015 S S 25\.57 HSSP2 to USD 154\.37 million\. Closing date for the Project is extended from December 31, 2015 to June 30, 2016, and closing date for the MDTF is extended from June 30, 2016 to December 31, 2016\. The AF is used to cover a financing gap for a period of 10 months for the SDGs, and to scale up HEF Grants nationwide\. I\. Disbursement Profile 1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal 1\. At appraisal, Cambodia was a low-income country, ranked 129 out of 177 countries on the UN Human Development Index\. With an annual growth rate of about 2%, the total population reached about 14 million in 2008\. Most of the population (80%) lived in rural areas\. Per capita gross national income (GNI) was about USD 670 in 2008 (in current terms using the Atlas method)\. The poverty headcount under the national poverty line was about 30% in 2008\. Economic growth however was high, averaging about 8% per year between 1998 and 2008\. 2\. The economy and the health system were largely destroyed after the international and domestic conflicts of the 1970s\. Reconstruction efforts began in the 1980s, but progress was slow\. Reforms to rebuild the health system were initiated in the 1990s after the signature of the Paris Peace Accords in 1991\. Cambodia lost up to 90 percent of their trained health staff during the Khmer Rouge regime; moreover, the subsequent civil conflict that lasted until 1998 made provision of health service difficult\. Since then, Cambodia has made substantial progress in rebuilding its health system\. 3\. Improvements in health outcomes in the 2000s was steady, but despite these significant trends, Cambodia lagged other countries in the region\. Life expectancy increased by 9 years between 1998 and 2008, and both infant and under 5 mortality were declining and on track to meet the MDG targets\. Significant health inequalities persisted however among the population\. 4\. Like many other developing countries, health financing was dominated by out-of- pocket expenditures in Cambodia (60% of total health expenditure)\. One important driver of the maldistribution of health gains was the impact of financial barriers on access to health services by the poor\. Moreover, the cost of health care was reported as one of the most important cause of new impoverishment in Cambodia (Biddulph, 2004)\. 5\. The World Bank had been actively engaged in the health sector since 1996\. The previous Health Sector Support Project (HSSP) allowed the World Bank to build strong relationships with the Government and other development partners, and the institution was positioned to be a key player in Cambodia’s health sector development\. 1 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 6\. To support the implementation of the Government's Health Strategic Plan 2008- 2015 in order to improve health outcomes through strengthening institutional capacity and mechanisms by which the Government and Program Partners can achieve more effective and efficient sector performance\. 7\. This evaluation’s interpretation of the Program’s objectives breaks down the PDO in three components: a\. PDO1: Improve health outcomes b\. PDO2: Institutional capacity strengthening i\. Strengthening human resources ii\. Strengthening health system stewardship functions c\. PDO3: Strengthening mechanisms by which the Government and DPs can achieve more effective and efficient sector performance i\. Strengthening health service delivery network ii\. Improving financial protection 8\. Key performance indicators are itemized in Annex 2b and organized around each PDO component according to their category (impact, outcome, output)\. Key impact indicators for example relate to the first component of the PDO “Improve health outcomes”, and are extracted from the high level HSP2 goals which appear in Table A (Program Results Framework) of the PAD\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO remained unchanged through PR1, PR2, AF1, PR3, AF2, and AF3\. 1\.4 Main Beneficiaries, 9\. The primary beneficiaries are the total population, but women and children are a priority group, through reproductive and child health, as well as the poor and ethnic minority groups living in remote rural areas\. Key intermediate beneficiaries of the project include health providers who were meant to benefit from pre and in- service training and from additional resources through performance based financing to improve service quality and efficiency\. Other secondary beneficiaries included MOH policy makers, program planners and managers who benefit from system strengthening, increased autonomy at the decentralized level, and from capacity building activities\. 1\.5 Original Components (as approved) Box: Original Components The Project has a health system strengthening focus, with components that are aligned to the Government’s HSP2\. Component 1: Strengthening Health Service Delivery through: 2  - (i) the provision of Service Delivery Grants and contracting for health services at provincial level and below; and - (ii) strengthening health services management supervision and public health functions at provincial and district level; and - (iii) investments for the improvement, replacement, and extension of the health service delivery network\. Component 2: Improving Health Financing which supported - (i) 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 - (ii) supporting the development of health financing policies and institutional reforms\. Component 3: Strengthening Human Resources focused on - (i) strengthening pre- and in-service training and supporting enrollment where shortfalls existed; - (ii) strengthening human resource management in the Ministry of Health; and - (iii) support the Merit Based Performance Incentive (MBPI) scheme for health managers and key technical staff participating in the implementation of the HSP2 at central and provincial level\. Component 4: Strengthening Health System Stewardship Functions by supporting: - (i) development of policy packages identified, strengthening the institutional capacity (in particular meeting the demands from Decentralization and Deconcentration); - (ii) private sector regulation and partnerships; and - (iii) governance and stewardship functions of the national programs and centers overseeing the three HSP2 strategic programs\. Table 1: Total Estimated Financing by Component Local Foreign Total USD USD USD million million million Overall Program Cost 79\.6 30\.4 110\.0 A\. Strengthening Health Service Delivery 50\.6 14\.4 55\.0 B\. B\. Improving Health Financing 9\.9 4\.1 14\.0 C\. Strengthening Human Resources 9\.0 3\.5 12\.5 D\. Strengthening Health System Stewardship Functions 20\.1 8\.4 28\.5 Source: PAD, Annex 5\. 3 1\.6 Revised Components (No revised components) 1\.7 Other significant changes 10\. First Project Restructuring (Level 2, October 2011)\. A restructuring was proposed in October 2010 to reflect the RGC decision to cancel the MBPI, Priority Mission Group and all other salary supplement and incentives schemes with effect from January 1, 2010, and to replace it with the establishment of Priority Operating Costs (POC)\. No changes were proposed in the PDOs, Program components, or implementation arrangements\. The proposed changes related to (i) replacing the Project indicator related to MBPI with an indicator related to POC, (ii) updating the Project financing tables and counterpart contributions, as well as reallocating the unallocated expenditure category, and (iii) updating the Results Framework and related indicators and targets to reflect agreements with the MOH and HSSP2 partners\. 11\. Second Project Restructuring (Level 2, September 2012)\. The MDTF Grant Agreement was amended to reflect the full amount of Trust Fund resources available under AusAID and DFID\. To guard against exchange rate risks, the original MDTF Grant Agreement was signed for USD 52\.09 million (i\.e 65% of the original commitment of USD 80 million)\. The additional Trust Fund resources at PR2 include the remaining of the original commitment (USD 27\.9 million) and an additional contribution from AusAID equivalent to USD 6\.09 million\. The total Trust Fund resources amounted to USD 86\.09 million after PR2\. No changes were proposed in the PDOs, Program components, or in the Results Framework\. The Financing and the Grant Agreement were however amended to reflect the following changes: ï‚ Change in the deadline for Joint Annual Operational Plan and Appraisal, to be held no later than November of every year, instead of September\. ï‚ HEF Grants eligibility extended to Community Based Organizations (CBOs) in addition to NGOs, in order to consolidate and expand the coverage of health care benefits packages to the poor\. ï‚ Each Project Report to cover a period of six months and to be furnished to the Association not later than 90 days, instead of 45 days, after the end of the period covered by the report\. ï‚ The thresholds for procurement to be carried out by the PHDs and SOAs raised to USD 20,000 per contract for goods, and to USD 40,000 per contract for civil works\. ï‚ The financing percentage for Priority Operating Costs was changed to reflect the fact that POC payments under HSSP2 were stopped as of July 1, 2012\. 12\. First Additional Financing (October 2013)\. The first Additional Financing reflects the scale up of the project following additional receipts into the MDTF for a total amount of USD 13\.44 million, raising the total MDTF envelope to USD 99\.5 million\. No changes were proposed in the PDOs, Program components, or in the Results Framework 4 13\. Third Project Restructuring (Level 2, June 2014)\. The third Project Restructuring (i) extended the Program closing date by 18 months at the request of the Government (from June 30, 2014 to December 31, 2015) to allow for adequate time for implementation completion of the civil works and procurement and delivery of medical equipment; and (ii) amended the Financing and Grant Agreements to reflect these changes\. No changes were proposed in the PDOs, Program components, or in the Results Framework 14\. Second Additional Financing (September 2014)\. The second Additional Financing reflected additional donor receipts into the MTDF consisting of USD 8\.86 million from AusAID, and USD 4\.5 million from the Korean International Cooperation Agency (KOICA)\. The additional grant financing of USD 12\.69 million increased the total MDTF envelope of the Program to USD 112\.23 million and the total financing envelope to USD 142\.23 million\. No changes were proposed in the PDOs or in the Program components\. The Program’s Results Framework was revised to only include targets that could be attributed to the Program's activities and could be measured\. In some cases, the type of indicator was also revised, such as from PDO level to intermediate level, and vice-versa\. All relevant core IDA indicators were included\. Indicators and targets remained aligned with those of the government’s own health strategic plan results framework\. 15\. Third Additional Financing (October 2015)\. The third Additional Financing was conducted to allow for (i) extension of the Project closing date from December 31, 2015 to June 30, 2016 and extension of the closing date of the MDTF from June 30, 2016 to December 31, 2016; (ii) additional donor contributions to the MDTF from AusAID (USD 6\.26 million equivalent) and the Government of Germany (USD 6\.51 million equivalent); and (iii) to reallocate Credit funds between categories of expenditure to adjust for overdraws\. The additional grant financing of USD 12\.67 million equivalent increased the total MDTF envelope of the Program to USD 124\.37 million and the total financing envelope to USD 154\.37 million\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry Soundness of the background analysis 16\. The Program objectives were highly relevant to the country’s context\. The improvement in health status of all Cambodians has been recognized by the RGC as a priority for investing national resources in the social sector\. The PDOs were directly aligned with the objectives of the Second Health Strategic Development Plan (2008- 2015) which aim at increasing demand and ensuring equitable access to quality health services for all the population, especially for the poor, the women and the children\. Achieving these high level goals directly contributes to poverty alleviation and socio- economic development\. The PDOs were also fully consistent with the country’s broader development agenda as defined by the National Strategic Development Plan Update (2009-2013) and the Third National Strategic Development Plan (2014-2018)\. 5 17\. The Program objectives were also aligned with the Country Assistance Strategy (2005-2008) and the World Bank Health Nutrition and Population (HNP) Strategy\. The Country Assistance Strategy was developed jointly by the World Bank, the Asian Development Bank (ADB), DFID, and the United Nations, calling for increased investments in sectors relevant to the achievement of the MDGs\. For the health sector, this translated into supporting Cambodia’s commitment to provide affordable health services for the poor, improving service utilization and service quality, reducing the burden of communicable diseases, and enhancing sector capacity and performance\. The World Bank HNP “Healthy Development” strategy was focused around strengthening health systems and results\. 18\. The preparation of HSSP2 drew extensively from existing analytical and sector work such as the Health Sector Strategy Review (2003-2007), a Public Expenditure Tracking Survey Report in the Health Sector (2007), a Contracting Review (2007), a Midwifery Review (2007), a Poverty Assessment (2006) and an Equity Report (2007)\. All served as key inputs during project preparation\. Annear et al\. (2008) for example, identified the principal issues in health planning for Cambodia as being (i) the improvement of public health service delivery quality, (ii) the reduction of out-of- pocket payments, (iii) increasing the utilization of public facilities, and (iv) providing better access to services for the poor\. All these four elements were taken into account during the preparation of the Project design\. 19\. The design of HSSP2 also incorporated a number of lessons from HSSP\. After ADB decided to withdraw from the health sector in Cambodia, the Bank built a partnership with several other donors (including AusAID, DFID, AfD, BTC, UNICEF and UNFPA) to form a stronger sector-wide partnership for the new project\. All of the successful initiatives in HSSP were continued in HSSP2 (performance based contracting with district health services, HEFs, strengthening health service delivery network)\. Skills and capacities built in MOH and the PMU during HSSP have been used during the implementation of HSSP2, and financial and operational management systems further strengthened\. Assessment of Project Design 20\. The design of HSSP2 expanded on the previous HSSP project\. While the objective of strengthening health service delivery and institutional capacity was pursued to consolidate the progresses made under the previous project, improving health financing mechanisms and financial protection for the poorest as well as strengthening human resources were new focus areas under HSSP2\. Support to health financing was an integral part of HSP2 in a context where the country was characterized by an unusually high reliance on out-of-pocket spending (about two thirds of total health expenditure)\. Moreover, the MOH’s Health Workforce Strategic Plan 2006 -2015 had identified human resources as a major constraint to improving service delivery outcomes in the health sector\. 6 21\. HSSP2 was designed to consolidate existing innovative pilot experiments which proved successful both on the supply and demand side of the health sector\. On the supply side, the support to the SDGs provided by HSSP2 was meant to foster the adoption of internal contracting principles within the Government system to improve service delivery after MOH had already begun experimenting with sub-contracting district health service delivery through NGOs since 1998\. On the demand side, Health Equity Funds had emerged as locally generated projects developed by various international NGOs to assist MOH in providing health services at district level with a focus on facilitating financial access to health services for the poor\. Based on the successful experience in implementing these schemes, support for HEFs became an integral part of the National Poverty Reduction Strategy and the Health Strategic Plan, and the early HEF pilots quickly drew the attention of donors and policy makers\. 22\. The design of HSSP2 followed the sector-wide management (SWiM) approach which was in essence a flexible form of Sector-Wide Approach (SWAp) aiming at striking a balance between increased donor alignment with Government priorities and some degree of flexibility regarding funding and implementation mechanisms to preserve the participation of development partners who might otherwise not be able to be involved\. In 1999 the RGC decided to pursue a SWAp to support the health sector\. Subsequently, MOH adopted a modified version of sector coordination arrangements which was labelled SWiM and which provided more flexibility to development partners\. Under the SWiM, the common strategic framework to achieve national goals and objectives was maintained, but pooled funding and the adoption of common implementation arrangements would not be mandatory\. Adequacy of government’s commitment 23\. MOH prepared the HSP2 through a participatory process with donors and NGOs, following a sector review to identify key problems\. MOH also committed to developing comprehensive annual plans and budgets, linked to three-year rolling plans (3YRPs)\. The RGC had also shown strong support for the SWiM endorsing the principles of the Paris Declaration on Aid Effectiveness\. The SWiM approach emerged as a modified version of a wider SWAp and aligned Development Partners’ effort behind MOH leadership and under a common strategic framework to achieve the national goals and objectives set in the Health Strategic Plans\. 24\. Transitional arrangements for implementation were conducted smoothly between HSSP and HSSP2\. The HSSP Secretariat key functions were maintained with the extension of the Project Director and Project Coordinator’s positions\. Other contract from previously employed consultants were also extended in the Secretariat’s administration, M&E, finance and procurement units\. Additional positions were created to support implementation arrangements such as a pooled fund management officer, a discrete fund management officer and an infrastructure specialist\. 7 Assessment of risks 25\. Overall the risk rating for the Program was substantial, and the risk assessment covered a wide range of potential challenges at country level and at Program level, such as weak governance systems, weak institutional capacity to implement the Program in a decentralized context, the quantity and quality of civil works and goods, procurement risk, corruption risk, and weak financial management and controls environment\. Table 2 below show the Country Policy and Institutional Assessment scores between 2005 and 2015\. The rating for transparency, accountability and corruption in the public sector deteriorated from a low base during the period covered by the Program\. Table 2\. CPIA scores 2005-2015 26\. Mitigation measures were appropriate and included: (i) providing technical support and capacity building; (ii) monitoring and physical verification, use of an International Procurement Agent (IPA); (iii) strengthening FM and procurement arrangements; (iv) the implementation and monitoring of a Good Governance Framework; (v) the establishment of preventive controls during the operation and (vi) external audits arrangements\. Given the level of institutional risk assessment, adopting the SWiM approach can also be seen as a way to cautiously avoid the risk of placing the non- mandatory pooled funds on budget, by using a separate funding mechanism, and by working to gain leverage with the government and to manage risks\. 2\.2 Implementation 27\. Effectiveness, MTR, Restructuring\. The Program became effective on January 19, 2009\. The Program MTR was conducted in November 2011 to align the process with the HSP2 mid-term review led by the Department of Planning and Health Information of MOH\. The MTR influenced the fine tuning of program support and implementation\. The Program closed on June 30, 2016, two years after the original closing date\. The first extension of the closing date was approved at the request of RGC to allow adequate time for implementation completion of the civil works and delivery of medical equipment (PR2, June 11, 2014)\. The second extension took place because additional 8  financing was approved (AF3, October 30, 2015) to bridge the gap between the end of HSP2 implementation and the preparation of HSP3\. 28\. Program implementation of HSSP2 was planned to closely follow existing Government systems and procedures as much as possible\. HSSP2 implementation was aligned with the National Planning Process which consists of (i) Joint Annual Planning Appraisal, (ii) Mid-Year Reviews, and (iii) Joint Annual Performance Reviews\. Annual plans were developed and updated by using national planning and budgeting instruments (AOPs and 3YRPs)\. The AOP activities supported by the Program were implemented by the respective health sector implementing units, including central health departments, national programs and provincial health departments (PHDs) and operational districts (ODs)\. 29\. The governance of HSSP2 was overseen by the Health Sector Steering Committee (HSSC) under chairmanship of MOH\. The HSSC included high level officials of the MOH and other relevant line ministries and agencies, and provided policy guidance and implementation oversight of HSP2, including the endorsement of the sector AOP\. A Secretary of State for Health was appointed as the Program Director to provide executive oversight on the overall Program implementation, and a Deputy Director General for Health was responsible for routine coordination of the Program supported by a Program Secretariat\. The Program Secretariat was staffed with consultants and was responsible for facilitating the Program implementation with regard to the preparation of procurement plans and disbursement, semi-annual progress reports, providing information ahead of the Joint Annual Performance Reviews, maintaining communication with implementation units at the central and decentralized levels, as well as with the HSSP2 partners\. 30\. Phases of restructuring and additional financing were approved to preserve the continuity of engagement in the health sector\. Some part of the apparent complexity of the HSSP2, including three rounds of additional financing, (AF01: 10/01/2013; AF02: 09/11/2014; AF03: 10/30/2015), can be attributed to the strong perceived support from the World Bank’s partner entities to continue this engagement in the health sector until a follow on project was possible\. These rounds of additional financing through MDTF funding, allowed the sectoral engagement to continue even during a period of challenges in the overall engagement of the World Bank in the country (in the period from August, 2011 until the new CEN was approved by the Board in May, 2016)\. HSSP2, thus, became the only World Bank lending program in Cambodia that did not face any interruption in financing\. 31\. Factors outside of Government Control\. Cambodia was negatively affected by the 2008 global financial crisis when real GDP growth dropped from a level of about 10 percent in 2007 to close to zero percent in 2009\. Floods in 2011 and 2013 also affected Program implementation by reducing agricultural income, by increasing the water- borne burden of disease and by hampering access to health facilities\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 9  M&E Design 32\. The M&E framework for HSSP2 was designed to be aligned with the Health Strategic Plan M&E framework\. A selection of key Program indicators was drawn primarily from the HSP2 since there was a broad agreement amongst donors on the importance of adopting a single, common results and monitoring framework reflecting the Government’s priorities in the sector\. 33\. The results framework (RF) consisted of two sets of indicators: one related to Program results (see Table A in Annex 3 of the PAD), and one related to Project results (see Table B in Annex 3 of the PAD, where the term Project refers specifically to the pooling partners) 1 \. The Program RF is used to monitor aggregate health sector performance and to track progress towards health outcomes\. The Project RF included the Program RF (Table A) and, in addition, indicators aimed at measuring (i) improved policy, planning and implementation, (ii) improved financing at front line service delivery, (iii) use of performance results to improve planning and management, (iv) broad commitment and ownership of the sector wide process, and (v) improved sector governance (Table B)\. The Program RF had eight high level goals (impact level) and 30 outcome and output indicators, eight of which are proxies (outcome level) for monitoring the high level health indicators (impact level)\. In addition, the Project RF comprised 18 indicators\. While the PAD explicitly states that the RF indicators against which the World Bank is held accountable are the 18 indicators in Table B of the pAD\. 34\. There is some degree of discrepancy between the broad ambition of the program and the selection criteria for some indicators in the Results Framework\. While HSSP2 has only provided support to parts of the activities aligned with HSP2, it is mentioned in the PAD (p\. 93, paragraph 248) that “the success of the program should be judged by looking at HSP2 as a whole, rather than on the specific areas supported with the pooled account”\. Yet several outcome indicators were dropped because the underlying interventions were not financed by the program\. 35\. Several of the 30 Program Results indicators (Table A in PAD) did not have targets, and some did not have baseline\. Out of the 48 original indicators, 18 were dropped at PR1, 12 were added, and 12 revised\. During AF2, one indicator was revised, one was added, and 33 were dropped\. Finally, at AF3, 14 indicators got revised, and one new indicator was added to the list\. During the course of the project, indicators were dropped because they were assessed not relevant, or because of data collection and measurement issues\. 1 Support provided through common management arrangements to the HSP2 was defined as “Program”\. The term “Project” refers to the pooling partners which included AusAID, DFID, the World Bank, KOICA and KFW\. 10 36\. The original 18 Project Results indicators were “streamlined” first after PR1 (12/19/2010) and a second time after AF2 (09/11/2014) in order to further align the Results Framework with the Government’s own health strategic plan Results Framework, and in order to focus on indicators and targets that are measurable using existing MOH systems\. In addition, four of the IDA “Core Indicators” for health were added\. From the original list of 18 Project Results indicators, eight were dropped at PR1, and nine were dropped at AF2\. Only one indicator (Proportion of ODs implementing SDGs and internal contracting meeting at least 80% of their performance target) remained\. Before AF2, the indicators reported in the ISRs were the Project Results indicators\. After AF2, the indicators reported were the Program Results indicators, plus the remaining Project Results indicators that were not dropped (one from the original PAD, and four core IDA indicators)\. One important motivation underlying the revision of the original dual Results Framework were the lessons learned from the 2011 Aid Effectiveness Assessment Report (Vaillancourt et al\., 2011)\. In particular, it was deemed difficult for MOH to fully assume its sector stewardship role as long as DPs insisted on multiple M&E frameworks, indicators and reporting systems (Lesson 5 in the report)\. M&E Implementation 37\. M&E was implemented as planned, using data coming from a variety of sources, including from HMIS, survey data (CSES, CDHS), LQAS, and participatory assessments\. The MOH department of Planning and Health Information was responsible for the HMIS, and the Ministry of Planning for the CSES\. With HSSP2 support, the HMIS was improved, moving from manual data collection of data to a fully computerized system, and with the inclusion of private sector data\. A new software was purchased in 2010 to improve the quality and timeliness of data and its analysis\. Some areas for further improvement remain, such as data quality, rationalization of indicators included in the HIS, capacity building for data analysis and data use, as well as timeliness of the data production stream\. M&E Utilization 38\. Joint Annual Performance Reviews were conducted annually to review and benchmark progress in the implementation of HSP2 and to determine the impact of HSP2 on improved health status\. These Joint Annual Performance Reviews then formed the basis for annual planning in the Annual Operational Plans (AOPs)\. The AOPs were then used to promote decentralized planning through provincial plans\. Community scorecards were implemented by NGOs at the beginning of the project but the pilot experiment was stopped due to difficulties in bringing it to scale\. 39\. Joint semi-annual Performance Reviews were also conducted to monitor progress made against annual targets\. The purpose of these semi-annual reviews was to speed up implementation for indicators that were unlikely to meet their annual targets\. 2\.4 Safeguard and Fiduciary Compliance 11 Safeguard Compliance 40\. The Program triggered four safeguard policies: Environmental Assessment (OB/BP 4\.01), Pest Management (OP 4\.09), Involuntary Resettlement (OB/BP 4\.12), and Indigenous People (OB/BP 4\.12)\. To address these safeguard policies, the Government prepared an Environmental and Social Management Framework (ESMF) 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\. 41\. Compliance with safeguard was assessed as moderately satisfactory between effectiveness and 2013, and as satisfactory from 2013 until Program closure\. The only safeguard compliance rated as moderately satisfactory since effectiveness was the Indigenous People safeguard, due to delays from the Government in conducting consultations\. All other safeguard compliances were rated satisfactory throughout all ISRs\. Fiduciary Compliance 42\. Fiduciary risks were deemed high during Program preparation\. The design of mitigation policies was a high priority for the team which drew lessons from World Bank’s past reviews of projects as well as from more detailed assessments of projects in which mis-procurement were revealed\. Appropriate control mechanisms were incorporated in the Financial Management and Procurement Arrangements and in the Good Governance Framework\. 43\. Financial Management\. Project financial management at central level was carried out by a Financial Management Group (FMG)\. An accounting firm was hired to provide training on general accounting procedures and on the use of an accounting software\. Capacity building at the subnational level was also supported at district and province levels\. With the support of HSSP2, PwC provided capacity building to the internal audit department of MOH, and internal auditing manuals were developed\. Looking forward, internal audit functions will be the responsibility of the internal audit department\. Despite being intense and time consuming exercises, the Quarterly Integrated Technical and Financial Audit reports were effective tools to address technical and financial management issues in a timely manner\. 44\. Financial management was downgraded to “Moderately Satisfactory” at the third ISR, and then to “Moderately unsatisfactory” during the fifth ISR (01/23/2013) due to delays in the submission of IFRs and inaccurate cost projections\. MOH had also not adequately addressed FM issues identified in audit reports\. The timely submission of the financial audit reports improved and were unqualified since April 2014 (7th ISR) which resulted in an upgraded rating to “Moderately Satisfactory”\. Further improvements in monitoring the implementation of the auditor’s recommendation 12  resulted in an upgraded rating to “Satisfactory” by June 2015 (9th ISR)\. The processing of funding extension requests between July 2014 and June 2016 translated into some interruptions of funding which affected Program implementation\. The RGC managed, however, to fulfill its commitment to finance the funding gap in HEFs during the first semester of 2016\. 45\. Procurement\. A specific HSSP2 procurement department within the MOH was in charge of all bids financed under the Program for both pooled funds and discrete funds\. The procurement activities were carried out by an International Procurement Agent (IPA) which adhered to the RGC’s Standard Operating Procedures (SOP) for Externally Assisted Projects\. The RGC and the World Bank agreed to exit the IPA arrangements after the expiry of their contract\. An international procurement consultant was then hired to support the MOH procurement department in executing the remaining procurement tasks related to HSSP2 implementation\. Overall, procurement was conducted according to procedures\. There were however occasional delays due to, for example, price escalation and shortage of construction labor\. The RGC approved and adopted a revised Standard Operating Procedures and Procurement Manual in May 2012 for HSSP2 procurement tasks\. 46\. Procurement was downgraded to “Moderately Satisfactory” during the 4th ISR (March 2012) due to delays by MOH in providing technical specifications and consultant recruitment\. Continued delays in addressing technical inputs for some procurement packages and procurement delays in general resulted in keeping the rating to “Moderately Satisfactory” until closure\. 2\.5 Post-completion Operation/Next Phase 47\. A new project building on the lessons learned from HSSP2 was approved by the World Bank Board on May 19, 2016\. The project development objectives of the Health Equity and Quality Improvement Project (H-EQIP) for Cambodia is to improve access to quality health services for targeted population groups with protection against impoverishment due to the cost of health services in the country\. The project will consolidate the HSSP2 achievements by focusing on: (a) strengthening quality of health service delivery by expanding the current SDGs into a mechanism for providing performance-based financing to different levels of the Cambodian primary and secondary health system based on achievement of results; and (b) by improving financial protection and equity, through continued support and expansion of the HEF system, and with RGC co-finance of the cost of health services for the poor\. In addition, the third component will aim at ensuring sustainable and responsive health systems, by supporting a program of activities designed to improve supply-side readiness and strengthen the institutions that will be implementing project activities\. Project design followed core principles aligned with those of HSSP2 such as the support of a broader government program (HSP3), a focus on results, and a continued ambition to mainstream implementation arrangements to make greater use of Government’s systems\. 13 48\. The implementation arrangements are also based on lessons learned from HSSP2, as well as from the PFM reforms ongoing in the country\. The implementation agency for the project will be the MOH through the Department of Planning and Health Information (DPHI) and the Department of Budget and Finance (DBF)\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation Relevance of Objectives Rating: Substantial 49\. The Program objectives were, and continue to be, highly relevant to the country’s sectoral context\. The improvement in health status of all Cambodians was recognized by the RGC as a priority for investing national resources in the social sector\. The PDOs were directly aligned with the objectives of the Second Health Strategic Development Plan (2008-2015) which aimed at increasing demand and ensuring equitable access to quality health services for all the population, especially for the poor, women and children\. Achieving these high level goals directly contributed to poverty alleviation and socio-economic development\. These objectives remain relevant with respect to the (draft) Third Health Strategic Plan 2016-2020 (HSP3)\. The overarching goal of HSP3 is “improved health outcomes of the population, with increased financial risk protection in access to quality health services”\. 50\. The Program objectives were also fully consistent with the country’s broader development agenda as defined by the National Strategic Development Plan Update (2009-2013) and the more recent Third National Strategic Development Plan (2014-2018) which provided the foundation for investing in health as a means to develop human capital and build a more productive workforce for the social and economic development of Cambodia\. Improving access to quality health services and increasing financial protection coverage are also two key objectives of the recently adopted Sustainable Development Goals (SDGs), especially with respect to goal 3\.8 on Universal Health Coverage (UHC)\. Relevance of Design Rating: Substantial 51\. The Program components were also very relevant to the operational framework of HSP2\. Strengthening health service delivery, improving health care financing, strengthening human resources, and strengthening health system governance were four of the five strategic areas of HSP2\. Moreover, the focus on RMNCH, on communicable diseases control and on non-communicable diseases also corresponded to the three priority health program areas of HSP2\. 52\. The logic of the results chain was sound and addressed key weaknesses of the Cambodian health system from the supply side and from the demand side\. 14  Improvements in the availability and quality of physical infrastructure and of human resources, coupled with management reforms offering more autonomy in exchange of greater accountability of performance at the decentralized level were meant to strengthen the supply side of the health system\. Improvements in financial protection of the poor through the consolidation of HEF schemes addressed some of the main demand side constraints\. 53\. The use of a pooled funding mechanism and of a Sector Wide Management Approach (SWiM), including common management and monitoring practices, strengthened wider stewardship of the sector and institutional capacity for MOH, as well as reduced the transaction costs generated by donor fragmentation\. 3\.2 Achievement of Project Development Objectives 54\. This evaluation’s interpretation of the Program’s objectives breaks down the PDO in three components: a\. PDO1: Improve health outcomes b\. PDO2: Institutional capacity strengthening i\. Strengthening human resources ii\. Strengthening health system stewardship functions c\. PDO3: Strengthening mechanisms by which the Government and DPs can achieve more effective and efficient sector performance i\. Strengthening health service delivery network ii\. Improving financial protection 55\. A summary of indicator achievement broken down by PDO component is given in Table 3 below\. This table includes an assessment of indicators that were included in the Results Framework during Program implementation but which were dropped at some point 2 \. The summary table for indicator achievement is based on the more detailed Table in Annex 2b where all indicators are broken down according to their PDO component and according to the type of indicator (impact, outcome, output)\. Overall, 89% of the measured indicators were achieved or surpassed\. 2 As long as the indicator is measured and can be assessed against original target values\. 15 Table 3: Indicators summary table for efficacy rating PDO1 PDO2 PDO3 Strengthening mechanisms to Strengthening institutional High level HSP2 goals achieve more effective and capacity efficient sector performance 2a: Human resources 3a: Health service delivery Improve Health Outcomes 2b: Health system stewardship 3b: Financial protection IMPACT Outcomes Outputs Outcomes Outputs Surpassed* 3 0 1 14 7 Achieved* 1 3 8 3 2 * Not achieved 2 0 2 1 0 Dropped but measured 0 2 9 5 3 Dropped / not measured 2 6 9 6 6 Total (measured) 6 3 11 18 9 % achieved (among measured) 67% 100% 82% 94% 100% * Includes the number of indicator that were dropped, but measured through the HMIS\. Project efficacy is rated Substantial PDO 1\. Improve health outcomes: Substantially Achieved 56\. Cambodia has made remarkable progress towards achieving the MDGs which were the higher level outcomes to which the Program contributed\. Maternal, infant and under five mortality fell on average by about nine percent per year between 2005 and 2014\. Over the same period, neonatal mortality fell by almost five percent annually, and stunting by about three percent\. Most of the high level impact goals figuring in the Program Results framework have been achieved or surpassed and the end of the project period\. The original HSP2 targets for chronic undernutrition and for maternal mortality were not met in 2015, but the improvement in these indicators is positive and accelerates during the course of the projects if the average annual changes are compared with those preceding the project period\. 57\. Two indicators have not been achieved but are trending positively with an acceleration of progress between 2010 and 2014\. The target for maternal mortality for example was 140 deaths per 100,000 live births in 2015, with the actual value 170 based on the 2014 CDHS results\. Given that the observed average rate of reduction in maternal mortality between 2010 and 2014 was about -4\.7% per year, one could expect the 2015 value to lie around 162 which would represent a potential achievement given that the target would represent 86% of the actual value\. TB death rate is also trending positively towards its target value (32 per 100,000) from 75 per 100,000 at the beginning of the Program to 55 per 100,000 in 2015\. 58\. Several factors have driven these achievements, including economic growth\. Income growth alone however does not account for all the progress achieved in health outcomes\. Figure 1 below for example shows a predicted under five mortality rate based on a fixed effect panel regression model using income and a (non-linear) time 16  trend as explanatory variables3\. We can see that while the simple fixed effect model captures the declining trend in under five mortality, it underestimates the decline between 2004 and 2014\. The gap between the actual data points and the predicted series increases with years during the period span of the Project, suggesting that income alone is not a sufficient factor to explain the observed improvement in health outcomes\. The observed increase investments in physical infrastructure, improvements in the quality of health service provided, and increase in essential health service utilization by the Cambodian population, including the poorest, are also important plausible contributing factors behind these trends\. Figure 1: Predicted and actual under 5 mortality 120 100 HSSP2 Under 5 mortality rate 80 60 40 20 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Fixed Effect Model WDI 59\. The large improvements in health outcomes observed over the period 2008-2014 have allowed Cambodia to catch up with average regional outcomes\. Table 4 below shows that for key selected health outcomes, the ratio between Cambodia and the EAP average has reduced between 2008 and 2014\. 3 Annex 3 shows similar figures for maternal mortality and for life expectancy\. 17 Table 4: Health outcomes regional comparison 60\. Important inequalities in health outcomes do persist however\. Improvements in health outcomes are not equally distributed across the 24 provinces of the country for example\. Table 5 below gives the level achieved in infant mortality as well as the average annual rate of change in the indicator between the years for which DHS surveys were conducted\. Table 5: Levels and changes in infant mortality across provinces PDO 2\. Strengthening institutional capacity: Modestly Achieved 61\. Overall, all 86% of all measured indicators have been achieved\. All of the (3) outcome indicators were achieved, and 82% of the 11 output indicators were also achieved (Table 3)\. Strengthening Human Resources: Modestly achieved 62\. The Project contributed to increase the coverage and to improve the distribution of secondary midwives across the country and in all provinces\. Despite the fact that the secondary midwives’ coverage ratio indicator was dropped from the RF at AF2, 18  HMIS data show that the nationwide coverage ratio increased by 37% from 1\.35 to 1\.85 secondary midwife per 10,000 population\. The distribution of these key health personnel has also been appropriate with all health centers in the country having at least one secondary midwife at the end of the Project (against a target of 85%)\. 63\. The Project also contributed to substantially increase the number of pre-service and in-service training provided to public health staff\. National examinations for pharmacists, dentists and nurses were introduced as planned, and these factors have played a key role in improving health service quality\. 64\. Progress in other domains such as Health Professional Registration and Licensing, scaling up the public sector workforce against population growth and the development of policy regarding private sector regulation have however been slower\. These elements were highlighted in the Health Workforce Development Plan (HWDP) 2006-2015\. The mid-term review of the HWDP recommended for example that urgent attention is given to the further development of mechanisms and processes to regulate and ensure quality and adequacy of the health workforce, with the institution of a formalized governance framework to oversee the accreditation of institutions\. 65\. The introduction of performance based incentives schemes for public health managers and technical staff did not succeed\. The MBPI scheme represented one of the main elements behind the Program strategy to strengthen human resources, but it was cancelled by the Government of RGC in January 2010 leading to the first restructuring of the Project\. The MBPI scheme was replaced by another merit based incentive scheme called Priority Operating Costs (POC)\. The POC scheme was then subsequently ended in July 2012\. 66\. A Value for Money Assessment (VFM) for training and supervision activities was conducted in 2012 and highlighted several components with low value for money\. The MOH model used for preparing training facilitators to deliver courses using Training of Trainer (TOT) at the sub-national level combined with leadership from key facilitators from national agencies was shown to be cost-effective\. Operational district integrated supervision of health centers was assessed as providing good value for money\. At the level of Provincial Health Departments however, integrated supervision activities were assessed as low value for money\. Moreover, the evaluation identified weaknesses in the MOH training continuum which include: (i) identification of training needs based on a national prioritized training plan (absent); (ii) effective targeting of the MOH cadre that requires training (weak to absent); (iii) and assessment of the impact of training against identified health indicators (absent)\. Because of these major gaps in the MOH training continuum, HSSP2 Pooled Fund training expenditure was assessed overall as low value for money\. Strengthening Health System Stewardship Functions: Substantially Achieved 67\. The Program has contributed to strengthening institutional capacity and to support MOH policies and regulations in critical areas identified in the Health 19  Strategic Plan\. Assessing and quantifying the extent to which the Program has effectively contributed to strengthen MOH’s stewardship functions is rendered difficult by the fact that only one of the initial 21 RF indicators related to Strengthening Health System Stewardship has been retained throughout the course of the Project (see Annex 2b)\. Overall however, out of the seven indicators that were measured, all were surpassed\. HEFs were scaled up over the life of the program and became Cambodia’s most significant social security scheme\. The program also supported the development, implementation and regulation enforcement for quality standards through the regular quality of care assessments\. Finally, in order to increase accountability of health providers to citizens, the program provided technical support to the National Center for Health Promotion\. Areas of technical support included health promotion, nutrition, and behavior change surrounding food and hygiene for pregnant women and post-delivery\. 68\. At the subnational level, the Program contributed to increase the autonomy of provincial and district level agents at the operational level ensuring more efficient service delivery\. HSSP2 supported the national policy on public service delivery through the transition of contracting of NGOs under HSSP to MOH internal contracting of Special Operating Agency (SOA) for SDGs under HSSP2\. This move translated directly into increased autonomy of public service providers\. HSSP2 provided support in the area of internal contracting through the conversion of ODs and Provincial Referral Hospitals (PRHs) into Special Operating Agencies (SOAs) as well as through the transfer of performance based Service Delivery Grants (SDGs) from the central level to the local level (ODs and PRHs)\. The resulting increased management autonomy, coupled with the development of a solid web-based HMIS system, a stronger electronic Patient Management and Registration System (PMRS), and with increased staff incentives for front line health personnel have also contributed positively to the provision of more efficient service delivery\. 69\. Efforts to strengthen the local budgeting process through the AOPs have been pursued, but improvements in overall efficiency of health expenditures remains possible\. Training, supervision and outreach activities at central and provincial level were supported by HSSP2, but the JPIG partners continued to express concerns about the disconnect between subnational budgeting and the AOP process\. Initially, each AOP would constitute the first ingredient in the MOH three-year rolling plan (3YRP)\. Subsequently, the government introduced the Budget Strategic Plan (BSP) with a medium-term horizon to incorporate the sector AOP\. The BSP, together with the Public Investment Program constitutes the principal strategy for medium to long term planning which is aligned with the National Strategic Development Plan (NSDP)\. The link between these national plans, the Medium Term Expenditure Framework and the AOP needs to be strengthened\. External financing for example is not fully captured in the government budget and is not classified using the government’s chart of accounts\. Subnational level planning is also not fully integrated in the BSP\. 70\. Initial activities to strengthen private sector regulation and partnership have been supported by the Program, but overall there is still scope for reinforcing the regulatory mandate of MOH\. During the course of the project, MOH has made 20  progress in developing standards for public and private training institutions, and developing a licensing system for health professionals\. The completion of the National Laboratory and Drug Quality Control, meeting strict international pharmaceutical and environmental standards, has also strengthen MOH’s capacity to monitor counterfeit and sub-standard drugs use in the country\. Despite these improvements, regulation of private service providers, especially private-for-profit health care providers remain a major challenge\. While only authorized practitioners are allowed to operate in the public sector, the enforcement of licensing and registration procedures is still incomplete\. The MOH took an initial step towards establishing a proper accreditation system for health providers by developing a Master Plan for Quality Improvement in Health (2010-2015)\. 71\. Progress in the domain of increasing effective sector coordination have been made, but there is still a need to make the governance strategy more explicit\. Overall, HSSP2 and the JPIG have contributed to decrease the degree of fragmentation in a sector characterized by high fragmentation among the development partners, thereby increasing harmonization and improving alignment of priorities\. The establishment of a pooled funding mechanism, as well as the Joint Partnership Arrangement between RGC and the HSSP2 Development Partners have improved the alignment and consistency of activities supported in the sector\. HSSP2 also acted as a convening platform to harmonize the voice of the JPIG partners in their policy dialogue with RGC and MOH\. The conduct of joint supervision missions and six-month joint review meetings (JRM) as well as joint quarterly management meetings (JQM) and joint technical and financial audits have also translated into more effective coordination across the sector\. The HSP2 2011 mid-term review (MTR) however highlighted the fact that visualizing and appraising the specific strategies and decisions taken in relation to governance as a cross-cutting strategy was difficult\. The MTR report noted that lack of clarity and visibility of the governance agenda, and lack of regular reporting on progress achieved are clear limiting factors for the implementation of this cross- cutting strategy\. In addition, the 2011 Sector-Wide Management (SWiM) Assessment drew similar conclusions in pointing out the absence of a clear articulation of the SWiM vision, goals, objectives, performance indicators, implementation arrangements and accountability mechanisms\. PDO 3\. Strengthening mechanisms by which the Government and Program Partners can achieve more effective and efficient sector performance: Substantially Achieved 72\. Overall, all 96% of all measured indicators have been achieved\. 94% of the (18) outcome indicators were achieved, and all of the nine output indicators were also achieved (Table 3)\. Strengthening Health Service Delivery: Substantially Achieved 73\. Supporting the transition from pilot experiences in contracting health services from international NGOs into scaled up internal contracting arrangements has 21  been a major achievement of HSSP2\. Established in 2009 by government decree, Special Operating Agencies (SOAs) are decentralized MOH administrative units which provide district health managers with greater autonomy in decision making and additional resources to be used for staff incentives and to cover operating costs, in exchange for stronger accountability for performance\. Internal contracts were signed between the central MOH and the provinces (as commissioners), and between the commissioners and the district level (SOAs)\. MOH defined and monitored the performance agreements with the contracts stipulating the specific roles and responsibilities of the respective parties, with performance targets and associated bonuses\. Additional funds channeled through the Service Delivery Grants (SDGs) were paid 80% in advance, with 65% for staff incentives, and the remainder for operating costs\. The remaining 20% represented an SOA performance bonus payment and was paid upon verification of services delivered\. The government counterpart contribution to SDGs increased from ten percent in year one of program implementation to reach 40% in 2013\. After the 2011 MTR, MOH requested HSSP2 support to fully scale up SOAs nationwide\. 74\. HSSP2 support to the three strategic health program areas was successful, although Non-Communicable Diseases (NCDs) remain an underfunded priority area\. All outcome and output indicator targets for RMNCH and for Communicable Disease Control have been achieved or surpassed\. HSSP2 has for example contributed to the success of reducing the dengue case fatality rate from 1\.2% to 0\.25% in 2016\. The percentage of births delivered by trained staff in facility has also increased from 39% in 2009 to more than 80% in 2016\. It is difficult to assess however the extent to which the Program has contributed to supporting NCDs control given the absence of relevant indicators being monitored by the M&E system\. AOP resource allocations of program budgets for NCDs have increased from 0\.5% in 2008 to 2% in 2014\. At the same time, NCDs represent about 57% of the total burden of diseases in Cambodia in 2015 (IHME, 2015)\. 75\. HSSP2 has also contributed to strengthening the health service delivery network\. The final number of health facilities constructed, renovated or upgraded (699) surpassed the original target of 300\. The construction and renovation and equipping of the BEmONC and CEmONC facilities has been almost entirely due to HSSP2 funding\. This large increase has most likely contributed to reducing MMR, although geographical spread remains inequitable\. Maintenance and the use and repair of clinical equipment remains a challenge\. 76\. While utilization of public health facilities has increased, the percentage of the population being ill or injured and seeking care first in private facilities instead of public facilities is also increasing (see Figure 2 below)\. This is a signal that the quality of services provided in public facilities remains a concern\. This also suggests that private sector regulation should be kept high on the MOH reform agenda\. 22 Figure 2: Type of first contact health provider Percentage of ill or injured population who sought treatment, by place of treatment 70\.0 60\.0 50\.0 40\.0 30\.0 20\.0 10\.0 2005 2010 2014 First public (Total) First private (Total) First public (Rural) First private (Rural) Source: CDHS 2005, 2010, and 2014\. Improving Health Financing: Substantially Achieved 77\. Supporting the scale up of Health Equity Funds (HEFs) nationwide has been another major achievement under HSSP2\. The HEF system has become Cambodia’s most significant social security scheme, covering the poorest 20% of the total population (approximately 3 million)\. This system is funded by government taxation revenues and by pooled donor funding\. The system was designed to reduce the financial barriers to accessing health services for the poor\. HEFs are autonomous district-based schemes that reimburse public health facilities for the cost of user-fee exemption provided to the identified poor\. A subsidy for transportation costs and food required during health seeking episodes is also provided\. HEF beneficiaries are identified either through the national (Ministry of Planning) Identification of Poor Households Program (IDPoor), or through post-identification at Referral Hospital level\. 23 Figure 3: Total HEF member visits by facility types and year Source: Annear et al\. (2016) 78\. A substantial body of evidence has shown that HEFs have increased access to health services for the poor, raised utilization levels at government facilities, acted as a significant source of additional revenue for public facilities, and reduced debt for health care4 \. A recent analysis of the Cambodia Socio Economic Survey has also shown that HEF reduced the amount (but not the incidence) of out-of-pocket expenditure on health by 35% on average, with a larger effect for the poorer households\. Another recent report on HEF member service utilization has shown that HEF recipients have greater access to hospitalization services than the rest of the population, and have similar utilization rates at HC level\. 79\. Relying on several rounds of CSES data, we can see that while impoverishment due to OOP for the total population has decreased steadily since 2007, the incidence of catastrophic payments has been on the rise between 2011 and 2013 (Figure 4)\. While this recent trend has touched all the population covered by the survey, it seems that the increase in the share of households spending 25% or more of their budget on health OOP was driven mostly by the better off households who are more likely to resort to private facilities (Figure 5)\. 4 Annear et al\. (2016) National coverage and health service utilization by Health Equity Fund members, 2004-2015\. 24 Figure 4: Financial protection indicators Financial Protection Indicators (% population) 14\.0 12\.7 11\.5 12\.0 10\.2 10\.0 8\.5 8\.3 8\.0 6\.8 5\.8 5\.4 6\.0 4\.7 5\.0 4\.9 4\.0 3\.0 2\.6 2\.1 2\.0 3\.3 2\.7 2\.3 2\.2 0\.3 1\.8 0\.5 0\.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Catastrophic payments (15%) Catastrophic payments (25%) Impoverishment ($1\.90) Figure 5: Changes in catastrophic payments (25% threshold) 12 Incidence of catastrophic payments (25% threshold) 11 10 9 8 7 6 5 4 3 2 1 0 Poorest 20% Q2 Q3 Q4 Richest 20% Source: CSES 2008 and 2013\. Hollow (solid) circles are 2008 (2013) values\. The dashed orange line represents the national average in 2008 (%)\. The solid orange line represents the national average in 2013 (%)\. 3\.3 Efficiency 80\. Given the broad objectives of the Program, the economic analysis provided in the PAD does not provide an explicit calculation of the External Rate of Return (ERR) / Internal Rate of Return (IRR), or the expected Net Present Value (NPV) of the Program\. While the Program contributed to finance inputs, activities, and interventions in specific areas, it also provided a broad platform to align the efforts and 25  objectives of MOH and development partners regarding resource allocation in the health sector\. It is mentioned in the PAD that “given this logic, the success of the Program should be judged by looking at HSP2 as a whole, rather than on the specific areas supported with the pooled account”\. 81\. Economic efficiency\. Following the logic underlined in the PAD, we attempt to estimate the NPV of the Program in light of the overall achievement in health outcomes\. We first start by estimating what health outcomes would be by estimating a simple model using country level fixed effects, a nonlinear time trend, and GDP per capita as the main predictors\. This is our simplified counterfactual scenario\. We then value the incremental gains in health outcomes observed above and beyond what this simple model would predict\. These incremental health gains are then valued using the estimated Value of Life Year (VLY) parameter derived by the Lancet Commission on Investing in Health for the East Asia and Pacific region5\. Depending on the assumed value for a discount factor used over the duration of the project, we estimate the NPV of the Program to lie between USD 220 million (using a seven per cent discount factor) and USD 930 million (using a three per cent discount factor)\. This corresponds to benefits to costs ratios ranging from 2\.5 to 6\.2\. 82\. Leveraged resources and alignment of development partners with MOH\. Another important aspect of HSSP2 contributing to the overall economic efficiency was the capacity of the Program to leverage multi donor resources into a pooled fund, and to align resources and objectives to the Government’s priorities and strategic plan\. While the initial financing envelope for HSSP2 was USD 110 million at appraisal (including USD 30 million from IDA), the overall financing at the end of the Program amounted to USD 213 million, including pooled fund contributors, discrete funders, and the Government of Cambodia counterpart contribution\. Feedback collected during the ICR mission interviews suggested a common view that HSSP2 had served as an effective harmonization platform both for the strategic dialogue between the development partners and MOH, as well as among the development partners themselves, and in terms of management and supervision of the Program implementation\. The pooled funded program has been seen as an improvement over more traditional bilateral approaches or stand-alone projects\. This was mainly due to the common management and implementation structure\. The pooled funding approach has been seen as a vector of economies of scales and of reduced transaction costs which allowed some development partners to maximize the return on their investments in the sector\. 83\. Performance based contracting influence the overall efficiency of the system by changing incentives at the margin\. While the vast majority of personnel working in SOAs are regular civil service employees, with their base pay and benefits directly funded by MOH budget allocation, part of the SDGs received in relation to performance outcomes were used to fund salary top-ups in order to incentivize 5 See Jamison et al\. (2013) Global Health 2035: a world converging within a generation\. Lancet 382(9908), pp\. 1898-1955\. 26  improvement in the quality of service provision\. The 2015 Level 2 Quality of Care Assessment suggests that SOAs appear to have higher quality of care services compared to non-SOAs\. Similarly, HEF revenues to facilities represented a marginal increase in revenues for facilities representing on average about five percent of the full cost of the health system\. These only provided marginal incentives for facility managers to improve the quality of service delivery, including the poor\. 84\. Implementation Efficiency\. The ICR assessment for implementation efficiency is mixed\. Many of the key activities financed under HSSP2 have improved the coverage and quality of high impact interventions for children and women such as family planning; antenatal, delivery and postpartum care; breastfeeding, immunization and integrated management of childhood illnesses (IMCI)\. The civil work and medical equipment procurement have also been prioritized based on assessments of basic and emergency obstetric and neonatal care\. According to a Value-for-Money Assessment conducted in 2012, the overall MOH model for preparing and delivering training courses at the sub-national level proved to be cost-effective and efficient\. Operational district integrated supervision was also assessed to provide good value for money\. However, most of the other training and supervision activities evaluated showed low value for money\. Initial implementation of SDGs also faced a variety of difficulties including delayed transfers, lack of clarity in administrative procedures, unclear guidelines on target setting and limited engagement of PHDs Commissioners\. The implementation of outreach activities faced several challenges with budget allocations falling short of the AOPs and of the need, and with inefficiencies stemming from the conduct of fragmented “vertical” outreach activities\. The activities conducted focused on closest and easy to reach villages to meet the service coverage targets, instead of benefiting the most remote communities\. Finally, non-communicable diseases remained underfinanced with respect to the burden of diseases (45% of DALYs in 2005 and 57% in 2015) even though NCDs were one of the three priority national Programs in HSP2\. 85\. The multiplication of funding extension requests at the end of the project increased transaction costs and generated interruptions in funding flows which affected service delivery\. During the implementation, especially from 1st July, 2014 to 30th June, 2016, there have been several interruptions of funding due to different stages of request for extension of HSSP2 from the Ministry of Economy and Finance to the HSSP2 Partners\. The Interruptions of funds, especially during the last stages of HSSP2 have had adverse impact on program implementation\. Better planning and avoiding the multiplication of extension requests would have minimize the risk of abrupt interruption of funding, leading to the interruption of key activities such as the implementation of HEF to help the poor to access to health care service\. 27 3\.4 Justification of Overall Outcome Rating Rating: Satisfactory 86\. The overall outcome of this project is Satisfactory\. Even though a split rating was initially applied to evaluate the achievement of objectives through the main phases of the Project (effectiveness to PR1, PR1 to AF2 and AF2 to closure), the final assessment by PDO subcomponents does not change between the different phases so we present ratings pertaining to the whole course of implementation\. Table 3: Rating Summary Ratings RELEVANCE: Relevance of Objectives Substantial Relevance of design Substantial EFFICACY: Expected Impact: Substantial Improved health status Expected Outcomes: Strengthening institutional capacity ï‚ Strengthening human resources Modest ï‚ Strengthening health system stewardship Substantial functions Strengthening mechanisms to achieve more effective and efficient sector performance ï‚ Strengthening health service delivery Substantial ï‚ Improving health financing Substantial EFFICIENCY Satisfactory Overall Outcome SATISFACTORY 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts 87\. The scaling up of HEFs has been seen as Cambodia’s most significant social security scheme\. Approximately three million poor Cambodians are now enrolled in the HEF\. The poor are identified by local government authorities through routine interviews that consider household assets and vulnerabilities\. The poor are identified with an “ID poor card” that grants them access to subsidized services available at public health facilities\. When members of poor households are hospitalized, they are also provided with reimbursement for transportation and a food allowance of for the patient’s caretaker\. As a result of scaling up HEFs, fewer households are falling into debt to pay for health care\. Two recent surveys show that household debt for health care has fallen across the country, but that effect is more pronounced in areas where HEFs provide support\. HEFs reduced out-of-pocket expenditures by the poor on health care by 29 percent and reduced the amount of their health-related debt by a quarter\. 28 (b) Institutional Change/Strengthening 88\. The establishment and strengthening of SOAs have fostered a new mindset in public service delivery, where citizens are seen as customers, and results are more important than bureaucratic systems\. SOAs are seen as ministry-led semi- autonomous government bodies controlled by performance targets setting and management contracts\. These entities still receive funding through the national budget, but they are also granted a certain degree of autonomy over finance and managerial decision making\. While in theory any ministry can seek to establish SOAs, most existing SOAs are health agencies, which underlines the leading role of the health sector in implementing internal contracting schemes at scale in Cambodia\. (c) Other Unintended Outcomes and Impacts (positive or negative) 89\. HSSP2 represented a vehicle for continued engagement with the RGC during a period in which the overall World Bank portfolio had substantially reduced in Cambodia\. The World Bank froze new lending to Cambodia in 2011 over mass evictions at the capital's Boeung Kak lake\. The discontinuation of new IDA lending led to a reduction in portfolio size both by commitments and by number, as closing projects were not replaced by new commitments\. As the World Bank Board agreed in July 2016 to restart lending the current IDA portfolio consists of two investment operations for a total commitment of US$53 million in the education and health sectors\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 90\. No beneficiary survey was specifically undertaken under HSSP2\. 4\. Assessment of Risk to Development Outcome Rating: Moderate 91\. Risk to health outcomes is low\. The Cambodian economy is growing steadily by approximately seven percent annually and has recently graduated to lower-middle income status\. The Government is showing strong political commitment to consolidate and expand the set of extensive health reforms initiated in the 1990s\. The RGC has recently adopted a new Health Strategic Plan (HSP3 2016-2020)\. Government funding which has increased significantly over the recent years is expected to remain sustained\. A new health sector support project (H-EQIP) has been prepared to improve access to quality health services for targeted population groups\. 92\. Risk to financial protection outcomes is moderate\. One explicit objective of the new H-EQIP project is to provide protection against impoverishment due to the cost of health services through a dedicated component to improve financial protection and equity\. This component will provide support to consolidate the HEFs which are now covering the entire poor population in rural areas\. Further consolidation of the HEF scheme will include deeper appropriation by RGC, expansion of the target population to include vulnerable groups, and expansion of the benefit package with efforts to improve the quality of care\. 29 93\. Governance risk is substantial\. Governance of the health sector remains constrained by a limited ability of the Government to manage and coordinate multiple initiatives and by weak regulation of public and private sector providers\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance 94\. HSSP2 represented a continuous sectoral engagement for the World Bank in Cambodia\. The health sector was one of the only sectors through which the World Bank was supporting Cambodia during the period of loan freeze (2011-2016)\. Moreover, within the health sector in Cambodia, the World Bank represented an element of continuity during HSSP2 by being, with Australia, the only development partners supporting the Program throughout its whole duration\. The Bank has been a trusted partner to the Royal Government of Cambodia (RGC) over the last 13+ years\. Each of the country’s strategic health plans, since the first one (2002-2007), has been supported closely by a Bank-financed project, often co-financed with trust funds and informed by strategic analytical work\. The Bank engagement has evolved from support to initial policy intervention pilots on contracting for service delivery (initially from NGOs) and the highly successful Health Equity Funds (HEFs) that were mainstreamed under HSSP2 with nationwide coverage\. 95\. The Bank has been at the forefront of alignment and harmonization efforts of development partners’ support to RGC\. The performance of the Bank in these convening, coordination and joint implementation roles (including as an MDTF administrator) has secured the trust of partners who see the Bank as the most appropriate entity to pool and manage funds, and to lead knowledge work that would support further attainment of project’s development objectives\. (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 96\. The design and preparation of HSSP2 was technically sound and highly relevant to the health sector priorities identified in the Second Health Strategic Plan\. HSSP2 can be seen as a natural continuation building on the lessons learned from the previous project and from the pilot experiments conducted in Cambodia such as service contracting to NGOs and pilot HEF and CBHI schemes\. The overall ambition of HSSP2 was to consolidate, scale up, and mainstream through Government systems the experiments that proved successful at pilot scale\. The adopted SWiM approach also proved to be a flexible compromise between a more stringent Sector Wide Approach and stand-alone projects\. In a context of high fiduciary risk, the Good Governance Framework provided detailed, comprehensive and appropriate risk mitigation actions which applied to all activities funded by the pool account\. Social and environmental safeguard policies were also appropriately addressed\. 30 97\. While the HSSP2 M&E framework and indicators were aligned with those of HSP2, the original design proved too complex and unnecessarily lengthy\. Several important adjustments were made to the Results Framework during the project with several indicators dropped, others revised and some with target adjustments\. The total number of indicators was 68 at PR1, 54 at AF2, and 22 at AF3\. (b) Quality of Supervision Rating: Satisfactory 98\. During the seven-year period of project implementation, the project had four different TTLs, but the nature of the supervision (frequency and quality) remained constant and appropriate\. Supervision missions were conducted jointly with the other development partners contributing to the pooled fund, and the Joint Review Mission Reports were similarly structured around Program components and development impact\. These reports were of good quality, candid, and ISR performance ratings were supported by evidence\. Supervision of fiduciary and safeguard policies was appropriate\. 99\. The World Bank has adequately fulfilled its management and fiduciary roles as the manager of the development partners’ pooled fund through the HSSP2 MDTF\. A 2016 DFAT Partners Performance Assessment attributed the World Bank a rating of 5 (“Good, satisfies criteria in almost all areas”) out of a 6 points scale for (i) being results focused and delivering on time, (ii) undertaking sound monitoring and evaluation reporting, and (iii) promoting sustainability where applicable\. The assessment also attributed a rating of 5 for efficiency (“Maximize value for Money”) with World Bank policies and procedures, including fraud, corruption and procurement policies and processes, evaluated as adequate to mitigate fiduciary risks during HSSP2 implementation and to ensure procurements are value for money\. Collaboration, communication and responsiveness was also rated 5, as well as “Policy alignment, risk management and innovation”, and “Effective partner personnel”\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 5\.2 Borrower Performance (a) Government Performance Rating: Satisfactory 100\. The RGC remained committed to this Program and to supporting the achievement of its development objectives\. This commitment manifested itself through the provision of counterpart funding, although with some delays, and through the Government request to scale up proven successful activities such as the SDGs and HEFs\. Government’s commitment to HEFs and SDGs rose steadily from 10% in the first year of the project to over 40% of the budget in 2014 and in subsequent years\. 101\. The provision of counterpart funding took place with some delays, but the RGC increased its counterpart funding during the course of the Program\. Delayed 31  provision of counterpart funding resulted in ISR rating of “Moderately Unsatisfactory” in 2013 at ISR 5 and 6\. The performance of the RGC in this domain was however upgraded to “Satisfactory” when the full share of counterpart funds allocated for 2013 was released and when MEF confirmed and disbursed the 2014 allocation to HEFs and SOAs\. 102\. Transition of HSSP2 Secretariat functions to MOH were an explicit objective of the Program, but was never fully implemented\. Progress on moving HSSP2 toward a sector-wide approach with greater alignment and use of country systems remained a challenge\. It was estimated in 2012 that a full transition as originally planned would have been unlikely due to human resource constraints which prevented MOH to follow World Bank/JPIG recommendations to transfer fiduciary staff to the Department of Budget and Finance (DBF)\. Some HSSP2 Secretariat functions were transitioned to MOH units, however\. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 103\. Various delays affected implementation performance at the start of the Program\. Slow disbursement at startup, delays in civil work procurement and delays in Secretariat transitions and in processing contracts affected implementation effectiveness and resulted in a rating of “Moderately Unsatisfactory” for overall project management at ISR 5 (01/2013)\. The rating was however upgraded to “Moderately Satisfactory” during the following ISR, and to “Satisfactory” during the last ISR (June 2016) due to the completion of all key activities and to significant effort shown to ensuring a smooth transition into the new H-EQIP project mechanisms\. Clear transition plans were developed and new manuals and guidelines were drafted\. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 32 6\. Lessons Learned 104\. The SWiM approach followed by the World Bank and by development partners in Cambodia proved to be a successful intermediary approach towards getting closer to Government systems for aid delivery\. The establishment of a pooled funding mechanism with solid fiduciary guarantees and the alignment with the RGC’s Health Strategic Plan has been an attractive value proposition for development partners looking to maximize the impact of their support to the health sector\. The SWiM approach put in place effective tools to improve coordination and management of the sector, establishing new and different partnership dynamics between the government and donors\. Whether or not this type of sector wide approach has been effective in reducing transaction costs for the government or for donors is however difficult to determine since objective data to support such assessment is lacking\. Given the degree of fiduciary risk assessed during project preparation, a full sector wide approach would have been a riskier choice\. 105\. Experimentation and evaluation are key ingredients for a successful scale up of effective policy interventions\. HSSP2 can be seen as a logical follow up program from HSSP with the consolidation of successful policies both for the demand side (HEFs) and for the supply side (SOAs/SDGs) of the health system\. Likewise, H-EQIP can also be gauged as a natural evolution from HSSP2 with a continued focus on strengthening health service delivery and improving financial protection, but with a strong emphasis on improving the quality of care\. 106\. The harmonization of development partner management and implementation systems is an important aspect of aid effectiveness which 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\. 107\. Marginal changes in incentives (salary top-ups), together with clear and verifiable performance contracts are powerful and cost effective tools to improve the overall efficiency of the health systems\. Performance based incentives were introduced through SOAs and SDGs, but the bulk of SOA’s budget remained funded by line item government finance (50% to 70%)\. 108\. HSSP2 stands out in the health sector in Cambodia, as well as within the World Bank’s portfolio, for its continuity of engagement with the RGC\. Health was the only sector where the WB’s financing engagement with RGC did not get interrupted for well over a decade and continues unabated with the new project until 2021\. Within the country’s health sector, too, this engagement stands out with WB being a partner managing pooled funds where the composition of the pool has itself been changing\. from a set of donors who have themselves been changing\. The Bank has been at the forefront of alignment and harmonization efforts of development partners’ support to RGC\. 33 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies: No major issues were raised by the MOH\. All comments received were addressed and summarized under Annex 8\. (b) Cofinanciers: No major issues were raised by the co-financiers\. All comments received were addressed and summarized under Annex 8\. (c) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) 34  Annex 1\. Project Costs and Financing (a) Project Cost by Component (IDA + MDTF, in USD Million equivalent) Appraisal Actual as Estimate Actual percentage of PR2 AF1 AF2 AF3 Components (USD Exp\. AF3 (09/2012) (10/2013) (09/2014) (10/2015) millions and (06/2016) allocation %) Component 1: 54\.99 58\.04 61\.77 65\.28 69\.42 84\.83 Strengthening Health [50%] [50%] [48%] [46%] [45%] [56%] 122% Service Delivery Component 2: 13\.93 14\.70 21\.45 30\.63 38\.63 40\.70 Improving Health [13%] [13%] [17%] [22%] [25%] [27%] 105% Financing Component 3: 12\.47 13\.16 14\.65 14\.65 14\.65 2\.41 Strengthening Human [11%] [11%] [11%] [10%] [9%] [2%] 16% Resources Component 4: Strengthening Health 28\.59 30\.18 31\.67 31\.67 31\.67 24\.88 79% System Stewardship [26%] [26%] [24%] [22%] [21%] [16%] Functions TOTAL Project Costs 110\.0 116\.08 129\.53 142\.23 154\.37 152\.54 98\.8% (b) Financing Appraisal Actual Actual as Estimate PR2 AF1 AF2 AF3 Source of Funds (06/2016) percentage of (USD (09/2012) (10/2013) (09/2014) (10/2015) (USD millions) AF3 allocation millions) AUSTRALIA: Australian Agency for International Development (AusAID) / 30\.00 36\.09 43\.89 52\.75 57\.72 57\.72 100% Department of Foreign Affairs and Trade (DFAT) UK: British Department for International 50\.00 50\.00 55\.64 55\.64 55\.64 55\.64 100% Development (DFID) KOREA: KOICA 0\.00 0\.00 0\.00 4\.50 4\.50 4\.50 100% GERMANY: KfW 0\.00 0\.00 0\.00 0\.00 6\.51 6\.51 100% TOTAL MDTF 80\.00 86\.09 99\.53 112\.23 124\.37 124\.37 100% International Development 30\.00 30\.00 30\.0 30\.0 30\.0 28\.17 93\.9% Association (IDA) TOTAL 110\.0 116\.08 129\.53 142\.23 154\.37 152\.54 98\.8% (MDTF + IDA) Source: World Bank PR2, AF1, AF2 and AF3 documents, and MOH Financial Reports\. 35 Annex 2a\. Outputs by Component As per the PAD description, there were thirteen intermediate outputs identified and divided by the four project components, with three corresponding to the first component, two corresponding to the second component, three corresponding to the third component, and five corresponding to fourth component\. Outputs Planned Achieved COMPONENT 1\. Strengthening Health Service Delivery: 1\.1\. Service ï‚ Support Service Delivery Grants and The program supported Service Delivery Grants to ODs and PRHs, which had been upgraded to Delivery Grants contracting to Operational Districts and the status of Special Operating Agencies (SOAs), to support the objectives of the HSP2 in and Contracting Referral Hospitals increasing utilization of quality health services by the whole population\. SDGs were allocated to ODs and PHDs in accordance with their Annual Operational Plan (AOP) and through the ï‚ A program of technical support provided to mechanism of Service Delivery Management Contracts\. They were managed by the DPHI for help strengthen core functions in PHDs and overall management and coordination, and for planning and resource allocation formula and ODs, including: planning; budgeting; monitoring; and by the DBF for overseeing the program-based budget for OD use in tandem financial management; contracting; with the SDGs\. Contracts were dependent on the achievement of satisfactory quality scores performance management; and, monitoring using MOH quality assessment tools, and based on agreed service delivery targets to be and evaluation\. financed partially by the SDGs\. ï‚ Internal and External monitoring: technical Over the lifetime of the program, SDGs were scaled up from 30 ODs and PHDs as SOAs, to 40 and financial management performance SOAs, with six additional SOAs being added in 2009, and the remaining four being added in supported through contracting of 2016\. There was an increase in Government financing from 10% at the start of the program to independent teams by MOH to validate 40%\. performance and financial transactions\. Technical support was provided to SOAs to help set up appropriate targets and to facilitate the transition from contracting under HSSP1 to SDGs under HSSP2, following the guidelines of the SDG Operational Manual\. Capacity-building was a core of the SDG design, with a necessary capacity building assessment, along with necessary appropriate actions to build capacity in the case that a lack of capacity was observed, as part of the SDG eligibility assessment\. Technical support was also provided for the opening of commercial bank accounts at the PHD and OD levels for receiving SDGs and bonuses, and a package of technical support was 37  provided to help strengthen core functions in PHDs and ODs, including: planning; budgeting; financial management; contracting; performance management; and, monitoring and evaluation\. At the central level, the project supported the Department of Administration and Finance to manage, coordinate, and monitor internal contracting arrangements at Central, Provincial and District levels\. The program also provided technical support to the Service Delivery Monitoring Group (SDMG), an inter-departmental working group at MOH (members from various departments (DPHI, DBF, DHS and HRD), which was set up at the beginning of the project to manage monitoring of SOA performance at the central level, develop tools for assessing eligibility for SDGs and HEFs and monitoring SDGs\. By March, 2014 and at the end of the program, 100% of ODs were implementing SDGs and internal contracting was meeting at least 80% of their performance targets (ISR Seq\. 11)\. 1\.2\. Strengthening ï‚ Support incremental operating costs for HSSP2 has supported these priorities for central programs, PHDs, and ODs through the AOP health services management, public health, integrated process, mostly through financing of training, supervision, and outreach activities\. Support was management, supervision, and capacity strengthening guided by priorities established in the MOH’s AOP cycle for both the central and provi ncial supervision and activities, based on provincial AOP and level, with 100% of MOH central institutions and provinces submitting AOPs and 3YRPs public health guidelines set out in the Program according to schedule and format by February, 2014 (ISR Seq\. 7)\. All PHDs also prepared functions at Operational Manual, for provinces not AOPs, beginning in 2009 (ISR Seq\. 2) As of December, 2013, the AOP process was recorded as provincial and initially receiving SDGs\. having “improved” in terms of technical content and results -focus of the AOP process, based on district level the MTR and Final Evaluation (ISR Seq\.6)\. Support was also provided to priority reproductive, ï‚ Support to priority reproductive, maternal maternal and child health elements of selected provincial and OD AOPs, as well as to the and child health elements of selected gender mainstreaming committee at MOH\. A gender mainstreaming committee at MOH was provincial and OD AOPs to be provided supported through UNFPA discrete funds\. through discrete Partner support until such time as these locations are eligible for SDGs Financial support was provided for the convening of the Annual Health Congress, attended by through the pooled account\. all PHDs, selected ODs, and local governors for sector supervision and planning and the JAPR process\. Additionally, SDGs were also designed to strengthen Government systems for financing and managing service delivery at the sub-national level by linking closely with the Government’s budget and AOP processes, the ongoing process of decentralization and deconcentration (D&D), new Government service delivery initiatives, and the shift from external contracting (of NGOs) to internal contracting (using MOH staff)\. 1\.3\. Improving the ï‚ Support investments to fill in the gaps The program supported investments to fill in the gaps identified in the Health Coverage Plan health service identified in the Health Coverage Plan (HCP), including the construction of: delivery network (HCP)\. o 121 new health centers (12 of which were under both HSSP and HSSP2 support) 38  o five new health posts ï‚ Support in quantifying necessary investment o one new referral hospital (Tbeng Meanchey referral hospital in Preah Vihear costs through: (a) supporting the review and province under both HSSP and HSSP2 support) update of hospital and health center designs, o 79 additional delivery rooms in health centers (b) finalizing the Health Infrastructure o 15 maternity wards for hospitals Investment and Maintenance Plan, (c) o 12 non-communicable disease clinics at referral hospitals\. establishing a database for standard costs o one pharmacy store in Preah Vihear OD for works and goods, and (d) strengthening o landscape improvement of O’Chrov referral hospital; and capacity for asset management\. o two regional medical training centers o a radiation bunker and installation of the Linear Accelerator at Khmer Soviet Friendship Hospital o National Laboratory for Drug Quality and Control and installation of the same This was supported by: 1) the hiring of a civil construction design supervision firm and technical support on the preparation, design, planning, supervision of construction, and 2) development of maintenance plans, to be used by OD and HC staff\. The program target of 399 health facilities constructed, renovated, and/or equipped through the project was surpassed with 699 by May, 2016 (ISR Seq\. 11)\. Social and environmental safeguards were taken into account in the design and construction of health facilities, including safeguards for health care waste management, water supply, proper resettlement of populations for civil works when necessary, and for indigenous populations\. Areas with high numbers of indigenous populations were prioritized in the overall civil works plan to increase access to health services\. Additionally, the program supported procurement of goods, primarily including: office furniture, office equipment, drugs, medical instruments and equipment and vehicles\. The program supported monitoring of drug stock management at the Department of Drugs and Food (DDF) and the development of a standards list and medical equipment for HCs and RHs\. For medical equipment, the program supported provision of training and/or proper installation where necessary\. HSSP2 support was provided toward co-financing of contraceptive commodities, as well as programs for de-worming of school children\. UNICEF support was provided to the procurement of nutrition commodities to prevent or manage severe or acute malnutrition among children (F75, F100, ReSoMal, RUTF and micro-nutrient powder supplementation)\. 39  The program saw improvements in service delivery, with the target for people with access to a basic package of health, nutrition, or reproductive health services surpassing its target\. As of May, 2016, a cumulative total of 8,464,456 cases had been supported by HEFs (against a target of 6,500,000) (ISR Seq\. 11)\. Additionally, targets were achieved by more than 85% for percentage of births delivered by trained personnel (85\.2% achieved by 5/31/2016 with a target of 85% as of 12/31/2013) and percentage of children under one year immunized with DPT- HepB3 (94\.8% achieved by 5/31/2016 with a target of 95% as of 12/31/2013) (2016 NAHC)\. The indicator for percentage of children aged 6-59 months who received two doses of Vitamin A supplement every six months surpasses it’s target of 80%, with 81\.5% achievement by May, 2016 (2016 NAHC), as did the indicator for percentage of pregnant women receiving iron folate supplementation (90\.3% achieved by June, 2016; target 85%; HMIS), and percentage of pregnant women attending at least two antenatal care consultations (93% achieved by May, 2016; target 90%) (ISR Seq\. 11)\. 2,239,784 pregnant women were attending at least two antenatal care consultations by 2014, surpassing a target of 1,900,000 (2014 PMR)\. Overall, consultations for new cases per person per year for those under five surpassed its target of 1\.5, with an achievement of 1\.52 (2016 NAHC)\. By May, 2016, 100% of health centers were implementing IMCI services (target of 90%) (2016 NAHC)\. COMPONENT 2\. Improving Health Financing: 2\.1\. Improving ï‚ Support operating and management costs, The program financed the HEF Grants, managed by eligible NGOs operating HEFs, financing Health Protection and costs associated with identification of the direct benefits for the poor, including user fees and associated costs as defined in the HEF for the Poor the poor, outreach and community benefit package\. Over the life of the program, the HEFs were scaled up nationwide and participation of the NGOs operating HEFs, expanded to all ODs and RH, as well as to HCs based on priority ODs (marked by high poverty and the HEF Implementer\. rates and slum areas)\. By the end of the program, and by March, 2016 HEFs had expanded to 100% of the IDpoor (URC and 2016 NAHC), 100% of RHs, and 91% of HCs (2016 NAHC)\. ï‚ Finance the HEF Grants managed by The number of cases, OPD, IPD, and deliveries receiving HEF assistance also all surpassed eligible NGOs operating HEFs, financing their targets by May, 2016 (2016 NAHC)\. By May, 2016, 8,464,456 cases had been financed the direct benefits for the poor, including using HEF assistance (against an end-project target of 6,500,000), broken down by 7,346,365 user fees and associated costs as defined in OPD cases (end-project target 5,500,000), 869,743 IPD cases (target 720,000), and 230,348 the HEF benefit package, and scaling up delivery cases (target 190,000) (2016 NAHC)\. over the lifetime of the program\. ï‚ Support the HEF monitoring, supervision The program also supported operating and management costs of the HEFs, costs associated with and oversight role of the DPHI\. the post-identification of the poor, and outreach and community participation of the NGOs operating HEFs\. The HEF Implementer (HEFI), University Research Company, was supported by USAID through and MoU with MOH, with support of World Bank and other partners\. The 40  program also supported costs for HEF monitoring, supervision, and the oversight of DPHI within MOH\. 2\.2\. Support to ï‚ Support to development of Government The Program provided technical support to the development of Government health care Health Financing health care financing policies and financing policies and institutional reforms, based on the Government’s Strategic Framework Policies and institutional reforms, based on the for Health Financing\. This included: 1) financial support to improving health services costing, Institutional Government’s Strategic Framework for building capacity for and linking health financing information to the AOP process, and 2) Capacity Health Financing\. This included: building institutional capacity for implementing health financing policies both on central and (a) improving the collection of health provincial level through trainings, workshops, and supervision activities\. Workshops and financing information such as trainings were also supported to review the HEFs and implementation of health financing National Health Accounts and policies, organized by the PDHI within MOH\. health services costing; (b) integrating health financing information, costing results and other evidence in health financing policies, including medium-term planning and budgeting processes; (c) aligning DP resources with sector priorities; and (d) building institutional capacity for implementing health financing policies both on central and provincial level\. COMPONENT 3\. Strengthening Human Resources: 3\.1\. Strengthening ï‚ Support and strengthen training institutions The program supported and strengthened training institutions and pre-service training Training and pre-service training programs in the programs in Regional Training Centers (RTCs)\. Support was provided for the construction Institutions and Technical School of Medical Care, the of two new RTCs (Battambang and Steung Treng), training fees, teaching fees, and Programs Regional Training Centers (RTCs), and the preceptors at RTCs, as well as for translation feed and procurement of small goods and University of Health Sciences\. services\. Additionally, national examinations were introduced for pharmacists, dentists, and nurses\. ï‚ Capacity strengthening needs assessment on Training Institutions and Programs, as well Support was also provided to the Department of Human Resources Development for the as on needs for infrastructure improvement, development of training requirements in AOPs, 3YRPs of RTCs\. Additionally, a Value for including buildings, classroom and teaching Money assessment (2012) was conducted and provided important recommendations to materials, and office equipment, and strengthen planning, monitoring, impact of training, and supervision\. Based on this, there support to identified areas thereafter\. was a move to prioritize training, and technical support was also provided for workshops, trainings, and supervision for RTCs\. 41  ï‚ Support the improvement and revision of the pre-service curriculum, including The Program also reviewed and expanded specific in-service training programs, and supported support to strengthening skills and learning from scale-up of training activities for priority areas\. Trainings of trainers, trainings, competencies of trainers and developing a and follow-up were provided in targeted areas, including reproductive health, CDC and core group of Master Trainers for each dengue prevention\. For the purpose of streamlining programs, support for the Avian and training intuition at HC level linked to Human Influenza Control and Preparedness Emergency Project (P100084: AHICPEP 2008- RTCs\. 2014), previously being supported by the World Bank, was transferred to the HSSP2 pooled funds in 2014, based on the CDC’s AOP\. ï‚ Establish at least two Training Skills Centers in two RTCs as sites for training of trainers and training of preceptors in hospitals providing training to medical students\. ï‚ Review and expand specific in-service training programs, and support learning from scale-up of training activities for priority areas\. ï‚ Support to build upon training programs developed by the NIPH trainings and broad degree levels for management, with GTZ support\. ï‚ Support to the Department of Human Resources Development for development of training requirements in AOPs, 3YRPs of RTCs\. 3\.2\. Strengthening ï‚ Support to key human resource management The program supported improvements for technical skills and competencies of the health Human Resource areas, including licensing of professionals in workforce, through capacity building trainings and workshops for central-level national Management both public and private sectors, self- programs, MOH departments, PHDs, and RTCs\. Technical support was also provided for regulation of medical professionals, ethics improving staff distributions and retention, with a priority given to personnel essential to health and code of conduct for health professionals, sector priorities, and financial support was provided for trainings of staff at RTCs\. better alignment and strengthening of human resource planning and personnel Over the course of the program, 166,042 health personnel were trained (ISR, Seq\. 11 06/20/2016)\. management, and recruitment and In terms of human resources capacity, the program exceeded its target of training secondary midwives and the percentage of health centers with a secondary midwife rose from 53 percent in 42  deployment of staff, including locally 2011 to 100 percent by the end of the program (Latest HMIS data for Jan-June 2016)\. At the time managed contracted staff\. of AF3, it was deemed that the existing staff at HFs was sufficient to effectively implement the HEFs and SDGs, including those in new ODs\. ï‚ Modest financial support for building effective national organizations, professional The program also strengthened performance management and quality improvement through associations and councils, as described in the performance incentives through the SDGs and additional revenues from HEFs, as well as through MOH Second National Health Workforce the interim support of the Merit-Based Performance Incentive Scheme and the Priority Operating Plan 2006-2015, and linking these to Costs System (POC)\. The performance of staff receiving SDG and POC schemes was managed regional and international organizations\. through the performance management mechanism, the Performance Management and Accountability System (PMAS), on which technical support was provided to the Personnel Department\. Until the POC scheme was ended in July, 2012, 239 MOH staff had received POC payments financed by the project, almost meeting the target of 247 staff (ISR Seq\. 5)\. 3\.3\. Support to ï‚ Support to improving governance and The program supported 190 MBPI positions, identified by MOH from September, 2005 until Merit Based performance in priority ministries by January, 2010, when this program was cancelled by the Government, and leading to the first Performance providing salary incentives to MOH restructuring of the project\. Incentive Scheme officials responsible for implementing key Government strategies at the central and provincial levels, linked to performance, through the Merit Based Performance Incentive Scheme\. COMPONENT 4\. Strengthening Health System Stewardship Functions 4\.1\. Support to ï‚ Strengthen MOH policies and regulations in The policy on public service delivery, announced in 2006, called for increased autonomy of public policy development critical areas identified in the Health service providers, including in the health sector\. HSSP2 supported these moves through the and implementation Strategic Plan, including: transition of contracting of NGOs under HSSP1 to MOH internal contracting of Special Operating o contracting and purchasing health Agency (SOA) for SDGs under HSSP2\. services, including institutional arrangements for internal Additionally, through the scale up of the HEFs over the life of the program, HEFs became contracting by the MOH and Cambodia’s most significant social security scheme, also promoting remuneration reform with a PHDs, focus on front line clinical staff through both the salary incentive portions of the SDG and the o social health insurance, additional revenues gained for HFs from the HEFs\. community-based health insurance and HEFs; The program also supported the development, implementation and regulation enforcement for o the autonomy of health care quality standards through the regular quality of care assessments, required under the Annual providers and strengthening health 43  care institution governance Service Delivery Management Contracts, and monitored by the SDG working group\. The project arrangements in decentralization provided travel allowances for the MOH Quality Assessment team, led by the DHS\. settings; o staff remuneration reform, These assessments were also used to determine eligibility of HEF, based on the guidelines in the focusing on front line clinical staff; HEF manual\. Eligibility for HEF to health facilities relied upon scores from performance o detailed design of the assessments, led by a team from the DPHI with members from relevant MOH departments and decentralization reforms in the participation from PHDs and ODs for peer assessments\. The program supported these activities health sector; towards an increased focus on quality of care, as well as capacity trainings on the tools, quality o development, implementation and linked with resource allocation, and management skills\. regulation enforcement for quality standards and clinical guidelines; In 2006 and 2015, respectively, L1 and L2 quality assessments were implemented under the and support of the program for facilities receiving HEFs and SDGs, supporting government reforms o empowering new structures for toward the institutionalization of quality\. increasing local accountability of health care providers to citizens In order to increase accountability of health providers to citizens, the program provided technical support to the National Center for Health Promotion\. Areas of technical support included health promotion, nutrition, and behavior change surrounding food and hygiene for pregnant women and post-delivery\. The program also made partial contributions toward the sub-national operational costs for outreach activities and priority behavior change communication\. Finally, training of Health Facilities staff on the implementation of HEF, taking over HEFO, was conducted to strengthen institutional capacity at sub-national levels\. 4\.2\. Strengthening ï‚ Support capacity strengthening to The program supported capacity strengthening to implement policy packages identified in the institutional implement policy packages identified in the Health Strategic Plan, sector-wide planning at all levels, and implementing financial management capacity Health Strategic Plan sector-wide planning and procurement strengthening plans in conjunction with the ongoing Public Financial at all levels, the Health Information Management Reform\. Support was provided for trainings on financial management on cash flows Strategy, and implementing financial of national budget; costing activities for national programs within the DBF; monitoring management and procurement strengthening supervision to provincial departments, ODs, RHs, and SOAs after trainings; supervision for asset plans in conjunction with rolling out Public management for provinces, districts, HFs, and SOAs; and support to supervision of the web-based Financial Management Reform, guided by Health Information System (HIS)\. MOH’s Institutional Development Plan\. The HSSP2 also integrated the processes for technical audits on health services and financial ï‚ Support the Government strategies on audits under a single firm (previously separated by function under the HSSP1)\. quality assurance cited in HSP2, including: At the HSSP2 Secretariat, 3 international consultants, 22 national consultant positions, and 21 o the development, implementation drivers, were supported by the program, as detailed in the HSSP2 Operational Manual\. Despite and regulation enforcement across delays in integrating project management into the MOH structure, there was progress toward the health sector for quality standards; transfer of key consultant positions to DPHI, Personnel Department, and Human Resource Department\. 44  o the development and implementation of routine facilities Supervision support was also provided to PHD regulation of drugs in private pharmacies through survey procedures to ensure that the DBF and technical support was provided to strengthen institutional capacity in M&E through working environments, facilities, the procurement of one international consultant\. and equipment enable health workers to provide high quality Following the Government’s policies toward decentralization, decentralized procurement was care; initiated through the SDGs, allowing for small consumables, motorbikes, and civil works to be o the establishment of incentive completed by SOAs themselves, supported by hands-on trainings by the HSSP2 Secretariat\. mechanisms; o strengthening demand side Support was provided through the SDG monthly incentives, based on individual and institutional feedback mechanisms for performance, which were subject to review and approval by the SDMG and subject to MOH monitoring client satisfaction in guidelines to ensure transparency and equity, as detailed in the SDG manual\. 60% of user fees, public health service; and including additional revenue from HEFs, could also be used for staff incentives\. o broaden institutional regulation by strengthening licensing in the HSSP2 was one of the major financiers for surveillance and response to emerging diseases\. private sector, introducing the same Technical support was provided to the development of a National Dengue Strategic Plan for process in the public sector, and the 2013-2020, and two expert positions were supported for dengue and non-communicable development and implementation disease, based at WHO\. Targets for reporting of dengue case fatality by public health facilities of accreditation system as a step-up surpassed their targets in December, 2013 (2014 PMR) and May, 2016 (2016 NAHC)\. after compliance to licensing Achievement was 0\.33 (target 0\.6) and 0\.25 (target 0\.5), respectively\. requirements\. 4\.3\. Strengthening ï‚ Support the development and enforcement Limited work was provided in the area of private sector licensing and accreditation, mainly private sector of regulations related to private sector through the contracting of eligible NGOs for the operating of the HEFs\. An NGO, University regulation and providers; licensing and accreditation; Research Company, was also supported as HEF Implementer, by USAID through and MoU partnerships options for contracting accredited NGOs with MOH, and with support of World Bank and other partners\. and private sector providers to provide public services; and engaging NGO and private sector providers in the AOP planning processes and the HCP\. 4\.4\. Governance ï‚ Support to relatively under-resourced Technical and financial support was provided for procurement of small goods, services, trainings, and stewardship priority programs of reproductive, maternal, and workshops to the National centers including: Helminth & Dengue Fever (CNM), Maternal & functions of the neonatal and child health, including sub- Child Health, Health Promotion Centre (NCHP), Traditional Medicine Centre (NCTM), and the national programs programs addressing reproductive health, University of Health Sciences (UHS)\. and centers immunization, child health, newborn care, and nutrition; and non-communicable Support was provided to support the D&D process, as envisaged in the Government’s three-year diseases\. implementation plan, including functional mapping at central, provincial, district, and commune levels and mapping functions to HSP2 and AOP categories to facilitate resource mapping\. 45  ï‚ Support for essential central level functions of National Programs and respective MOH The program initiated a move towards the integration of M&E functions from the central level departments and groups that will through the SDMG and its work on monitoring of SOA performance and developing tools for complement the drive to decentralization assessing eligibility for SDGs and HEFs and monitoring SDGs\. The SDMG was presided over and local health system strengthening\. by an under-secretary of state for health, and had a wide range of members from relevant MOH central departments (Department of Planning and Health Information, Department of Communicable Disease Control, General Department of Preventive Medicine, Department of International Cooperation, Central Medical Store, Department of Drugs and Food), one representative from one PHD, National Program Managers (Malaria, Dengue, Nutrition, EPI, MHC), and 7 HSSP2 partners\. 4\.5\. Strengthening ï‚ Support toward increased community Outreach activities and community participation were supported through the NGOs operating the Community participation, multisectoral responses HEFs and to support Health Center Management Committees, with representation of Village Participation toward improving health, and empowering Health Support Groups (VHSG), using the SDGs\. The program also supported outreach activities communities to hold health systems more in remote and difficult to access communities, including areas with indigenous persons, and accountable, based on the Strategic supported the allocation at every health facility a staff member who themselves were an Framework on Community Participation of indigenous person or who spoke an indigenous language\. the MOH\. The program supported the Annual Health Congress and JAPR development process, including attendance by selected commune members to attend the event\. ï‚ Enhancing the governance role of Hospital and Health Center Management Support was also provided to the National Center for Health Promotion for health promotion, Committees\. nutrition, and behavior change communications, as well as mass media plans to foster community awareness and preventative measures for CD and NCD\. In order to increase ï‚ Prepare community leaders and political accountability of health providers to citizens, the program provided technical support to the representatives for increased health system National Center for Health Promotion on health promotion, nutrition, and behavior change management and oversight\. surrounding food and hygiene for pregnant women and post-delivery, and made partial contributions toward the sub-national operational costs for outreach activities and priority behavior change communication\. 46  Annex 2b\. Indicators by PDO HIGH LEVEL HSP2 GOALS (IMPACT LEVEL) PDO 1: Improve health outcomes Original End of Project Infant mortality rate Target surpassed Baseline: 66 per 100,000 live births (2005-2008) 28 per 100,000 (CDHS 2014) Target: 50 per 100,000 (2015) Under 5 mortality rate Target surpassed Baseline: 83 per 1,000 live births (2005-2008) 35 per 1,000 (CDHS 2014) Target: 65 per 1,000 (2015) Stunting rate (WHO standards) Target achieved (87%) and trending positively (-5\.1% per year on average between 2010 and 2014) Baseline: 43% (2005-2008) 32% (CDHS 2014) Target: 22% (2015) Maternal mortality Target potentially achieved and trending positively (-4\.7% per year on average between 2010 and 2014) Baseline: 472 per 100,000 live births (2005-2008) 170 per 100,000 (CDHS 2014) Target: 140 per 100,000 (2015) HIV prevalence rate among 15-49 Target surpassed Baseline: 0\.9% (2005-2008) 0\.7% in 2013 (UNAIDS Cambodia Country Progress Report, 2015) Target: <0\.9% (2015) TB death rate Target not achieved but trending positively (-5% per year on average between 2009 and 2015) Baseline: 75 per 100,000 (2005-2008) 55 per 100,000 in 2015 (WHO) Target: 32 per 100,000 (2015) Malaria CFR Data not available Baseline: 0\.36 per 1,000 (2005-2008) Target: 0\.1 per 1,000 (2015) Percentage of deaths due to road Data not available traffic accidents Baseline: 3\.5% (2005-2008) Target: 2\.8% (2015) OUTCOMES AND INTERMEDIATE OUTCOMES PDO 2: Strengthening institutional capacity Sub-objective 2a: Strengthening human resources Outcomes Original PR1 AF2 AF3 End of Project Ratio of MOH secondary midwives Continued Dropped - Target potentially achieved per 10,000 population per location Achievement by 12/31/2015 * Country ratio (“No target * Country ratio: 1\.85 * Provincial average values and * Provincial average: 2\.45 * Provincial median better indicator * Provincial median: 2\.17 for secondary Baseline: midwives now Although the indicator was dropped, all coverage * Country ratio: 1\.35 available”) ratios have increased at the end of the project\. * Provincial average: 1\.40 * Provincial median: 1\.74 (Source: 2015 PMR) Target: * Country ratio: NA * Provincial average: NA * Provincial median: NA Percentage of staff covered by agreed Dropped - - NA and aligned incentive scheme ("Definitions Baseline: NA were unclear Target: NA and/or data collection systems have not been established") 47 Number of MOH staff receiving POC New Dropped - Target potentially achieved payments financed by Project 239 MOH staff received POC payments financed by ("No longer the Project by 06/30/2011 (ISR Seq\. 5) before the Baseline: 0 (12/31/2009) relevant") POC scheme was ended in 07/01/2012\. Target: 247 (12/31/2013) Health personnel receiving training New Continued Continued Target achieved through the Project (number) Although no target was explicitly established, this indicator is considered “achieved” since December Baseline: NA 2015 with 166,042 health personnel trained Target: NA (Source: ISR Seq\.11, 06/20/2016) Outputs Percentage of health center having at - New Continued Target surpassed least one secondary midwife 100% of Health Centers with at least one secondary midwife Baseline: NA (Source: Latest HMIS data for Jan-June 2016) Target: 85% (12/31/2013) Number of HC with staffing level Dropped - - NA recommended by MPA Guidelines ("Definitions Baseline: NA were unclear Target: NA and/or data collection systems have not been established") Number of RH with staffing level Dropped - - NA recommended by CPA Guidelines ("Definitions Baseline: NA were unclear Target: NA and/or data collection systems have not been established") Number of HC with staffing level Dropped - - NA recommended by CPA Guidelines ("Definitions Baseline: NA were unclear Target: NA and/or data collection systems have not been established") Sub-objective 2b: Strengthening health system stewardship Outcomes Original PR1 AF2 AF3 End of Project Percentage of external funds for Revised Dropped - NA health included in AOPs ("Very process oriented and Baseline: 57% (12/31/2008) data not Target: 80% (12/31/2013) available") Percentage of RH, ODO and PHD Dropped - - NA offices with computerized HMIS ("Definitions Baseline: NA were unclear Target: NA and/or data collection systems have not been established") Percentage of functioning HCMCs Revised Dropped - NA ("Not within Baseline: NA control of the Target: NA project and data not available") Percentage of private entities Revised Dropped - NA licensed: ("Not supported - Polyclinics by the project") 48 - Consultation cabinets - Maternity clinics - Dental clinics - Pharmacies Baseline: NA Target: NA Percentage of licensed private Revised Dropped - NA Pharmacies and Depots ("Not supported by the project") Baseline: NA Target: NA Outputs Original PR1 AF2 AF3 End of Project Technical content and results-focus of Revised Dropped - Target potentially achieved AOP process improves based on Mid- The AOP process was recorded as “improved” by Term Review (MTR) and Final ("No specific 12/31/2013 at ISR Seq\. 6\. Evaluation way to measure") Baseline: NA Target: AOP process improved by 12/31/2013 Number and percentage of MOH Revised Dropped - Target potentially achieved central institutions and provinces The indicator value was 100% by 02/28/2014 (ISR submitting AOP and 3YRPs according ("Very process Seq\. 7)\. to schedule and in MOH format oriented and levels already Baseline: 79% (12/31/2008) very high") Target: 95% (12/31/2013) Number of PHDs allocating budgets Dropped - - Target potentially achieved based on AOPs All provinces prepared AOPs in 2009 (ISR Seq\. 2) ("Definitions Baseline: 0 (12/31/2008) were unclear Target: 23 provinces (12/31/2013) and/or data collection systems have not been established") Percentage of external funds for Dropped - - NA health sector included in 3YRPs and AOPs ("Definitions were unclear Baseline: 57% (12/31/2008) and/or data Target: 80%(12/31/2013) collection systems have not been established") AOP resource allocation of program Revised Dropped - Target potentially achieved budgets reflecting HSP2 and JAPR By 02/28/2014 (ISR Seq\. 7) priorities ("No targets\. MCH: 22% (1\.MCH; 2\.CDs; and 3\.NCDs) Relevance not CDs: 48% clear") NCDs: 2% Baseline: (12/31/2008) MCH: 3\.9% CDs: 20\.2% NCDs: 0\.5% Target: (12/31/2013) MCH: Increase CDs: Maintain NCDs: Increase Rate of Program execution for pooled Continued Dropped - Target potentially not achieved DP and for Government funds By 12/31/2013 (ISR Seq\. 7) ("Monitored Baseline: (12/31/2008) during RGC: 93% RGC: 91% implementation DPs: 57% DPs: 85% support") 49 Target: (12/31/2013) RGC: 95% DPs: 95% Percentage of Government and AOP Dropped - - NA expenditure at provincial level ("Definitions Baseline: (12/31/2008) were unclear RGC: 85% and/or data AOP: 91% collection systems have Target: (12/31/2013) not been RGC: 37% established") AOP: 40% Share of operating cost budget Continued Dropped - Target potentially achieved reaching contracting ODs The indicator value was 100% by 12/31/2013 (ISR ("Difficult to Seq\. 7)\. Baseline: NA measure, not Target: 100% (12/31/2013) entirely in control of the project, and adds relatively little value") Proportion of ODs implementing Continued Continued Continued Target achieved SDGs and internal contracting 100% of ODs implementing SDGs and internal meeting at least 80% of their contracting meeting at least 80% of their performance performance targets target by 03/30/2014 (ISR Seq\. 8) and also by 06/30/2016 (ISR Seq\. 11) Baseline: NA Target: 100% (12/31/2013) Financial Management Improvement Continued Dropped - Target potentially achieved Plan developed and implemented FMIP to be aligned with PFM reform and chart of ("Very process accounts, expected to be rolled out in mid 2015 (ISR Baseline: NA oriented and no Seq\. 7)\. Target: FMIP implemented longer (12/31/2013) relevant") Increased number of ODs and PHDs Dropped - - NA using health indicators for prioritization in their AOPs ("Definitions were unclear Baseline: NA and/or data Target: AOPs better match health collection need priorities (12/31/2013) systems have not been established") Government health sector expenditure Dropped - - Target potentially achieved in line with NSDP and MTEF targets By 12/31/2014 ("Definitions Budgeted: 1\.3% of GDP Baseline: 1% of GDP (12/31/2008) were unclear Executed: 1\.1% of GDP Target: 1\.2% of GDP (12/31/2013) and/or data (Source: 2014 Annual Health Financing Report) collection systems have not been established") Annual health planning summits Continued Dropped - NA (JAPR and JAOP) conducted with wide stakeholder participation ("Monitored during Baseline: (12/31/2008) implementation JAPR: Conducted annually support") JAOP: No Target: (12/31/2013) JAPR and JAOP: Conducted annually Percentage of HSP2 indicators that Revised Dropped - Target potentially not achieved have baselines and targets 50  ("Monitored 83% of indicators with baseline and target values by Baseline: 83% of indicators with during 12/31/2013 (ISR Seq\. 7) baseline and 73% with targets implementation (12/31/2008) support") Target: 100% of indicators with baseline and targets (12/31/2013) Selected key HSP2 indicators Revised Dropped - NA disaggregated by location and sex ("Monitored Baseline: NA during Target: NA implementation support") Increased percentage of performance Dropped - - NA agreements between the MOH and PHDs meeting target performance ("Definitions indicators were unclear and/or data Baseline: 0% (12/31/2008) collection Target: 100% (12/31/2013) systems have not been established") PDO 3: Strengthening mechanisms to achieve more effective and efficient sector performance Sub-objective 3a: Strengthening health service delivery Outcomes Original PR1 AF2 AF3 End of Project Percentage of births delivery by Continued Continued Revised Target achieved (over 85% of target) trained personnel 84% by 12/31/2013 (Source: 2014 PMR) (Target 85\.2% by 05/31/2016 (Source: 2016 NAHC) Baseline: 58% (12/31/2008) revised Target: 85% (12/31/2013) upward to 87% by 06/30/2016) Percentage of births delivery by Continued Continued Revised Target achieved (over 85% of target) trained personnel at health facility 80% by 12/31/2013 (Source: 2014 PMR) (Target 80\.35% by 05/31/2016 (Source: 2016 NAHC) Baseline: 39% (12/31/2008) revised Target: 65% (12/31/2013) upward to 85% by 06/30/2016) Percentage of currently married Continued Dropped - Original target potentially not achieved women using a modern contraceptive 34\.25% by 12/31/2013 (Source: 2014 PMR) method ("Data not reliable") Revised target potentially achieved Baseline: 26% (12/31/2008) (over 85% of target) Target: 49% (12/31/2013) 35% by 12/31/2014 (Source: 2014 PMR) Target lowered at AF1: 39% (12/31/2014) Percentage (and number) of children Revised Continued Continued Target achieved (over 85% of target) under one year immunized with DPT- 94\.8% by 05/31/2016 (Source: 2016 NAHC) HepB3 Baseline: 84% (12/31/2008) Target: 95% (12/31/2013) Percentage of HIV+ pregnant women Continued Dropped - Target potentially surpassed receiving Antiretroviral drugs for 67% by 12/31/2013 (Source: 2014 PMR) PMTCT ("Project does not finance Baseline: 27% (12/31/2008) HIV/AIDS Target: 65% (12/31/2013) interventions\. Covered by other donors") TB cure rate Continued Dropped - Target potentially surpassed 91% by 12/31/2013 (Source: 2014 PMR) Baseline: 90% (12/31/2008) ("Project does Target: >65% (12/31/2013) not finance TB 51  interventions\. Covered by other donors") Number of malaria cases treated at Continued Dropped - Target potentially surpassed public health facilities per 1,000 1\.7 cases by 12/31/2013 (Source: 2014 PMR) population ("Project does not finance Baseline: 4\.1 (12/31/2008) Malaria Target: 3\.7 (12/31/2013) interventions\. Covered by other donors") Percentage (and number) of children New Continued Revised Original target surpassed (original definition): age 6-59 months who receives two 100% by 12/31/2013 (Source: 2014 PMR) doses of Vitamin A supplement every (Indicator 6 months (R1,R2) definition Revised target surpassed (AF3 definition): revised at 81\.5% by 05/31/2016 (Source: 2016 NAHC) Baseline: 89% (12/31/2008) AF3 from Revised baseline at AF3: 77% “within the (12/31/2008) last 12 months” to Target: 96% (12/31/2013) “every 6 Revised target at AF3: months”) 80% (06/30/2016) thus bringing down the baseline value from 89% to 77%\. The end target was revised accordingly from 96% to 80%) Percentage of children aged 12-59 New Dropped - Target potentially surpassed months who received mebendazole 100% by 12/31/2013 (Source: 2014 PMR) ("Similar to Baseline: 71% (12/31/2008) coverage of Vit\. Target: 90% (12/31/2013) A") Percentage of pregnant women New Continued Revised Original and revised targets surpassed receiving Iron Folate supplementation 90\.3% by 06/30/2016 (Source: HMIS) Baseline: 80% (12/31/2008) Target: 87% (12/31/2013) Revised target at AF3: 85% (06/30/2016) Percentage of population with access Dropped - - NA to full MPA ("Definitions Baseline: NA were unclear Target: NA and/or data collection systems have not been established") Percentage of population with access Dropped - - NA to at least CPA2 ("Definitions Baseline: NA were unclear Target: NA and/or data collection systems have not been established") People with access to a basic package - - New Target surpassed of health, nutrition, or reproductive 8,464,456 by 05/31/2016 (ISR Seq\. 11) health services (number) 52 Baseline: 152,213 (12/31/2008) Target: 6,500,000 (06/30/2016) Percentage of pregnant women Continued Continued Revised Original target achieved by 12/31/2013 attending at least 2 antenatal care (over 85% of target) consultations (Target 81\.5% (Source: 2014 PMR) aligned with Baseline: 81% (12/31/2008) NSDP 2014- Revised target surpassed by 05/31/2016 Target: 94% (12/31/2013) 2018 at AF3) 93% (Source: ISR Seq\. 11) Revised target at AF3: 90% (06/30/2016) Number of pregnant women attending Continued Continued Revised Target surpassed at least 2 antenatal care consultations 2,239,784 (Source: 2014 PMR) (Target Baseline: 291,853 (12/31/2009) aligned with Target: 1,900,000 (06/30/2016) NSDP 2014- 2018 at AF3) Dengue case fatality rate reported by New Continued Revised Target surpassed by 12/31/2013 public health facilities 0\.33 (Source: 2014 PMR) (Target Baseline: 0\.7 (12/31/2008) aligned with Target surpassed by 05/31/2016 Target: 0\.6 (12/31/2013) NSDP 2014- 0\.25 (Source: 2016 NAHC) Revised target at AF3: 2018 at AF3) 0\.5 (06/30/2016) Percentage of adults with diabetes Continued Dropped - NA treated at public health facilities ("Project does Baseline: 3\.5 (12/31/2009) not cover Target: <0\.55 (12/31/2013) treatment of diabetes at all public health facilities nor as part of HEF package") Outputs Original PR1 AF2 AF3 End of Project Consultations (new cases) per person Continued Dropped - Target potentially achieved per year (all consultations) 0\.61 by 12/31/2013 (Source: 2014 PMR) ("Project not Baseline: 0\.54 (12/31/2008) accountable for Target: 0\.6 (12/31/2013) all consultation, just priority groups") Consultations (new cases) per person Continued Continued Continued Target achieved by 12/31/2013 per year (under 5) (over 85% of target) 1\.43 (Source: 2014 PMR) Baseline: 1\.1 (12/31/2008) Target: 1\.5 (06/30/2016) Target surpassed by 05/31/2016 1\.52 (Source: 2016 NAHC) Percentage of deliveries by C-section Continued Dropped - NA Baseline: 2\.0 (12/31/2008) ("May Target: 3\.2 (12/31/2013) incentivize unnecessary procedures") Case detection rate of smear (+) Continued Dropped - NA pulmonary TB (%) ("Project does Baseline: 69% (12/31/2008) not finance TB Target: >70% (12/31/2013) interventions\. Covered by other donors") Percentage of families living in high Continued Dropped - Target potentially surpassed malaria endemic areas (<1km from 100% by 12/31/2013 (Source: 2014 PMR) forest) of 20 provinces have sufficient ("Project does (1 net / 2 persons) treated bed nets not finance (LLIT / ITN) Malaria interventions\. 53 Baseline: 75\.6% (12/31/2008) Covered by Target: 90% (12/31/2013) other donors") Percentage of children under 5 years Continued Dropped - Target potentially surpassed with pneumonia receiving correct 68\.8% by 12/31/2014 (Source: 2014 PMR) antibiotic treatment at public facilities ("Only measured every Baseline: 48% (12/31/2008) 5 years\. IMCI Target: 65% (12/31/2013) indicator to be revised to cover quality") Percentage of children under 5 years Continued Dropped - NA with diarrhea having received ORT and Zinc at public health facilities ("Only measured every Baseline: 58% (12/31/2008) 5 years\. IMCI Target: 95% (12/31/2014) indicator to be revised to cover quality") Percentage of disease outbreak Dropped - - NA responses in timely manner ("Definitions Baseline: NA were unclear Target: NA and/or data collection systems have not been established") Percent of health centers New Continued Revised Target surpassed by 12/31/2013 implementing IMCI services 98% (Source: 2014 PMR) (Target Baseline: 69% (12/31/2008) aligned with Target surpassed by 05/31/2016 Target: 95% (12/31/2013) NSDP 2014- 100% (Source: 2016 NAHC) Revised target at AF3: 2018 at AF3) 90% (06/30/2016) Percentage of Essential Drugs (15 Continued Dropped - NA items listed) at HCs that faced stock- outs ("Not within control of the Baseline: NA project") Target: NA Health facilities constructed, New Continued Continued Target surpassed renovated, and/or equipped through 699 by 05/31/2016 (ISR, Seq\. 11), including: the Project * 53 additional delivery rooms * 15 referral hospitals Baseline: 0 (12/31/2007) * 1 LINAC Target: 506 (12/31/2016) * 1 clean room * 103 solar lighting * 193 water improvement * 263 sanitation improvement Sub-objective 3b: Improving financial protection Outcomes Original PR1 AF2 AF3 End of Project Percent of poor population covered by New Revised Revised Target surpassed Health Equity Funds 100% by 05/31/2016 (Source: URC and 2016 NAHC) (Moved from (Target set at Baseline: 57% (12/31/2008) intermediary AF3) Target: 95% (06/30/2016) indicators to PDO level) Coverage of HEFs (by OD and Dropped - - NA beneficiaries) ("Definitions Baseline: NA were unclear Target: NA and/or data collection systems have not been established") 54 Number of cases receiving Health Continued Continued Revised Target surpassed Equity Fund assistance 8,464,456 by 05/31/2016 (Source: 2016 NAHC) (Target set at Baseline: 152,000 (12/31/2008) AF3) Target: 6,800,000 (06/30/2016) Number of OPD receiving Health Continued Continued Revised Target surpassed Equity Fund assistance 7,346,365 by 05/31/2016 (Source: 2016 NAHC) (Target set at Baseline: 312,713 (12/31/2009) AF3) Target: 5,500,000 (06/30/2016) Number of IPD receiving Health Continued Continued Revised Target surpassed Equity Fund assistance 869,743 by 05/31/2016 (Source: 2016 NAHC) (Target set at Baseline: 102,205 (12/31/2009) AF3) Target: 720,000 (06/30/2016) Number of deliveries receiving Health Continued Continued Revised Target surpassed Equity Fund assistance 230,348 by 05/31/2016 (Source: 2016 NAHC) (Target set at Baseline: 15,629 (12/31/2009) AF3) Target: 190,000 (06/30/2016) Number of individuals insured under Revised Dropped - NA CBHI schemes ("Project does Baseline: 79,873 (12/31/2008) not support Target: NA CBHI, just HEFs") Government health expenditure per Continued Dropped - USD 12\.7 in 2014 capita ("Not within Baseline: USD 7\.75 (12/31/2008) control of the Target: NA project") Outputs Original PR1 AF2 AF3 End of Project Percentage of Government health Continued Dropped - NA expenditure at provincial level and below ("Not within control of the Baseline: NA project") Target: NA Percentage of referral hospitals Continued Continued Revised Target surpassed implementing Health Equity Funds 100% by 06/30/2016 (Source: 2016 NAHC) (Target set at Baseline: 61% (12/31/2008) AF3) Target: 85% (06/30/2016) Percentage of Health Centers Continued Continued Revised Target surpassed implementing Health Equity Funds 91% by 06/30/2016 (Source: 2016 NAHC) (Target set at Baseline: 13% (12/31/2008) AF3) Target: 65% (06/30/2016) Number of cases receiving Health Continued Continued Revised Target surpassed Equity Fund assistance 8,464,456 by 05/31/2016 (Source: 2016 NAHC) (Target set at Baseline: 152,000 (12/31/2008) AF3) Target: 6,800,000 (06/30/2016) 55 Annex 3\. Economic and Financial Analysis Cambodia is performing beyond projections based on time trend and on income per capita in terms of mortality and of life expectancy Total and public health expenditure are below projections based on time trend and on income per capita between 2008 and 2015 56 Value of Life Year parameters (Lancet) Changes in key health outcomes Life expectancy Under 5 mortality rate Maternal Mortality rate Predicted Actual Predicted Actual Predicted Actual 2009 62\.8 65\.8 67\.5 361\.5 2010 63\.1 66\.4 65\.9 54\.0 354\.1 206 2011 63\.3 66\.9 64\.3 346\.8 2012 63\.5 67\.3 62\.9 339\.5 2013 63\.7 67\.8 61\.4 332\.3 2014 63\.9 68\.2 60\.1 35\.0 325\.1 170 2015 \. 58\.8 318\.0 57 Valuation of incremental life expectancy gains Value of Value of Income per increase in life increase in life Life Income per capita net of expectancy in expectancy in expectancy capita health million USD million USD increment (USD) expenditure (discount = (discount = (USD) 3%) 7%) 2009 3\.0 750\.09 702\.43 655\.7 268\.3 2010 3\.3 782\.70 736\.10 767\.6 314\.0 2011 3\.6 824\.84 778\.31 899\.6 368\.0 2012 3\.8 870\.48 816\.16 1012\.0 414\.0 2013 4\.1 920\.30 865\.70 1177\.4 481\.7 2014 4\.3 969\.34 914\.32 1325\.8 542\.4 PV 1110\.3 361\.4 Cost-benefit summary Total costs, in million USD 154\.37 Total costs, in million USD (PV [3%]) 129\.28 Total costs, in million USD (PV [7%]) 102\.86 Benefits, in million USD (PV [3%]) 1110\.3 Benefits, in million USD (PV [7%]) 361\.4 NPV, in million USD (discount=3%) 981\.1 NPV, in million USD (discount=7%) 258\.5 CB ratio (discount=3%) 8\.6 CB ratio (discount=7%) 3\.5 58 Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Simeth Beng Senior Operations Officer GED02 Edward Daoud Senior Finance Officer GSUOA Roch Levesque Senior Counsel LEGAM Magnus Lindelow Practice Manager GHN01 Nareth Ly Operations Officer GHN02 Donald Herrings Mphande Lead Financial Management Spec GGO31 Sirirat Sirijaratwong Procurement Specialist GGO08 Hope C\. Phillips Volker Consultant GHNDR Supervision/ICR Chandra Chakravarthi Program Assistant GEDDR Ravan Chieap Program Assistant EACSF Seida Heng Consultant GHNDR Timothy A\. Johnston Program Leader ECCU4 Pema Lhazom Senior Operations Officer GHNDR Da Lin Program Assistant EACSF Nareth Ly Operations Officer GHN02 Sirirat Sirijaratwong Procurement Specialist GGO08 Hope C\. Phillips Volker Consultant GHNDR (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (all No\. of staff weeks expenses charged to BB) Lending FY07 5\.37 FY08 326\.29 Total: 331\.66 Supervision/ICR FY09 122\.58 FY10 78\.90 FY11 82\.44 FY12 111\.12 FY13 73\.27 FY14 57\.01 FY15 54\.03 FY16 102\.82 FY17 24\.10 Total: 706\.27 59  Annex 5\. Beneficiary Survey Results (No beneficiary survey was conducted) Annex 6\. Stakeholder Workshop Report and Results (No stakeholder workshop was conducted) 60 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR Summary of Royal Government of Cambodia Completion Report (December 2016) The review of the implementation of Health Strategic Plan phase I for 2003-2007 has laid out the foundation for the Ministry of Health in its development of Health Strategic Plan phase II (HSP2) for 2008 to 2015\. The process was led by the Department of Planning and Health Information with wide consultation with all key stakeholders including DPs, NGOs, sub-national level of health system, local authorities, and relevant line Ministries of the Royal Government of Cambodia\. HSP2 has highlighted 4 top priorities--Reproductive Maternal Newborn and Child Health (RMNCH), Communicable Diseases (CD), Non- communicable Diseases (NCD), and Health System Strengthening\. To achieve these goals of HSP2 and building on experience from HSSP1, Health Sector Support Program Phase II (known as HSSP2) was developed to support and implement the priorities set forth in HSP2\. HSSP2 was financed jointly by the significant contribution from the Royal Government of Cambodia through loan from the WB, and grants from the WB, DFID, AFD, BTC, DFAT, UNICEF, and UNFPA\. The Ministry of Health is the Executive Agency of the Program\. In addition, KOICA and KFW joined the pooled fund from 20 August 2014 and 5 March 2015 respectively\. The program builds on the positive experience of using joint monitoring arrangement from HSSP1 and HSSP Secretariat system\. However, unlike HSSP1, the program proposes to support the transition of key accountability functions and systems to the respective Ministry of Health's Departments and moving away from reliance on the freestanding Project Implementation Unit\. Most important aspect of HSSP2 was that the program designed with the joint contribution of the national budget to complement with other interventions/programs financially supported by additional external funding such as the GFATM\. In improving health service delivery, HSSP2 put strong emphasis on nutrition for mothers and children, Reproductive Newborn and Child Health, some under-funded communicable diseases, non- communicable diseases, and Health System Stewardship functions\. The indicators in over the past decade since prior to the design of HSSP1 and the continuation of HSSP2 have shown that the support from the WB, and other HSSP partners including ADB, AFD, DFID, DFAT, BTC UNFPA, UNICEF, KFW, and KOICA, has put on the right things and has been doing those right things right through building the national systems, and promoting the government leadership and ownership\. This is one of the best examples, which could lead to effective development cooperation in Cambodia's Health Sector\. Moving from NGO Contracting to internal contracting managed solely by the government is a major step toward strengthening the government leadership and ownership, leading to a strong health care system which will produce sustainable health outcomes as well as being able to effectively and efficiently respond to communicable diseases or any emerging infectious diseases\. SOA/SDGs aim at financing and managing health service delivery at sub-national level--making the operational health system strong, adequate with supplies and function\. Transition from the NGO-managed contracting to internal contracting, which has led to more sustainable development in strengthening health system and improving 61 health of the people under the ownership and leadership of the government, has faced considerable challenges for the health system to tackle including financial management, organizational capacity, technical capacity, the change in staff regulation and behavior\. However, with all the support from experienced NGOs, HSSP2 DPs and high level leadership of the Ministry of Health, it has demonstrated good improvements—resulting in better access to improved quality of health care services at SDGs-implemented health facilities\. PHDs are contracted by the central MOH through a Performance Agreement under which the PHD acts as a commissioner; the SOA districts represented by their directors are contracted by the PHD through a Service Delivery Agreement; within each SOA, health facilities (referral hospital and health centers) are contracted by the SOA with each party represented by the head of the institution; at facility level, performance contracts are made between the head of the facility and each staff member\. The key stipulations in the contract between the PHD and the SOA are: responsibilities of the contracting parties, service provision, resource needs, performance achievement and sanctions, financing and legal representations\. The most important commitments of the PHD are to provide financial resources, drugs and medical supplies to the SOA in a timely and transparent manner and to support the SOA in enforcing a performance management system, including reshuffling of non-performing staff\. The SOA is required to comply with the three golden rules: no under-the-table payments, no pilfering of clients or conduct of private services in the public facilities, and no pilfering of drugs and medical supplies from the public facilities\. Incentives are paid in full when targets are achieved and are reduced when the level of achievement falls short\. Facility chiefs are responsible for achieving the contracted outputs\. Funding for SOA districts comes from three major sources: the government budget, the SDGs and user fees\. The government line item budget accounts for 50% to 70% of the SOA budget and is provided to the SOA as a quarterly advance through routine government channels (MEF, 2011)\. The SDG, a direct grant from HSSP2 pooled donor-government funds, is transferred through private banks directly to SOA accounts quarterly following reports\. The implementation of SOA/SDGs has made the operational health system more accountable to the communities through engagement with local authorities (reporting to provincial and district councils), conducting clients’ satisfaction survey, and the implementation of community score card\. All has led to improved quality of care and the availability of health services at health facilities\. As of 31st December, 2015, proportion of Operational Districts implementing Service Delivery Grants (SDGs) and internal contracting meeting at least 80% of their performance targets has reached 100% in the entire health care system of Cambodia\. Through this five years’ implementation of HSSP2, SOA has tremendously made changes in applying staff regulation in their facilities\. This includes (1) they were more punctual, (2) they worked more hours at the facilities, (3) they were present at work even on public holidays (staff on duties), and (4) they paid more attention in service provision to clients\. In other words, SOA has made 24 hours’ and 7-day-a-week’s availability of health services at the health facilities\. Performance-based incentive with a set of target indicators determining the 62 achievements through SDGs’ contracts has also proven good improvement of health providers’ compliance with the national protocols, policies, and guidelines, demonstrating improved quality of care\. As a result of such mechanism in place, maternal and child health has been of huge improvement, making Cambodia among a few countries in the developing world achieve MDGs 4 and 5\. HSSP2 has made remarkable achievements of key outcome indicators for maternal and child health--Birth delivered by trained health personnel has reached 85\.20 %; delivered at health facilities was 80\.50%; Percentage of children under one year immunized with DPT-HepB3 was 94\.38%; children aged 6-59 months who received two doses of Vitamin A supplement every 6 months reached 81\.5%; and percentage of women receiving Iron Folate supplementation reached 82\.17%\. These improvements of outcome indicators have greatly impacted on MMR, IMR and Under-5 MR\. According to CDHS, Maternal Mortality Ratio has declined sharply in the last decade--moving from 472 per 100,000 live births in 2005 to 206 in 2010, and then 170 in 2014\. Likewise, the total fertility rate declined from 4\.0 in 2000 to 3\.0 in 2010, and to 2\.7 in 2014\. Both under 5 mortality Rate and the IMR showed remarkable declines over the period from 2000 to 2014\. Under 5 mortality declined from 124 in 2000 to 83 in 2005 and 54 in 2010, and 35 in 2014, per the CDHS\. IMR declined from 95 per 1,000 live births in 2000 to 66 in 2005 per the CDHS, then to 45 in 2010, and 28 in CDHS 2014\. Both HSSP1, and in particular HSSP2, have strong focus on improving health of women, infants, and children\. Since year 2000, significant decrease in the prevalence of stunting, evidently, from 2010 to 2014 stunting among the poorest Cambodians decreased by 7\.4% points\. Despite some progress made, nutrition remains the area of challenge and among the top priority to improve maternal newborn and child health\. The 2014 Cambodia Demographic and Health Survey (CDHS) shows that in nutrition, Cambodia did not meet the 2010 Cambodia Millennium Development Goal (CMDG) targets\. In Cambodia, 32\.4% of children are stunted and 23\.9% are underweight – in comparison to the targets of 24\.5% and 19\.2%, respectively\. Stunting alone accounts for 45% of the projected economic losses\. Overweight is now growing especially among the better-off population: overweight exceeded underweight (18% versus 14%, respectively)\. Another area of challenge ahead is that no significant improvement in complementary feeding for children aged 6-11\.9 months, and also appropriate breastfeeding practice, especially among the wealthier population\. Despite the challenges ahead, NNP did not get financial support from HSSP2 since early 2014\. With all the positive impact on health service provision as well as the improved quality of care, most health staff complained that the incentive received through SDGs was too little (on average between 20-40 US dollars per month) in comparison with what they could earn through private practice in their moonlight jobs\. The SDG incentive should be higher or bigger enough to drive quality changes and they should be done in a timely manner, with no delay or abrupt disruption\. Most health staff and managers under SDGs contracts reported that they experienced that the procedures to get SDG payment were too strict, no flexibility, and too complicated\. This may be part of the delay of the use of SDG fund\. Unlike other projects, the longer they work on the more increasing payment they could get\. 63 Most recently, especially early 2016, SDG payment reduced but more workload imposed- -causing big demotivation and dissatisfaction among health staff and managers\. Some lessons learnt can be taken into consideration why Cambodia could achieve MDGs 4 and 5\. Direction is set at the highest level by establishing clear development goals\. The Sector Wide Management (SWiM) mechanism for health is used to align and direct the contribution and activities of the development partners in achieving MOH objectives\. The Technical Working Group for Health and other sub-technical working groups and task forces have helped with coordination and development of technical content\. The NGO support organization, MEDICAM, has helped facilitate collaboration between government activities and activities at the grassroots level\. The MOH provides leadership and plays a central role as a technical advisor to the Provincial Health Departments (PHD) and the Operational Health District (OD) health offices\. The ODs are the key actors for activities implemented at health facilities and community level – and are responsible for translating national policies into local actions\. High level of commitment, support and follow-up from the Government and the Development Partners (Example include ‘skilled birth attendance’ area, where the government incentive for live births in health facility contributed to significant and sustained increases over the past 2 years; selection of SBA as a Joint Monitoring Indicator to be reviewed on quarterly basis through CDCF is another indicator of high level of commitment to this area)\. Some improvements in childhood nutritional status, particularly in severe stunting and underweight, are likely to have contributed to mortality declines; as well as improvements in rates of exclusive breastfeeding, early breastfeeding and coverage with vitamin A supplements\. There have been significant increases in the proportion of women attending at least four antenatal care (ANC) visits (93%), making more of these visits early in pregnancy, delivering with a skilled birth attendant and delivering at health facilities\. Improving availability of midwife at health facilities through (1) setting standards for at least one midwife and an additional secondary midwife at health center level, (2) midwifery incentive schemes, and (3) improved training/capacity building for midwife in both pre-service and in-service trainings all contributed to improving RMNCH\. Another critical lesson is that HSSP2 funds were available for all 25 provinces to support the implementation of RMNCH priorities\. Reducing newborn deaths will require increased attention on improving the quality of intrapartum, early essential newborn care and postnatal care for routine deliveries as well as for high risk newborns with prematurity and low birth weight, birth asphyxia and neonatal sepsis\. Complementary efforts are needed to improve quality of care and, in particular, routine delivery and immediate postpartum and postnatal care, and EmONC services\. Mechanisms are needed for improving quality, including regular supervision, self-assessment and improved training methods using clinical coaching\. Ensuring quality and geographic coverage of EmONC is a must in improving maternal and newborns health, especially ensuring the functionality of health facilities with BEmONC and CEmNC\. And this would include improving the quality and availability of ANC and PNC\. The EmONC services should be 24 hours and 7 days a week at health facilities and must be accessible without financial barriers\. 64 HSSP (both one and two) has not only assisted in supporting to strengthen national system but also ensured that the poor have access to quality health care services they need\. Since early the 1990s, NGOs have pioneered the implementation of Health Equity Fund in order to break the financial barriers so that the poor can access to publicly provided health care services\. Building on the experience, the Ministry of Health has adopted into the health care financing policy and the HEF implementation framework has been developed\. Significant proportion of HSSP2 funding (pooled fund and the government's share) has been used to support Health Equity Fund implemented by NGOs--Health Equity Fund Operators and Health Equity Fund Implementer (URC)\. The HEF Operators including eligible local NGOs and CBOs worked closely with public health facilities and the poor through pre-identification and post-identification system determined by the Ministry of Planning\. The HEF Implementer provides technical oversight of the HEF implementation and financial scrutiny ensuring that the poor will benefit the most, and the Health Facilities provide quality of care and make them available and accessible for the poor\. Through HSSP2 support, 91\.67% of Health Centers and 82% of Referral Hospitals have implemented Health Equity Fund\. Remarkably, 100% of the poor have now been covered by HEF (Result Framework attached in Annex 3)\. Health Equity Fund appears to be the main reason that motivates people to come and use the public sector because they can get free health care services\. With reference to the study on Utilization and Impact of Health Equity Fund conducted by the WB on June 20, 2016, it found that, among HEF beneficiaries, 25% of medical visits took place at public health facilities\. HEF promotes health seeking towards Public Health Facilities--resulting in a marginally significant reduction in the use of informal sector\. In addition, a World Bank study on Rural Health Markets (2013) concluded that the possession of a pre- (ID Poor) or post- (HEF) ID card increased health seeking behavior towards the public sector by 34%\. An episode of hospitalization per household is as frequent as once a year, meaning that about one tenth of the annual income may be dedicated to health expenditures\. Without HEF Mechanism, the poor usually faces catastrophic payments because seeking care at private sector would cost them 17USD for OPD consultation and treatment and 190 US dollars for hospitalization\. Among households with some OOP payment, HEF have reduced the amount by 29%, on average\. The effect is larger for households that are poorer, mainly use public health care and live closer to a district hospital\. HEF are more effective in reducing OOP payments when they are operated by a NGO, rather than the government, and when they operate in conjunction with the contracting of public health services\. However, during the implementation, HEFOs experienced funding interruptions which contributed to a negative environment in facilities and reduced staff morale, and can lead to shortages of drugs and equipment; all of which can erode beneficiary’s trust in providers\. Moreover, there is an indication that reimbursement of transport to patients may be hindered as a consequence, leading to underutilization of the scheme\. There is the need to revise the procedures and to work with the health facilities, HEFOs and MOH to improve the disbursement of funds\. Gains in efficiency are likely to increase facility staff’s trust in the HEFs, creating a more positive environment for it beneficiaries within the public facilities\. This may mean an examination of the entire reporting and disbursement process 65 – and re-trainings – if there are upstream errors that are causing the delays\. Furthermore, HEF's underutilization is one of the significant issues that need to find out and understand the reasons\. CDHS 2010 has suggested that only 4% of the poorest quintile reported having health service paid for by HEF, while the CSES 2011 finds that only 20% of the poor reported using HEF for free treatment\. The most recent study of the WB June 2016 also finds that only 10% HEF beneficiaries use OPD, whilst 40% use IPD\. The study also found that 44% of HEF beneficiaries claimed having little knowledge of their entitlement-- indicating the need for increasing knowledge about HEF's entitlement among beneficiaries\. There seem to be problems with ID Poor targeting and with the villager’s perceptions of the fairness/transparency of the process\. Improving these processes – improving equity and card distribution times – would increase satisfaction with selection and trust in the program\. HSSP2 provided support for the review of curricula\. However, this was done a couple of years ago and it is now the time to do it again\. Thus, the curricula should be updated and responsive to the current needs, the context of health system development, and the epidemiological patterns\. 17 public and private institutions are currently providing training for medical care, dentistry, pharmacy, nursing, midwifery, laboratory technician, and maintenance of medical equipment\. Thousands of medical professionals come out of schools every year\. They should have adequate skill and competency after their graduation\. Cambodia, however, faces tremendous challenges in the pre-service training, and these include: (1) competency-based curricula for health profession training currently not in use; (2) all curricula have been reviewed several years ago with the support from HSSP2; (3) requirements for training hospitals are not standardized and often lack infrastructure and resources to perform as clinical placement sites; (4) students have limited exposure to clinical trainings and practice; (5) faculty members have very limited opportunities for capacity building or continued professional development; (6) quality of national entrance and exit needs to be further strengthened; (7) limited monitoring of the curricula implemented in health training institutions\. Merit-based performance in deployment, retention, and promotion of medical professionals was not implemented because the government thinks that it could demoralize those who did not get it\. Applying meritocratic system could lift up the main impediment in ensuring good distribution of health providers and retaining them in the system\. All promotions and awards should be based on (1) experience, (2) morality, and (3) qualifications (doing the right thing in the right way and at the right time)\. Having at least one secondary midwife at one health center is key to improving reproductive maternal newborn and child health\. The government midwifery incentive scheme of 60000 Riels per live delivery of one baby at health center level have evidently boosted facility birth deliveries, which is one of the main indicators driving the reduction of Maternal Mortality Ratio\. The last component of HSSP2 was to strengthen Health System Stewardship Functions\. This support area aligns with HSP2 Strategies to strengthen health system governance and health information system\. The program put emphasis on the promotion of Harmonization and Alignment, Public Private Partnership, Policy Development and Implementation, Health Management Information System and Strengthening Community Engagement\. 66 To promote Harmonization and Alignment and mutual accountability, HSSP2 supported the development of Annual Operation Plan and three-Year rolling plan\. HSSP2 have contributed a great deal to promote harmonization and alignment\. The fund from the program supported not only the implementation of HSP2, but also funded the development of Annual Operational Plan, conducting AOP appraisal, organizing pre-JAPR (Joint Annual Performance Review) and JAPR\. AOP and JAPR were very crucial tools for all partners to align and harmonize their resources with the country's plan/ Pre-Joint Annual Performance Review (JAPR) and JAPR alongside with Health Congress were conducted every year in the promotion of mutual accountability because all key stakeholders including NGOs representatives could work jointly to understand the progress to date, successful factors, challenges ahead, recommendations and priority actions which will be addressed in the coming year's planning\. So far 100% of Development Partners have aligned their resources with Health Strategic Plan\. However, how their resources were put remains the challenges\. HSSP1 and HSSP2 is a very good example to ensure sustainable development of health systems because the Development Partners' funding (both grants and loan) has gone through the government's systems\. When Development partners become more interested in using the country's systems; they will then be improved\. Private Sector engagement was through the establishment of sub TWGH for Private and Public Partnership\. PPP strategic plan will be developed in due course and it will detail key strategic areas of this engagement\. HSSP2 has supported the review of Health Management Information System to include data collected from the Private Sector\. On the policy development and regulation, the draft Health Finance Policy is currently being reviewed by MEF before finalization and implementation and a private consultancy firm was engaged to prepare the Social Health Protection Framework which is likely to provide inputs toward the final Health Financing Policy\. The final national Health Strategic Plan 3 (2016-20) was presented at the NHC during its meeting in March, 2016\. The Health Information System has great improvement, moving from manual collection of data to computerized system, and the inclusion of private sector data into the HIS\. HO2 has been completely computerized\. However, only about 40% of HCs have been computerized\. More computers are needed to fill the gap\. The HIS has been much developed--computerization and updated to version 3 which includes ICD-10 (International Classification of Diseases) and data collection from private sector, but human capacity remains an uphill challenge to cope with the new development\. Community Score Card initiated by the WB, implemented by several NGOs such as RHAC, CARE, and others has stimulated more discussion and engagement between community and local operational health provision facilities\. Using the score card, community has a great opportunity to provide feedback and comments to health centers/referral hospitals--creating more productive dialogues\. 67 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders Editorial comments were received from KOICA, DFAT and from MOH, and were directly included in the report\. Summary of comments received from Cofinanciers and from MOH: Organization Comment Response MOH Para 2: please check the date of Date was corrected\. Paris Peace Accord 1989? –> 23 October 1991 MOH Para 66: “\.Except for Operational Clarification and more detailed district integrated supervision of included in para\. 66\. health centers, most training activities were assessed as low VFM\.” [This paragraph is difficult to understand, please clarify?] Overall, HSSP2 Pooled Fund training and supervision expenditures were assessed as low VFM\. [This view may reflect to the specific area, but not overall, please re-phase]\. MOH Para 102: “It was estimated in Para\. 102 was edited to include a 2012 that a full transition as mention to human resource originally planned would have constraints\. been unlikely due to the resistance of MOH to follow WB/JPIG recommendations to transfer fiduciary staff to the Department of Budget and Finance (DBF)\.” [Please change the resistance to human resource constraint] KOICA Will Executive Summary be The ICR template does not inserted in the report? include an executive summary, but the datasheet provides a summary of the key information and of the ratings\. KOICA I noticed that there are two Annex Annex table labels corrected 2c Indicators by PDO\. Why these two Annexes have the same name? KOICA I feel that it is rather difficult to The structure in these two tables compare the indicators in the is purposely different\. Section F Annex2c and the indicators under display indicators according to the Section F of Results PDO level and intermediary 68  Framework Analysis, because the level indicators, while Annex 2b structures are different\. breaks down the indicators according to their type (impact, outcome, output), and breaking them down along the different PDOs\. DFAT Outcome indicator 10 should refer The wording of the indicator to the rural poor and not to the should be the same as the whole poor population wording used in the results frameworks DFAT Thorough edit of acronyms would List of acronyms has been edited be useful and expanded DFAT A lesson learnt that should be Contractual arrangements have highlighted is the implementation indeed been simplified for H- arrangements of HEF and SDG of EQUIP, but we think that this HSSP2 were very complicated element is an implementation using six-monthly or annual detail which does not necessarily contracts with HEFOs and SOA constitute a broad lesson learned facilities\. This bottleneck was from HSSP2\. clearly identified during HSSP2 and has been solved in H-EQIP\. DFAT Another lesson learnt that should This element has been reflected be documented as well is that in the section on “Efficiency” HSSP2 experienced few delays and funding shortfalls during transition /extension, which caused a serious problem for health service providers on the ground\. Their root causes should be highlighted as lesson learnt or challenge that needs to be minimized with H-EQIP\. DFAT HSSP2 learnt that transition for This point was mentioned in Secretariat to MOH systems faces para\. 102\. challenges\. This was a lesson taken up with H-EQIP (no Secretariat from the beginning)\. DFAT The amount reported in the These differences are probably financing table (Annex 1b) to explained by the application of a reflect the contribution from fee contributing to the BETF and Australia differs from the DFAT Bank costs\. accounting numbers\. (Annex 2a) It would be Point added to Annex 2\. worthwhile to highlight the training of Health Facilities staff on the implementation of HEF, 69  taking over HEFO, as institutional capacity strengthening at sub- national levels DFAT What does target “potentially Some indicators were dropped achieved” mean in Annex 2b from the RF, but for the purpose of the ICR, we still take them into account in our assessment if the indicators are still monitored at the end of the project\. Because these indicators were dropped, we don’t mark them as “achieved” or “not achieved”, but as “potentially achieved/not achieved” DFAT Minor editorial comments (use of These comments were factored appropriate tense, typos) were in for the final version of the provided in track changes ICR report\. 70 Annex 9\. List of Supporting Documents Project documentation: ï‚ World Bank (2008) Project Appraisal Document for HSSP2 ï‚ World Bank (2016) Project Appraisal Document for H-EQUIP ï‚ Financing Agreement (2008) ï‚ Grant Amendment (2010, 2012, 2013) ï‚ Additional Financing Project Papers (AF1, AF2, AF3) ï‚ Restructuring Papers (PR1, PR2, PR3) ï‚ Cambodia Health Strategic Plan (2008-2015) ï‚ Cambodia National Strategic Development Plan Update (2009-2014) ï‚ World Bank (2005) Country Assistance Strategy ï‚ World Bank (2016) Country Engagement Note ï‚ Martinez et al\. (2011) Overall Assessment for Mid Term Review of Health Strategic Plan 2008-2015\. ï‚ Aide Memoires and Back to Office Reports ï‚ Implementation Status and Results Reports ï‚ Integrated Financial and Technical Reports ï‚ HSSP2 Operational Manual ï‚ Financial Policies and Procedures Manual ï‚ SDG Manual ï‚ Procurement Plan ï‚ Environmental Assessment Report ï‚ Updated Environmental Management Plans ï‚ Framework for Land Acquisition Policy and Procedures ï‚ Indigenous Peoples Planning Framework ï‚ Social Assessment 71 Additional References: ï‚ Annear (2010) A comprehensive review of the literature on health equity funds in Cambodia 2001-2010 and annotated bibliography\. ï‚ Annear et al\. (2015) Cambodia Health System Review\. Health in Transition\. ï‚ Annear et al\. (2016) National coverage and health service utilization by Health Equity Fund members, 2004-2015\. ï‚ DFAT (2015) Sector wide approaches in the health sector: A desk-based review of donors’ experience in Asia and the Pacific ï‚ DFID (2014) HSSP2 Project Completion Review Report ï‚ Flores et al\. (2013) Financial protection of patients through compensation of providers: The impact of health equity funds in Cambodia\. Journal of Health Economics, 32 (pp\. 1180-93)\. ï‚ IEG (2009) Do health sector-wide approaches achieve results? Emerging evidence and lessons from six countries\. ï‚ Jacobs (2015) Enabling the rural poor access to health services through innovative health interventions in Cambodia (PhD thesis, Vrije Universiteit Brussel) ï‚ Jamison et al\. (2013) Global Health 2035: a world converging within a generation\. Lancet 382(9908), pp\. 1898-1955\. ï‚ Vaillancourt et al\. (2011) Aid Effectiveness in Cambodia’s Health Sector: An Assessment of the Sector-Wide Management (SWiM) Approach and its Effect on Sector Performance and Outcomes 72 MAP 73

REVIEW

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Document of The World Bank FOR OFFICIAL USE ONLY Report No\.: 18076 IMPLEMENTATION COMPLETION REPORT BANQUE OUEST AFRIOCAINE DE DEVELOPPEMENT l'BOAD) THIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) Juine 25, 1998 Private Sector Finance Group 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: CFA franc (CFAF) Calendar Year 1990 (July) Calendar Year 1998 (May) US$ 1 = CFAF 286 US$ 1 = CFAF 596 SDR 1 = US$ 1\.323 SDR 1 = US$ 1\.250 WEIGHTS AND MEASURES Metric system ABBREVIATIONS AND ACRONYMS ADB - African Development Bank ADF - African Development Fund; ABEDA - Arab Bank for the Economic Development in Africa BCEAO - Central Bank of the West African States BDEAC - Central African States Development Bank IDB - Islamic Development Bank BOAD - West African Development Bank CFD - Caisse Francaise de Developpement DFI - Development Finance Institution EADB - East African Development Bank EIB - European Investment Bank ECOWAS - Economic Community of West African States EDF - European Development Fund FIL - Financial Intermediary Loan GARI - West African Guarantee Fund GTZ - German Technical Cooperation KfW - Kreditanstalt fir Wiederaufbau SOE - Statement Of Expenditure UEMOA - West African Economic and Monetary Union UMOA - West African Monetary Union FISCAL YEAR OF BORROWER October I - September 30, until 1994 October 1 - December 31, in 1995 January I - December 31, from 1996 Vice President : Jean-Louis Sarbib Director Theodore Ahlers Sector Manager : Thomas Allen Task Manager Olivier Lambert  FOR OMCLAL USE ONLY TABLE COF CONTENTS 1\. PREFACE 2\. EVALUATION SUMMARY \. i 3\. PART I - PROJECT IMPLEMENTATION ASSESSMENT \. 1 A\. PROJECT OBJECTIVES AND DESCRIPTION \. 1 B\. ASSESSMENT AND ACHIEVEMENT OF OBJECTIVES \. 3 C\. PROJECT IMPLEMENTATION\. \. 7 D\. MAJOR FACTORS AFFECTING THE PROJECT \. 7 E\. PROJECT SUSTAINABILITY \. 8 1\. Subprojectsfinanced \. 8 2\. BOAD as an institution \. 8 F\. BANK PERFORMANCE \. 10 G\. BORROWERPERFORMANCE \. 10 H\. ASSESSMENT OF OUTCOME \. 11 I\. FUrURE OPERATION \. 1 1 J\. KEY LESSONS LEARNED \. 12 4\. PART II - STATISTICAL ANNEXES \. 13 5\. PART III- PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE \. 19 I\. INTRODUCTION \. 20 II\. LE PROJETBOAD III DE LA BANQUE MONDIALE \. 20 III\. LA MISE EN OEUVRE DU PROJET \. 21 IV\. EVALUATION DES PERFORMANCES DE LA BOAD \. 26 V\. EVALUATION DES PERFORMANCES DE LA BANQUE MONDIALE \. 27 VI\. IMPACTS INSTITUTIONNEL, ECONOMIQUE ET FINANCIER \. 27 VII\. LES LECONS A TIRER \.9\. 29 APPENDIX A: ICR MISsIoN AIDE-MEMOIRE \. 33 1\. LE PROJET BOAD III: RAPPELS \. 33 1I\. EXECUTION DU PROJET BOAD III \. 35 III\. CONCLUSIONS ET LE(;ONS \. 37 IV\. CALENDRIER, DILIGENCES ET POIJRSUITE DE L'ETUDE STRATEGIQUE \. 39 APPENDIX B: ECONOMIC INDICATORS OF UEMOA COUNTRIES \. 41 APPENDIX C: BOAD's TOTAL PROJECT ACTIVITY \. 42 APPENDIX D: CHARACTERISTICS OF REFINANCED SUBPROJECTS AND LIST OF STUDIES \. 43 APPENDIX E: STATUS OF SUBPROJECTS \. 44 APPENDIX F: DESCRIPTION AND RATING OF SUBPROJECTS \. 45 APPENDIX G: EQUITY OWNERSHIP OF BOAD - 1997 \. 55 APPENDIX H: SIMPLIFIED BALANCE SHEETS (199 1-1997) \. 56 APPENDIX I: SUMMARY INCOME STATEMENTS (1991 - 1997) \. 57 APPENDIX J: BOAD FINANCIAL INDICATORS AND RATIOS \. 58 APPENDIX K: PORTFOLIO ARREARS \. 59 APPENDIX L: BOAD'S RISK MANAGEMENT POLICIES, FINANCIAL SITUATION AND PORTFOLIO \. 60 APPENDIX M: STATUS OF EXTERNAL RESOURCES \. 65 APPENDIX N: COMPOSITION OF HIGHER LEVTEL STAFF AND ORGANIZATIONAL CHART \. 66 Map of The West African Economic And Monetary Union 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\.  BANQUE OUEST AFRICAIN]E DE DEVELOPPEMENT (BOAD) THIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) IMPLEMENTATION COMPLETION REPORT 1\. PREFACE This is the Implementation Completion Report (ICR) for the Third Regional Development Project to Ban que Ouest Africaine de Developpement (BOAD) for which Credit 2089-WAF in the amount of US$40 million equivalent and Loan 3161-WAF in the amount of US$15 million were approved on February 1, 1990, and became effective on April 27, 1990 and September 28, 1990, respectively\. The Credit and the Loan closed on December 31, 1997, after a one-year extension\. At Credit/Loan closing, US$36\.4 million equivalent was disbursed under Cr\. 2089-WAF and US$13\.2 million was disbursed under Ln\. 3161-VAF; US$8\.56 million equivalent and US$1\.77 million respectively was canceled\. The ICR was prepared by Olivier Lambert and Amy Champion, Private Sector Finance Group, Africa Region\. Mmes\. Femandes, Fye, Hilgers and Mr\. Bathia also contributed to this document\. It was reviewed by Ann Rennie, Lead Specialist, and Jerome Chevallier, Manager, Operations Support, Africa Region\. The Borrower provided its analysis that is included as Part III of this ICR\. Preparation of this ICR started during the Bank's final supervision of November 1997 and the completion mission of March 1998\. It was based on materials in the Project file, including the Staff Appraisal Report dated January 2, 1990, the Development Credit Agreement and Loan Agreement, supenrision reports, progress reviews and monitoring reports by the Borrower\. The Borrower contributed to the preparation of the ICR by supplying the views reflected in the final mission's aide-memoire (Appendix A), preparing its own evaluation of the project's implementation and initial preparation, and providing comments on the draft ICR\.  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) IMPLEMENTATION COMPLETION REPORT 2\. EVALUATION SUMMARY 1\. The present operation was the third project in favor of the Banque Ouest Afrncaine de Developpement (BOAD), following the Second Regional Development Project (Ln\. 2242-WAF/Cr\. 1331-WAF), which closed on March 29, 1991, and the Regional Development Credit (Cr\. 969-WAF),, which closed on December 31, 1987\. 2\. Project Objectives and Description\. As stated in the President's report, the major objective of the project was to enable the Bank Group, through BOAD as an intermediary, to contribute to the provision of investment finance to a broad spectrum of viable investment projects in the seven resource-poor countries of Union Mon6taire Ouest Africaine (UMOA), thus helping to strengthen the supply response needed to support structural adjustment reforms which were underway in these countries\. Another objective was to achieve further institutional growth particularly in enhancing the development impact of its operations\. Specifically, this called for (a) an intensification in the promotion of regional integration projects, (b) a shift in favor of private sector investment, (c) measures to address environmental issues, (d) initiation of a study of grass root banking, (e) initiation of a study of the leasing industry, (f) attempt to tap into capital markets\. 3\. The project consisted of: (a) an IDA component that included a line of credit (US$39 million equivalent) to finance subprojects in Benin, Burkina Faso, Mali, Niger, Senegal and Togo and a technical assistance subcomponent (US$1 million) to finance economic and project feasibility studies and consultant services; and (b) an IBRD component in the form of a line of credit (US$15 million) to finance subprojects in C6te d'Ivoire\. The objectives were not modified during project implementation\. 4\. Implementation, Experience and Results\. The objective of providing resources to a broad spectrum of viable investnments projects was achieved\. The IDA line of credit financed 13 subprojects for a total of US$36\.4 million equivalent and the IBRD line of credit financed four subprojects for a total of US$13\.2 million\. About one third of these projects may not achieve their objectives\. BOAD contributed to private sector development through direct lending (28 percent of total amount disbursed) and three actions in the financial sector\. First, BOAD resorted to the local regional capital market to raise CFAF 24 billion in three issues in 1993, 1995, and 1997\. Second, BOAD in  partnership with donors and commercial banks established a venture capital company (CAURIS Investissement), and a regional guarantee fund (GARI) for private investments, both of which became operational in late 1995\. Third, BOAD was instrumental in creating an adequate fiscal environment for the leasing industry in the member countries\. 5\. Supporting the institutional development of BOAD is assumed reached because BOAD has a sound financial situation, as evidenced by its capital adequacy ratio of 38 percent and its profitability\. Under its two-tiered interest rate policy, BOAD has established two windows one for the public sector and another for the commercial sector\. But, beyond the financial sector, the Project has had less success in supporting the regional approach as no regional project' was completed during the period under review\. 6\. Although the overall program cost was in line with anticipated costs, project implementation took longer than initially expected\. Commitments were made beyond 1993 and 60 percent of disbursements occurred during 1996 and 1997\. The loan/credit closing date was extended by one year to December 31, 1997\. A key factor behind the slow start was the macroeconomic environment prevailing at that time in BOAD's member countries\. The external adjustment (in January 1994 the CFA Franc was devalued by 50 percent vis-a-vis the French franc) restored the competitiveness of those countries\. As a result, new investments became profitable and bankable projects were presented both in the public and private sectors\. 7\. Based on three criteria (financial situation, contribution to project design, access to resources), BOAD is not yet sustainable, but on the path to sustainability\. BOAD has a sound financial situation\. However, only about 50 percent of the subprojects benefited from a valuable technical input from BOAD\. Finally, BOAD has only limited access to fund, as it cannot independently fund all of its lines of business by itself 8\. BOAD's performance during project implementation was satisfactory\. Disbursement requests were reviewed by the Bank and proved satisfactory\. Procurement documents are reviewed systematically by BOAD\. 9\. Bank performance has been unsatisfactory\. Initially, at appraisal, the Bank had recognized that the CFAF was overvalued vis-a-vis the FRF\. This project was prepared before lessons were drawn from BOAD I and II projects\. The SAR is not clear about the objectives of the project, specifically with respect to institutional strengthening\. The Bank was not well organized to handle this project\. 10\. Overall, the outcome of the project is rated marginally satisfactory based on the assumed weight of the different objectives\. The major benefits proposed have been realized\. It must be noted that BOAD and IDA did not share the same definition of a regional project (see paragraph 21)\. \.i\.  11\. Summary of Findings, Fuiture Operations and Key Lessons Learned\. There are two major findings\. First, since financial intermediary lending is as efficient as the institution itself, the Bank should insist that the institution has a clear strategy and adequately measures its own impact\. Second, in the context of policy framework coordination, the Bank team in charge of the proposed project should include sector specialists, in addition to financial sector specialists\. 12\. Fundamental changes have occurred both at the global and at the sub-regional levels\. In this new context, BOiW has to review fundamentally its role\. BOAD is currently engaged in developing its strategy for future operations in a business-as-usual mode, when the whole environment is undergoing radical changes\. Until BOAD formulates a clear strategic vision addressing those changes, while ensuring that key principles, such as (i) selectively building on comparative advantage, (ii) complementing but not competing with the private sector, and (iii) financial transparency while ensuring accountability, are respected, it will be difficult for IDA to justify additional funding support\. iii  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) IMPLEMENTAT][ON COMPLETION REPORT 3\. PART I - PROJECT-IMPLEMENTATION ASSESSMENT Project Identitv Name : Third Regional Development Project Credit/Loan Number 2089-WAF / 3161 -WAF RVP Unit Africa Region Regional : 3anque Ouest-Africaine de Developpement Sector All sectors, except social infrastructure A\. PROJECT OBJECTIVES AND DESCRIPTION 1\. On November 14 1973, the West African States ratified a Treaty creating the West African Monetary Union (UMOA)\. The by-laws of the Central Bank of the West African States (BCEAO) and an Agreement establishing the Banque Ouest Africaine de Developpement (BOAD) were annexed to that Treaty\. BOAD was established as a regional financial institution, whose broad mandate was to promote economic integration and balanced development among the member states\. In January 1994, in parallel to the devaluation of the CFA Franc (CFAF) vis-a-vis the French Franc (FRF) by 50 percent, that Treaty was complemented by another Treaty establishing the West African Economic and Monetary Union (UEMOA)\. Presently, UEMOA includes Benin, Burkina Faso, Cote d'Ivoire, Niger, Mali, Senegal, Togo and Guinea Bissau, which joined the Union in May 1997\. 2\. The present operation, approved in February 1990 was the third in favor of BOAD and was in the chain of almost continuous assistance, both technical and financial, provided by the Bank to BOAD\. When BOAD started operations in 1976, three Bank 1  staff members were made available to BOAD to help it in its formative years\. An advance Project Preparation facility was extended in 1979 to help finance feasibility and engineering studies of potentially successful regional development sub-projects\. Two IDA/IBRD blend operations2 were approved in 1983 and 1990 to finance such projects\. 3\. The Third Regional Development Project was thus a follow-up to the two earlier projects\. It was justified on the basis that the thrust of the BOAD's objective of furthering economic integration of UEMOA countries was congruent with the Bank Group's own objectives in that part of Africa, and because of BOAD's institutional capacity as an efficient financial intermediary\. The SAR for the Project concluded "BOAD is\. a suitable intermediary for channeling IDA/IBRD funds to development-oriented investments in the UMOA zone"\. 4\. As stated in the President's report, the major objective of the project was to enable the Bank Group, through BOAD as an intermediary, to contribute to the provision of investment finance to a broad spectrum of viable investment projects in the seven resource-poor countries of Union Monetaire Ouest Africaine (UMOA), thus helping to strengthen the supply response needed to support structural adjustment reforms which were underway in these countries\. Another objective was to achieve further institutional growth particularly in enhancing the development impact of its operations\. Specifically, this called for (a) an intensification in the promotion of regional integration projects, (b) a shift in favor of private sector investment, (c) measures to address environmental issues, (d) initiation of a study of grass root banking, (e) initiation of a study of the leasing industry, (f) attempt to tap into capital markets\. The objectives were not modified during project implementation\. 5\. The project consisted of: (a) an IDA component that included a line of credit (US$39 million equivalent) to finance subprojects in Benin, Burkina Faso, Mali, Niger, Senegal and Togo and a technical assistance subcomponent (US$1 million) to finance economic and project feasibility studies and consultant services; and (b) an IBRD component in the form of a line of credit (US$15 million) to finance subprojects in C8te d'Ivoire\. 6\. As part of project preparation, BOAD formulated a Statement of Development Strategy, 1989/92\. Under that strategy BOAD was to pursue, inter-alia, the following objectives: * Significantly increase the share of its financing of the private sector, to about 35 percent of its total financing; * Give full consideration to the environmental aspects of projects; 2 Until January 1994, Cote d'Ivoire was IBRD eligible, while all other UEMOA countries were IDA eligible\. 2  * Promote projects with a potential for regional economic integration, with the objective of doubling the proportion of regional projects from the 20 percent to a lending target of 40 percent; * Further diversify its funding sources to reduce its dependence on official sources of funding, and to tap international capital markets; and * Initiate studies with a view to deepening the financial and banking sector of the UMOA zone\. 7\. The line of credit was extended under the following conditions\. Subloans would not exceed US$4 million\. There was a free limit of US$2 million for individual subloans subject to an aggregate free limit of 50 percent of the overall amount of the composite line of credit\. As an indicative target 35 percent of total lending was to benefit the private sector\. BOAD was to apply a new interest rate structure comprising a market rate for lending to commercially-oriented projects, and a special (lower) rate, but still sufficient to cover BOAD's full costs, for non-commercial, priority investments by public sector entities\. BOAD agreed to assume the: exchange risk on all its foreign borrowings, which under the fixed parity between the CFAF and FRF was expected to be limited to the fluctuations of FRF vis-a-vis other currencies included in BOAD's foreign liabilities\. BOAD was required to include the calculation of economic and financial rates of return, both of which had to be at least 12 percent, and an analysis of the expected environmental impact, in all its subproject appraisals\. Finally, BOAD was required to credit to a Special Account the net concessional benefits of the IDA funds to be used by BOAD exclusively to finance promotional and development expenditures benefiting its IDA-eligible member countries\. As concerns the TA component, the funds were to be utilized to finance short- term adhoc consultant services to supplement BOAD's in-house staff capacity and to undertake economic, sectoral, and project feasibility studies\. B\. ASSESSMENT AND ACHIEVEMENT OF OBJECTIVES 8\. BOAD's development strategy did not provide a clear vision\. It was a list of actions without specific performance indicators, with the exception of the objectives for private sector investment (to reach 35 percent of total lending during project period) and regional projects (40 percent of lending)\. The project objectives were vague, without a clear sense of priorities\. No attempt was made to define indicators for assessing institutional growth\. More importantlly, the line of credit was extended at a time when the common currency of the sub-region was clearly misaligned, which created an unfavorable environment for private sector develolpment\. 9\. The assessment of this project is proposed under two headings: implementation of loan conditions, and implementation of the Development Strategy\. 3  1\. Implementation of loan conditions\. 10\. BOAD onlent the equivalent of US$49\.6 million for 17 subprojects in six countries within the individual ceiling of US$4 million (ranging between a low of US$0\.72 and 4\.0 million)\. Further, of this amount a total of US$14 million, or 28 percent compared to the indicative target of 35 percent, went to projects in the private sector\. The estimated ex ante rate of return for all sub-projects was 12 percent or greater\. 11\. Based on a technical study financed by the TA component of the Project, BOAD also introduced in 1991 the two-tiered interest rate structure which was further refined in the light of another similar study focusing on the implementation of the new interest rate policy\. Under this policy BOAD has established two windows one for the public sector and another for the commercial sector\. For the public sector the applied rate of interest is based on the equilibrium rate (5\.5 percent in 1997) that covers BOAD's full costs; for the commercial window, the interest rate is based on BOAD's average cost of borrowed funds to be onlent through that window (6 percent in 1997)\. While the latter is not the market rate of interest envisaged in the SAR, the implication of the policy is that as BOAD increasingly relies on market borrowing, the commercial window rate would tend towards the market rate\. 12\. BOAD charges a fee to cover the exchange risk relating to the fluctuations in the FRF rate\. As of December 31 1997, the foreign exchange risk provision account showed a credit balance of CFAF 8\.4 billion, that is about 14 percent of foreign exchange denominated liabilities\. The exchange losses resulting from the 1994 devaluation of the CFAF vis-a-vis the FRF were, however, absorbed by member countries in the form of special grants to BOAD\. 13\. A Special Account was created to credit the difference between the interest income received by BOAD on the IDA component after the deduction of the lending spread (3\.25 percent) and an annually adjusted foreign exchange risk fee\. During project implementation, CFAF 2\.1 billion were credited to this account\. These funds financed seven studies and nine seminars and fora; but BOAD used it essentially to fund its contribution to the operational budget of the UEMOA Commission (approximately CFAF 500 million)\. As of December 31 1997, the Special Account balance was CFAF 1\.4 billion\. 14\. Finally, as required under the agreement, BOAD conducted various studies, including on mutualistic financial institutions (Banques populaires), and on developing the leasing business in the UEMOA region (which concluded that there was a market for the leasing business), and a study on the feasibility of the port of Cotonou\. The technical assistance component (US$1 million equivalent) thus financed four studies for a total amount of US$617,140 equivalent\. BOAD did not use all the funds because some grant money was available from other sources\. 15\. Thus, it can be concluded that all formal requirements, including indicative targets were, by and large, fulfilled\. 4  2\. Implementation of the Developnment Strategy\. 16\. BOAD's development strategy would appear to have had three broad objectives: first, to contribute to the provision of investment finance to a broad spectrum of viable investment projects, to the development of the private productive sector and of the financial sector; second, to further its institutional development; and third, to support the regional approach, by financing regional projects and undertaking economic and sectoral studies of regional interest\. 17\. The objective of providing resources to a broad spectrum of viable investment projects in the resource poor countries of the zone and to contribute to the development of the private sector was achieved\. The IDA line of credit refinanced 13 subprojects for a total of US$36\.4 million equivalent\. Thiree subprojects focused on rural development: two irrigation projects (one in Burkina Faso and one in southern Mali) and one feeder road project also in southern Mali\. Seven of the subprojects were in the infrastructure sector and included road projects, supply of port equipment, and development of the telephone network\. There were also two subprojects in the energy sector in Senegal, including the rehabilitation of a power generator and distribution of electricity\. In the private sector there was one leasing project\. The IBRD component of the line of credit refinanced four subprojects (including three in the private sector) in Cote d'Ivoire for a total of US$13\.2 million\. Two subprojects were in the energy sector (CIPREL and PETROCI) and two were in the agro-industrial sector (SACO and SICOR)\. As evidenced by the estimated ex- ante rates of return, these were all considered to be viable projects\. (See appendices D for the main characteristics and E for the status of subprojects)\. 18\. Based on staff assessment, about 35 percent of subprojects are considered unsatisfactory, or at risk of being unsatisfactory\. This assessment is qualitative and too early for definitive conclusion, as several projects are still in the process of being implemented\. (See Appendix F for a description and rating of the subprojects)\. 19\. BOAD's activities also contributed to the development of the financial sector in three ways\. First, BOAD tapped the local regional capital market to raise CFAF 24 billion in three issues in 1993, 1995, and 1997\. These resources were raised in the form of two bond issues (1993 and 1995) on the Abidjan securities exchange, and one issue on the regional money market, subscribed exclusively by financial institutions of the region, thus making available new financial instruments to the market\. However, there appears to have been no secondary market in these issues, partly because of the lack of alternate investment opportunities for the primiary holders of these bonds\. Second, BOAD in partnership with donors and commercial banks established a venture capital company (CAURIS Investissement), and a regional guarantee fund (GARI) for private investments, both of which became operational in late 1995\. Third, on the basis of a study concerning the feasibility of establishing leasing industry in the sub-region, appropriate adjustments were made by member countries in their tax structure (removing disincentives linked to VAT) to allow for the development of the industry\. Simultaneously, BOAD made available resources for the leasing cornpanies to finance their leasing operations\. As a consequence, leasing has developed into a credible alternative to bank financing\. 5  20\. The-project contributed to further the institutional development of BOAD, which has a sound financial situation as evidenced by its capital adequacy ratio of 38 percent and the profitability of its operations during the whole period under review (1990-97)\. Considering that BOAD is not a profit maximizing institution, its profitability remained adequate: its average Return-On-Assets (ROA) was one percent and its average Return- On-Equity (ROE) was 2\.5 percent for the last four years\. During that period, BOAD improved its risk management and therefore its long term viability\. The Board is monitoring classified assets and provisioning on a quarterly basis\. In order to tap the regional capital market, BOAD has adopted risk management principles for its interventions; guiding principles were submitted to the Board in June 1996 and were approved (see Appendix L for an analysis of risk management policies, financial situation and portfolio)\. A Post Evaluation Unit, which was created in 1991 but, stopped functioning in 1995 and 1996, has been recently reinvigorated\. The Private Sector Unit became a full Private Sector Department enabling BOAD to handle better and more projects in the private sector\. However, while BOAD has considered the environmental aspects of its lending in subproject appraisal reports, little progress has been achieved in enhancing the environmental objective\. BOAD has no specific guidelines or specialized staff to address the environmental impact of its projects, but relies on consultants\. 21\. Beyond the financial sector (see paragraph 19), BOAD had less success in promoting the regional approach: although BOAD led some regional thinking by conducting studies and coordinating some member countries' actions, no regional project was completed during the period under review\. It must be noted that BOAD and IDA do not share an common definition of a regional project3\. BOAD has not been successful in promoting genuine regional development or investment planning on a regional basis, thus not even approaching its stated goal of doubling the proportion of regional projects to 40 percent of its lending\. However, this may be more a reflection of the lack of regional thinking culture in the sub-region, which tends to favor country limited horizons for investment and development, and makes it difficult to achieve true regional behavior\. This culture is nevertheless changing following the 1994 devaluation of the CFAF, the institution of the UEMOA, and the establishment of various regional operational policies and institutions such as the UEMOA Commission, to which BOAD contributed\. 22\. Taking an overall view of the performance during the period under review against agreed upon objectives, it could be reasonably regarded as satisfactory\. 3For IDA, a regional project would involve a regional institution or, at least two countries simultaneously in all the project steps\. BOAD's definition is broader: a regional project contributes to regional integration\. For instance, the Togolese project "Port Autonome de Lome" is considered a regional project by BOAD, because it should have a positive impact on the regional trade between Togo, Burkina and Niger\. With this definition, BOAD claims 59 regional projects and 30 percent of its portfolio (see Part III, page 25 paragraph 3\.4\.5\. "Promotion de l'integration economique")\. 6  C\. PROJECT IMPLEMENTATION 23\. Although the overall program cost was in line with anticipation (see Table 5), project implementation took longer than initially expected, as commitments were made beyond 1993\. After the January 1994 devaluation, BOAD experienced a rapid increase in its activity, to the point that the portfolio increased by 150 percent in three years, thus extending its project processing capacity\. During, 1996 and 1997, as the date of the loan/credit closing was extended by one year, BOAD disbursed 60 percent (see Table 4)\. During implementation, IDA invested on average 8 man-weeks per year to supervise this project (see Table 9)\. 24\. The Bank's response time to requests from BOAD regarding specific subprojects was too slow\. There were three main reasons for the lengthy response time\. First, there was an initial general miscommunication between BOAD and Bank staff, mainly concerning the approval of subprojects (the first several requests for subproject financing sent by BOAD were rejected by the Bank for reasons that were not clear to the staff of BOAD) and the use of the "free limit"\. After a BOAD mission to the Bank's headquarters in September 1993, the issues were resolved and the pace of the project improved considerably\. Second, many of the subprojects were in the infrastructure sector (roads, water, telecommunication), requiring inputs from specialized staff, who were not part of the project team, and whose help was based on goodwill rather than on structured collaboration\. Third, reorganizations of the Africa Region during project implementation impacted the quality of Bank supervision\. In addition, as, a regional project, there was sometimes ambiguity as to which division was responsible for this project and as a result, some project files were misplaced, making the project documentation incomplete\. 25\. Disbursement\. Disbursement requests were reviewed by the Bank and proved satisfactory\. BOAD's control system was adequate and a review of supporting SOE documents revealed that sufficient documentation existed\. However, it appeared BOAD could better monitor certain financial parameters (such as elapsed time of processing requests, or outstanding documentation of special advances) in order to improve its internal processing efficiency\. The periodic reports from such a monitoring system would allow BOAD management to identify and address implementation problem areas\. 26\. Procurement\. All aspects of procurement were reviewed by Africa's Operation Support\. BOAD's review of documents is systematic but not necessarily thorough\. In addition, BOAD's guidelines are outdated and inadequate\. The lack of procurement specialists to assist staff, and the focus on appraisal rather than on supervision, explain the cursory reviews\. Procurement guidelines are being revised with the help of the European Union\. D\. MAJOR FACTORS AFFECTING THE ]?ROJECT 27\. UMOA member countries were in the process of implementing structural adjustment programs when the present operation was being prepared\. The situation of 7  economic hardship was exacerbated by the CFA franc overvaluation, which was not corrected until the January 1994 devaluation\. Before the devaluation, BOAD had difficulty identifying productive investments that would contribute substantially to economic growth in member countries\. Hence, the approval process and implementation of approved subprojects were much slower than anticipated\. After the devaluation, however, BOAD experienced a rapid increase in its activity, as mentioned earlier\. E\. PROJECT SUSTAINABILITY 1\. Subprojects financed 28\. At the time of loan/credit closing, many of the subprojects were still being executed or had recently closed, therefore no project completion reports were available for review (see Appendix E: Status of subprojects)\. Although IDA staff visited several subprojects at various stages of execution throughout the region, no joint subproject supervision was carried out\. It is therefore not possible to adequately assess at this stage the sustainability of the subprojects in general\. For that reason, project completion reports (PCR) for BOAD II subprojects were reviewed\. Three PCRs were available, two for subprojects in the public sector and one in the private sector\. BOAD carried out thorough assessments of all three subprojects, concluding that two were successful and one was not\. This illustrates that BOAD is candid in evaluating its operations and willing to build on its past experience: this process contributes to sustainability\. 2\. BOAD as an institution 29\. BOAD is a financially sound institution, on the path to sustainability\. As a result of technical and financial assistance from the Bank and prudent management, BOAD has become a financially sound institution with a track record of sound policies and practices in its lending and financial management\. It has acquired valuable knowledge of its member countries' economies and their requirements in the development area\. It has established itself as a source of development finance, but probably needs to further establish itself as a source of technical thinking in the UEMOA zone\. 30\. BOAD will be considered sustainable when the three following criteria are met simultaneously\. First, a sound financial situation with capital growth in line with portfolio growth and administrative costs in line with its activity, comparing favorably with financial institutions\. Second, a real contribution to project design and supervision through valuable technical input\. Third, an ability to mobilize its resources\. 31\. BOAD has a sound financial situation with an adequate capital adequacy ratio of 38 percent (see Appendix L)\. Its intermediation margin has improved during the period under review, as it was halved from 7 percent to 3\.5 percent (see Appendix J)\. This is due to a better private sector risk management evidenced by a stable figure for classified loans and since 1995, a low level of specific provisioning (see Appendices I and K)\. These figures can be compared with average intermediation margins of large commercial banks 8  in 1992 of 2\.3 percent in France, 4\.13 percent in the UK or 5\.7 percent in the US\. A greater emphasis on private sector lending will probably reduce further the average size of booked assets, while increasing the number of loans to process\. BOAD will therefore need to (i) ensure that administrative costs remain in line with the size of the portfolio, i\.e\. watch closely loan processing and monitoring and, (ii) ensure adequate contribution of each loan, i\.e\. set margins on a risk adjusted base\. BOAD meets this criteria\. 32\. BOAD's contribution to project design through valuable technical input is difficult to assess accurately\. However, based on (i) the description of the subprojects (see Appendix F), (ii) on whether the project is rated satisfactory at this time, (iii) on the presence of cofinanciers and, (iv) the nature of the cofinanciers, we estimate that nine out of the 17 projects, or 50 percent of' subprojects, benefited from a valuable input from BOAD\. The supervision effort was insufficient, however\. This was mostly due to the greater number of projects processed in the post-devaluation period by a stable number of staff\. With the additional assumption\. that this sample of projects is representative of the overall BOAD portfolio, we conclude that BOAD's contribution needs to be improved and as a result that BOAD does yet meet this criteria\. 33\. Finally the ability to access funds\. BOAD may have a comparative advantage in amounts\. The existence of BOAD may have allowed its borrowers to access funds that would not have been available otherwise\. The credit line from Japan Eximbank (Jexim) may be cited as an example\. Jexim sees it as a better means to increase its exposure to West Africa than lending directly to each country because of economies of scale\. 34\. To finance a public sector operation, however, BOAD is not in a position to raise funds more cheaply than its shareholders and borrowers\. When Burkina Faso borrowed from BOAD, it paid more (intermedliation and margin) than if it had borrowed directly from IDA, therefore implicitly subsidizing BOAD's operations\. However, should BOAD provide value through technical advice, this may not be that important\. 35\. It is safe to state that BOAD is probably one of the best credit risks in the region when it comes to tapping the local capital markets to finance private sector operations\. The recent successes could illustrate this point, although BOAD benefits from a privilege, as revenues from its bonds are tax-exempt\. Nevertheless, should the above tax advantage be terminated, BOAD can probably still access more and cheaper funds than its private borrowers\. This line of business is, however, not yet sustainable for two reasons: first, because BOAD incurred start up costs, essentially in the form of provisions for classified assets; and second, because the funding of those private sector operations is not yet fully market-based\. BOAD does not meet yet this criteria\. 36\. Thus, BOAD is not yet sustainable but assuming no undue political pressures, it should be on the path to replicating, improving and funding its operations with little external technical financial support\. 9  F\. BANK PERFORMANCE 37\. Overall Bank performance has been unsatisfactory\. Initially, at appraisal, Bank staff was aware that the CFAF was overvalued vis-a-vis the FRF\. This foreign exchange risk was not properly assessed\. The macro-economic imbalances did not provide an enabling environment for private sector investment and contributed to a slow project start\. Little disbursement occurred prior to the CFAF devaluation (9 percent in three years until December 1993), which, eventually, limited the losses it triggered\. 38\. This project was prepared before lessons were drawn from BOAD I and II\. As a result the SAR stated overoptimistic goals related to the regional aspects of the project and as written earlier this aspect was not satisfactory\. 39\. The objectives were vague\. The SAR did not specify indicators to monitor the project results, particularly as concerns institutional strengthening\. 40\. The Bank was not well organized to handle this project\. As mentioned earlier, the Bank's response to requests from BOAD regarding specific subprojects was too slow\. G\. BORROWER PERFORMANCE 41\. BOAD's performance during project implementation was, by and large, satisfactory\. The funds were to have been committed by the end of 1993, but subproject identification took much longer than originally anticipated at the time of appraisal, because of poor macro economic conditions and suspensions of countries from the lending program4: commitments were reduced and disbursements became minimal as BOAD did not relax its lending standards\. The IDA/IBRD loan disbursement rate was very slow and by January 1996, had only reached 34 percent and 27 percent, respectively\. BOAD therefore requested an extension of the closing date by one year, from December 31, 1996 to December 31, 1997\. The IDA/IBRD loan disbursement rate increased considerably in 1997 and reached 80 percent and 88 percent respectively by the closing date\. 42\. Increased coordination between BOAD, IDA and other donors would have avoided the situation created by the power generation project in Senegal, whereby BOAD extended a loan to SENELEC (electricity parastatal), under the free limit, after the Bank had indicated that policy and institutional problems had to be solved before extending any new lending to this agency\. Similarly, better coordination among borrowing countries would have helped improve the justification of a road section supported by BOAD in Burkina Faso\. It is expected that this section will be eventually part of the Lom-Niamey axis, but its extension into Togo is not yet planned (See appendix F for a detailed description)\. 4 During the project, Senegal was suspended for 18 months, Togo for 3 years and Niger has been in suspension since May 2, 1991\. 10  43\. Finally, BOAD contributed in an efficient and timely manner to the production of the present Implementation Completion Report\. }I ASSESSMENT OF OUTCOME 44\. Overall, the outcome of the lproject is rated marginally satisfactory\. No specific performance indicators were identified at the time of appraisal by which to measure the project's results but, the major benefits discussed in the SAR have been realized\. L FUTURE OPERATION 45\. The line of credit was approved when macroeconomic conditions were not appropriate\. Subproject approval lagged compared to initial expectations\. Following the CFAF devaluation in January 1994, BOAD invested most of its resources in the processing of new projects\. Most of' these projects are not completed or recently closed, and it is therefore hardly possible, at this stage, to make a well informed assessment of their future operations as we lack the necessary perspective allowing hindsight\. The insufficient focus put by BOAD on supervision in past years makes such an assessment even more difficult\. In addition, sulpervision has been mostly concerned with input and output, not outcome and impact\. 46\. Late 1996, BOAD requested another US$100 million IDA credit\. At that time, the BOAD III lines of credit were 50 percent disbursed only and there was no point in considering a new project\. As conditions have changed, BOAD needs to evolve and Bank continued support cannot be taken fDr granted\. In fact, fundamental changes have taken place, both at the global and the sub-regional levels\. At the global level, the private sector is now recognized as being the main engine of economic growth; the importance of capital markets is increasing as opposed to that of the banking system; public sector investments are being reduced and increasingly focused on social sectors and poverty alleviation; official development aid flows are declining, leading to increased donor coordination with greater emphasis on achieving sustainable results\. 47\. In the sub-region, since the devaluation of the CFAF in 1994, the member countries are coordinating more closely and harmonizing their economic and financial policies, liberalizing and privatizing their economies, creating a regional stock market to deepen and widen of the regional financial system\. In this new context, BOAD has to fundamentally reassess its role\. 48\. BOAD is currently engaged in developing a strategy for future operations in a business-as-usual mode when the whiole environment is undergoing radical changes\. Until BOAD formulates a clear strategic vision that addresses all those changes, while ensuring that key principles, such as (i) selectively building on comparative advantage, (ii) complementing but not competing w(ith the private sector, and (iii) financial transparency 11  while ensuring accountability, are respected, it will be difficult for IDA to justify additional fanding support\. J\. KEY LESSONS LEARNED 49\. The project is rated satisfactory although there is an unsatisfactory component related to regional aspects\. Certainly the BOAD III SAR would have set different goals in that respect if both ICRs for BOAD I and BOAD II had been available for review, including the harmonization of the definition of a regional project\. 50\. Ceterisparibus, financial intermediary lending is as efficient as the institution itself\. Therefore it is essential that the institution has a clear strategic vision\. In this case the strategy note was vague\. It is also important that the institution measures its impact and ensures that its projects have satisfactory and sustainable results on the ground\. The Bank cannot measure the impact of all sub-projects, the institution itself must be able to do it reasonably well, with the Bank concentrating on the methodology used\. BOAD has a capacity to appraise and manage projects resulting in relatively satisfactory outputs; however BOAD does not allocate enough resources to supervision and impact measurement\. 51\. In the context of policy framework coordination, the Bank team in charge of the proposed project should have included sector specialists, in addition to financial sector specialists\. 52\. In the case of financial intermediary loans (FILs), the Bank should delay the preparation of the ICR to better assess the impact or the sustainability of subprojects\. The additional time would allow more subprojects to be completed and hence the analysis would benefit from valuable input\. 12  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIRD REGIONAL, DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) 4\. PART II -- STATISTICAL ANNEXES Table 1: Summary of Assessments A\. Achievement of Obiectives SubstantiaI Partial Negligible Not A_Mlicable Macroeconomics policies \. O 0el Sector policies \.E o O Financial objectives El O o Institutional development O El O ° Physical objectives El El O El Poverty reduction O O 0 El Gender concerns E El El Other social objectives O El El Environmental objectives E O °l Public sector management E ° El Private sector development \. El El E ° B\. Project Sustainability Likely Unlikely Uncertain 0 0 O C\. Bank Performance Highly Satisfactory Satisfactory Deficient Identification 0 0 El Preparation assistance 0 Appraisal \. 0 0 El Supervision El D\. Borrower Performance Highly Satiisfactorv Satisfactory Deficient Preparation 0 El 0 Implementation 0 El 0 Covenant compliance 0 El 0 Operation 0 El 0 E\. Assessment of Outcome Highly Satisfactorv Unsatisfactory Hiehlv SatisfactqEy Unsatisfactory 0 0 0 13  Table 2: Related Bank Loans/Credits Loan/Credit Title Purpose Board Status *___________________ \.________ _________ ______ _ A pproval ,\. _l Preceding Operations BOAD I To finance feasibility and detailed engineering 12/27/1979 Closed on Cr-969-WAF studies for regional development projects\. 12/31/87 BOAD II To strengthen BOAD in its development efforts I 03/08/1983 Closed on Ln 2242-WAF; Cr 1331- and expand its role in regional integration\. 03/29/1991 WAF More specifically, (a) to provide US$ 19\.1 \.million for financing of sub-projects in all sectors, except social infrastructure (health, education and housing) and (b) technical assistance equivalent to US$ 1\. million\. Following Operations BOAD IV The purpose of an eventual following operation \. Identification (3A-PE-16) remains to be defined\. 14  Table 3: Project Timetable Steps in Project Cvcle Date Planned Date actual Identification n\.a\. January 1989 Appraisal n\.a\. May 1989 Negotiations n\.a\. September 1989 Board presentation n\.a\. February 1, 1990 Signing n\.a\. March 30, 1990 Effectiveness Ln\. 3161-WAF May 1990 September 28, 1990 Cr\. 2089-WAF April 27, 1990 Loan/credit closing December 31, 1996 December 31, 1997 Table 4: Credit and Loan Disbursements\. Cumulative Estimated and Actual I 1990 1991 \. 1992 1993 1994 1995 1996 1997 1998 Cumulative \. \. \. \. Estimated 2\.0 8\.0 18\.0 31\.0 41\.0 49\.0 53\.0 55\.0 (US$ m) Cumulative Estimated 3\.64 14\.55 32\.73 56\.36 74\.55 89\.09 96\.36 100 (% ) \. _ _ \. \. _ '' Cumulative Actual 21 21 443 8\.04 19\.63 29\.12 46\.95 49\.63 (US$ m) \. , Cumul\. Actual \. \. \. (%)based on \.42 \.42 8\.93 16\.20 39\.55 58\.67 94\.60 100 amount disbursed \. _ \. _ \. Cumul\. Actual (%) based on total \.35 \.35 7\.34 13\.31 32\.51 48\.22 77\.74 82\.18 project amount Date of Final Disbursement: January 14, 1998 (*): Actual percentages are based in SDRs for the Credit and US$ for the Loan\. 15  Table 5: Program Costs (US$ million) Project component A Appraisal estimate Actual i|Local Foreign jTotal Loca Foreign Total Subproject Financing 170\.0 370\.0 540\.0 362\.3 258\.0 620\.3 Technical Assistance 0\.5 1\.5 2\.0 0\.1 0\.8 0\.9 Total Project cost 170\.5 371\.5 542\.0 362\.4 258\.8 621\.2 Table 6: Program Financing (US$ million) Financing Plan Appraisal estimate Actual l ____________________________ I[ Local Foreign Total Local Foreign Total BOAD 88\.5 - 88\.5 188 - 188 IBRD - 15\.0 15\.0 - 0 0 IDA - 40\.0 40\.0 27\.7 27\.7 OTHER EXTERNAL 276\.5 276\.5 - 231\.1 231\.1 RESOURCES SUBBORROWERS 82\.0 40\.0 122\.0 174\.4 - 174\.4 Total 170\.5 371\.5 542\.0 362\.4 258\.8 621\.2 NB: At appraisal, program costs and financing anticipated an approval period of four years, 1990- 1993\. In order to compare a similar period and take into account the major changes induced by the CFAF devaluation, we extended that period to include 1994\. Actual figures relate to the 1990-1994 period\. 16  Table 7\. Compliance with Credit Conditions CredittLoan \. Covenant Present5 Agreement Type \. Status Description of Covenant Comments Reference \. * Credit Agreement (Cr\. 2089) MP\. 6\.02(b) Project Imp C No sub-projects will be funded in None member states delinquent in their payments to IDA and/or the Bank\. 3\.03 (b) Flow & C All sub-projects to be pre-approved by \. None Utilization IDA, except for sub-projects of up to of Funds $2 million equivalent which fall under the free limit\. Projects in the free-limit category not to exceed US$27 million equivalent in the aggregate\. Loan Agreement (Ln\. 3161) 4\.03 Flow & C BOAD to charge sub-borrowers a \. None Utilization foreign exchange coverage fee\. ; of Funds *\. ; *; 6\.02(f) Project Imp\. C No sub-projects will be funded if None delinquent in its payment to the Bank\. Schedule Flow & C All sub-projects to be pre-approved by None 2-3(b) Utilization the Bank, except for subprojects of up of Funds to $2 million equivalent which fall under the free-limit category not to exceed US$27 million equivalent in the aggregate for subprojects proposed to be financed out of the loan or credit proceeds\. Present status C complied with CD = complied with after delay CP = complied with partially NC= not complied with 17  Table 8: Use of Bank Resources (Staff- Weeks) Stage of Project Cycle Planned Actual Through appraisal (Preparation, N/A\. 11\.5 Preappraisal) ___ Appraisal + Board (Negotiation) - 13\.0 Board 4 Effectiveness i 3 Supervision 77" \.5 Completion i - 10\.0 Total -"- 112\.0 N/A: not available Table 9\. Bank Resources: Staff Missions Performance Rating Stage of Month/ Number g Days Specialized Staff g Types of Problems Project Cycle Year of Persons in Skills Represented jhmplemntatio Development Field n Status g Mact g Supervision I 10/1990 I 5 OperationsOfficer S S Operations Officer II 6/1991 1 5 S Operations Officer III 3/1992 i1 5 i i i Utilization of the line of credit IV 10/1992 I 5 Operations Officer U S slow disbursement V 2/1994 2 5 Operations Officer, j U S slow disbursement Consuhant VI 5/1994 2 5 Operations Officer, S S Financial Analyst VII 3/1995 I1 5 Sr\. Private Sector S S Development Specialist VII 2/1996 i1 4 Sr\. Private Sector U S slow disbursement of Development both lines of credit Specialist Vill 2/1997 2 2 Sr\. Private Sector U S slow disbursement of Development both lines ofcredit Specialist, Financial Analyst IX 5/1997 2 5 Sr\. Private Sector iDevelopment S S Specialist, Financial g gAnalystggg Comoletion 311998 I 2 10 Financial Analyst S S ICR preparation _ _ _ _ _ * \. _ _ _ \. Program Assistant \._ * _ _ 18  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) IMPLEMENTATION COMPLETION REPORT 5\. PART III -- PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE Banque Ouest Africaine de Developpement RAPPORtT D'ACHEVEMENT DU PROJET BOAD III DE LA BANQUE MONDIALE MARS 1998 19  I\. INTRODUCTION La cooperation avec le Groupe de la Banque Mondiale est lune des plus actives que mene la BOAD\. Elle a et initiee des le debut de ses activit6s et est marquee de plusieurs accords d'assistance technique et financiere qui se sont constanument renouveles pour nourrir d'intenses relations de cooperation entre les deux institutions\. L'assistance technique apportee par la BIRD a et multiforme et a concern6 la mise a disposition d'assistants techniques, la fornation de cadres, l'appui institutionnel et l'echange d'informations\. L'assistance financiere s'est concretisee par la conclusion de trois lignes de credit successives d'un montant global de US$ 78 millions (US$3 millions en 1980; US$ 25 millions en 1983 et US$ 55 millions en 1990\.) I:L LE PROJET BOAD m DE LA BANQUE MONDIALE Le troisieme Projet de la Banque Mondiale a la BOAD sign6 le 30 mars 1990 est a deux composantes: le pr& Banque Mondiale 3161 WAF d'un montant de US$ 15\.000\.000 destine a refinancer des pr&s secondaires lies a des Projets productifs implantes en Cote d'Ivoire; le montant maximum de chaque refinancement est de US$ 4\.000\.000; le Cr6dit IDA 2089 WAF d'un montant de DTS 32\.000\.000 destine a refinancer des pr&s secondaires implantes dans les autres pays de rUnion Economique et Monetaire Ouest Africaine (UEMOA) autres que la CMte d'Ivoire comporte deux volets\. A\. Prets secondaires 31 100 000 DTS (montant maximum de refinancement par sous-projet = US$ 4 000 000) B\. Etudes et services de consultants 900 000 DTS (montant maximum de refinancement par dtude = 90 % du couit de la consultance)\. La mise en place de ce troisieme Projet a ete subordonnee a: a) l'Weaboration et l'adoption d'une strat6gie de developpement de la BOAD dont les principaux axes concement : i) le developpement institutionnel de la Banque, ii) la promotion et le financement du secteur prive, iii) la mobilisation de l'epargne locale et la contribution a l'emergence d'un march6 financier sous-regional, iv) la promotion de l'integration economique, v) la mise en place des nouveaux instruments de controle de gestion (audit interne et evaluation retrospective); b) la realisation de trois etudes economiques: i) une etude sur la creation et l'exploitation de nouveaux etablissements bancaires de type cooperatif : ii) une etude sur les perspectives et modalites de d6veloppement d'activites de leasing sur le territoire des Etats membres ; et iii) une etude visant a determiner la faisabilit6 de l'etablissement d'une societe de consultant par l'Emprunteur; c) 1'engagement de la BOAD de mettre en place un r6gimne modifi6 de taux d'int6ret applicables a ses nouvelles op6rations de pret\. 20  M\. LA MISE EN OEUVRE DU PROJET Pour atteindre ses objectifs fondamentaux et conformement aux conditionnalites du Projet BOAD 3 la Banque a elabor6 et a fhit approuver par ses organes deliberants les outils ci-apres qui servent de cadre a ses activites : (1) la Strategie de developpement de la BOAD, (2) l'actualisation de la Declaration de politique gen6rale pour la BOAD, (3) la Strategie de promotion et de financement du secteur priv6 ainsi que les Directives detailles pour la mise en oeuvre de ladite stratgie\. La mnise en place de ces outils par la Banque s'inscrit dans le cadre des efforts d'actualisation de ses textes et procedures en vue de mieux s'adapter aux exigences du secteur priv6\. Dans la meme veine, rapprobation et la mise en oeuvre du Projet regional d'appui mstitutionnel a la BOAD pour la promotion du secteur prive dans les pays de l'UEMOA, finance par la Comnnission de l'Union Europeenne et la Banque en mai 1995, ont permis a celle-ci de poursuivre ses efforts d'adaptation de ses textes de base, regles et manuels d'intervention\. En effet, ce Projet comporte quatre (04) composantes: (i) un appui institutionnel et technique, (ii) des etudes sectorielles et diagnostiques d'entreprises, (iii) l'organisation d'une table ronde, et (iv) la formation\. L'execution du Projet BOAD 3 s'est faite dans un environnement marqu6 par une periode d'atonie des economies des pays de l'UEMOA suivie d'un ajustement de la parite des FCFA par rapport au FF (intervenu en janvier 1994)\. En outre le Traite de l'UEMOA transformant l'Union Monetaire en une Union Economique et Monetaire en vue d'une accel6ration du processus d'integration economique, a et signe en janvier 1994 et est entre en vigueur en aouit 1994\. C'est dans ce contexte de mutation de l'environnement de la Banque et d'adaptation progressive de r'action de celle-ci que le credit IDA 2089 WAF et le Pr& BIRD 3161 WAF, respectivement entres en vigueur le 27 avril 1990 et le 28 sept=mbre 1990, ont ete ex6cut6s\. Les dates linmites d'imputation et de mobilisation ont ete prorogees une seule fois du 31\.12\.1996 au 31\.12\.1997\. 3\.1\. Le Pret de developRement 3 161 WAF Les prts de cinq (05) projets secondaires du secteur prive implant6s en CMte d'Ivoire concenant le secteur priv6 ont e imputes sur le pret de developpement 3161 WAF a hauteur de 100 % de l'enveloppe du credit (US$ 15 000 000)\. Ils se repartissent comme suit: - deux (02) operations dans le secteur de l'energie (CIPR-EL et Bloc CII 1); - deux (02) operations dans le secteur de I'agro-industrie (SACO et SICOR); - une (01) operation dans le domamne sanitaire (Centre Ophtalmologique d'Abidjan)\. Des cinq (05) operations, seul le prit secondaire concernant le Centre Ophtalmologique d'Abidjan n'a pas connu de tirage\. Sur le plan Financier, I'execution du Pret s'etablit comme suit: Montant Autclrise Montant Tire Taux de Ralisation \. \.)\. \. (U\. L \. \. \. ,\. \. \. (o \. Pret secondaires \. 15 000 000 13 232 662 \. 88% Le dMtail des utilisations figure en annexe I\. 21  3\.2\. Credit de developpement 2089 WAF 3\.2\.1\. Volet A = refinancement de prets secondaires Quinze (15) pr&s secondaires dont un (1) conceme le secteur prive (credit bail au Senegal) ont ete imputes sur le volet A du credit de developpement 2089 WAF a hauteur de 100 % de l'enveloppe du credit (DTS 31 100 000)\. La repartition sectorielle desdites autorisations est la suivante: Secteur public - neuf (09) Projets d'infrastructures (routes modemes, ports, aeroports et t6l6communications); - trois (03) Projets de developpement rural; - deux (02) Projets d'energie\. Secteur prive - un (01) Projet de credit bail; 3\.2\.2\. Volet B - Etudes et Missions de Consultance Quatre (04) operations ont ete imputees sur le volet B du credit de developpement 2089 WAF pour un montant global de DTS 540 061 soit 60 % environ de 1'enveloppe du credit (DTS 900 000) et concemnent les etudes suivantes: - deux (02) etudes sont relatives a la creation et a l'exploitation de nouveaux etablissements bancaires (Banqu - une (01) etude conceme une mnission de Consultance en faveur de la Banque (etude sur les taux d'intret); - une (01) etude se rapporte & une etude de factibilite (rehabilitation du Port Autonome de Cotonou au Bnin)\. 3\.2\.3\. Execution globale de la ligne de credit L'execution de la ligne de credit s'etablit comme suit: Montant Crdit Montant Autorie Montant Tire Taux de D TS p)TS \. *\. S2 Realisation VOLET A Prets secondaires 31100 000 I 31 100 000 25 159 969 81% VOLET B * Etudes et Consultants 900 000 \. 540 061 444 124 49% TOTAUX 32 000 000\. 31 640 061\. 25 604 093 \.80% Les details de l'utilisation des volets A et B figurent en annexes II et Im\. 22  3\.3\. Autres constats dans la mise en oeuvre du Projet Le demarrage du Projet a ete marque par des difficultes\. S'agissant du pret BIRD, pendant les trois premieres annees apres la mise en place du credit, aucune des trois (03) demandes d'imputation de sous-projets implantes en COte d'Ivoire n'a recu l'accord de la Banque Mondiale\. Le delai de r6action de la Banque Mondiale a ete en moyenne de deux (02) mois\. En ce qui concerne le Credit IDA 2089 WAF, sur dix (10) Projets proposes au refinancement sur la ligne de credit, les suites donn6es par la Banque Mondiale se sont presentees comme suit: - deux (02) Projets ont e acceptes; - cinq (05) Projets ont ete refus6s; - trois (03) Projets ont eu une re)onse d'attente\. Les delais de reaction de la Banque Mondiale ont e en moyenne de quatre (04) mois, avec un delai extreme de neuf (09) mois\. Cette situation a conduit la Banque a depecher une mission a la Banque Mondiale du 20 au 24 septembre 1993\. Celle-ci a permis au regard des r6sultats obtenus, de dissiper des incomprehensions et de clarifier les procedures d'imputation notamment sur (( free limit >)\. 3\.4\. Mise en oeuvre de la Strat6ie de developpement de la BOAD dans le cadre du Projet BOAD III 3\.4\.1\. Developpement institutionnel de la Banque La Strategie de developpement de la BOAD adoptee en 1989, definit une division et les limites des risques d'intervention dans un Projet, la politique des taux d!int6r8t, la politique de prise de participation et la notion de Projets a caractere int6grateur\. En outre deux guichets ont ete mis en place pour les emplois de la Banque : (1) le Guichet 1 dit commercial est ouvert a toute op6ration d'investissement, de production et de services a but lucratif et commercial, les taux applicables sont ceux du marche; (2) le Guichet II dit special est reserve aux operations de soutien au developpement\. Certains pr&s du Guichet II, notamment ceux du developpement rural et des infrastructures de base, beneficient des interventions du Fonds de bonification\. 3\.4\.2\. Actualisation de la DMclaration de politique generale En relation avec les mutations du contexte economique et institutionnel de la sous-region, la BOAD a procede en 1992 a une actualisation de la eclaration de Politique Generale qui definit les champs d'actions de la Banque ainsi que ses relations avec les institutions financieres existantes\. 3\.4\.3\. Promotion et financement du secteur priv6 En vue de soutenir les politiques et actions de promotion de l'initiative privee dans les pays de l'Union, la Banque s'est dotee progressivement d'outils appropries pour une intervention mieux adaptee et plus significative en faveur de ce secteur\. II s'agit notamment de I'adoption de la Strategie de la BOAD pour le financement du secteur prive en decembre 1990, de la creation en juin 1991 d'un departement specifique charg6 des activites avec les operateurs prives\. En octobre 1995 les moyens de ce departement cnt e renforces par un redeploiement du personnel de la 23  Banque et une Division de l'Analyse et du Suivi des Risques a e creee pour conforter ses activites en direction du secteur priv6\. Les objectifs vises par la Strategie de la BOAD pour la promotion et le financement du secteur prive dans les pays de 1'UEMOA concernent essentiellement : (1) la promotion et le financement des Projets productifs ; (2) le d6veloppement de Projets a caractere integrateur ; (3) la creation d'un environnement favorable a l'epanouissement de l'initiative priv6e ; (4) la mise en place de mecanismes et structures necessaires A l'essor du secteur priv6 ; (5) I'emergence de nouveaux entrepreneurs et la cooperation Sud-Sud\. En outre, la Banque, pour se donner d'avantage de moyens de contribuer a la realisation desdits objectifs, a initie des reflexions pour une meilleure adaptation de ses regles et procedures d'intervention\. Au 31 decembre 1997, les approbations de la Banque en faveur du secteur prive ont atteint 98 milliards FCFA pour 104 operations soit 28,2 % du cumul des engagements nets de la Banque (347 milliards de FCFA pour 251 operations)\. La repartition de ces realisations par type de concours se presente conmme suit: - 51 443 M FCFA pour 42 pr&s directs a essentiellement des entreprises industrielles de valorisation des ressources locales; - 34 762 M FCFA pour 34 lignes de refinancement destinees aux histitutions Financieres Nationales (IFN) en vue du financement des P\.M\.E\.; - 11 843 M FCFA pour 28 prises de participation au capital social d'nstitutions Financieres Nationales, d'entreprises industrielles ou de societes r6gionales intervenant dans le secteur prive\. La Banque a joue un role actif dans le soutien A la restructuration des banques et au renforcement de leurs ressources longues\. Elle a mis en place des lignes de refinancement en faveur des Institutions Financieres Nationales (WN)\. Ces formes d'interventions contribuent a resoudre les problemes de ressources longues d'un nombre important d'IFN des pays de l'UEMOA en permettant un refinancement de Projets d'investissements productifs dans les secteurs d'intervention de la Banque\. La Banque a developpe des operations de cofinancement de Projets prives avec des banques locales lui permettant d'avoir indirectement un suivi rapproche des Projets finances grace aux informations sur l1exploitation communiquees par les banques locales\. En outre les cofinancements permettent aux banques locales de s'impliquer davantage dans le financement des investissements a long terme\. S'agissant du credit-bail dans les pays de l'UEMOA, la Banque a initie depuis 1994, une action de promotion pour developper ce produit\. A cet effet, elle a oeuvr6 pour l'adoption et lharmonisation du regime fiscal du credit-bail et soutenu la creation en 1996 de l'Association Ouest Africaine des Societes de Credit-bail\. Au plan du developpement de l'esprit d'entreprise, la Banque a organis6 des s6minaires en faveur des cadres des administrations publiques et des operateurs econorniques des pays membres de 1'UEMOA\. En plus des actions ci-dessus, la Banque a continu6 de se doter d'instruments appropries pour contribuer a attenuer les handicaps serieux que constituent l'absence de garanties consequentes et de fonds propres suffisants au niveau des op6rateurs 6conomiques prives\. 24  Pour cela, la Banque a contribue entre autres, a la promotion et a la creation: - d'une Societe de Capital Investissement (CAURIS - INVESTISSEMENT), qui a demarre ses activit6s en juillet 1995, pour le renforcement des fonds propres et des quasi-fonds propres des societes; - d'un Fonds de Garantie des Investissements Prives en Afrique de rOuest (Fonds GARI), en collaboration avec d'autres partenaires notamment la CFD, devenu operationnel en septembre 1995\. 3\.4\.4\. Mobilisation de l'epargne locale - et la contribution a l'emergence de un marche financier sous-r6gional A partir de mars 1993, la Banque a lanc6 des emissions obligatoires et des bons\. Ces types d'operations r6pondent a deux motivations principales: - conform6ment a la mission statutaire de la BOAD, contribuer a l'arnorce d'un marche financier regional UMOA, en lui fournissant des titres fiables pouvant faire lobjet de transactions; - lever des ressources financieres en FCFA pour le financement des activites operationnelles de la Banque\. En effet, la premiere emission obligataire de cquatre milliards FCFA lancee par la Banque au mois de mars 1991 dans les pays de l'UMOA a e une premiere et un succes\. Elle a notamment pernis de prouver qu'il est possible de rnaliser des operations financieres regionales a l'echelle de 1'UMOA, d'ouvrir ainsi la voie a d'autres initiatives et d'en tirer des lecons pour la mise en place dun marche financier sous-regional\. Cette operation a e suivie *un emprunt obligatoire de cinq milliards FCFA en 1995 et d'une emission de bons BOAD de 15 milliards FCFA en 1997 portant ainsi les emprunts mobilises sur le march6 int6rieur a l'UEMOA sur un montant de 24 milliards FCFA representant 31 % de 1'encours des emprunts de la Banque\. Ces emissions oni; egalement permis de tester la signature de la BOAD sur le marche financier sous-regional, de s'assurer qu'elle est bonne et de confirmer la qualite de la Banque comme animateur naturel d*un marche: financier regional de valeurs mobilieres\. 3\.4\.5\. Promotion de I'intrion 6conomiquc- La BOAD a initie, en accord avec les autorites nationales concernmes la realisation d'etudes regionales pour aider a l'emergence de Projets integrateurs\. Cinquante cinq (55) etudes ont e ainsi effectuees depuis l'origine de la Banque sur les filieres et secteurs suivants: industrie textile, et filieres avicole et porcine, cuirs et peaux, machines agricole, industrie pharmaceutique, etc\. Elles ont g6nere trente-sept (37) Projets viables dont onze (11) ont ete realises\. La Banque a finance au 31 decembre 1997, cinquante neuf (59) Projets integrateurs pour un montant de 101 666 millions de FCFA, soit 29,2 % de ses engagements cumul6s nets dans les Etats membres\. Bien que cette performance soit ap)preciable par rapport aux realisations d'institutions similaires au niveau de la sous-r6gion et du continent, elle demeure inferieure a l'objectif de 65 % qu'elle s'etait fixe volontairement\. 25  3\.4\.6\. La mise en place de nouveaux instruments de contr8le de gestion La Banque a mis en place deux nouveaux outils de gestion qui viennent renforcer sa capacit6 d'expertise et de contr8le de ses activites, a savoir l'audit interne et l'evaluation retrospective en mai 1991 au sein du Bureau de l'Evaluation, des Operations et de l'Audit Interne (BEAI) rattache au Cabinet du Pr6sident et dirig6 par un Directeur\. IV\. EVALUATION DES PERFORMANCES DE LA BOAD Une des missions de la BOAD est le financement des op6rations de soutien au developpement des Etats membres\. Dans ce cadre, les Projets de developpement rural et de mise en place des infrastructures ont occupet une place de choix dans les interventions de la Banque durant l'execution du Projet BOAD 3 de la Banque Mondiale\. Les facteurs qui ont contribue au succes ou A l'echec peuvent s'apprehender comme suit: 4\.1\. Facteurs de succes Les principaux facteurs de succes du Projet BOAD 3 de la Banque Mondiale sont de divers ordres: - la pertinence des strategies adoptees par les instances decisionnelles de la Banque relative entre autres a la promotion et au financement du secteur prive, a la contribution de la BOAD a l'emergence d'un marche financier sous regional; - la bonne disposition des Etats membres de la BOAD a accepter les adaptations strat6giques proposees; - le reajustement de la parit6 du FCFA par rapport au Franc Francais a donne un nouveau souffle aux economies des Etats membres en permettant une reprise des activites 6conomiques; - la mise en place par la BOAD de Bureaux de Representation a permis un suivi plus rapproch6 des Projets refinances sur les lignes de credit de la Banque Mondiale\. - Les habitudes de travail avec la Banque Mondiale ont facilite les echanges dans l'execution du Projet\. - L'organisation inteme mise en place par la BOAD pour le suivi du Projet a contribue a redynamiser lIex6cution du Projet\. 4\.2\. Les facteurs d'echec Les facteurs qui ont affecte la bonne ex6cution du Projet sont relatifs a: - la lethargie des economies des Etats membres durant la periode precedant le reajustement de a parite du FCFA; - la lourdeur dans la mise en oeuvre des Projets refinances; - la suspension des decaissements qu'ont connu plusieurs Etats membres de la BOAD du fait des impay6s, dont un qui est demeure de maniere constante sous sanction depuis 1991; - quelques insuffisances dans la supervision des Projets refinances\. 26  V\. EVALUATION DES PERFORMANCES DE LA BANQUE MONDIALE 5\.1\. Facteurs de succes - La Banque Mondiale a fait montre de disponibilit6 et de comprehension quand la BOAD a depeche une mission a WASHINGTON du 20 au 24 septembre 1993\. Cette mission a permis de dissiper des incomprehensions et de clarifier les procedures d'imputation notamment sur la "Free Limit"\. - La supervision rapprochee du Projet par la Banque Mondiale au moins deux fois par an a permis d'accelerer l'execution du Projet\. - La souplesse observee par la Banque Mondiale en autorisant que les pieces justificatives souvent volumineuses ne soient pas jointes aux demandes de tirage, a permis d'all6ger les procedures de tirages\. 5\.2\. Les facteurs d'echec Les facteurs qui ont affect6 negativement l'ex6cution du Projet ont trait a - la rotation 6levee des cadres au niveau de la Banque Mondiale; - la depersonnalisation des relations entre la Banque Mondiale et la BOAD au demarrage du Projet a entraine de nombreux rejets de demandes d'imputation; - la lenteur observee dans la reaction de la Banque Mondiale au demarrage du Projet dont la moyenne a e de trois (03) mois avec un delai extreme de neuf (09) mois pour une op6ration\. VI\. IMeACTS INSTITUT[ONNEL, ECONOMIQUE ET FINANCIER L'execution du troisieme Projet de la Banque Mondiale a eu un triple impact 1) institutionnel, 2) economique, et 3) financier\. 6\.1\. Impact institutionnel Les sous-projets soumis au refinancement de la Banque Mondiale ont toujours fait lobjet de conumentaires enrichissants sur le plan methodologique\. Cette contribution a eu un impact favorable sur l'am6lioration de rexpertise des cadres de la Banque et sur le developpement de nouveaux m6tiers (credit-bail, capital-risque, 6missions d'emprunts sur le march6 monetaire et sur le march6 financier)\. De meme, la concertation permanente instauree entre les deux institutions a permis un echange d'exp6rience fructueux\. 6\.2\. Impact operationnel et economique 6\.2\. 1\. Pret BIRD 3161 WAF Le Projet a apporte un appui a l'action de la Banque dans le secteur prive en refinancant cinq (05) sous-projets (CIPREL - BLOC CI - 11 - Centre International d'Ophtalmologie d'Abidjan - SACO - SICOR) pour un montant total de 7 714 M FCFA\. En dehors du Projet de Creation du Centre International d'Ophtalmologie d'Abidjan, dont le demarrage des travaux n'a pu s'effectuer avant la cl6ture du Projet, rex6cution des autres sous-projets s'est effectu6e de maniere satisfaisante\. 27  Du point de vue de l'impact 6conomique, l'execution des Projets d'energie a permis i) la valorisation des gisements de gaz naturel existant, ii) la couverture du deficit 6nergetique du pays, iii) la reduction de cout de production de l'energie electrique de source locale, et iv) la valorisation des ressources locales\. II en est de meme pour les Projets agro-industriels dont la realisation a eu un impact tres significatif dans l'conomie en permettant notamment aux nationaux de participer plus activement au d6veloppement economique, (privatisation) et en apportant une valeur ajoutee aux productions interieures\. 6\.2\.2\. Cr6dit IDA 2089 WAF En ce qui conceme les Projets publics, les sous-projets refinanc6s ont contribue en la realisation ou en l'amrnagement de 230 km de routes bitumees, 211 km de pistes rurales, l'am6nagement de 258 ha de p6rimetres irrigues, 167 forages positifs dont 16 equipes de pompes solaires\. Le Projet a egalement permis la rehabilitation de centrales thermiques, de reseaux d'eau et d'electricite\. II a contribue a l'amenagement de terre-pleins et d'autres infrastructures portuaires\. L'impact des Projets d'infrastructures routieres sur les economies des pays concernes se traduit par la reduction des couits d'exploitation des vehicules et des effets induits sur la securite du transport et la conimercialisation des produits agricoles et manufactures\. Les deux demiers Projets cites ont permis notamment de desenclaver les pays de 1'hinterland en leur offrant un acces sur la mer et en favorisant l'int6gration economique\. S'agissant specialement du sous-projet "Amenagement et Assainissement des voles urbaines dans le District de Bamako", l'impact est non seulement economique mais aussi environnemental parce qu'il touche plus de 75 000 habitants et contribue a diminuer la pollution de P'air\. En outre 1'exploitation des perimetres agricoles realises (258 ha) a entrain6 un accroissement de la production vivriere de la zone d'intervention du Projet et am6liore l'autosuffisance alimentaire\. L'hydraulique villageoise avec 167 forages realis6s permet de donner de l'eau potable et saine A de centaines de milliers de personnes\. La rehabilitation des surchauffeurs de la Centrale de CAP des Biches a eu pour impact d'eviter beaucoup de delestages nuisibles au fonctionnement des installations\. Enfin, le troisieme Projet a contribue a l'approfondissement du secteur financier dans la zone de l'Union Economique et Monetaire Ouest Africaine (UEMOA)\. 6\.3\. Impact financier Le Projet BOAD 3 a permis de drainer dans la zone dintervention de la Banque un flux financier evalue aux environs de 25 milliards de FCFA\. Les durees des lignes de credit IDA (40 ans dont 10 ans de differe) permettront a la Banque de recycler lesdites ressources pour d'autres Projets de d6veloppement\. II conviendrait 6galement de souligner 1'effet d'entrainement des concours de la Banque Mondiale pour les autres bailleurs de fonds qui ont accepte de renouveler leurs concours a la Banque\. 28  VII\. ]LEs LESONS A TIRER La coop6ration initiee entre la Banque Mondiale et la BOAD rev& aujourd'hui un caractere exemplaire\. Elle a demarr6 avec les activites operationnelles de la Banque en 1975 et il est indubitable que les deux partenaires l'ont mise a profit pour mieux se connaitre et s'apprecier\. On peut alors legitimement penser qu'a ce jour, du fait de cette longue p6riode de cooperation, les deux institutions soient disposees a inaugurer ime nouvelle ere de relations faite de confiance mutuelle renforcee et de densification des liens de cooperation\. C'est dans cet esprit que la Banque Mondiale, a l'instar d'autres partenaires, devrait pouvoir desormais accorder une plus grande souplesse a la BOAD, ben6ficiaire du Projet, en lui laissant a la fois une reelle initiative dans l'imputation des sous-projets pressentis et une enveloppe plus elargie (consistante) en terme de free-limit\. Conume la Banque Mondiale l'a initi6 au cours de la pr6paration du rapport d'achevement du present Projet, il serait tout a fait souhaitable que la conception des Projets ulterieurs se fasse, en etroite concertation avec le beneficiaire\. II s'agirait alors de mieux prendre en compte ses specificites operationnelles et les realites de l'environnement econoniique dont il est tributaire\. Par ail]leurs, la BOAD confirme la necessit6 de poursuivre une concertation permanente en vue d'une plus grande znaitrise des procedures des deux institutions dont les actions devront continuer de s'adaLpter aux evolutions de l'environnement\. n y a lieu enfin au niveau de la BOAD d'observer i) une plus grande souplesse dans les procedures d&instruction et de mise en oeuvre des sous-projets finances, ii) une plus grande s6lectivite des Projets, et iii) la mise en place d'un mecanisme de suivi de rex6cution des lignes de cr6dit octroyees i la BOAD\. 29  ANNEXE I SITUATION DE L'UTILISATION DE LA LIGNE DE CREDIT BIRD 3161 WAF PROJETS AUTORISATIONS UTILISATIONS MONTANTS NON TIRES CONCERNES US $ FCFA US $ FCFA US $ FCFA CIPREL C\.I 4 000 000,00 1 963 600 000 4 000 000,00 1 963 600 000 BLOC CI 11 4 000 000,00 2 032 960 000 4 000 000,00 2 032 960 000 - CENTRE 30 000,00 17 100 000 30 000,00 17 100 000 OPHTALMOLOGIQUE D'ABIDJAN 2 970 000,00 1 500 000 000 1 895 299,83 1 023 618 060 1 074 700,17 476 381 940 SACO 4 000 000,00 2 200 000 000 3 337 362,35 1 900 000 000 662 637,65 300 000 000 SICOR 15 000 000,00 7 713 660 000,00 13 232 662,18 6 920 178 060,00 1 767 337,82 793 481 940,00 MONTANT DE LA LIGNE DE CREDIT 15 000 00000 TAUX DE REALISATION AU 31/12/97 88,22% 30  ANNEXE H SITUATION DE L'UTILISATION DE LA LIGNE DE CREDIT IDA 2089 WAF AUTORISATIONS UTILISATIONS RESTE A TIRER DTS FCFA DTS FCFA DTS FCFA PAST ROUTIER SENEGAL 3 000 000 1 252 973 373 2 998 213,77 1 252 973 373 1 786,23 - PISTES RURALES MALI-SUD 2 530 000 1 640 000 000 2 084 946,72 1 576 231 251 445 053,28 63 768 749 A\.H\.A\. LIPTAKO-GOURMA BURKINA 2 830 000 2 077 000 000 2 573 593,88 1 996 025 302 256 406,12 80 974 698 HYDRAULIQUE VILLAGEOISE MALI-SUD 2 430 000 1 562 000 000 1 834 455,34 1 451 429 480 595 544,66 110 570 520 ROUTE PARAKOU-DJOUGOU-NATITINGOU 2 830 000 2 197 245 826 2 824 686,00 2 197 245 826 5 314,00 - ROUTE TINDANGOU-KOMPIENGA 700 000 723 000 000 640 388,65 486 379 283 59 611,35 236 620 717 EQUIPEMENTS PORTUAIRES DE DAKAR 1 400 000 1 069 484 890 1 399 790,54 1 069 484 890 209,46 - SURCHAUFFEURS SENEGAL 1 400 000 1 065 793 635 1 400 389,59 1 065 793 635 389,59 SOGECA-SENEGAL 1 400 000 1 000 000 000 1244 862,90 1 000 000 000 155 137,10 - INTERCONN\.CENTRES SECOND\. SEN\. 1 300 000 1 021 460 000 379 671,27 324 222 301 902 328,73 697 237 699 PDR MALI 2 730 000 2 2000 000 000 - - 2 730 000,00 2 200 000 000 REHABILITATION PAL-TOGO 2 730 000 2 2000 000 000 2 992 242,62 2 415 032 923 262 242,62 215 032 923 TETLE-C\. OLTTATA-RIRTCTA 2 ?3 nnon 2 nnn nnn 000 2 5x4 460904 2 108 796 696 145 539,96 91 203 304 VOIES URBAINES BAMAKO 2 730 000 2 2000 000 000 2 184 268,42 1 791 532 247 545 731,58 408 467 753 AEROPORT DE COTONOU BENIN 360 000 288 000 000 - - 360 000,00 288 000 000 31 100 000 22 696 957 724 25 159 969,74 18 735 147 207 5 940 030,26 3 961810 517 MONTANT DE LA LIGNE DE CREDIT 31 100 00 TAUX DE REALISATION AU 31/12/97 80,90% 31  ANNEXE III SITUATION DE L'UTILISATION DU VOLET B DU CREDIT 2089 WAF OPERATIONS AUTORISATIONS UTILISATIONS RESTE A TIRER CONCERNEES DTS FCFA DTS FCFA DTS FCFA BANQUES POPULAIRES 66 161,68 24 508 800 66 161,68 24 508 800 CREDIT BALU 80 683,34 29 888 182 80 683,34 29 888 182 ETUDE TAUX D'INTERET 8 215,77 6 318 630 8 215,77 6 318 630 - REHAB\. PORT AUTONOME 385 000,00 300 000 000 289 064,15 229 929 674 95 935,85 70 070 326 COTONOU BENIN 540 060,79 360 715 612 444 124,94 290 645 286 95 935,85 70 070 326 MONTANT DE L'ENVELOPPE DTS 900 000 TOTAL DES TIRAGES DTS 444 124,94 TAUX DE REALISATION AU 31/12/97 49\.35% 32  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIRD REGIONAI, DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) APPENDIX A: IICR MISSION AIDE-MEMOIRE AIDE-MEMOIRE DE LA MISSION BANQUE MONDIALE ACHEVE,MENT DU PROJET ,(mars 1998) Une mission de la Banque mondiale a sejourne au Togo du 16 au 26 mars 1998 afin de mener la mission d'achevement du projet BOAD III\. La mission etait constitude de Madame Amy Champion, Assistante de Programmes et de Monsieur Olivier Lambert, Analyste Financier, tous deux du D&partement Secteur Prive Finance de la Region Afrique\. Au cours des semaines precedentes, cette mission avait 6te precedee par trois missions specialisees dans le domaine de passation des marches avec Madame Asha Ayoung du 9 au 14 fevrier, des decaissements avec Monsieur Wolfgang Chadab du 11 au 13 fevrier et des aspects juridiques avec Madame Claudine Morin du 16 au 21 fevrier\. En outre, la mission s'est deplacee au Burkina Faso en fin de semaine afin de visiter trois projets de la Banque Ouest Africaine de Developpement (BOAD)\. La mission de la Banque mondiale a et recue par Monsieur le President Boni Yayi i la fin de Ia premiere semaine\. Elle a eu des seances de travail avec tous les departements de la BOAD\. La mission remercie la haute direction de la BOAD pour la qualite de l'accueil qui lui a ete r6serve et pour sa disponibilite\. La mission tient aussi a exprimer sa reconnaissance aux collegues des cdifferents departements de la BOAD pour leur participation active aux travaux de la mission, la bonne qualite des documents de base ainsi que pour la bonne organisation des seances de travail et des visites sur le terrain\. L LE PRCOJET BOAD m: RAPPELS 1\. Historique et Contexte Le projet BOAD II fait suite au projet BOAD II (Credit 1331 WAF et Prt 2242 WAF) qui lui meme fait suite au projet BOAD I (Credit 969 WAF)\. L'objectifdu projet BOAD I, approuv6 par l'IDA en 27 decembre 1979 et cl6ture le 30 decembre 1987, etait de financer des etudes de faisabilite pour des projets de nature regionale\. Le rapport d'achevement est date du 25 octobre 1991\. L'objectif du projet BOAD II, approuve le 8 mars 1983 et cloture le 29 mars 1991, etait de fournir des ressources a la BOAD pour refinancer ses prets ainsi que des ressources pour beneficier d'assistance technique\. Ce projet a fait l'objet d'un rapport d'achevement en date du 22 decembre 1992\. 2\. Les Objectifs du Projet BOAI, IIL 33  Le projet BOAD HI a ete approuve par le Conseil de la Banque mondiale le 30 mars 1990 et a cl6tur6 le 31 d6cembre 1997 apres une extension d'un an de la date de cloture\. L'objectif poursuivi par ce projet etait: (i) de continuer a renforcer la capacite institutionnelle de la BOAD; (ii) de lui permettre de financer des investissements productifs dans la zone UEMOA; et (iii) de favoriser une approche regionale\. 3\. Descripfion du Projet BOAD III Le projet consistait en une ligne de credit BIRD/IDA d'un montant total equivalent de US$55 millions pour refinancer des projets de la BOAD dans les pays de l'UEMOA\. A l'origine la ligne BIRD (US$15 millions) etait prevue pour la CMte d'Ivoire et la ligne IDA (US$39 millions equivalent) pour les autres pays i\.e\. Burkina Faso, Benin, Mali, Niger, Senegal et Togo\. Finalement US$1 million equivalent de la ligne IDA etait reserve a I'appui institutionnel et aux etudes\. L'Accord portait sur certains aspects lies au refinancement des sous-projets, aux aspects institutionnels et a des actions a realiser\. Accords Iies aux sous-projets: a) refinancement limite a US$4 millions par sous-projet avec 'free limit' de US$2 millions b) taux de rentabilite economique et financier de 12% minimum pour les sous- projets; c) mise en place d'un compte special (compte de contrepartie) dans lequel est credite la difference entre le taux d'int&& paye par les projets et le taux IDA +3,25% de marge d'intermediation autorisee\. Aspects institutionnels: a) rationalisation de la grille des taux d'int&r&t par la creation de deux guichets; b) revue annuelle de la structure des taux d'int&& de la BOAD pour ses clients; c) revue annuelle de la marge devant compenser le risque de change; d) revue annuelle du portefeuille pour determiner le niveau adequat des provisions; e) formulation de procedures concemant l'analyse des problemes environnementaux\. Actions a rialiser: a) la r6alisation d'etudes sur (i) les banques cooperatives; (ii) les perspectives du leasing; et (iii) I'opportunite d'6tablir une societe de conseil; b) l'6laboration d'une strategie de developpement de la BOAD qui, outre les aspects institutionnels susvises, concerne: (i) la promotion et le financement du secteur prive; (ii) la mobilisation de l'epargne locale et la contribution a l'emergence du marche financier sous-regional; (iii) la promotion de l'integration economique; (iv) la mise en place de nouveaux instruments de controle de gestion (audit interne et evaluation retrospective)\. 34  c) la mobilisation des ressources locales\. IL EXECUTION DU PROJET BOAD m 1\. La sitation des deux lignes dk credit a\. La ligne de credit IDA 2089 WAF Sur le volet A de cette ligne, 15 autorisations d'imputations ont ete donnees, par la Banque mondiale, pour le montant total de la ligne i\.e\. 31,1 millions DTS, mais seulement 13 utilisations effectives ont eu lieu pour un montant d'un peu plus de 25,1 millions DTS\. Le reliquat de 5,9 millions DTS a ete annule\. L'utilisation de la ligne ressort donc a environ 81%\. Sur le volet B du credit, le niontant disponible etait de 0,9 million DTS\. Les autorisations concernaient quatre etudes pour un montant total de 0,54 million DTS, mais seulement 0,44 million DTS a ete tire\. Le taux d'utilisation ressort donc a 50% environ et la moitie a ete annulee\. b\. La ligne de credit BIRD 3161 WAF Sur cette ligne, cinq autorisations pour le montant total de US$15 millions ont ete donnees par la Banque mondiale\. Cependant les utilisations ne concement que quatre projets pour un montant de US$13,2 million\. Le reliquat i\.e\. US$1,8 million a donc ete annule\. L'utilisation de cette ligne ressort donc a plus de 88%\. C\. Calendrier des Imputations et DMcaissements Les imputations ont pris plus de temps que prevu (elles devaient avoir lieu avant le 31 decembre 1993)\. Les raisons tiennent a deux facteurs: le contexte macroeconomique d'une part, et d'autre part, A une incomprehension entre la Banque mondiale et la BOAD dans l'instruction des demandes d'imputation par la Banque mondiale\. Les decaissements, quant a eux, n'ont reellement commence qu'a partir du deuxieme semestre 1993, soit pres de trois ans apres la date de mise en vigueur\. Au cours de l'annee 1997 seule, les documents de retraits de fonds indiquent, que pour le pret BIRD et le credit IDA, respectivemenit 30% et 40% des fonds ont ete decaisses\. 35  2\. Les sous-projets a\. Sous-projets refinances sur le ligne de credit IDA Des seances de travail ont ete organisees avec le Departement des Financements Publics (DFP) de la BOAD\. Elles ont pernis a la mission de mieux apprehender les sous- projets dans le secteur public\. La ligne de credit IDA a refinance 13 projets dans le secteur public et un projet dans le secteur prive (SOGEGA) au Senegal\. Le DFP a fourni les fiches de projets, la situation de l'utilisation de la troisieme ligne de credit IDA, et les rapports d'evaluation pour tous les projets\. La moitie des sous-projets est en cours d'execution, et le reste, acheve recemment; les rapports de fin d'execution n'ont donc pas encore et produits\. Parmi ces 14 projets, il n'y a pas un seul projet regional\. La mission a visite sur le terrain trois sous-projets en cours au Burkina Faso: "Route Tindingou- Kompienga", un site du sous-projet "Amenagements hydroagricoles Liptako-Gourma", et "R6habilitation du R6seau de telecommunications a Ouagadougou\." La mission a pu se rendre compte du bon avancement des projets et de la satisfaction des emprunteurs a travailler avec la BOAD et le bureau de representation local\. En ce qui conceme les aspects environnementaux, la mission a pu constater au travers des rapports d'evaluation que malgre l'absence de procedures specifiques cette question a ete traitee dans tous les cas a partir de 1991\. L'Accord de Credit IDA pr6voyait que les taux de rentabilite economique (TRE) de tous les sous-projets devaient etre au minimum de 12 %\. La mission a pass6 en revue tous les calculs de TRE et a constate que tous les TRE anticipes etaient calcules (a 1'exception des projets d'hydraulique villageoise) et que ceux-ci etaient sup6rieurs a 12%\. b\. Volet B de la ligne de credit IDA Le projet a refinance quatre etudes concemant les banques populaires dans 1I'UEMOA, le credit-bail dans I'UEMOA, une etude sur la structure des taux d'inter6ts de la BOAD, et une etude de faisabilite concemant le port autonome de Cotonou qui se traduit a l'heure actuelle par un projet\. c\. Sous-projets refinances sur la ligne de credit BIRD De meme, des seances de travail ont ete organisees avec le Departement du Financement du Secteur Prive (DSP) au sujet des sous-projets dans le secteur prive\. La troisieme ligne de credit BIRD a refinance quatre projets dans ce secteur\. Le DSP a foumi: (i) les fiches de projets pour tous les sous-projets finances sur la ligne de credit BIRD; et (ii) les etats financiers pour CIPREL, SACO et SICOR\. (Le sous-projet SOGECA au Senegal faisait partie de refinancement sur la ligne de credit IDA, bien qu'il soit dans le secteur prive\.) Les derniers etats financiers pour PETROCI manquent et il a et6 convenu que le DSP les enverra a la Banque mondiale a Washington des qu'il les obtiendra\. Parmi ces quatre projets, il n'y a pas un seul projet regional\. De m8me, la mission a obtenu tous les rapports d'evaluation; les rapports d'achevement ne sont pas disponibles parce que les sous-projets sont en cours d'execution\. Quant aux rapports d'evaluation, la mission a verifie les TRE et les taux de rentabilite interne (TRI) pr6visionnels qui ont tous depasse le minimum de 12 % prevu dans l'accord de pret\. L'aspect environnemental a ete examine dans tous les cas\. 36  3\. L'institution a\. La gestion des risques La gestion des risques n'appara^it pas tres contraignante mais est structuree\. D'apres le Departement Finance et Comptabilite (DFC), la BOAD respecte tous les ratios lies a la gestion des risques\. Les credits\. La BOAD n'est pas soumise a la Loi Bancaire de l'UMOA et par consequent a la Commission Bancaire\. La BOAD n'as pas non plus l'obligation d'appliquer le plan comptable bancaire\. Cependant, elle I'applique dans un souci de transparence compte tenu de son activith de marche\. C'est le Conseil des Ministres qui a fixb les regles relatives aux limites d'interventions\. Les regles distinguent le secteur public et le secteur prive; celles-ci sont plus restrictives dans le cas du secteur prive; neanmoins, a l'inteineur du secteur prive, les institu1tions financieres, les pr8ts directs aux projets de privatisations (non d6finis), les projets regionaux et les projets miniers et energetiques ben6ficient des memes regles que les projets du secteur public\. Les regles concement les engagements par rapport aux fonds propres effectifs et la division des risques\. Une provision de 1 % sur les encours publics est constituee pour prot6ger la BOAD contre les delais'de paiement, une provision g6n6rale de 3% des risques prives est aussi constituee\. La tr6sorerie\. Jusque recemmnent, la BOAD n'avait d'autre choix que de placer sa tresorerie aupres de la BCEAO\. Avec la mise en place du march6 monetaire approfondi, la BOAD s'est dotee de principes directeurs pour intervenir sur ces marches en tant que placeur\. La duree maximum des placements est de 25 mois ce qui peut apparaltre un peu long\. La BOAD s'est dotee de trois types de limites: une limite globale, par operation et par contrepartie\. Il a aussi et institue un comite de placement dont le role est de faire une recommandation au President, sur la base d'une note d'analyse\. Les emprunts\. Ils sont limites par le plus petit des deux montants: 300% des fonds propres effectifs ou par le capital sujet Ai appel\. Le risque de change\. Une provision, couvrant le risque de fluctuation entre le franc francais et les autres devises d'emprunt, est constituee chaque annee\. La determination du taux de provision est donc limitee aux fluctuations entre le franc francais et les autres devises d'emprunt\. En 1997, ce taux etait de 0,5 % de l'encours des pr8ts approuves au cours de l'exercice\. Ce taux est determine par un modele qui applique aux risques de change constates de l'e:ercice precedent, un coefficient de fluctuation determine et a partir des differences des taux des obligations a 10 ans des principales devises d'endettement de la BOAD\. La BOAD n'est pas autorisee a preter en devises et ne peut conserver de la tresorerie en devises\. Au 31 decembre 1997, le fond de couverture de risque de change affiche un solde de crediteur de plus de 8 milliards FCFA pour\.un encours d'emprunts en devises, de plus de 56 milliards FCFA\. Le risque de taux\. Celui-ci est limite dans la mesure oii les taux d'intervention de la BOAD sont calcules a partir d'un couit moyen des ressources appele le taux d'equilibre\. II n'existe pas encore d'instruments de gestion du risque de taux en ce qui concerne les placements\. b\. La situation financiere 37  La situation financiere de la BOAD est bonne malgre 1'evenement majeure qu'a constitue la devaluation du franc FCFA de 50% par rapport au franc francais en janvier 1994\. Le ratio de solvabilite international a baisse au cours de la periode 1990-97 de 71% a 38% au 31 decembre 1997\. Les sources de financement\. Le capital autorise de la BOAD ressortait A FCFA 240 milliards au 31 decembre 1997\. Cependant le capital effectivement lib&e ne representait que 10% environ a FCFA 24,5 milliards\. Le capital sujet a appel (FCFA 184 nilliards) represente la garantie de remboursement des emprunts de la BOAD\. Au 31 janvier 1998, les trois sources principales d'emprunts mobilisees par la BOAD concernaient la Banque mondiale, les emprunts internes (deux emissions obligataires et une emission de papier long sur le marche monetaire approfondi) et Japan Eximbank\. La BOAD beneficie aussi de concours non remboursables pour un montant de FCFA 19,5 milliards, actuellement utilise a hauteur de FCFA 6,5 milliards\. Les fonds suisses et le fonds de contrepartie IDA en constituent les elements les plus importants\. La devaluation a cree une perte exceptionnelle mecanique de plus de 17 milliards de par la reevaluation des emprunts en devises\. Cependant cette perte exceptionnelle est entierement support6e par les Etats membres au fur et a mesure du remboursement des emprunts et donc n'a pas affect6 les fonds propres effectifs de la BOAD qui ont progresse de FCFA 44 a 66 milliards au cours de cette periode\. Les utilisations desfonds\. Au cours de la p6riode 1990-1997, l'encours des prets a ete multiplie par trois, passant d'environ FCFA 43 a 116 milliards\. Les prets au secteur public (risques souverains) sont passes de FCFA 36 a 79 milliards, alors que ceux au secteur prive passaient de FCFA 7 a 37 milliards\. Mais cette croissance ne s'est pas realisee uniformement: en fait l'activite a plutot stagne jusqu'a la devaluation de janvier 1994\. Pendant cette periode la BOAD disposait d'une tresorerie abondante qui a oscille entre FCFA 33 et 45 milliards\. Au 31 decembre 1997, le montant des liquidites atteignait FCFA 40 milliards\. La decrue des taux d'interet, favorable a l'activite economique, a eu un impact sur la qualit6 des revenus de la BOAD: en effet, la part des produits de placement a diminu6 fortement et la part liee aux revenus des prets a augmente\. Pendant toute cette periode les resultats de la BOAD ont et positifs\. Structure des taux d'interets\. La BOAD a institue deux guichets: un guichet public et un guichet commercial\. Le taux applique a un projet depend de la nature de celui-ci et est determine a partir d'un taux de r6f6rence: pour le guichet public, le taux d'equilibre (5,5% en 1997) et pour le guichet commercial, le coat moyen des ressources du secteur prive (6% en 1997)\. 38  le taux de r6ffrence marge ou bonification guichet public taux d'dquilibre rural: -1,7% route: -0,7% secteur marchand: +1,3% guichet commercial cofit moyen des ressources du a travers les IFN: +1 a 2 % _ secteur privd financement direct: +3 A 5 % Le hors bilan\. Le hors bilan de la BOAD est constitue uniquement par les engagements sur pr8ts non decaisses\. Au cours de la periode sous revue ceux-ci sont passes d'environ 63 milliards FCFA a 155 milliards FCFA au 31 decembre 1997\. Cette situation est mise en evidence par un tauix de decaissement qui est passe de 50% a 54% au cours de la periode 1990-97\. c\. L'itat du portefeuille Portefeuille du secteur public\. Au cours de la periode couvrant le projet BOAD HI, ont &e suspendus le Senegal pour un an et demi, le Togo pour 3 ans et le Niger, qui l'est encore actuellement, depuis 1991\. Au 31 decembre 1997, les arrieres des Etats concernent donc actuellement exclusivement le Niger pour un montant FCFA 7,6 milliards dont 2,2 d'inter8ts de retard\. Le Niger se trouve depuis le 2 mai 1991 au stade de suspension des operations de financement\. Portefeuille du secteurprive\. Les impayes sur les prets au secteur prive s'e1lvent a FCFA 4,7 milliard dont 1,2 d'int6r6t de retard et concernent 10 dossiers\. Les deux cr6ances les plus importantes concernent les dossiers SIALIM en Cote d'Ivoire pour FCFA 2,5 mnilliard et African Sea Food au Senegal pour FCFA 656 millions\. Le ratio "cumul des prets declasses-sur-encours des prets au secteur prive" a evolue de 53% au cours de l'exercice 92-93 'a 12% en 19I97 refletant une meilleure maitrise du risque priv6\. De plus, il faut noter que les dossiers probl6matiques actuels ont ete approuves avant 1991 en grande majorite et que depuis 1994-95 aucun declassement de pret n'a eu lieu\. Le portefeuille de pr8ts declass6s est provisionne a environ deux tiers a la fin 1997\. Portefeuille de participations\. La BOAD a pris environ FCFA 12 milliards de participations dans 14 institutions financieres et 7 entreprises\. La valeur brute des participations qui posent probleme s'elevait a FCFA 3,3 milliard soit 27%\. Les trois participations problematiques les plus importantes concernent Air Afrique (FCFA 2,5 milliard), BND Burkina (FCFA 0,5 milliard) et BHCI (FCFA 150 millions)\. Le montant de la depreciation etait de FCFA 2,6 milliard a fin 1997 soit environ 75%\. d\. Les proc6dures Decaissements\. La mission a permis de mettre en evidence que le processus de decaissement est assez elabore de meme que les requetes de retrait de fonds aupres de la Banque mondiale\. Cependant, si les mecanismes de contr8le financier apparaissent adequats, le systeme d'information ne permet pas de suivre les d6lais de paiement\. D'apres la BOAD, les decaissements s'effectuent aujourd'hui dans un delai moyen compris entre deux et trois semaines\. Le suivi des comptes speciaux doit 8tre renforc6 de 39  maniere a s'assurer que les ressources mises en place servent bien a financer le projet prevu\. Les documents justifiant les retraits de fonds aupres de la Banque mondiale etaient disponibles et complets\. Achat de biens et services\. II est apparu que d'apres les documents que les memes procedures s'appliquent tant aux projets du secteur public qu'aux projets du secteur prive\. De plus, il n'y a pas de distinction entre l'achat des biens et le recrutement de consultants\. En fait les procedures stipulent une methodologie sans rentrer dans les details; en effet, les emprunteurs de la BOAD sont senses appliquer les procedures locales des differents pays\. Les procedures explicitent les appels d'offres internationales ou nationales, les procedures sont discutees au cours des negociations et font partie de l'accord de credit\. En ce qui concerne le recrutement des consultants, la BOAD recommande ses propres procedures qui sont assez satisfaisantes\. La revue des documents apparait syst6matique mais n'est pas suffisanument approfondie et ceci pour trois raisons: il n'y a pas de specialistes en la matiere pour assister les responsables de projets; les ressources humaines sont limitees et le personnel se concentre plus sur les 6valuations des nouveaux projets; et, les procedures sont differentes d'un pays a l'autre\. Les procedures apparaissent quelque peu obsoletes et non adaptees en particulier pour les projets du secteur prive\. Ceci n'a pas echappe a la BOAD qui a institue une commission de revision avec l'aide d'un consultant\. 4\. Les Accords depret et de cr'dit II apparait que les accords aient et realises en tres grande partie\. Cependant il apparalt que l'article 3\.01 (c) du contrat de credit IDA relatif aux procedures specifiques environnementales n'ait pas ete respecte en totalite dans la mesure od aucune procedure n'a ete formulee en ce domaine\. L'utilisation du compte de contrepartie pour contribuer au financement du budget de fonctionnement de la Commission de l'UEMOA est a la frontiere de l'accord\. En effet, la definition des utilisations retenues dans l'accord de credit stipulent "des mesures specifiques d'assistance au developpement des Etats membres"\. L'Accord de Credit prevoyait dans son annexe II que la BOAD menerait une etude pour determiner de l'opportunite d'etablir une societe de conseil\. Cette etude n'a pas ete realisee parce qu'elle n'a plus e jugee opportune par la BOAD apres une reflexion approfondie de la question\. Au dela des accords formels, la BOAD avait planifie de mobiliser US$80 millions equivalent sur les marches financiers\. La BOAD a leve FCFA 24 milliards en trois emissions distinctes i\.e\. environ la moitie prevue a l'origine pendant la periode\. Actuellement une emission de 10 milliards FCFA est en cours de placement\. 40  M\. CONCLUSIONS ET LECONS 1\. Conclusions et acquis du proj,et Le projet BOAD III a toutefois permis de renforcer la capacite institutionnelle de la BOAD par la realisation d'etudes, la mise en oeuvre continue des accords notamment l'accent sur la qualit6 financiere du portefeuille avec l'exercice de determination des provisions, la r6vision annuelle de la provision pour risque de change, et la reflexion strategique continue\. Les ressources mises a la disposition de la BOAD lui ont permis d'accroitre son activite et de financer des investissements productifs (+17 projets) dans la zone UEMOA, et cela au dela de ces ressources precises car, fort du soutien de la Banque mondiale la BOAD a pu mobiliser des ressources supplementaires d'autres bailleurs de fonds\. Cependant sans une analyse fine de l'impact des projets qui ne peut etre effectuee au stade actuel (la plupart des projets sont en cours d'execution) il est difficile d'6valuer precisement la contribution reelle de la BOAD au developpement des economies des Etats membres\. L'approche regionale a ete favorisee mais pas au travers des sous-projets\. En effet la BOAD en creant Cauris (capital developpement), GARI (fonds de garantie) et en mobilisant des ressources locales a complete et anime le systeme financier regional contribuant ainsi a le developper\. SorL action en faveur du credit bail, en concertation avec les operateurs economiques et les tresors nationaux a permis de resoudre certains probl6mes emp8chant le developpement de cette alternative essentielle au credit bancaire\. La mission ayant eu des seances de travail avec tous les departements de la BOAD estime que l'institution demeure une institution dans laquelle l'age moyen des cadres est eleve (41 a 45 ans), tres centralisee, hierarchisee et rigide laissant peu de place a l'initiative personnelle et quelque peu deresponsabilisante\. Cet etat de fait a certainement permis a l'institution de rester solide en franchissant les periodes d'ajustement internes et externes de ses Etats membres\. Cependant on peut se poser la question de savoir si cette structure est toujours adaptee a la situation acluelle (environnement en mutation rapide) et donc, si la BOAD peut accompagner, voire preceder, ces mutations\. 2\. Les legons a\. Performance des sous-projets L'impact des sous-projets\. La performance des sous-projets BOAD III ne peut etre analysee au cours de cet exercice car beaucoup d'entre eux sont encore en cours d'execution\. C'est pourquoi la mission a etendu son champ d'action a l'analyse de projets refinances sous la ligne BOAD II et d'autres non refinances par la Banque mondiale mais beneficiant de rapport de fin d'ex6cution\. En effet, chaque projet doit faire l'objet d'un rapport de fin d'execution\. La mission a obtenu les rapports de fin d'execution pour deux sous-projets dans le secteur public finances sur la deuxieme ligne de credit IDA (Cr\. 1331- WAF), le Projet de Centre de Tri Postal au Benin et le Projet Hydraulique Villageoise 41  Houet au Burkina Faso\. Ces deux rapports ont 6te 6labores d'une maniere satisfaisante; les effets sur l'environnement ont ete evalues, et le TRI a ete calcule pour un des deux projets\. L'impact des deux projets a ete positif\. Par exemple, dans le projet au Burkina, tous les villages de plus de 100 habitants possedent maintenant un point d'eau moderne et les femmes ont ete liberees de la corvee d'eau\. En ce qui concerne le projet au Benin, I'impact est le raccourcissement du delai d'acheminement du courrier\. Cependant, cet impact n'a pas et mesure et reste tres qualitatif alors qu'il aurait fallu le quantifier\. La mission a aussi obtenu les rapports de fin d'execution pour deux projets dans le secteur prive refinances sur la deuxieme ligne de credit BIRD (Ln\. 2242-WAF), notamment COSMIVOIRE et CARNAUD\. Ces rapports ont ete elabores d'une maniere satisfaisante; cependant les TRE et TRI ont ete calcules seulement pour le rapport CARNAUD\. La division d'Evaluation des Operations a ete creee en 1991 au sein du Bureau de l'Evaluation et de l'Audit Interne (BEAI)\. Cette division a post-evalue 17 projets faisant l'objet de 14 rapports dont 12 disponibles et 2 en cours de finalisation sur 149 projets executes\. La BOAD n'a pas defini une classification permettant de qualifier l'impact et donc de quantifier le taux de reussite\. Le tableau produit par la Division d'Evaluation des Operations (Etat des projets faisant l'objet d'un rapport d'audit de performance) mentionne que le projet COSMIVOIRE en C6te d'Ivoire compte parmi des operations reussies de la BOAD, bien que le rapport d'audit de performance date decembre 1993 conclu que le projet n'a pas atteint ses objectifs, et rappelle que l'etude de faisabilite et l'evaluation du projet ont ete insuffisantes A plusieurs egards, que la BOAD n'a pas corrige les insuffisances de l'etude de marche et sous-estime le montant de certaines depenses\. Le rapport d'audit de performance tire un certain nombre de lecons utiles pour les interventions de la BOAD dans le secteur prive\. Enfin, il apparait que la BOAD ne fait pas d'exercice systematique regulier pour mesurer la qualite de son portefeuille en terme d' impacts, au dela des problemes de decaissement ou de remboursement\. b\. Performance de la BOAD Analyse du portefeuille de projets sous l'angle de I'impact\. I1 serait souhaitable que la BOAD mette au point un systeme et analyse regulierement la qualite de son portefeuille en terme d'impact reel\. Ces mesures et leurs evolutions permettront de mesurer I'efficacite de l'institution\. En tout etat de cause, il apparait important de suivre la production des rapports de fin d'execution et de favoriser une production plus importante de rapports de post evaluation et peut-etre de presenter ceux-ci au Conseil d'Administration dans un dMlai fixe de la cloture du projet, ce qui n'est pas le cas a l'heure actuelle\. Coordination entre bailleurs\. L'utilisation de la free-limit n'a pas permis dans un cas de coordonner l'action de la Banque mondiale et de la BOAD dans le secteur de l'electricite au Senegal (cas de SENELEC - surchauffeurs du Cap des Biches)\. Sans vouloir remettre en cause le principe de la free limit, il serait souhaitable que la BOAD s'assure de la coh6rence des actions avec la Banque mondiale et les autres bailleurs de fonds lors de chaque projet\. 42  Coordination entre emprunte&rrs\. Un sous projet routier au Burkina (axe Lome- Niamey via Burkina), bien qu'ayant et realise physiquement de facon satisfaisante a eu un impact nul (sur l'augmentation du trafic) car le risque (identifie dans la rapport d'evaluation) de non construction, d[u cote togolais, d'un trongon indispensable, s'est realise\. II conviendrait avant de comnnencer les projets routiers impliquant plusieurs pays, de s'assurer de la coordination elfective des differents pays concemant les axes prioritaires\. Achats de biens et services\. La mission recommande de revoir d'abord les objectifs concernant la supervision de la passation des marches dans les secteurs public et prive, puis de clairement distinguer les deux cas; et en ce qui concerne le secteur public, une certaine harmonisation des procedures des differents pays serait souhaitable\. Decaissements\. II serait souhaitable de mettre en place un systeme de suivi des delais de decaissements\. c\. Perfornance de la Banque mondiale L'evaluation du projet n'a pas suffisamment anticipe l'impact qu'a eu la surevaluation du franc CFA sur le deroulement du projet\. Ce risque avait n6anmoins et6 identifie\. Les d6lais initiaux de r6ponse de la Banque mondiale concemant l' imputation des sous-projets ne sont pas acceptables\. L'equipe chargee de ce type de projet devrait inclure officiellement outre des specialistes financiers, des specialistes en infrastructures (6nergie, eau, routes, telecom) et en agriculture qui seraient charges et responsables d'evaluer les demandes d'imputation et la coherence d'action avec la Banque mondiale et les autres bailleurs de fonds dans leur secteur\. IV\. CALENDRIER, DILIGENCES ET POURsuITE DE L'EtTUDE S'TRATEGIQUE La mission a pu constater que le Rapport d'Achevement de la BOAD est presque pret et s'en felicite\. Ce rapport de synthese (10 pages au plus) fera partie integrante du Rapport d'Achevement officiel\. II devra etre transmis a la Banque mondiale des que possible avec une breve lettre indiquant comment la BOAD entend mettre a profit les lecons tirees\. La mission preparera le rapport d'achevement provisoire comprenant des annexes statistiques et le transmettra a la BOAD pour commentaires avant le 15 mai 1998\. Une fois les commentaires repus, la Banque accomplira toutes les diligences pour soumettre ce rapport avant le 15 juin 1998\. En marge des travaux relatifs a l'elaboration du rapport d'achevement du troisibme projet, des discussions ont porte sur la poursuite de l'etude strategique des activites futures de financement et d'appui de la BOAD en zone UEMOA\. La mission a et6 informee ides decisions prises, concemant cette etude, par les reunions extraordinaires du Conseil d'Administration de la BOAD et du Conseil des 43  Ministres de I'UMOA tenues en fevrier 1998\. Dans le cadre de la poursuite de 1'etude et conformement a I'approche sugg6ree par la Banque Mondiale et approuv6e par les instances de decisions de la BOAD, il a ete retenu que la BOAD proposera a la Banque Mondiale, un projet de termes de reference de I'6tude complementaire pour affiner les strategies de la BOAD\. Cette etude comportera trois aspects: une etude diagnostique de la BOAD, une evaluation sommaire de l'impact de ses financements et une proposition d'affinement des strat6gies tenant compte des conclusions des deux premiers aspects\. II a et6 convenu de confier la realisation de l'etude a Mazars et Guerard\. Afin de s'assurer de r6sultats satisfaisants, pour toutes les parties concern6es a l'issue de 1'6tude compl6mentaire, ce bureau soumettra a l'appreciation prealable de la BOAD et de la Banque Mondiale une note d'approche methodologique des trois aspects de 1'etude complementaire\. L'evaluation approfondie de l'impact des financements de la BOAD pourrait constituer une condition d'accompagnement d'un eventuel 4ame projet\. Lome, le 26 mars 1998 Olivier J\. L\. Lambert pour la mission de la Banque mondiale 44  BANQUE OUEST AFRICAI[NE DE DEVELOPPEMENT (BOAD) THIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) APPENDIX B: EcoNoMIc INDICATORS OF UEMOA COUNTRIES UEMOA Member Country Statistics, 1997 Population GDP GNP Total DebtiGDP Investment-to- Country Share in Per Capita GDP the Union (million) (in CFAF (1996, USS) (external debt (based-on GDI (based-on GDP \. \.billion) \. in 02 i\./) in°O%) \. \. \. \. \. \. v\. \. \. i\., \. Benin * 6 1,238 \. 350) \. 72\.1 18\.0 8\.2 \. \. \. \.----\.----------------------\. BurkinaFaso 11 1,425 230) 51\.01/ 24\.9 9\.5 ~~~~~~~~~\. \. \. \. \. \. Cote d'Ivoire 15 5 984 660 227\.2 18\.5 39\.8 --\. \. \. Guinea-Bissau! 1 181 260 303\.1 16\.0 1\.2 ~~~~~~~~~~------------------\. H i \. \. \. Mali 10 \. 1,478 240 111\.8 258 9\.8 \.l i\.8 e\.r j 10 1\.094 200 85\.8 132 7\.3 SeneSal 9 2,773 570 69\.6 16\.5 18\.4 \. \. \. \. \.;\.T\. \. \. Togo 4 862 300 94\.5 \. 15\.0 5\.7 Raw Data Source: Africa Region Database, April 9, 1998\. / 1996 figure 45  O , \. \. I\. ~~~~0 _ \.i \. \. men \.' ~~~~~~~~~~~~~~~~~~\. \. \.  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) APPENDIX D: CHARACTERISTICS OF REFINANCED SUBPROJECTS AND LIST OF STUDIES Subproject Sector Country Loan Subloan a) BOAD b) IDA Credit 2089 CFAF billion I Hydroagriculture Liptako-Gounna Burkina Imgation 2\.98 2\.10 Burkina-Faso 2 Road rehab\. zone CMDT Mali Rural Development 1\.64 1\.35 Mali 3 Village hydraulic - Mali -Sud Drinking Water 1\.56 1\.58 Mali 4 Paved road reinforcement -Senegal Road 2\.77 1\.25 Senegal 5 Parakou -Djougo Road - Benin Road 3\.00 2\.20 Benin 6 Tindangou-Kompienga road - Burkina Faso Road 0\.72 0\.72 Burkina Faso 7 Mali Urban road rehabilitation- Mali Street Network 5\.00 2\.20 Burkina Faso 8 Port Rehabilitation / Dakar - Senegal Port 2\.00 1\.07 Senegal 9 Port Autonome de Lome - Togo Port 5\.00 2\.20 Togo 10 Urban Telecom - Burkina Faso Telecomununications 5\.00 2\.20 Burkina-Faso 1 Rehabilitation Surchauffeurs 302 - Senegal Energy Production 1\.50 1\.07 Senegal 12 Secondary interconnection centers - Senegal Energy Distribution 3\.00 1\.02 Senegal 13 SOGECA - Senegal Leasing 1\.00 1\.00 Senegal Loan 3161 Loan Subloan US$ million I CIPREL Electricity Product 9\.00 4\.00 CMte d'Ivoire 2 PETROCI (bloc CI-11) Oil I Gas 6\.00 4\.00 CMte d'Ivoire 3 SICOR Agroindustry 5\.00 4\.00 CMte d'Ivoire 4 SACO Agroindustry 3\.00 2\.97 Cote d'Ivoire Credit 2089 Name of study CFAF million Volet B I Cooperative banling institutions Finance 25\.00 UEMOA 2 Leasing Finance 29\.00 UEMOA 3 Interest rate structure Finance 63\.00 BOAD 4 Cotonou port rehabilitation Infrastructure 3\.00 Benin 47  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) APPENDIX E: STATUS OF SUBPROJECTS ,Name of Subprojects Date of first Date of Number of Man-day unit disbursement Completion supervision of supervision expected or missions actual 1 DAKAR Port Rehabilitation - (Senegal) Mar-91 1996 5 30 \. 2 \.Paved road reinforcement -(Senegal) Mar-92 1997 5 30 3 Hydroagriculture Liptako-Gourma (Buriina) Apr-92 1998 4 96 4 Parakou -Djougo Road - (Benin) Mar-94 1998 5 35 \.I\. 5 Rehabilitation Surchauffeurs 302 - (Senegal) Jun-94 1996 1 14 6 Village hydraulic - Zone CMDT (Mai) Dec-94 1998 2 20 7 \.Tindangou-Kompienga road - (Burkna Faso) Dec-94 1997 1 7 8 Road rehab\. zone CMDT - (Mali) Dec-94 1997 2 20 9 \.Secondary interconnection centers - (Senegal) Aug-95 1999 1 7 10 ,Ouagadougou urban Telecom - (urkina Faso) Jan-96 1998 1 15 11 \.SOGECA Leasing - (Senegal) Aug-96 1998 2 6 12 Port Autonome de Lom6 - (Togo) Dec-96 1999 1 10 13 ,Bamako urban road rehabilitation - (Mai) Jan-97 1998 3 12 14 ICIPREL - Cote d'Ivoire Oct-94 1996 0 0 15 ,PETROCI (bloc CI-ll) - Cote d'Ivoire Feb-95 1996 0 0 16 SACO- Cote d'Ivoire Mar-96 1998 1 5 17 ',SICOR - Cote d'Ivoire Dec-96 1999 1 5 48  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) APPENDIX F: DESCRiPTION AND RATING OF SUBPROJECTS A total of 17 subprojects were refinanced under the BOAD III project\. The IDA line of credit refinanced 13 subprojects for a total of US$36\.4 million equivalent\. Three subprojects focused on rural development: two irrigation projects (one in Burkina Faso and one in southern Mali), and one feeder road project also in southern Mali\. Seven of the subprojects were in the infrastructure sector and included road projects, supply of port equipment, and development of the telephone network\. There were also two subprojects in the energy sector in Senegal: the rehabilitation of a power generator and distribution of electricity\. In the private sector there was one leasing project\. The IBRD component of the line of credit refinanced four subprojects (including three in the private sector) in Cote d'Ivoire for a total of US$13\.2 million\. Two subprojects were in the energy sector (CIPREL and PETROCI) and two were in the agro-industrial sector (SACO and SICOR)\. Conclusion On the basis of field visits and conversations with Bank Staff 35% of subprojects are considered unsatisfactory or at risk, of being unsatisfactory (see Table A: Rating of Subprojects in this Appendix F)\. BOAD's supervision was weak\. General Comments * After the 1994 CFAF devaluation BOAD conducted missions to reevaluate the costs of projects which had already been appraised\. In the majority of cases, the devaluation had an impact on the costs and the additional funding needed, was shared among donors, including BOAD\. * Four subprojects closed in 1996 end three in 1997\. The other 10 projects are expected to close either in 1998 or in 1999\. During the period under review, on average, BOAD sent a supervision mission every 21 months and invested 9 man-day per mission (see Appendix E, Status of subprojects)\. 49  Rural Development * The irrigation project in Burkina Faso, in the Liptako-Gourma region, involved six different sites in a sensitive institutional context; the completion mission visited one site (Soubeira)\. This project was approved by BOAD in December 1990\. The developmental objective was to contribute to food security by rehabilitating and developing small and medium size irrigation zones thus allowing rice to grow in winter and vegetables during the off season\. The expected outcome of the project was the (i) rehabilitation of 195 hectares in the irrigation zone below the Bogande, Mani and Tapao dams; (ii) increase in the size of the irrigation zone by an additional 63 hectares; and (iii) creation of a 38 hectares area for flood cultivation\. The project resulted in (i) the rehabilitation of five small dams and the construction of one additional dam, (ii) in all sites, the rehabilitation of existing ditches and in some cases creation of new ones; and, (iii) the construction of six village warehouses\. The total cost for this project was initially estimated at approximately CFAF 2\.5 billion with BOAD providing CFAF 2 billion\. At appraisal 50% of expenditures were identified as foreign expenditures\. Presently, the total cost has been revised to CFAF 3\.5 billion mainly because of the 1994 devaluation but also because the costs were underestimated in 3 sites\. BOAD has increased its loan by CFA 1 billion\. As of late 1997, CFAF 2\.1 billion has been disbursed\. During the visit of the completion mission, it appeared that the project had a positive impact on beneficiaries' income and on food security\. It is the opinion of IDA staff involved in similar projects in the country that these projects are needed in Burkina\. In the cotton growing zone of southern Mali (Bougouni, Sikasso, Koutiala and Fana) two BOAD projects were refinanced by IDA: a feeder road program and water supply project\. * The southern Mali III program was a multi-component, multi-donor, program\. One component consisted in the rehabilitation and the construction of 600 km of priority feeder roads and drainage to open up this isolated region\. This component was financed by BOAD and IDA\. The initial task manager on IDA's side was aware of BOAD's involvement and of the nature of its resources: the TM involved BOAD at all stages to ensure a tight coordination (one procurement package divided in four lots) and took the opportunity to expose BOAD to the Bank's methods on the ground through joint supervision missions\. It is the former TM's judgment that BOAD staff was competent although less rigorous and that they did not emphasize enough capacity building, an important element to ensure sustainability\. This project closed recently on December 31 1997\. This overall program is a success as cotton produced increased from 230,000 tons in 1989 to 560,000 tons in 1997, thus ensuring substantial additional revenue to the local people\. BOAD's contribution cannot be isolated nor this particular component\. Such a project certainly gave BOAD the opportunity to build further capacity in the rural development field\. * The water supply project in the same region is aimed at improving women's lives by shortening the distance to get water and improve health of all beneficiaries\. The output of the project consisted of the creation of 200 new wells, 150 with manual 50  pumps and 50 with solar powered pumps\. It was approved in June 1993 by BOAD's Board and the first disbursement occurred in December 1994\. The total cost of the project is estimated at approximately CFAF 3\.6 billion, with BOAD as the lead donor providing CFAF 1\.5 billion, the FED approximately CFAF 0\.8 billion and, FAD CFAF 0\.3 billion\. This project is almost completed and BOAD has almost fully disbursed its loan\. According to the latest supervision report the following has been noticed: there have been delays in the installation of the pumps; in the case of certain wells, defects in the concrete have been detected; in the case of solar pumps, defects in water valves have been detected\. Roads Four road projects were refinanced under the IDA credit: in Senegal, the Kaolack connection in the context of the transport sector adjustment program; in Benin, the Parakou-Djougou-Natitingou axis; in Burkina Faso, the road Tindangou-Kompienga to the border of Togo; and in Mali, the street network in Bamako\. In Senegal\. BOAD participated in one aspect of the sector investment portion of an IDA-led transport sector adjustment program which was initiated in 1987, but really started in 1992\. For the road sub-sector, the overall objective was to create a sustainable, efficient road maintenance system, ensure a well-maintained network by privatizing road maintenance works and by supporting the rehabilitation of a number of roads, including those that facilitated regional integration, among others\. The objective of the investment in which BOAD participated was to facilitate trading with Mali and Gambia\. The outcome of the project was lower maintenance costs for the 200 to 300 vehicles using these rDads\. The project output is 110 km of resurfaced roads which were in a very poor shape, contributing hence to safeguard the initial investment\. The total cost was; initially estimated to be about CFAF 5 billion (excluding taxes)\. BOAD provided CFAF 2\.5 billion, while IDA contributed CFAF 1\.2 billion\. This project was delayed in 1993 due to the fact that Senegal accumulated arrears with BOAD, which in tum suspended its disbursements\. It was also unable to meet its counterpart funds requirements to the IDA credit due to the difficulty macro- financial situation resulting from the overvaluation of the CFA Franc\. At that time the project was 87% completed\. Subsequently, Senegal became current with its arrears with BOAD, provided its counter part funds to the IDA credit and the project was completed\. During project implementation BOAD conducted five supervision missions\. The overall program is rated satisfactory by IDA for the investment portion\. BOAD's participation in this program was appreciated for the following reasons: it allowed close coordination based on an agreed program, BOAD's country knowledge was useful, and additional funds were needed\. In Benin, the objective was to contribute to improve the farmers revenue in the cotton- producing region of Djougou through better feeder roads and accessibility to and from rural areas\. The project output consisted of the construction of 216 kmn of paved roads linking Parakou-Djougou and Djougou-Natitingou\. The project execution took place between 1993 and 1995 and the project is about to close\. Total costs amounted to CFAF 16 billion which were financed by donors including FED, ECOWAS fund, 51  OPEC fund and BOAD (CFAF 3 billion)\. In 1997, traffic was measured: 200 vehicles per day compared to 132 vehicles per day before the project\. This indicates a positive impact of this project\. * In Burkina Faso, the road from Tindangou-Kompienga to the border of Togo is on the Lome-Niamey axis\. This project can be considered as a regional project as it contributes to facilitate exchanges between two countries via a third one\. It is a 45 km stretch that would contribute to reduce the length of the actual trip by 75 km\. In addition a large dam was built in the Kompienga region\. This road was to contribute to better access to the markets of the additional agricultural production made possible by the existence of the new dam\. After the June 1992 appraisal, the approval by BOAD's Board was delayed by almost one year due to the fact that Burkina had accumulated arrears with BOAD\. The initial estimate was CFAF 2\.1 billion (excluding taxes) but the final cost was CFAF 3\.8 billion due to unanticipated additional work and the CFAF devaluation\. The financing was provided by donors which included ABEDA, ECOWAS fund, IDB and BOAD (CFAF 0\.7 billion)\. The project was completed in April 1996\. However, this project so far has had no impact as measured by a stagnant traffic which is not mentioned in the supervision reports\. The explanation lies in the presently missing 50 km stretch of road in Togo that would complete the axis\. According to BOAD, that project is now ready to be presented to the Board of BOAD for approval\. Donors involved include IDB and ADB\. * In Mali, BOAD was involved in the improvement of the street network of Bamako in the context of the urban development plan agreed between the Malian Government and donors, aiming at improving the efficiency of Bamako and the salubrity of a very low-income district inhabited by 75,000 people\. BOAD's project output was the rehabilitation and construction of 16\.3 km of streets and the construction 8\.2 km of ditches collecting rain water\. The total cost was estimated in 1996 to amount to CFAF 5\.5 billion (excluding taxes)\. The project was appraised in July 1996, the loan became effective in January 1997 and the works started in February 1997\. When ROAD requested the no objection to refinance this project under the IDA credit, the Bank requested that BOAD change the structure of its project to better coordinate with other donors including IDA\. 52  Ports and Telecommunication Additional infrastructure projects financed by BOAD in the context of BOAD III included (i) the rehabilitation of the Dakar Port, (ii) the rehabilitation and modernization of the Lome Port, and (iii) the telephone netwvork extension in Ouagadougou\. * The rehabilitation of the Dakar Port was also part of the Transport Adjustment and Investment Program mentioned earlier\. The expected outcome of this investment project was a more efficient and better maintained port ensuring the sustainabiity of investments\. Three donors were involved: IDA, CFD and BOAD\. BOAD's project output consisted in repairing and reinforcing the embankments, modernizing the medium and low voltage electrical network and modernizing the water distribution system\. The total cost was initially estimated at appraisal in 1990, at CFAF 3 billion (excluding taxes); it was subsequently revised to 3\.8 billion due to the devaluation\. BOAD provided a CFAF 2\.8 biLilion loan\. The project was completed in 1996: containers can be unloaded faster thanks to adequate structures and facilities along with bigger machines; water lealcs have been reduced and water billing improved; centralized management of electricity allows better management linked to movements of ships\. The BOAD mission indicated in the last supervision report dated November 1996 that maintenance allocations and systems were not sufficient\. This was also noted during a visit of an IDA miission to the port\. Nevertheless, it is IDA's opinion that this was a sound project which contributed to make the Dakar port one of the most efficient in West Africa measured by total number of ship movements (+20% between 1992 and 1995) or transshipped volume handled (+13% p\.a\. since 1992) or by time to harbor ships (from 48 hours in 1992 to 15 minutes in 1996)\. * BOAD also financed the rehabilitation of the Lome Port\. The project aimed at improving the port competitiveness by repairing its basic infrastructure which was damaged and modernizing its equipment\. The project output consisted in restoring the principal pier and the acquisitiorL of moving equipment to replace the obsolete and aging fleet\. The project was appraised in June 1995 and the total cost was estimated to be CFAF 5\.7 billion (excluding taxes) of which BOAD financed CFAF 5 billion\. The project was approved in October 1995 and started in 1996 after some initial delays\. It appeared in early 1997 that the cost of restoring the pier had been underestimated due to more than initially expected deterioration\. The increase costs were borne by the Borrower (Port Autonome de Lome or PAL)\. As of December 31, 1997, the loan was 50% disburseid\. In 1997, PAL profit should surge from CFAF 612 million to CFAF 1,500 million due to a 25% increase in traffic from 2 million tons to 2,5 million tons\. This project was visited by an IDA mission in February 1998 and focused on procurement\. Rehabilitation works of the main pier were procured through an international competitive bidding procedure\. A short-list was used to select an international consulting company\. The mission also met with representatives from the borrower, the consulting firm retained and the contractors\. The borrower expressed satisfaction to work with BOAD\. The contractor and consultant confirmed the likelihood of completing the 'works within schedule\. Based on that visit, IDA was satisfied with the implementation of the project\. Although technical studies may have been done too quickly resulting in an initial underestimation of the costs and no policy 53  measures have accompanied this loan such as contracting out certain activities, it is the opinion of IDA staff involved in similar projects in the country that this project was needed and overall beneficial to the Port and that BOAD showed greater responsiveness than other donors\. * In the telecommunication sector, BOAD financed the telephone network extension in Ouagadougou\. The expected outcome is an improved telephone quality, reliability and greater access to new lines\. The project output includes the installation of(i) a second digital switch of a capacity of 25,000 lines, \.(ii) a fixed digital link between the two switches and (iii) extension of the local distribution network to connect new subscribers in Ouagadougou\. The project was appraised in June 1995 and the total cost was estimated at CFAF 7\.8 billion including CFAF 2\.2 billion of taxes\. The BOAD loan was CFAF 5 billion\. The project was visited by an IDA mission and it was noted that it was almost completed\. IDA considers that the project\. contributes positively to the network extension in Ouagadougou which is needed to meet the market demand of telephone access\. Energy Sector BOAD also financed four projects in the energy sector; two were in Senegal (rehabilitation of a power generator in Dakar and improvement of electricity distribution in secondary cities) and two in Cote d'Ivoire (CIPREL and PETROCI)\. * The expected outcome of the first project (rehabilitation of the boilers of two power generating units in Dakar) consisted in a better performance of the power generator\. IDA visited this subproject and also noticed the reduced gas pollution produced compared to furnaces not rehabilitated\. However, the visiting mission also noticed that via BOAD, IDA money financed in part a larger investment project that IDA had turned down in 1992\. The financing by BOAD of this project may have contributed to a delay in institutional reforms that were necessary in IDA's judgment\. At appraisal in 1992, the cost was estimated at CFAF 2\.2 billion (excluding taxes); additional costs amounted to CFAF 1\.7 billion due to the impact of the devaluation\. BOAD finally provided a CFAF 2\.6 billion loan\. The project was completed at the end of 1996 after some delays\. The production of the rehabilitated units increased by 50%, while their specific consumption fell by 11% highlighting the positive impact of this project on electricity generation\. SENELEC (the Senegalese electric company) and the Government of Senegal had already come to IDA requesting assistance to rehabilitate these generators\. IDA's response was positive provided that institutional reforms (mainly reforming SENELEC) were undertaken in parallel\. At that time, SENELEC refused these reforms and turned to BOAD who did not accept immediately because of the position of the Bank and CFD\. However, observant that CFD had agreed to finance another SENELEC investment, BOAD agreed to finance this project\. Then BOAD refinanced that subproject in part under the IDA line of credit using its free limit of US$2 million (without the need of seeking a no-objection)\. During the preparation of the new energy sector adjustment program in January 1997, the Senegalese government finally agreed to privatize SENELEC\. 54  * The second project deals with electricity distribution in Senegal in secondary cities of Darha, Linguere and Touba\. The expected outcome is an increased access to electricity in those three cities\. I'he output is to connect Darha and Linguere to the general interconnected grid and to extend the low voltage grid in Touba to include new areas of that city\. This project was appraised by BOAD in July 1994 and the loan became effective in August 1995 Total cost was estimated to be CFAF 3\.6 billion (excluding taxes); the BOAD loan was CFAF 3 billion\. By mid 1997 BOAD had not disbursed because SENELEC hacl delayed setting up the guarantees agreed, such as the pledging of a trustee account\. Project implementation started recently\. * CIPREL is a private special purpose company, created in 1994, with the Bouygues group as a major shareholder, which aims at generating electricity with natural gas discovered in Cote d'Ivoire\. It was a large project as total costs amounted to almost CFA 37 billion\. The company started to generate electricity in late 1995\. BOAD contributed to the financing plan along with IFC and CFD/Proparco, both in equity with an investment of CFAF 184 million (3% of capital) and debt with a loan of CFAF 4\.5 billion (16% of the debt)\. The 1996/1997 audited income statements show revenues amounting to CFA 14\.3 billion and a profit of CFA 3\.1 billion\. This is a good project\. According to IFC staff involved in the project, the presence of BOAD was appreciated because, at that time in 1995, no private bank wanted to get involved\. * In the early 1980s oil was discovered in Cote d'Ivoire; production of crude oil started in the late 1980s\. PETROCI (which is 100% owned by the Ivoirian state), in association with a technical partner (United Meridien International corp\.) other financial partners, including IFC, decided to develop in 1995 two oil fields (Lion and Panther) in the so-called "CI-I 1"\. Expected output of these fields is 20,000 barrels and 67\.4 million cubic feet of natural gas a day for at least two to three years\. The total development costs were estimated to top US$160 million (CFAF 84 billion equivalent) and PETROCI was to finance 33% or CFAF 28 billion\. The financing plan of PETROCI's share included E][B for CFAF 19 billion, BOAD for 3 billion and a local bank pool for CFAF 6 billion\. BOAD's loan was totally disbursed by February 1996\. But the reservoir is complex, estimates were optimistic and expected output of 20,000 barrels a day did not even last one year: presently production amounts to 12,000 barrels and 97 million cubic feet of gas a day\. Today this project barely breaks even on a cash basis and it remains to be seen whether investors will recoup their initial investment: the 1996 financial statements show a CFAF 27\.6 billion revenue and a profit of CFAF 217 million\. 55  Agro-industrial sector * Through an earlier privatization, SICOR, the largest coconut flake producing company in Africa, became part of the OCTIDE group, one of the largest agro-industrial groups in Cote d'Ivoire controlled by Mr\. Bakou\. The rationale of the project was to control supply (integrate vertically) while allowing expansion and some diversification downstream\. The project consisted of (i) the transfer of assets from Palmindustries (a state owned company) to SICOR, namely 13,000 hectares in three plantations (Jacqueville, Grand-Lahou and Glike), and (ii) the construction of two coprah oil extraction units of 5,000 tons each of raw oil to be located in Jacqueville and Glike\. The total cost of this project amounted to CFAF 5\.6 billion (excluding taxes) of which CFAF 4 billion accounted for the purchase of the industrial plantations\. The lending pool included a loan from the Government for CFAF 1\.7 billion, from BOAD for 2\.5 billion and a pool of local banks for CFAF 0\.5 billion\. The deal was leveraged; but BOAD reduced its risk by involving GARI which guaranteed 50% of its loan to SICOR in addition to the usual collateral\. The loan agreement was signed in December 1996\. During fiscal year 1996, SICOR's sales amounted to CFAF 6\.7 billion and the profit to CFAF 534 million\. The SICOR coconut plant and industrial plantation were visited by IDA in 1997: it was noted that management and the work force were motivated to deliver a success story\. The acquisition phase went ahead but the construction of the two oil extraction units have not yet been built and may be further delayed because, the OCTIDE group is experiencing financial difficulties linked to its coffee and cocoa trading subsidiary\. * SACO is the result of a merger of two companies (SACO and Chocodi) in 1995, in which Ivoirian State owned 35% and 14% respectively, under the auspices of the BARRY Group a world class player in the chocolate business\. BARRY subsequently sold SACO to the Callebeau Group, also a world class player in the chocolate business\. The project output included (i) the installation of a cocoa powder production line, (ii) the modernization and extension of the capacity of the Abidjan press and (iii) creation, in San Pedro, of a new crush and press unit for cocoa beans\. The total cost amount to CFAF 15 billion (excluding taxes)\. In February 1997, the total cost was estimated to be CFAF 16 billion\. The lending pool included Proparco for CFAF 4 billion, EIIB for CFAF 3\.5 billion, BOAD for CFAF 1\.5 billion and a pool of four local banks for CFAF 1 billion; additional financing (linked to the additional costs) was provided by the EIB and the local banks\. BOAD's loan became effective in March 1996\. The project has been implemented swiftly although it raised some procurement issues for BOAD (no bidding process in the private sector)\. The new unit in San Pedro has been operational since September 1996\. In fiscal 1996 year, SACO's sales revenue amounted to CFAF 58 billion and profit after tax to CFAF 1\.2 billion\. It is the opinion of IDA staff involved in privatization in Cote d'Ivoire that this project contributed to increase the share of local input in the final product which is the objective of the Ivoirian government\. 56  Financial sector * BOAD refinanced a Senegalese private leasing company with various shareholders including the IFC and Proparco\. The Borrower is SOGECA (Societe Generale de Credit Automobile) and BOAD provided CFAF 1 billion to develop its portfolio, representing about 10% of projected activity\. The project was appraised in mid 1996 and became effective in December 1996\. By mid-1997, BOAD had disbursed 70%\. SOGECA had sought to refinance one large operation (the leasing of three trucks) and a portfolio of 31 small operations including leasing of cars, computers and medical equipment\. In 1996 the net banking revenue amounted to CFAF 613 million and profit after tax to CFAF 249 million\. It is the opinion of IFC staff involved in this transaction that BOAD seemed to be more risk-averse and less flexible than IFC and that in general, BOAD's involvement seems to have a lesser market signaling effect than a corresponding IFC presence\. Nevertheless, by refinancing SOGECA, BOAD contributed to develop a credible alternative to bank credit --therefore to the development of the private sector-*- and, learnt how to deal with leasing companies as SOGECA was the first transaction of that kind\. 57  44 \. \. z\. \. \. \. \. \. \. \. \. \. \. t\. \. \. so oi\.t 0 cn 'o qzl "O 4- CA 45 12 4
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CD :00 Ch :4:1 Cd cq  BANQUE OUEST AFRICA\.INE DE DEVELOPPEMENT (BOAD) THIRD REGIONA]L DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) APPENDIX G: EQUrrY OWNERSHIP OF BOAD - 1997 (CFAF million) Shareholders Subscribed % Called Paid in To be Paid Subscribed Uncalled Class A Berin 14,200 5\.98 2,850 1,250 1,600 11,350 Burkina Faso 14,200 5\.98 2,850 1,250 1,600 11,350 Cte d'Ivoire 14,200 5\.98 2,850 1,250 1,600 11,350 Guinea Bissau 14,200 5\.98 2,850 -- 2,850 11,350 Mali 14,200 5\.98 2,850 1,250 1,600 11,350 Niger 14,200 5\.98 2,850 1,250 1,600 11,350 Senegal 14,200 5\.98 2,850 1,250 1,600 11,350 Togo 14,200 5\.98 2,850 1,250 1,600 11,350 BCEAO 113,600 47\.83 22,800 9,850 12,950 90,800 Total Class A 227,200 95\.66 45\.600 18\.600 27,000 181,600 Class B France 4,600 1\.94 4,600 3,114 1,486 - Germany 1,000 0\.42 1,000 1,000 - EIB 500 0\.21 500 500 - ADB 2,000 0\.84 500 500 - 1,500 Belgiurn 2,200 0\.93 1,400 800 600 800 Total Class B 10\.300 4\.34 8\.000 5\.914 2\.086 2\.300 GRAND TOTAL 237,500 100\.0 53,600 24,514 29\.086 183\.900 Authorized capital not subscribed 2\.500 Authorized Capital 240\.00) 59  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) APPENDIX H: SIMPLIFIED BALANCE SHEETS (1991-1997) September 30, except 1995-97, December 31 (CFAF million) 1990/91 1991/92 1992/93 1993/94 1994/95 1996 1997 \. Liquid asSets 32,892 35,770 46,093 42,233 41,134 29,514 26,959 Loans 43,540 46,906 51,437 54,467 74,179 91,013 116,509 to government 36,404 36,982 40,762 41,839 58,189 67,956 78,921 \.t iv s \.r \. 7,136 9,924 10,675 12,628 15,990 23,057 37,588 Other6 14,640 15,647 8,676 30,058 35,283 39,636 48,633 TotalAssets 91,072 98,323 109,236 126,758 150,596 160,163 192,101 L i ab\.tieS\. \. CaPital7 44,572 47,497 50,053 50,788 54,523 59,199 66,518 \. \. \. \. Borrowin\.s 16,313 16,601 22,021 36,852 38,723 43,096 55,665 Bonds -- -- 4,000 4,000 9 000 9 000 24,000 \. \.I\. \. \.2 R q \.?L2' Other8 30,187 34,225 33,162 35,118 48,350 48,868 45,918 Total Liabilities 91,072 98,323 109,236 126,758 150,596 160,163 192,101 6 Other assets include: essentially subsidies to be received linked to the reevaluation of liabilities, fixed and intangibles assets\. 7 Excluding callable capital\. 8 Other liabiihties include essentially special purpose funds managed by BOAD\. 60  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-VVAF; Loan 3161-WAF) APPENDIX I: SUMMARY ][NCOME STATEMENTS (1991 - 1997) (CFAF million) Sept\. 30 1990/91 1991/92 1992/93 1993/94 1994/95' 1996 1997 except Dec\., 1995 to 1997 _ Total interest 6,805 7,256 8,116 7,417 9,412 8,041 8,329 \. \. \. On loans to customers 3,612 3,895 4,295 4,704 6,515 6,608 7,048 On liquid assets and 3,193 3,361 3,821 2,713 2,897 1,433 1,281 investments ~~~~~~\. Total interest expense 934 956 1,319 2,047 2,906 2,579 3,123 \. \. Net interest differential income 5,871 6,300 6,797 5,370 6,506 5,462 5,206 Net non interest income 34 88 89 75 122 142 295 Gross operating income 65905 6,38 686 5445 6,628 5,604 5,501 \. \. \. Il,\. \. 1 \. \.Il \. \." \. 'l\.Il,\. I\.I\. Total operating expenses 2 410 2,670 2,795 3,173 4,828 3,605 4,253 Net operating income 3,495 3,718 4,091 2,272 1,800 1,999 1,248 Net specific risks provision 788 902 1,681 1,555 248 109 14 Net general risks provision 62 88 60 90 238 318 403 Earnings before extraordinary 2,645 2,728 2,350 627 1,314 1,572 831 items Net extraordinary items 127 184 87 106 231 78 450 |Netincome before tax 2 772 2,912 2,437 733 1,545 1,650 1,281 Retained profit 2,772 2,912 2,437 733 1,545 1,650 1,281 15 month period 61  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) APPENDIX J: BOAD FINANCIAL INDICATORS AND RATIOS 90/91 91/92 92/93 93/94 94/95 1996 1997 Capital Adequacy Ratio * (%/6) 71 68 70 50 44 40 38 \. \. \. 0\.7\.0\.3\.5\. \.2\. \.0\.9\. 0\.I\. TotalIDebt/Equity Ratio 0\.37 0\.35 0\.52 0\.8 0\.9 0\.9 1\.2 LiquidassetRatio(%) 36 36 42 33 27 21 21 Return on average assets (ROA) (%/o) - 3\.1 2\.3 0\.6 1\.1 1\.1 0\.7 \. \. \. \. \. Return on on average Equity (%) - 6\.3 5\.0 1\.4 2\.9 2\.9 2\.0 Intermediation costs (%/ototal average - 6\.8 7\.2 6\.1 3\.9 3\.6 3\.6 assets) \. Net interest margin 3\.4 3\.0 1\.7 2\.5 1\.8 1\.7 1\.3 \. Loan provisions as % of outstanding 3\.4 4\.1 6\.1 7\.1 5\.8 4\.7 4\.0 Loans * Following major assmtions: -Risk weighted assets: Government risk @ 33%; off balance sheet commitments @ 50% -Adjusted capital: callable capital excluded\. 62  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIRD REGIONAL, DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) APPENDIX K: PORTFOLIO ARREARS Sept\.30, except Dec\. 31, 95 - 97 90/91 91/92 92/93 93/94 94/95 1996 1997 (Currency unit: CFAF mnillion) Total Government risk portfolio 36,404 36,982 40,762 41,839 58,189 67,956 78,921 \. \. \. Arrears 1,684 2,960 3,575 4,141 4,862 5,871 4,693 Principal in arrears 1,123 1,672 2,284 2,943 3,495 4,311 3,462 Interestsinarrears 561 1,288 1,291 1,198 1,367 1,560 1,231 % principal in arrears / Government 3\.1% 4\.5% 5\.6% 7\.0% 6\.0% 6\.3% sk portfolio 4\.4/ Total\.private sector risk portfolio 7,136 9,924 10,675 13,287 15,990 23,057 37,588 Classified loans 3,746 3,761 5,659 6,072 5,597 5,379 4,665 Provisions 915 1,243 2,439 3,081 3,240 2,889 2,897 % Classified loans / Private sector 52\.5% 37\.9% 53\.0% 45\.7% 35\.0% 23\.3% 12\.4V portfolio % Provisions / Classified loans 24\.4% 33\.0% 43\.1% 50\.7% 57\.9% 53\.7% 62\.1° Equity portfolio at cost 2,965 2,515 2,335 5,250 8,337 9,109 11,370 Provisions 465 1,040 1,040 1,170 2,055 665 670 Net value of equity portfolio 2,500 1,850 1,295 4,210 7,667 7,939 9,315J Net value / Portfolio at cost 84\.3% 73\.6% 55\.5% 80\.2% 92\.0% 87\.2% 81\.9o/1 63  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) APPENDIX L: BOAD's RISK MANAGEMENT POLICIES, FINANCIAL SITUATION AND PORTFOLIO It is the Council of Ministers which sets the prudential rules that BOAD is to follow\. 1\. Risk Management Policies Credit risk\. BOAD does not fall under the UMOA Banking Law and, therefore, is not subject to the control of the Banking Commission\. BOAD is also not required to apply the Banking Accounting Plan; however, it does in order to tap the regional capital markets\. BOAD's prudential rules distinguish public sector risk and private sector risk; rules are more restrictive for the private sector; but financial institutions, direct loans to privatization projects (undefined), energy and mining projects, all fall under the same rules as those of public sector (see Table below)\. A provision of 1% on outstanding public sector risk is set apart to protect BOAD against delayed payments, as well as a general provision of 3% of private sector risk\. Table B\. BOAD's prudential rules in percentage of BOAD's effective net worth_ Limit per operation || Limit per borrower Public Loans < <10 loan + equity < 100 Sector Equity < 10 of equity fund l Private Loans [< S loan + equity < 10 Sector Equity |q<lOofeguityfund or <15 In addition, BOAD is to follow those two rules: the sum of the largest public sector risks (in excess of 25% of BOAD's effective net worth) are to remain below 10 times effective net worth; a loan to a private sector project must not exceed 50% of total project cost (excluding taxes)\. With regard to the definition of classified loans to the private sector, BOAD uses the new banking accounting plan definition\. However, this is not adequate because loan repayments are made twice a year in general; there are exceptions and repayments can be set at four times a year (or be specifically adjusted in the case of restructured projects)\. This is to be compared to monthly repayments in the case of commercial banks loans allowing close and regular contact\. When a payment is in arrears or a major event occurred, then BOAD downgrade the total amount of the loan and it becomes classified\. 64  Loans to Governments or guaranteed by Governments (public sector risk) are not classified but only considered to be in arrears\. Liquid Asset Management\. Until recently, BOAD had no choice but to invest its liquid assets with BCEAO\. With the new money market, investors have more choices and BOAD has adopted guidelines be an active participant\. The guidelines specify that the maximum duration of investments is 25 months; this may seem long\. BOAD has adopted in June 1996, three types of limits: a global limit, one per operation and one per counterpart\. Based on a technical note, the Investment Committee recommends an investment to the President\. Borrowings\. They are limited by the smallest of the two amounts: 300% of effective net worth or 100% of callable capital\. The maximum debt:equity ratio of 3:1 for BOAD is to be compared with the present (much too high) rate of 25:1 for commercial banks\. This is a sound rule for BOAD which takes into account the risky business of development\. Foreign Exchange Risk\. A provision, covering the foreign exchange risk between the French franc and other currencies, is constituted every year but not between CFAF and the French franc\. In 1997, this rate was 0,5 % of outstanding loans approved during the year\. This rate is determined by a model which applies, to the fluctuations of the preceding period, a variation coefficient based on the rate differences of 10-year bonds in the major borrowing currencies\. BOAD is only authorized to lend in CFAF and cannot hold foreign currencies\. As of December 31 1997, the foreign exchange risk provision showed a credit position in the amount of CFAIF 8 billion for an outstanding borrowing portfolio in foreign currencies of more than CFAF 56 billion that is a 14\.3% coverage\. This situation should nevertheless be reviewed carefully together with the CFAF compulsory lending practice\. Interest rate risk\. This risk is limited since BOAD lending rates are based on the average cost of resources\. There are no CFAF interest rate risk management instruments yet\. 2\. The Financial Situation BOAD's financial situation is reviewed annually by BCEAO's internal inspection and a local Commissaire aux Comptes\. In addition, BOAD is subject every two years to a financial audit by an international accounting firm (Price Waterhouse) and every four years to a management audit (also by Price Waterhouse\.) The last financial audit took place on the 1996 accounts and it was clean\. The last management audit took place in 1997 based on 1996 accounts and concluded that (i) financial performance was satisfactory, (ii) BOAD will face a shortage of resources, and (iii) BOAD has a floor for its interventions which is too low resulting in high administrative costs compared to asset growth\. BOAD's financial position of is good despite the CFAF franc devaluation against the French franc in January 1994 which idoubled all foreign borrowing: BOAD requested and obtained a special subsidy to cover those losses\. The capital adequacy ratio decreased 65  during the 1990-97 period from a high of 71% to a still strong 38% as of December 31, 1997\. (See Appendix J)\. Sources of Funds\. BOAD's authorized capital was CFAF 240 billion as of December 31 1997 (see Appendix G)\. However only 10% was paid-in which amounts to CFAF 24\.5 billion\. The callable capital (CFAF 184 billion) guarantees the reimbursement of BOAD borrowings\. In January 1998, BOAD three main borrowing sources were: (i) the World Bank; (ii) borrowings on the local regional capital markets (two bond issues and one long- term paper on the money market) and (iii) the Japan Eximbank\. BOAD also has other credit lines such as the French Credit Acheteur, but most are tied and therefore not always applicable\. BOAD also benefits from grants totaling CFAF 19\.5 billion of which 6\.5 billion are committed\. The Swiss and IDA special accounts are the major components of those grant resources \. The devaluation created a CFAF 17 billion loss\. But this exceptional loss is supported by the member states as they committed to a CFAF 17 billion subsidy to be paid over the life of the borrowings\. BOAD's net worth was therefore not affected: it increased from CFAF 44 to 66 billion during this period (see Appendix H)\. Use of Funds\. During the 1990-97 period, outstanding loans increased almost threefold, from CFAF 43 to 113 billion\. Loans to the public sector (sovereign risk) increased from CFAF 36 to 79 billion, whereas those to the private sector (private risk) increased from CFAF 7 to 37 billion\. Most of this growth took place after the January 1994 devaluation\. During this period, BOAD was a liquid institution with liquid assets ranging from CFAF 33 to 45 billion, although only part of it was available for funding loans as BOAD manages many funds as a trustee\. As of December 31, 1997, liquid assets amounted to CFAF 40 billion\. During this period, BOAD showed positive results between CFAF 2 and 3 billion prior to the devaluation and between CFAF 2 and 1 billion after\. The decline in profitability is the result of a combination of lower revenue on liquid assets (due to lower interest rates) and higher funding costs as a greater proportion of resources is raised at market rates\. (See Appendix I)\. This decline in profitability took place despite the fact that BOAD is approving on average 24 projects a year compared to 12 before the devaluation (see Appendix C)\. BOAD probably processes more smaller projects which is to be expected as private sector activity develops because those projects tend to be of a smaller size compared to public sector projects\. Keeping administrative costs in line will be a challenge to BOAD\. Interest Rate Structure\. In 1990, BOAD created two windows: a public sector window and a commercial window (including profitable public sector and private sector investments)\. The applicable rate to a project depends on the nature of the project; such rate is based on a reference rate to which a margin or a subsidy is added: in 1997, for the public window, the equilibrium rate was 5\.5% and for the commercial window, the average cost of resources of the private sector was 6%\. 66  Table C\. BOAD's lending interest rate structure Window reference rate [ margin or subsidy public sector equilibrium rate rural development: -1\.7% roads: -0\.7% commercial: + 1\.3% private sector average cost of private sector banks & financ inst\.: +1 to 2 % resources co-financing: +3 to 5 % Off Balance Sheet\. BOAD's off-balance sheet consists of the committed undisbursed portions of loans\. During the period under review, these commitments grew from CFAF 63 billion to CFAF 155 billion while the disbursement rate increased from 50% in 1990 to 54% 1997 according to BOAD's officials\. 3\. The Portfolio The public sector portfolio\. During the period under review, the following countries were suspended: Senegal for a year and half, Togo for three years and, Niger has been suspended since 1991\. As of December 31, 1997, Niger is the only country in arrears with CFAF 4\.7 billion including CFAF 3\.4 billion in principal i\.e\. 4\.4% of total government risk portfolio\. Niger has been in arrears with BOAD --and therefore of suspension of operations-- since May 2, 1991\. The private sector portfolio\. As of IDecember 31 1997, classified loans to the private sector total CFAF 4\.6 billion concerning 10 projects all approved before 1992\. The two most important loans are to SLALIM in Cote d'Ivoire (an IFC investment) for CFAF 2\.5 billion and to African Sea Food in Senegal for CFAF 656 millions\. The ratio of classified loans to total loans to the private sector decreased from 52% in 1991 to 12% in 1997 due to the growth of a healthy portfolio vwhich demonstrates an improved private sector risk assessment capacity\. However, this level of 12% is still too high\. Since 1994 no loan was downgraded to classified\. This classified portfolio is covered at 62% by specific provisions\. The equity portfolio\. The equity pornfolio is largely funded by an equity fund\. Member states contribute to this fund which amounted to CFAF 8 billion at year en 1996\. BOAD's equity portfolio amounts to CFAF 11\.3 billion at year end 1997 when valued at cost but the accounting value is CFAF 9\.3 billion; the ratio of net value-to-portfolio at costs is 82%\. BOAD has invested in 14 financial institutions and in seven enterprises\. The three main investments of the problem portfolio are Air Afrique, BND Burkina and, BH-CI, with initial investments of, respectively, CFAF 2\.5 billion, CFAF 0\.5 billion and, CFAF 150 million\. At the end of 1997, the total value of these holdings was worth about 25% of the total initial investment\. (see Appendix K)\. 67  BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD) THIRD REGIONAL DEVELOPMENT PROJECT (Credit 2089-WAF; Loan 3161-WAF) APPENDIX M: STATUS OF EXTERNAL RESOURCES January31, 1998 (CFAF million) Source Equity Credit Lines Non-reimbursable Remarks about Grants grants 1\. Countries Belgium 2,200 - 1,996 financing of studies France 4,600 - - Germany 1,000 Netherlands - - 136 Switzerland - 3,037 7,100 Rural Devel\. Fund Subtotal 7,800 3,037 9,232 L\. \. \. 2\. Bilateral organizations Eximbank Japan - 8,153 KfW - 1,428 1,018 counterpart funds DEG - 3,030 Belg\. Mixed Credit - 4,872 800 French Purch\. - 25,394 Credit CFD - 9,610 Proparco - 6,000 SwissMixed Credit - 4,112 4,112 public portion SEB Credit - 6,062 Subtotal 0 68,661 5,930 \. M i\. \. \. 3\. Multilateral organizations IBRD/IDA - 32,693 2,131 counterpart funds ADB/ADF 2,000 12,252 721 counterpart funds EIB 500 3,313 - IDB - 4,910 Subtal *----- - -----2 \. 2?S\.0 53,1 68 \. 2,852 GRAND TOTAL 10\.300 124\.866 18\.014 68  C f4 %O q 0 - OX4 1z4 F- bi 0  \."\. '- r %O 0  \. r _ U  _ (\. \. U 4 : 0: - 4 4)  - \.  4)  I\. '0 I- 4)  00  - z   4)  4  - 4) u  : 0' 0 4) 4) U 0%  ORGANIGRAMME DE LA BANQUE OUEST AFRICAINE DE DEVELOPPEMENT (BOAD)) Suite Decision No\. 96-028 du 30/05/96 President M\. Boni YAYI Cabinet MMNI V\. HOUNOUVI (CONSEILLER SPECIAIL) BUREAU DE L'EVALUATION DES C\. AGOSSA (CONSEILLER FINANCIER) _OPERATIONS & DE L'AUDIT INT\. (BCEAO) D\. V- KOYO (ASSISTANT) -M\. YAMEOGON (Dir\.) T\. ALOKO (A\.R\.P\.)_ V\. TRAORE (EXPERT COMMUNICAT\.) Division dc l'Audit Internc (DAI) _M\. YAMEOGON Division de L'Evaluation des OpErations (DEO) VICE PRESIDENT M\. Alpha TOURE BUREAU DE REPRESENATION BURKINA: NI\. V\. KOIKOU COTE D'IVOIRE: M\. B\. FAYE SENEGAL: NI\. K\. LANIIZANA GEI'T\. DES AFFAIRES DEPT\. DES RESSOTtRC DEP'n'\. DES FINANCES DEPl't\. DU FINANCENIEN'r DEPT\. DU FINANCEMEN' ECO\. DES ETUDES ET DE MENERALES (DAI) RNI\. A \. El' DE LA CONIP''Al\. (DFC) DUl SECT-EUR PRIVE (DSP;\. DU SECTEtJR PRIVE (DSP LA COOP\. (DIEC) NI\.C\. LELLA-KOUASSI NI\. L\. KANDA (Dir\.) NI\.M\. TIIIANI (Dir\.) Ai\.I\. KOULIBALI (Dir\.) M\. K\. WOMAS (Dir\.) M\. J\. HOUNTOMEY (Dir\.) (Dir\. Adj) NI\. NI\. ASKIA (Dir\.Adj) M\.Y\. SANOUSSI (Dir adj) NI\.D\. TRAORE (Dir\. adj MI\.F\. FASSASSI (Dir\. Adj) M\. 0\. FALL (Dir\. Adj) (Dir\. ~ Ad: N\. I SIA(i\.A Div\. des Affaires 1 Div\. du Personnel Div\. Des Operations Fin\. Div\. du Dev\. Rural M\.R\.K\. AKA & de l'Assist\. Juridiques (DAJ) J et de ls Formation (DPF) - el d la Treserorie (DOFT) et des I'Environ\. (DDRE Conseiller Div\. d Instit\. (DIEAP) |Nl\. C\. LELLA-KOUASSI| M\. O\. CISSE N | \.M\. TIIIAM N | \.S\.G\. IIASSANE F InancI H res s \.D\.IF| M\. F\. ZOUNGRAMA \. ~ ~ M\. ADUB Div\. des-- I Div\. de la comptabililt de des Div\. des Infrastruct\. | ' | Coo8\. el du Protocole (DCP) | Div\. de I'Approvision\. opErations bancaires (DCOD El de I'Energie (DIE) Div\. Prlts & Particif D detds C Ep NI\. V\. TRAORE j et du Patrimoine (DAP) NI\.V\. SANOUSSI M\.D\. TRAORE -- |M\.M\. ASKIA l 1M\. F\. FASSASSI| Div\. Informat\. 1 Div\. duControle;:p Et Organisation (DIC) de GCestion (DCC) Div\. Analyse etl Div\. de In Document\. | M\.E\. forogo | | M\.A\. FAVAMA \.:\.*\.*\.-\.|\.Suivi des RIsques De l'Informat & des \.(DASR) RNOArMhivesU(DDIA) |M\.K\. TRONOU \. ||M\. J\. HOUNTOMEY  MAP SECTION  WEST AFRICA WEST AFRICAN ECONOMIC AND MONETARY UNION WEST AFRICAN ECONOMIC AND MONETARY UNION MEMBERS * NATIONAL CAPITALS INTERNATIONAL BOUNDARIES ,\.,, , \. \. O \. \. \. ' z * wo < ~ A \. \. \. / ] O % O ° O 2 0 \. \. \. MER / A L G E R I A L I B Y A ANS : AT A:NrlCf ' M AUR\.TANI \. \.M qqsoto ; _\. v A U R I T A NIA £2 ~~~~~~~~Nouakchott 0~~~~~~~ ~ MA50 $ 5 IOEES\.? ;4 G E R O 2 CA ,\. tistnp o roue dea pg nt 9pra aldBnk\. RIAo{A -- SENEGAL > GAMBIA, ~~~~~~~~~~ ~ ~ ~ ~BURKINA> *N T,ef~o> \. , \. Ca Bamak cpcfc:TFAS i/ CSUDAN _s,Q \.BN'Diamena BISSA 0 GUINEA 6 --------~~~m-g -' ra~~~~~_ ,, ,,, \. "\.,\. \. \. : _\., \.: \. \. Conakr4 =-\,," N IG E R I A ,\. A LAN TIC ItCT\. HN *Abujo , FTeeefodowLEONE" 'Ng 6EGHN O OCEAN '~ -y , \.o N~ 'CENTRAL ~J~BERIA, Y ussuro -KAFRICAN Mpnonnvi '-L14 qN~~ " REPUBLIC ~~AMIK'JUIN ~ Bongul,,\. 250 500 750 KIOMET' "S\.MIbu7< *aud l Thi map was Piroduced by' the Map Vemon Un,it of The W~orld Bank\. QTtRAL L / 1 The: boundaries, colors, dfenanminations and onyo!her informotion shown A," DEM\. REP\. oin this map do not imsply, an the port of The Wobrld Bonk Group, any iSAO TOEAND___-0F iE udgment anf the 4eal status of any territory, or any endarsenent ar\.INp ~Libreville ( OG OG 0oscc'eptonc6 of such botundaries\. VSa,o t m e CONGON o (-~ 0' a'~~~~~~1 'a l\.2 ~\.1~\.0 o- 2\.0'

REVIEW

P102000

Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00004760 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-46000, IDA-55490) ON CREDIT 46000 IN THE AMOUNT OF SDR 150\.5 MILLION (US$ 225 MILLION EQUIVALENT) CREDIT 55490 IN THE AMOUNT OF SDR 16\.2 MILLION (US$ 25 MILLION EQUIVALENT) TO THE REPUBLIC OF GHANA FOR THE TRANSPORT SECTOR PROJECT June 24, 2019 Transport Global Practice Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective January 2, 2019) Currency Unit = Ghanaian Cedi (GHS) At Appraisal GHS 1\.41 = US$1 US$0\.66864 = SDR 1 At ICR GHS 4\.82= US$1 US$ 1\.390640 = SDR 1 FISCAL YEAR July 1 - June 30 Regional Vice President: Hafez M\. H\. Ghanem Country Director: Henry G\. R\. Kerali Senior Global Practice Director: Guangzhe Chen Practice Manager: Nicolas Peltier-Thiberge Task Team Leader(s): John Kobina Richardson ICR Main Contributor: Leslie Nii Odartey Mills  ABBREVIATIONS AND ACRONYMS AF Additional Financing ALTFTFP Abidjan Lagos Transport and Transit Facilitation Project CPS Country Partnership Strategy DVLA Driver and Vehicle Licensing Authority ERR Economic Rate of Return GACL Ghana Airports Company Limited GCAA Ghana Civil Aviation Authority GoG Government of Ghana GHA Ghana Highway Authority GPHA Ghana Ports and Harbors Authority GPRS Ghana Poverty Reduction Strategy GRDA Ghana Railway Development Authority GSGDA Ghana Shared Growth and Development Agenda GTTC Government Technical Training Center KNUST Kwame Nkrumah University of Science & Technology LVD Land Valuation Division MDA Ministries, Departments and Agencies MoF Ministry of Finance MRH Ministry of Roads and Highways NRSC National Road Safety Commission NPV Net Present Value PIM Project Implementation Manual PIT Project Implementation Team RAI Rural Accessibility Index RF Road Fund RMU Regional Maritime University RSDP Road Sector Development Program ToC Theory of Change TSP Transport Sector Project VLTC Volta Lake Transport Company  TABLE OF CONTENTS DATA SHEET \. 1 I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES \. 5 A\. CONTEXT AT APPRAISAL \.5 B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) \.8 II\. OUTCOME \. 10 A\. RELEVANCE OF PDOs \. 10 B\. ACHIEVEMENT OF PDOs (EFFICACY) \. 11 C\. EFFICIENCY \. 14 D\. JUSTIFICATION OF OVERALL OUTCOME RATING \. 16 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 \. 19 IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME \. 21 A\. QUALITY OF MONITORING AND EVALUATION (M&E) \. 21 B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE \. 22 C\. BANK PERFORMANCE \. 23 D\. RISK TO DEVELOPMENT OUTCOME \. 24 V\. LESSONS AND RECOMMENDATIONS \. 25 ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS \. 28 ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION \. 38 ANNEX 3\. PROJECT COST BY COMPONENT \. 41 ANNEX 4\. EFFICIENCY ANALYSIS \. 42 ANNEX 5\. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS \. 59 ANNEX 6\. SUPPORTING DOCUMENTS (IF ANY) \. 60  The World Bank Transport Sector Project (P102000) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P102000 Transport Sector Project Country Financing Instrument Ghana Investment Project Financing Original EA Category Revised EA Category Full Assessment (A) Full Assessment (A) Organizations Borrower Implementing Agency Ministry of Finance and Economic Planning Ministry of Roads and Highways Project Development Objective (PDO) Original PDO The project development objective (PDO) is to improve mobility of goods and passengers through reduction in travel time and vehicle operating cost, and to improve road safety standards\. This objective will be achieved through strengthening the capacity of transport institutions in planning, regulation, operations and maintenance, and through infrastructure investment\. Page 1 of 63  The World Bank Transport Sector Project (P102000) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 225,000,000 224,995,120 220,463,716 IDA-46000 25,000,000 24,999,992 22,536,317 IDA-55490 Total 250,000,000 249,995,112 243,000,033 Non-World Bank Financing 0 0 0 Borrower/Recipient 0 0 0 Total 0 0 0 Total Project Cost 250,000,000 249,995,113 243,000,033 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 30-Jun-2009 12-Nov-2009 03-Jun-2013 30-Jun-2015 31-Dec-2018 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 29-Jun-2018 231\.34 Change in Results Framework Change in Loan Closing Date(s) Reallocation between Disbursement Categories Change in Implementation Schedule KEY RATINGS Outcome Bank Performance M&E Quality Moderately Satisfactory Moderately Satisfactory Modest Page 2 of 63  The World Bank Transport Sector Project (P102000) RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No\. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 12-Nov-2009 Satisfactory Satisfactory 0 02 24-May-2010 Satisfactory Satisfactory \.50 03 06-Dec-2010 Satisfactory Moderately Satisfactory 5\.50 04 09-Oct-2011 Satisfactory Moderately Satisfactory 8\.53 05 28-May-2012 Satisfactory Moderately Satisfactory 13\.79 06 25-Feb-2013 Satisfactory Moderately Satisfactory 33\.62 07 02-Oct-2013 Satisfactory Moderately Unsatisfactory 51\.22 08 23-Feb-2014 Satisfactory Moderately Satisfactory 73\.13 09 22-Jan-2015 Satisfactory Moderately Satisfactory 132\.23 10 15-Nov-2015 Satisfactory Moderately Satisfactory 164\.15 11 30-Jun-2016 Moderately Satisfactory Moderately Unsatisfactory 189\.42 12 24-Jan-2017 Moderately Satisfactory Unsatisfactory 214\.64 13 12-Nov-2017 Moderately Satisfactory Moderately Unsatisfactory 223\.15 14 23-Jun-2018 Satisfactory Moderately Satisfactory 231\.34 15 31-Dec-2018 Satisfactory Moderately Satisfactory 243\.00 SECTORS AND THEMES Sectors Major Sector/Sector (%) Transportation 100 Urban Transport 36 Public Administration - Transportation 13 Rural and Inter-Urban Roads 51 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Page 3 of 63  The World Bank Transport Sector Project (P102000) Private Sector Development 10 Public Private Partnerships 10 Urban and Rural Development 100 Urban Development 50 Urban Infrastructure and Service Delivery 50 Rural Development 50 Rural Infrastructure and service delivery 50 ADM STAFF Role At Approval At ICR Regional Vice President: Obiageli Katryn Ezekwesili Hafez M\. H\. Ghanem Country Director: Ishac Diwan Henry G\. R\. Kerali Senior Global Practice Director: Jamal Saghir Guangzhe Chen Practice Manager: C\. Sanjivi Rajasingham Nicolas Peltier-Thiberge Task Team Leader(s): Ajay Kumar John Kobina Richardson ICR Contributing Author: Leslie Nii Odartey Mills Page 4 of 63  The World Bank Transport Sector Project (P102000) I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A\. CONTEXT AT APPRAISAL Context 1\. In 2009, Ghana’s vision of attaining middle income status was strongly underpinned by Government’s objective to strengthen the provision of infrastructure services and improve Ghana’s business environment to sustain broad-based growth\. In particular, the importance of transport infrastructure was highlighted in Ghana’s Poverty Reduction Strategy (GPRSII) where transport was recognized as an enabler to economic growth and poverty reduction\. The transport sector accounted for 5% of Ghana’s GDP and was instrumental in providing access to jobs and markets\. 2\. Ghana had a fairly developed transportation system in 2009\. Roads, being the predominant mode of transportation, accounted for 94% of freight and 97% of all traffic movements in the country\. In signifying its commitment to road transport, Ghana had just completed its Road Sector Development Program (RSDP) in June 2008\. Achievements chalked under RSDP1 included: i\. Improvement in the quality of Ghana’s road network and a 40% increase in road length\. Under the program and over a 5-year period conditions observed in Ghana’s road network showed a 10% increase in good condition, a 2% increase in fair condition and a 12% reduction of roads in poor condition\. ii\. Improvement in operations of an independent road fund, supported by a dedicated fuel levy iii\. Increase in maintainable network of feeder roads from 11500km to 30000km iv\. Decline in accident fatality rate from 27 per 10000 vehicles to 22; and v\. Completion of selected policy studies and action plans to improve sector strategy, financing, management, delivery and private sector participation in road transport\. 3\. Gains made under RSDP were not reflective for other modes of transport in Ghana\. These modes: rail, maritime and inland water and aviation had suffered significantly lower prominence relative to road transport\. They were under-utilized and plagued by inefficiencies as a result of low investments as well as institutional and infrastructure capacity constraints\. During the Mid-Term Review of RSDP, it was noted that a contributory factor linked to the inefficiencies of modes other than roads was the absence of an integrated and coordinated approach to multi-modal planning\. Specifically, laws, regulations, institutions, decision-making and financing mechanisms affecting the entire transport sector were uncoordinated and had created significant barriers to sector performance improvement while restricting opportunities that could be harnessed through domestic and sub-regional movement of people, goods and services\. 4\. Generally, the performance of the transport sector was mixed when assessed holistically\. On average, the performance of a particular mode of transport was based on the level of attention and or commitment Government of Ghana showed to that mode\. In turn, the level of attention given to a particular mode of transport was directly correlated to its traditional dominance as well as availability of investment opportunities associated with the said mode\. As such in terms of usage and performance, different modes exhibited varying degrees of success and limitations\. 1 Road Sector Development Program (Cr\. No\. 3554-GH) Page 5 of 63  The World Bank Transport Sector Project (P102000) Theory of Change (Results Chain) 5\. As at 2009, Ghana’s planning and decision making in the transport sector focused almost exclusively on improving individual modes with very little attention paid to the interaction between different modes\. The lack of a comprehensive approach towards multi-modal planning and coordination had created inefficiencies in the transport sector with direct consequences on the movement of people, goods and services\. Secondly, Ghana had yet to fully maximize opportunities presented through road transport, the dominant mode of transport in the country\. Opportunities such as improving rural, urban, regional and sub-regional connectivity through roads had not been realized; and yet problems such as road accidents, uncontrolled vehicle growth, deferred maintenance and lack of enforcement of traffic regulation were beginning to mount\. With this backdrop, the Transport Sector Project (TSP) was developed to remedy inefficiencies with coordination in the transport sector and to expand road connectivity in the country\. 6\. The Transport Sector Project (TSP) utilized experiences from RSDP in formulating its objective\. A key lesson obtained from RSDP was that efficient mobility of goods and services in Ghana was hindered by the absence of integrated and coordinated multi-modal planning\. This had severely hampered Government’s objective of “fostering effective modal integration and economic assignment of traffic to modes through market mechanism in order to minimize over-all transport costs to users\.”2\. The objective was unfulfilled as at 2008\. 7\. TSP also recognized the dominance of road transport in Ghana\. It therefore sought to magnify gains obtained under RSDP where it had been established that a direct positive correlation existed between the incidence of poverty and road condition\.3 Specifically RSDP showed that improved roads over a 3 year period resulted in (a) a 20% increase in the number of hospital trips; (b) a 23% increase in the price of maize received by farmers (c) a 65% lower cost of traveling to market; and (d) a 41% cost reduction in traveling to welfare services\. Thus, TSP’s motivation stemmed from an opportunity to fully maximize connectivity within Ghana’s road transport sector\. 8\. One critical assumption underlying TSP was that comprehensive multi-modal planning and coordination amongst modes and their respective actors would lead to efficiencies in Ghana’s transport sector which would ultimately translate to cost-savings for passengers, goods and services\. It is also assumed that improved road safety standards contribute to improved mobility of goods and passengers\. 9\. Theory of Change (ToC) was not a requirement at the time of Project Preparation\. However, one has been formulated for the ICR using the PAD & Additional Financing Project Document\. The TOC is shown in Figure 1\. Project Development Objectives (PDOs) 10\. The original PDO was to improve mobility of goods and passengers through reduction in travel time and vehicle operating cost, and improvement in road safety standards\. This PDO was to be achieved through strengthening the capacity of transport institutions in planning, regulation, operations and maintenance, and through infrastructure investments\. The PDO as stated in the Financial Agreement is the same as in the approved PAD\. Key Expected Outcomes and Outcome Indicators 11\. The original PDO indicators were (a) Average travel time reduced by at least 20% on project financed roads; (b) Average VOC (in real terms) reduced by at least 10% on project financed roads; (c) Fatality rate reduced from 22 per 10,000 vehicles to 19 per 10,000 vehicles (d) Rural Accessibility Index (RAI) increased from 53% to 57%; 2 www\.ghana\.gov\.gh 3 “Baseline Studies of the RSDP,” Ministry of Roads and Highways (2006), Ghana Page 6 of 63  The World Bank Transport Sector Project (P102000) (d) Condition of trunk road network in good and fair condition improved from 83% to 88%; from 36% to 50% for urban roads; and from 72% to 85% for feeder roads\. Activities Outputs Outcomes Rehabilitation Length of Increase in of roads & Road Rural & Urban ancillary Accessibility Reduction Network infrastructure in travel Rehabilitated time & Increase in Vehicle A1 Road Fund Operating Launch Contribution Costs legislative & Enacted institutional Regulation & Increase in Improved instruments to Completed good & fair mobility of strengthen Institutional condition of goods & transport Plans road network passengers subsector on selected capacity A2 Improved roads Institutional Capacity Number of Enhanced Launch road awareness Road safety creation % Reduction in Safety interventions opportunities Road Fatalities Awareness Key Assumptions A1: Implementation of Enactments & Plans A2: Road users apply knowledge gained from safety campaigns Figure 1: Theory of Change for TSP Components 12\. Project Components with corresponding activities are shown in Table 1 below Table 1: Project Components Component Activities Cost Estimates Cost Estimates Actual Costs (2009) (2015 AF) (2018) A – Support to (a) Integration of GIS of Road $US 4\.2m $US 4\.2m $US 4\.127m Ministry of Roads & Agencies; (b) Organization of Highways (MRH) Development Partners’ Conference; (c) Preparation of Feasibility Studies; (d) Capacity Building Page 7 of 63  The World Bank Transport Sector Project (P102000) B – Support to Road Support to DVLA, NRSC, KNUST & $US 6\.5m $US 6\.14m $US 5\.238m Sector and GTTC Educational Entities C – Improvement of (a) Rehabilitation of Ayamfuri – $US 64m $US 71\.64m $US 86\.965m Trunk Roads Asawinso Road; (b) supervision (including environmental & social safeguards); (c) Capacity Building & Equipment D – Improvement of (a) Provision of Urban Transport $US 78m $US 95\.86m $US 79\.442m Urban Roads & Infrastructure; (b) Rehabilitation Infrastructure of Burma Camp Road; (c) Rehabilitation of Giffard Road; (d) Capacity Building; (e) Supervision (including environmental and social) E – Improvement of (a) Improvement/ Rehabilitation $US 50\.5m $US 50m $US 46\.763m Feeder Roads of Feeder Roads; (b) Supervision (including environmental and social; (c) Capacity Building F – Support to MoT Support to MoT, GACL, GCAA, $US 13\.5m $US 13\.5m $US 12\.145m & Other Transport GMA, VLTC, GPHA and RMU Entities G – Project Procurement of Vehicles & $US 8\.3m $US 8\.66m $US 8\.320m Management Equipment; Human Resource Development Total $US 225m $US 250m $US 243\.000m 13\. With reference to Table 1, the project amount of $225mil in 2009 was increased to $250 mil in 2015 through Additional Financing (AF)\. This additional credit of $25mil was used to fund a financing gap created as a result of cost-overruns on the rehabilitation of the Ayamfuri-Asawinso road and targeted urban roads in the Accra East corridor\. AF was also used to adjust cost estimates of individual components\. The difference in the 2015 estimated costs and 2018 actual project costs is $7 mil\. This difference was used to cover exchange rate losses\. B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) Revised PDOs and Outcome Targets 14\. For additional financing in 2015, the PDO was revised as “to improve mobility of goods and passengers on selected roads through reduction in travel time, reduction in vehicle operating costs, and enhanced road safety awareness\.” Additional Financing was approved with Level 1 restructuring\. Page 8 of 63  The World Bank Transport Sector Project (P102000) Revised PDO Indicators 15\. All indicators in the parent PDO were maintained except for the following: (a) “Fatality rate reduced from 22 per 10,000 vehicles to 10 per 10,000 vehicles” was moved to an Intermediate Outcome level\. (b) “The number of direct beneficiaries and the percentage of which were females” was added\. (c) End-of-Project target value for Increase in Rural Accessibility Index changed from 57% to 68% Revised Components 16\. There were no changes to the parent components 17\. It is stated here that the outcomes and indicators proposed in the AF were not activated within the Operations Portal\. As a result, AF outcomes and indicators were not monitored throughout implementation; but rather monitoring of parent outcomes & indicators continued\. For the purposes of this ICR, assessment of outcomes will be done using indicators which were monitored throughout the project implementation phase\. Other Changes 18\. Overall: In April 2010, the project was restructured to reallocate US$2 million out of US$3 million of project funds allocated to the Volta Lake Transport Company (VLTC) for studies and to purchase engines for ferries operated by VLTC\. The original closing date for the IDA Credit was June 30, 2015 but was extended for thirty-six months under additional financing in the amount of SDR 16\.2 million (US$25 million) for cost overruns on the major civil works until June 30, 2018\. In June 2018, the project was extended to December 31, 2018, on account of delayed payment of resettlement compensation on the Ayamfuri-Asawinso road works\. Project restructuring also involved a reallocation of proceeds to allow contingency funds to be applied to Category 1 of the project\. 19\. Specific Changes to 2015 AF Intermediate Outcome Indicators are as follow: (a) 2 indicators were revised\. “The Implementation of the Axle Load Control Action Plan” became “Number of Axle Load Vans Deployed”; and “Contribution of the Road Fund to planned maintenance expenditures” became “Road Fund (RF) share of annual expenditures on road maintenance\.” (b) 4 of 13 intermediate outcomes were dropped\. These were strengthened Road Fund (RF) Management; feasibility studies for the dualization of the Tema Meridian Road; operationalization of GRDA; and completion of detailed design and safeguard reports for the Takoradi Airport\. 20\. Reasons for dropping and revising each respective Intermediate indicator in 2015 AF (a) Axle Load - deployment of mobile axle load vans shows more specificity than implementation of Axle Load Control Action Plan (b) Road Fund – the revised indicator is a better measure of improved financing of road maintenance\. (c) Strengthened RF Management - dropped due to measurement issues, and impact of better RF management is expected to be captured by the indicator on RF contribution to maintenance expenditures (d) Feasibility Study for the dualization of Tema Meridian Road - dropped as a result of Government decision to transfer the preparation of studies and works to funding from the China Development Fund4 (e) GRDA - dropped as the project supports the preparation of institutional and regulatory studies and not operationalization of recommendations (f) Takoradi Airport - GACL failed to reach an agreement with the military on adaptation of the existing military airport at Takoradi for civilian use\. 4 The planned CDF funding had not materialized at the time of project closure Page 9 of 63  The World Bank Transport Sector Project (P102000) Rationale for Changes and Their Implication on the Original Theory of Change 21\. The revised PDO sought to clarify that mobility improvements are targeted for project funded roads and not the country as a whole; and that project interventions support enhanced road safety awareness rather than road safety standards\. With the revision of the PDO, the indicator for fatality rate was no longer relevant at the PDO level and was therefore moved to the intermediate level\. Tracking of safety improvements in Ghana was to be monitored as an indirect indicator of raised safety awareness\. Revisions do not affect ICR Theory of Change (ToC) since proposed changes in the AF were incorporated in the formulation of the ICR ToC\. 22\. A split rating was not applied in assessing the outcomes of TSP\. The main justification was that phrases in the parent PDO that were vaguely worded were clarified in the revised PDO\. Specifically, roads that were initially referenced in the original PDO should have been specified as project funded roads\. For road safety standards, even though its related phrase was reworded to road safety awareness, the indicator on fatalities was still monitored as a PDO indicator\. This occurred as a result of proposed changes made at AF not being incorporated into the M & E framework\. More so, the indicator for fatalities was met prior to AF and at project close, hence there was no reason to apply a split rating due to the change proposed for this outcome at AF\. II\. OUTCOME A\. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating 23\. The PDOs remain highly relevant\. They are consistent with the Ghana-World Bank Group (WBG) Country Partnership Strategy (CPS) for FY13-165, which was extended up to FY186\. Transport is prominently mentioned Under Pillar II as one of the sectors that could improve competitiveness and enhance job creation\. One of the outcomes for Pillar II lists improved mobility of goods and passengers with its related indicator being the condition of trunk roads in fair and good condition\. Furthermore, the CPS cites the potential for road, rail, air, maritime and inland water transport to open up access to markets through better connectivity\. The CPS also recommends the promotion of investments targeted at the decongestion of urban roads; modernization of existing main corridors linking major regional centers and the capital as well as neighboring countries; rehabilitation of major ports and airports; and improving roads to better serve rural communities\. 24\. Ghana’s national development agenda continues to pursue objectives and outcomes covered under TSP\. The Ghana Shared Growth and Development Agenda II (GSGDA II) mentions the challenges the transport sector faces, and reflects the same challenges identified by TSP\. Key challenges facing the sector include poor coordination and cooperation among relevant institutions; rural-urban disparities in access to transport services; poor linkages between land use and transport planning; inadequacy of funding for construction, maintenance and management of all modes of transport; absence of legal framework for developing PPPs; inadequate enforcement of transport regulations, premature road deterioration, increasing traffic congestion, rise in road accidents and inadequate infrastructure to sustain rail, aviation, maritime and inland water transport\. GSGDA II identifies the constraints these challenges pose to Ghana’s vision to become a hub and 5 CPS Report number 76369 6 New CPF is under preparation Page 10 of 63  The World Bank Transport Sector Project (P102000) gateway to West Africa\. Similar challenges are also reflected in Government’s Coordinated Programme of Economic and Social Development Policies7\. This Programme highlights the constraints challenges in the transport sector pose to Government in its agenda to stimulate job creation opportunities\. 25\. Considering the above, the rating for Relevance of the PDO is High\. B\. ACHIEVEMENT OF PDOs (EFFICACY) 26\. Using the revised PDO, TSP aimed to improve mobility of goods and passengers through reduction in travel time and vehicle operating costs on project-funded roads\. The project outcome was broadly supported by the following intermediate level outcomes: enhanced infrastructure investment, enhanced road safety awareness and improved capacity of transport institutions to efficiently undertake planning, regulation, operations and maintenance for different modes\. With a combination of ISR data and random surveys of project beneficiaries, the ICR rates overall achievement of PDOs as Substantial\. The motivation for this rating is established in the subsequent sections where each Component is analyzed to assess how project outcomes were achieved\. Information obtained through interviews during the ICR mission using random surveys is also presented\. Assessment of Achievement of Each Objective/Outcome 27\. The assessment of TSP’s PDO is realized by analyzing the extent to which its related PDO outcomes were achieved\. With reference to the Theory of Change in Figure 1, the project’s objective of improving mobility of goods and passengers on selected roads were to be achieved through reduction in travel time and vehicle operating costs as well as enhanced road safety awareness\. 28\. Outcome 1 - Reduction in Travel Time and Vehicle Operating Costs (VOCs): This was to be achieved locally through improvement in road conditions of selected trunk, urban and feeder roads within TSP\. Simultaneously, this outcome was broadly assessed by the percentage of the country’s road network in good, fair and poor condition; rural and urban accessibility as well as funding for road maintenance\. Whereas reduction in travel time was obtained through improved road conditions on project-specific roads; vehicle operating costs depicted an increase at project closing\. For VOC’s an observation made during the project cycle showed a trend of reducing costs for majority of the project cycle, followed by increased costs at project closing\. One contributory factor for this trend was inadequate funding for maintenance to keep roads in good condition after improvements had occurred; thus, vehicle operating costs were observed to increase with deteriorating conditions of previously maintained roads\. Share of Road Fund contributions to maintenance remained at 60% throughout the project and did not increase as demands for maintenance increased\. For accessibility, initial improvements in road conditions meant increased accessibility for road users\. Under TSP, project components C, D and E were designed to realize this outcome and are analyzed here\. 29\. Component C - Improvement of Trunk Roads: Post-rehabilitation, travel time on the Ayamfuri-Asawinso road after rehabilitation was 55 minutes compared to a baseline value of 90 minutes and an end-of-project value of 65 minutes\. On the national network, percentage of trunk roads in good & fair condition increased from a baseline value of 83% to 93% by project close\. The end target value of 88% was exceeded\. In assessing improved conditions on the Ayamfuri-Asawinso road, a site visit was undertaken as part of the ICR mission\. Interviewees approached during the site visit comprised market women, Dominase residents, a headmaster at Amubaka and taxi drivers at Asawinso\. In spite of the remaining minor engineering works, road users were highly satisfied with the improvement in road conditions\. They reported reduction in travel times and vehicle operating costs as well 7 Government’s Coordinated Programme of Economic and Social Development Policies 2017-2014 Page 11 of 63  The World Bank Transport Sector Project (P102000) as increased access to social services\. Generally, individuals living in communities along the project route testified to a marked improvement in the movement of people, goods and services after rehabilitation of the road\. 30\. Component D - Improvement of Urban Roads and Infrastructure: The major activities under this component have been undertaken\. Percentage of urban roads in good & fair condition increased from a baseline value of 36% to 54% by project close\. The end of target value for this indicator was 50%\. The Mission visited the Giffard and Burma Camp roads that were rehabilitated under this component\. Per the drivers interviewed on site, road rehabilitation had markedly improved driving conditions with associated reduction in travel time and vehicle operating costs\. Pedestrians along the route also reported feeling safe as road users; and no pedestrian accidents or fatalities have been recorded\. However, drivers raised concerns about non-functioning street and traffic lighting systems\. They reported witnessing vehicular accidents at junctions where due to lack of maintenance, traffic signals were not operating as designed\. In addition to the urban arterials, the Mission visited the 2 bus terminals upgraded as part of Component D\. At both terminals, representatives from the Municipal Assemblies, driver unions and contractors briefed the Mission on the importance of the modern bus terminals in their municipalities as well as the status of civil works\. Representatives described in-situ conditions that existed before the terminals were upgraded\. Prior to the upgrade, drivers and passengers operated in an unsafe environment in which lorry stations were exposed to weather elements, and poor sanitary and security conditions\. With the new terminals, users (including minority groups like the physically challenged) now have state-of-the-art facilities to support bus operations\. 31\. Component E – Improvement of Feeder Roads: All activities aimed at improving rural access through efficient and sustainable feeder roads rehabilitation, maintenance and cost-effective feeder roads improvement have been completed\. Percentage of feeder roads in good & fair condition increased from a baseline value of 72% to 75% by project close\. However, the end target value of 85% was not met\. At the close of TSP, Rural Accessibility Index (RAI) met its end target value of 57%\. RAI in 2018 stood at 66\.6%\. This marked achievement in RAI meant the percentage of rural people who live within two kilometers of an all-season road had increased\. Selected feeder roads across 3 regions were visited as part of the Mission\. Different groups of road users of project financed feeder roads appreciated the impact of road improvement in their day to day activities\. Traders commented on how efficient their businesses had become due to the ease of moving commodities from wholesale centers to their shops\. Teachers and students recounted challenges faced in commuting from home to school pre-road improvement; especially during rainy seasons\. In general, most interviewees testified to the positive impacts project rehabilitated roads have had on their lives\. Areas of concern for project beneficiaries that were expressed during the site visit were poor drainage provisions, the presence of dust and an increase in the number of over-loaded vehicles using improved roads\. 32\. Outcome 2 – Enhanced Road Safety Awareness: In conjunction with other road safety initiatives in Ghana, TSP contributed to reducing road fatalities per 10000 vehicles from 22 in 2009 to 9\.74 in 2018\. End target value for Project was 19 fatalities; thus a significant reduction was recorded at project close\. TSP achieved this through targeted road safety initiatives such as road safety education campaigns, improved driver testing facilities and provision of road safety equipment and infrastructure to assist with road safety enforcement and post-crash care\. Under TSP, Component B was designed to achieve this outcome and is analyzed here\. 33\. Component B - Support to Road Sector and Educational Entities: As part of improving road safety standards and enhancing investments in infrastructure, TSP supported DVLA in the construction of two driver testing ground testing facilities\. The testing facility at Tema has been constructed and is in use; while that of Kumasi is 85% complete\. The ICR Mission visited both driver testing grounds\. Managers at the completed facility in Tema described the usefulness of the testing facility which presently serves as a primary feature in assessing the competencies of new drivers\. Using the facility prior to in-traffic tests ensures safety for DVLA assessors\. In the Page 12 of 63  The World Bank Transport Sector Project (P102000) pre-project dispensation, assessors conducted in-traffic tests without any preliminary tests to assess new driver competencies\. This exposed assessors, new drivers and mainstream road users to significant risks during in- traffic testing\. Such risks are now substantially reduced as drivers have to first pass critical driving maneuvers at the test facility before they are taken out onto the road for further assessment\. The testing facility at Tema has provided an additional benefit to DVLA\. Private driving schools have shown interest in using the new facility for a fee\. DVLA’s engagement of the private sector in this regard is highly commendable\. 34\. As part of Component B and in improving road safety awareness, NRSC engaged in extensive road safety campaigns throughout the country, utilizing road safety information, education and teaching materials designed under the project\. In addition, using TSP support, NRSC spearheaded other interventions such as the provision of road safety equipment for compliance monitoring as well as the construction of eight pilot emergency response centers\. The mission visited the center at Gomoa Okyereko where first-aid can be given to accident victims prior to transfer to nearby hospitals\. The location of this center has reduced the estimated reaction time accident victims receive medical assistance by one hour\. 35\. A key factor identified towards the realization of the two PDO outcomes was improved institutional capacity\. The motivation here is to develop legislative and institutional instruments to enhance performance of Ministries and agencies within the transport sector\. It also comprises building the human resource capacity of these institutions to improve efficiency\. Within TSP, short-term gains were attained through the support provided to implementing and beneficiary agencies to build capacity within their human resource personnel\. However long- term gains related to over-all institutional reforms proved difficult to assess as various institutional and legislative instruments funded under the project are at varied stages of adoption and implementation\. Components A, B and F were conceptualized to achieve institutional strengthening of the transport sector\. They are discussed as follow: 36\. Component A - Support to Ministry of Roads and Highways (MRH): All studies under TSP that were assigned to the MRH have been concluded\. Studies targeted but were not limited to strengthening institutional capacities in areas such as policy and institutional reforms\. Examples of study outputs are review of Ghana’s tolling policy; development of road operating and safety standards and axle load control; a monitoring and evaluation system for roads; a human resource strategy for the Ministry etc\. With studies complete, the next step of institutionalization of outputs within MRH is at different levels\. For example, while study recommendations on axle load control have been incorporated into MRH’s decision-making process; recommendation on the tolling policy is serving as input into broader deliberations on PPP legislation in Ghana\. 37\. Component B also provided support to educational entities\. As a result, both KNUST and GTTC have elevated their transport programs\. Graduate transport programs developed within KNUST’s Transport Research Center as part of TSP have been leveraged to transform the Center into an Africa regional center of excellence in mobility training and research\. This visibility has also spurred on international collaboration with leading universities in transport, the latest being the Technical University of Munich and École Polytechnique Fédérale de Lausanne\. With its new status, the Center will continue to train professionals in an interdisciplinary environment where all transport modes form the basis of teaching and learning\. Graduates, who naturally progress as professionals in transport agencies will continue to contribute to the coordination of transport sector policies from a multimodal perspective\. At GTTC, TSP support had provided a 4-story classroom block as well as some teaching and learning materials, notable among which was a vehicle maintenance simulator\. The completion of the classroom block enabled student enrollment to increase from 80 students to 120 students at entry level\. The vehicle maintenance simulator funded under TSP has raised the profile of the Center’s curriculum which had in turn fostered collaboration between the Center and SCANIA AB, a global trucking manufacturer\. This collaboration includes opportunities for internships for students as well as knowledge transfer opportunities\. TSP’s contribution to training at GTTC offers a capacity building avenue for the next generation of Ghanaian transport Page 13 of 63  The World Bank Transport Sector Project (P102000) professionals\. 38\. Component F - Support to Ministry of Transport (MOT) and other Transport Sector Entities: Consultancy studies for agencies under MOT to improve the planning and management of sub-sector agencies, and procurement of some critical equipment for Volta Lake Transport Company (VLTC) and Regional Maritime University (RMU) were completed\. Key outputs achieved through the support of TSP were the enacted road traffic regulation; a public expenditure and institutional review for the transport sector; a national airport system plan, development of regulations for Ghana Civil Aviation Authority (GCAA), a Railway Business Plan and an Organizational Developmental Plan for Ghana Railway Development Authority (GRDA); a Masterplan for Inland Water Transport on Volta Lake etc\. Through TSP, RMU has also made strides in developing its academic curriculum and building capacity amongst Ghana’s next generation of marine professionals\. Whereas the University used to send students to KNUST for practical training, support from TSP in acquiring state-of-the art laboratory equipment has assisted RMU to expand and introduce new 12 courses and assign cadets to vessels for on-board practical training\. RMU’s end of project target for courses was 8; and expectations have been exceeded\. Collaboration with global shippers like Bernhard Schute and PIL Singapore has given students the opportunity to intern and acquire best practices from such renowned shippers\. Table 2: Achievement of PDO Indicators PDO Indicators Baseline Target 2018 Status Average travel time (minutes): - Ayamfuri-Asawinso 90 65 50 - Burma Camp 60 45 45 - Giffard Road 40 30 30 Average VOC reduced (in real terms) (US$/veh-km) 0\.20 0\.17 0\.23 Fatality Reduced (per 10,000 vehicles) 22 19 9\.74 Increase in RAI 53 57 66\.6 Condition of road network in good and fair condition - Trunk 83 88 93 - Urban 36 50 54 Feeder 72 85 75 Justification of Overall Efficacy Rating From Table 2, seven of the nine PDO outcomes were achieved\. Thus, a proposed rating of Substantial is proposed\. C\. EFFICIENCY Assessment of Efficiency and Rating 39\. The civil works including contingencies represented about 85% percent of total project costs\. The economic analysis has been developed based on the scope and costs of the civil works, which consist of reconstruction, rehabilitation, and upgrading of the: (a) Ayamfuri-Asawinso; and (b) urban road network, specifically the Giffard and Burma Camp Roads\. Both ex ante and ex post analyses are presented in this section\. The economic analyses were undertaken using the road planning model Highway Development and Management Model version 4 (HDM 4)\. A discount rate of 12% is applied to all cases\. Page 14 of 63  The World Bank Transport Sector Project (P102000) 40\. In 2008, economic analyses of the 3 roads were done as part of project preparation\. Results obtained are shown in Table 3\. The Net Present Values (NPVs) were positive; & Economic Rate of Return (ERR) percentages were higher than the discount rate of 12%\. Table 3: 2008 Ex Ante Economic Analysis Road Link NPV (@12%) (US$mil) ERR Ayamfuri-Asawinso 55 17\.9% Giffard Road 2\.5 20% Burma Camp Road 2\.7 15% 41\. Assumptions made in computing the indicators in Table 3 are as follows: • It was assumed that population and income growth will provide the basis for traffic growth forecasts\. • For Ayamfuri-Asawinso, the highest growth rate was assumed for light vehicles where a growth rate of 7\.1% was adopted from 2008-2015; and 6\.5% in the period 2015-2025\. • For the urban roads, traffic was assumed to grow at 3% from 2010 – 2016; 4% from 2017 – 2029\. 42\. For Additional Financing in 2015, economic analyses yielded the values shown in Table 4\. Here again values for full road lengths were positive for NPV; and ERR was greater than the discount rate of 12%\. Table 4: 2015 AF Economic Analysis Road Link NPV (@12%) (US$mil) ERR Ayamfuri-Asawinso 16\.07 15\.01% Giffard Road 23\.82 48\.4% Burma Camp Road 1 8\.76 21\.7% Burma Camp Road 2 24\.88 60\.8% 43\. Assumptions made in computing the indicators in Table 4 are as follows: • Analysis for Ayamfuri-Asawinso assumed completion of works in 2016, and design life of 15 years • For Burma Camp & Giffard Roads, a base year of 2012 was selected, and a design life of 27 years was used\. 44\. Ex Post Economic Analyses was conducted as part of Government’s ICR using the following inputs presented in Table 5\. A summary is presented in the table with an extensive description being provided in Annex 4\. Table 5: Inputs for Ex Post Analysis Road Name Giffard Burma Camp 1 Burma Camp 2 Ayamfuri-Asawinso Design Life 20 years 20 years 20 years 15 years Const\. Start Date 09/2012 11/2012 09/2012 05/2013 Opening to Traffic 10/2016 09/2017 06/2015 05/2017 Road Type 4 Lane Major Arterial 4 Lane Major Arterial 4 Lane Major Arterial 2 lane Trunk Road Surface Material Asphalt Concrete Asphalt Concrete Asphalt Concrete Asphalt Concrete Road Length 5\.7km 4\.86km 3\.4km 52\.2km Project cost (US$) 28\.001mil 30\.803mil 16\.91mil 86\.965mil Page 15 of 63  The World Bank Transport Sector Project (P102000) 45\. The economic outputs obtained ex-post showed results were mixed\. The main benefits of rehabilitation realized are due to savings in VOC and travel time\. Table 6 highlights the performance of the selected economic indicators for the different road links\. Table 6: Results of Ex-Post Analyses Road Link NPV (@12%) (US$mil) ERR Ayamfuri-Asawinso -15\.275 1\.9% Giffard 2\.80 12\.9% Burma Camp 1 84\.85 33\.1% Burma Camp 2 45\.82 40\.0% 46\. The following observations are made from Table 6\. • Maximizing economic efficiency was not attained for Ayamfuri-Asawinso\. The NPV value was negative and ERR was below the discount rate of 12%\. A key factor that contributed to this was cost over-runs associated with rehabilitation\. Actual costs in 2018 exceeded 2008 cost estimates by 36%; and exceeded 2015 AF cost estimates by 21% (Table 1)\. The main reasons for the overruns were unforeseen ground conditions as well as higher than expected growth in traffic after preparation of road designs, resulting in a need for modified designs\. AADT grew by almost 300% between road design completion and commencement of construction\. The change in traffic levels necessitated the strengthening of the pavement structure with an additional 100 mm of crushed rock base\. Drainage requirements were also impacted and updated with additional provisions for slope stabilization (previously not considered critical) to prevent premature failure of specific cut sections\. • Economic efficiency for urban roads was attained\. NPV values for both Giffard and Burma Camp roads were positive; and ERR percentages were above the discount rate of 12%\. Referencing Tables 4, 5 and 6; economic gains from the Burma Camp Road post-construction far exceeded NPV and ERR values estimated at project appraisal and during approval for Additional Financing\. In the case of Giffard, economic gains in 2018 were lower than estimates made for Additional Financing\. For 2008 estimates, NPV values were similar, while ERR for 2008 was higher\. Key economic benefits accrued after improvement of this urban corridor are vehicle operating cost savings and time savings\. • The project was extended twice due to implementation delays\. Remediation measures to rectify engineering and traffic challenges posed to construction of civil works as described in Par\. 46 resulted in an extension period of 1 year for the completion of works\. Separately an additional extension of 6 months was given on account of delayed payment of resettlement compensation on the Ayamfuri-Asawinso road\. 47\. Based on the above, an Efficiency is rated Modest\. D\. JUSTIFICATION OF OVERALL OUTCOME RATING 48\. Using the ratings for relevance, efficacy and efficiency, the project’s overall outcome is rated Moderately Satisfactory\. With an objective to improving mobility of goods and passengers on selected roads, TSP achieved significant reduction in travel time on project funded roads and contributed to increasing road safety awareness country-wide\. Data collected during monitoring and evaluation of the project as well as random surveys conducted within beneficiary communities demonstrated the positive impacts of improved Page 16 of 63  The World Bank Transport Sector Project (P102000) connectivity on residents living in these communities\. Implementation delays faced by TSP however increased project costs and affected the timeliness in delivering project outputs & outcomes\. E\. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender 49\. There is little evidence of TSP’s impact in terms of gender\. This is because no monitoring was done for gender- related outcomes within the project\. A general observation that applies to gender was made as regards trading activities within beneficiary communities\. Most of the traders found within these communities are women, and improved mobility of passengers and goods implies positive developments for small businesses\. During surveys, traders indicated decreased travel times in getting goods and agricultural produce from wholesale centers to market stalls\. Likewise, customers who were patrons shared the ease with which they could access markets due to improved roads\. Improved roads have translated to increased accessibility for traders and customers; compared to pre-road improvement conditions where poor roads generated services characterized by irregular, infrequent and delayed accessibility to markets and small businesses\. In addition, the construction of 2 markets along the Ayamfuri-Asawinso road has significantly improved the physical working environment for traders\. Institutional Strengthening 50\. Components A and F provided unique opportunities targeted at institutional strengthening within Ghana’s transport sector\. The various legislative and institutional instruments that have been undertaken as part of TSP will aid Government in streamlining operations at the Ministry of Roads and Highways, Ministry of Transport and their related agencies\. These instruments comprising studies, plans and a regulation provide the foundation for public entities to improve efficiency within the transport sector; however full benefits aimed at institutional strengthening will only be realized once recommendations made within these instruments are enforced\. 51\. Short-term gains have been attained though capacity-building opportunities offered under TSP\. Officials from implementing and beneficiary agencies undertook various trainings in technical and administrative subjects\. Examples of technical capacity-building opportunities included trainings in Transport Planning and Engineering, Procurement Management, Performance Based Contracts and Auditing\. Administrative training covered areas such as human resource development, administration and management as well as strategic public relations\. About fifty- one (51) officers benefitted from about sixty-nine (69) training programs\. Officials who undertook training were interviewed during the ICR mission\. They indicated new skills had been attained that were being applied to their day to day tasks within their respective jurisdictions\. Mobilizing Private Sector Financing 52\. Not applicable under TSP Poverty Reduction and Shared Prosperity 53\. Poverty reduction and shared prosperity were not directly measured as part of the project\. However various classes of road users such as taxi drivers, teachers, school-children, traders etc\. testified to improved accessibility to Page 17 of 63  The World Bank Transport Sector Project (P102000) various centers of attraction as well as significant reductions in travel time and relieved congestion\. Such a development could implicitly lead to positive economic generating opportunities as well improvements in standard of living both in the short-term & long-term\. One immediate, direct economic benefit taxi operators realized from TSP was the creation of business for routes between Dunkwa and Ayamfuri, where taxi services had not existed prior to the Ayamfuri-Asawinso road improvement\. Other Unintended Outcomes and Impacts 54\. NA III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A\. KEY FACTORS DURING PREPARATION 55\. TSP was developed following a participatory design process\. The process was based on an all-inclusive approach to engage all transport decision-makers and to provide a platform for exchange of information among all stakeholders\. With such an approach, the project sought to use multi-modal coordination and planning to address inefficiencies within Ghana’s transport sector\. 56\. Steps for Inter-Agency collaboration: The institutional arrangement for TSP was organized such that agencies that had limited experience with Bank funded projects were dependent on the processes of more experienced agencies\. Such an arrangement provided comprehensive management support to all implementing and beneficiary agencies that had been assigned activities as part of the project\. The institutional arrangement put in place during project preparation comprised: • A Project Steering Committee (PSC) as an inter-ministerial oversight body; • A Project Implementation Team (PIT) for coordinating implementation of project activities and reporting; • A Finance Management Team (FMT), as part of the PIT, for the overall financial management and reporting; and • A Procurement Team (PT), as part of the PIT, with direct responsibility for procurement activities and to provide quality control\. The set-up was intended to streamline decision-making within TSP and to provide essential support as well as accountability to all participating agencies\. To achieve its goal, the proposed institutional arrangement was incorporated into the Project Implementation Plan\. 57\. Acknowledgement of Potential Risks: Potential risks that could curtail and or undermine TSP were identified during project preparation\. Upon identification, risk mitigation measures were prescribed by both the Client and the Bank\. Examples of risks considered during preparation included: • Weak commitment of Government to institutional reforms in the transport sector • The risk of funds not being used for intended purposes, economically and efficiently • Investment programs of different sub-sectors not being well-coordinated and leading to sub- optimal investments • Inadequate performance of the local construction industry and quality assurance of work contracts • Increased supply of improved roads may lead to higher traffic accidents and fatalities 58\. Instituting a Monitoring and Evaluation Framework: It was noted during project preparation that a good Page 18 of 63  The World Bank Transport Sector Project (P102000) project monitoring system was essential for effective management of the project\. As a consequence, a detailed monitoring and evaluation component, including collection of all baseline data was designed and built into TSP\. 59\. Design of Environmental and Social Safeguard Instruments: Project preparation emphasized the significance of using Environmental Impact Assessments (EIAs), Environmental Management Plans (EMPs), (Environmental & Social Management Framework (ESMF), and Resettlement Action Plans (RAPs) as demanded by a given context prior to the commencement of any construction, rehabilitation, maintenance or any related activity under the Project\. Assessment and disclosure of these instruments were paramount in ensuring project beneficiaries as well as their natural and cultural environs were protected or compensated from the negative impacts of project delivery\. 60\. Sustainability: TSP recognized the role of sustainability within the overall project strategy for ensuring quality, continuity and reliability of the institutional, regulatory and infrastructural improvements carried out under the project\. Each of the project sub-components was designed with sustainability in mind, with achievements dependent on the following factors: • continuing attention to maintenance issues and committing sufficient resources to it; • government’s willingness to create a rational institutional structure for the sector and create an incentive framework to attract and retain suitable technical manpower to address sectoral issues in a comprehensive manner; and • strengthening local construction industry and the role of the private sector in the transport sector B\. KEY FACTORS DURING IMPLEMENTATION 61\. Implementation of Proposed Inter-Agency Arrangement: Overall project implementation philosophy was achieved via a mainstreamed project implementation structure with staff of the line ministries and agencies directly responsible for the project implementation as part of their routine schedules\. In relation to Par\. 55 and 56, implementation was carried out using an Annual Work Plan and Budget prepared by the MRH, with inputs from other participating MDAs\. A Project Implementation Manual (PIM) was prepared by GOG for: (a) institutional coordination and day-to-day execution of the project; (b) disbursement and financial management; (c) procurement; (d) environmental and social guidelines; (e) monitoring, evaluation, reporting and communication; and other administrative, financial, technical and organizational arrangements and procedures as were required for the project\. During preparation of credit for additional financing it was observed that poor intra-agency coordination had been one of the main factors slowing implementation\. Based on this experience, the agencies suggested a revival of Agency Implementation Teams (AIT) composed of core technical and safeguards staff, led by a designated team leader\. Due to lack of dedicated commitment, the inter-agency Procurement Team (PT) and Financial Management team (FMT) had been less effective and were proposed to be discontinued\. These changes were reflected in the updated PIM\. In view of challenges in implementation, MRH and its agencies had hired Contract Management Specialists and a Project Accountant to support the project\. 62\. Delays in project implementation: The project closing date was extended by 42 months overall as a result of a number of challenges that led to delays in project implementation\. Firstly, procurement of major activities was slow and procurement documents required several clarifications before contracts could be cleared for signature\. The structure of the procurement team as constituted in the PIM was bearing out several coordination issues that contributed in part to the delay\. Secondly, design weaknesses were identified during the course of the major civil works\. Anticipated traffic on the trunk roads had increased due to revival of mining activities in the area, while the alignment of the urban roads, previously thought to be secure in a military facility had been encroached by the time of contract signature\. In addition, several Page 19 of 63  The World Bank Transport Sector Project (P102000) issues relating to optimization of the chosen alignment in the urban area as well as inadequate provisions for relocating of utilities necessitated a considerable level of redesign after the contract was awarded\. Further delays were consequently experienced\. Finally, on the trunk roads component, compensation payment to project affected persons also delayed inordinately leading to further delays in completion of critical road sections as well as increased costs (see further discussed in Para 63 and 64)\. Consequently, the disbursement was slow in the initial years of the project, but this picked up significantly thereafter as the emerging issues were successfully resolved\. 63\. Challenges with social and environmental safeguards implementation: Per TSP’s Financial Agreement, all safeguards triggered by the project that required assessment and disclosure were duly processed\. However, there were challenges in the implementation of safeguard instruments that negatively impacted implementation progress\. For social safeguards, delays in paying resettlement compensation to Project Affected Persons (PAPs) during implementation severely curtailed some civil works and resulted in additional costs to the project\. The civil works implementation for the Ayamfuri-Asawinso corridor revealed several gaps in the identification of PAPs, leading to increased compensation\. This was coupled with a much-delayed procedure of valuation reflecting major coordination problems between the Ghana Highway Authority (GHA) and LVD\. Failure for the Client to pay compensation on time accosted the project about 2 years and US$15m in contractor claims for idle time\. Government is yet to settle on claim with contractor\. For environmental safeguards, there were shortcomings with the slow response time in addressing drainage issues with civil works that ultimately resulted in flooding\. There were also issues with inadequate reinstatement of borrow pit sites as well as the Client’s inability to keep up with implementation schedule for post construction environmental mitigation measures\. On the administrative front, inadequate reporting on the safeguards aspects of progress reports, and the general lack of commitment in addressing safeguard issues affected safeguards ratings\. For example, the Overall Safeguards Rating was downgraded to Moderately Unsatisfactory in June 2013 due mainly to the outstanding release of funds by the Ministry of Finance for compensatory payments to affected people\. By project’s end ratings were Moderately satisfactory as government was able to resolve all major safeguards concerns\. A forward -looking approach to addressing safeguards was also adopted; an example of which a RAP audit was launched for TSP and the Abidjan Lagos Transport and Transit Facilitation Project (ALTTFP)\. 64\. Occurrence of cost overruns: There were unforeseen cost increases which threatened to jeopardize delivery of project outputs for road improvement\. Cost overruns were specifically associated with civil works as part of the Ayamfuri-Asawinso road rehabilitation and construction of selected urban roads in the Accra East Corridor\. Additional resources to cover overruns were obtained through Additional Financing in 2015\. Cost increases for civil works were largely as a result of an absence of due diligence in infrastructure design, unforeseen technical occurrences as well as forex movements\. In the case of Ayamfuri-Asawinso, unforeseen ground conditions as well as the higher than expected growth in traffic observed after design preparation necessitated the need for modified designs\. The detailed designs for Ayamfuri-Asawinso were completed in 2006 after which time average annual daily traffic (AADT) went up by almost 300 percent, from 800 to 2,364 vehicles per day; and much more than the 1,304 vehicles per day projected for 2013\. For the urban roads, relocation of utilities, design of ancillary structures like a railway bridge, revised corridor alignment and ground improvements to correct for soft soil contributed to cost increases\. 65\. Managing Risk and Monitoring & Evaluation Components: Risks were monitored during the entire project implementation phase and overall risk fluctuated between moderate and substantial\. Specific risks that were rated substantial in the last 3 years of the project were: • Political and governance risk: due to inadequate oversight of project activities by the Client that could lead to instances of non-compliance with operating procedures and policies\. Page 20 of 63  The World Bank Transport Sector Project (P102000) • Macroeconomic: due to a burgeoning fiscal deficit as a percentage of GDP • Institutional Capacity for Implementation and Sustainability: Risk of inadequate Client technical, procurement and management capacity to supervise and deliver a sustainable project • Safeguards: Risk posed by weak compliance to Bank’s social and environmental safeguard policies IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A\. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 66\. At project preparation, M & E component was given critical attention as a key pillar to achieving TSP’s PDO\. As a result, M &E design was robust and relevant indicators were identified in a collaborative effort between the Bank and Government\. Indicators were largely selected to measure performance and provide a continuous assessment of activities supporting the realization of the PDO\. Monitoring and evaluation of the overall project was the responsibility of the PIT\. However, each participating agency was responsible for collecting information on their respective components including collection of all baseline data\. The performance indicators were monitored annually with extensive consultations amongst stakeholders\. 67\. A risk that was flagged for M & E during design involved the adoption of criteria that would not easily lend themselves to measurement and would create challenges in evaluating project performance\. To mitigate such an occurrence, extensive deliberation between participating agencies and the Bank was undertaken to ensure criteria for the selection of indicators aligned with project outcomes\. 68\. In preparing the ICR, the author is of the view that the PDO as stated was fairly broad and could have been simplified\. This will lead to the identification of outputs and outcomes that can easily be measured\. 69\. Also, outcomes and indicators that were proposed during Additional Financing were not incorporated into the M & E framework\. As such they were not monitored once the AF was approved\. Indicators that were monitored were ones that had been formulated during preparation of the parent project\. M&E Implementation 70\. A robust M & E design translated to a well-structured M & E framework during implementation\. Data on indicators designed for the parent project was collected on a regular basis as project implementation activities progressed\. Information on assessed output performance was then disseminated amongst stakeholder\. Observations from M & E assessments were included in Quarterly Project Progress Report\. Reporting covered monitoring the outcomes of activities related to: (a) progress in civil works, services, institutional support, and procurement activities; and (b) progress in achieving project development objectives and intermediate outcomes\. Assessment of project and contract management progress was also monitored and included in the quarterly progress reports\. Support for M & E activities was provided under Component G and the Department of Monitoring and Evaluation at MRH was responsible for monitoring key outcome indicators\. Page 21 of 63  The World Bank Transport Sector Project (P102000) M&E Utilization 71\. In addition to measuring performance in attaining project outcomes, TSP’s M & E framework provided a feedback loop to both Government and Bank on modifications that could be made to ensure success in project delivery\. M & E assessment reports also served as critical input in guiding stakeholders to make informed decisions at different stages of the project cycle\. This was especially so during processing of credit for Additional Financing where approval was influenced by progress in achieving project outcomes\. Unfortunately changes made to indicators and outcomes during the AF phase were not monitored during implementation\. Finally, reporting on M & E also guided PIT in tracking areas of progress and delays within the implementation schedule\. Justification of Overall Rating of Quality of M&E 72\. Overall Rating of Quality of M & E for TSP is considered Modest\. Rating is based on shortcomings during M&E implementation and utilization where proposed changes made at AF were not fully incorporated into the M & E framework\. B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE 73\. Compliance of both social and environmental safeguards were rated moderately satisfactory at the time of project close\. Significant civil works to be undertaken as part of the project triggered the following safeguards: Environmental Assessment (EA), Physical Cultural Resources and OP 4\.12 Involuntary Resettlement\. As a result, the project was assigned the Environmental Category A; and an Environmental and Social Management Framework (ESMF), and a Resettlement Policy Framework (RPF) were prepared and disclosed accordingly\. Funding for safeguard mitigation measures was the responsibility of the Client\. 74\. The following project operations were flagged as potential hazards to the environment: (a) establishment of base camps for contractors and resident engineers; (b) road construction operations resulting in dust, noise, and temporary loss of flora; (c) opening or re-opening of borrow pits and solid rock quarries, which could result in soil erosion and pollution and aesthetically undesirable alterations of the landscape; (d) opening of diversions; and (e) dumping of construction waste and accidental spillage of machine oil and lubricants\. And the following were identified for social: (a) land acquisition (resulting in involuntary resettlement), loss of strips of land and (b) dislocation of social values induced by the influx of migrant workers (resulting in the spread of HIV/AIDS)\. 75\. Safeguards mitigation measures pursued during implementation included (i) prioritizing the use of road alignments with minimal negative social and environmental impacts; (ii) inserting social and environmental protection clauses into bidding documents for works contracts (iii) extensive and participatory safeguards consultations with various stakeholders and affected groups (iv) training of environmental and social safeguards specialists for effective monitoring and supervision\. 76\. Identification of hazards and development of mitigation measures limited safeguard disasters\. Main issues faced were inadequate drainage that led to flooding and delays in paying compensations to PAPs which led to delays and cost over-runs\. Par\. 63 highlights the extent of TSP’s safeguard issues\. 77\. Compliance with fiduciary obligations were rated moderately satisfactory under TSP\. Financial management arrangements under the project were adequate and met the minimum requirements per Bank Policy\. Whereas finance-related stipulations in the Financing Agreement were followed, concerns were raised by the Bank about the thoroughness of FM Reports\. This stemmed from the non-effective Page 22 of 63  The World Bank Transport Sector Project (P102000) use of financial management systems that were in place to support TSP\. As a consequence, Bank advised the Client to improve the quality, content and details of the report\. In addition, Client was encouraged to avoid occasional delays in the submission of acceptable interim financial statements and annual audited financial reports\. 78\. For procurement management, procurement delivery was in compliance with TSP’s legal agreement, the PAD, as well as the PIM\. No ineligible expenses were recorded\. Shortcomings with lengthy; as well as cumbersome approval procedures for invoices and subsequent payment caused delays in project implementation\. This in addition to incoherent filing of contract PVs, invoices and waybills on procurement files contributed to procurement’s moderately satisfactory rating\. There were also shortcomings in the lengthy procurement process and inadequacies in the quality of procurement documentation\. Examples of delays encountered in procurement were 12-18 months on the major civil works projects; as well as delays in the procurement of engines for VLTC, though acquisition of engines was listed as an emergency\. C\. BANK PERFORMANCE Quality at Entry 79\. The Bank worked closely with the Client to design a project tailored to meet GoG’s objective of strengthening the provision of infrastructure services and improving Ghana’s business environment to sustain broad-based growth\. Both parties worked together to recognize the role transport played within this objective, and more importantly how opportunities within different transport modes in Ghana could be harnessed to achieve Government’s vision of becoming a middle-income country\. 80\. In developing TSP, collaborative work between Bank and Government was enhanced by Ghana’s Country Assistance Strategy, the Bank-funded Road Sector Development Program and the UN Millennium Development Goals\. References from these documents provided useful material in laying out a well-defined project scope as well as identifying higher-level objectives to which TSP could contribute to\. 81\. Project preparation involved Bank providing sound technical advice as it worked with the Client in determining the type and composition of investment that would yield maximum benefits\. Experts from across the Bank offered input on TSP’s Project Development Objective as well as the structure of its underlining components\. Working with the Client forged a close interaction between Bank staff and Government officials which provided a platform for information sharing and exchange of ideas throughout the project cycle\. 82\. The Bank also provided constant support in assisting Government develop instruments required as part of project preparation\. Bank support was provided on identifying appropriate lending instruments; establishing required safeguard instruments; and setting up M & E and fiduciary guidelines for later stages in the project cycle\. Discussions between Bank and Client increased understanding of each party’s responsibilities and requirements under TSP which contributed immensely to a Client that was ready for project implementation\. Quality of Supervision 83\. The Bank provided regular hands-on support to the Client during Project Implementation\. Throughout the duration of TSP, regular implementation support missions were undertaken to review progress of work under the Page 23 of 63  The World Bank Transport Sector Project (P102000) various components\. This helped in monitoring the process required to achieving targeted project outcomes\. Bank staff together with government counterparts used missions to visit sites where works and services under TSP were being undertaken\. Missions offered Bank staff the opportunity to interact directly with project beneficiaries and assess the level of Client compliance to requirements prepared during project preparation\. Missions also gave staff useful information on how project risks were being managed by the Client and an understanding of what changes needed to be made to mitigation measures where applicable\. 84\. In between missions, regular meetings were held by video-conferencing at which time the Client provided assessments on the status of project activities\. The meetings provided a platform to discuss general and specific issues in relation to progress of project components\. 85\. The presence of in-country transport bank staff contributed greatly to effective project supervision\. It facilitated a direct and face-to-face interaction with the Client and was essential in providing readily available support to the Client\. Different aspects of the project could be monitored closely for compliance and field trips were organized more frequently to project sites\. For the Client, having in-country task team support meant the availability of a constant resource to address issues as they arose within the project\. 86\. The Bank team also had a strong engagement with the government team to deal with the delayed compensation issues which affected the project\. At the project level, the team met with high level officials of the LVD and GHA to agree on a way forward and provide support for the completion of valuation\. At the CMU level, the country director also engaged with the Minister of Finance to ensure that the funds were available once the bottlenecks had been resolved\. 87\. The fiduciary and safeguards teams also provided regular training on bank policies for the project staff to resolve emergent issues on the project\. Justification of Overall Rating of Bank Performance 88\. Based on the above, World Bank performance is rated Moderately Satisfactory\. D\. RISK TO DEVELOPMENT OUTCOME 89\. Reduced Political and Institutional Motivation to accelerate inter-agency coordination: In as much as Components A and F have achieved a good first step in developing instruments that would lead to greater efficiency and coordination within the roads sub-sector, institutionalizing these studies is at a nascent stage\. The impacts of these instruments will be observed in the long term, however in the interim Government needs to be committed to the uptake of recommendations from the study\. A lack of commitment will mean a continuation of the status quo where fragmented multi-modal decision-making does not maximize the potential for transport to efficiently move people and goods across Ghana\. 90\. Insufficient Funding of Road Maintenance: Maintenance of roads continues to suffer from inadequate funding resources\. Like any other jurisdiction, lack of investments in maintenance directly impacts road network condition by increasing the percentage of roads in poor condition\. In addition, deferred maintenance of roads also has cost implications\. Apart from increasing vehicle operating costs and travel time to service providers and passengers, rehabilitation cost for government to improve a previously maintainable road increases substantially\. Unfortunately, contributions by Ghana’s Road Fund for road maintenance has not increased since TSP was approved\. Condition of roads will suffer as a result ultimately contributing to reduced mobility for passengers, goods and services\. 91\. Risk of Increasing Road Safety Accidents: Increasing rate of motorization levels in Ghana contribute to an Page 24 of 63  The World Bank Transport Sector Project (P102000) increase in road safety fatalities and injuries\. A combination of increased motorization with existing deficiencies in road safety management, enforcement and infrastructure provision will result in increased risks of road accidents along Ghana’s road network\. Vulnerable road users particularly suffer the most from these resulting accidents\. As is the case for road safety awareness, solving the broader challenge of road safety in Ghana should involve targeted interventions aimed at other contributory factors such as limited capacity in road safety management and enforcement\. The approach of the road safety interventions under TSP which involved the integration of road safety into the teaching curriculum in primary schools, and junior secondary schools is yielding positive results seen in a reduction in fatalities among the most vulnerable in society\. Continued investment in in other modes of infrastructure may also provide various options to the public and may reduce the strong dependency on road transport, which will further reduce the risk overall to road users\. V\. LESSONS AND RECOMMENDATIONS 92\. Level of coordination: An overall satisfactory assessment was given for coordination at agency-level and with the Project Implementation Team that was formed to manage TSP\. One area for improvement identified is greater involvement of divisions/departments that had peripheral, yet critical tasks associated with the Project, for example the Land Valuation Division as an external stakeholder whose actions impact specific project components\. Another area for improvement calls for strengthening the role of the Project Steering Committee to enable Committee members consisting of senior management of participating agencies to interact more and make decisions quickly on project related issues\. The practice of forming inter-agency teams based on expertise should be strengthened and committed to during project preparation and implementation\. Development of teams for finance; procurement, safeguards across different agencies will improve coordination and delivery of both donor and government-funded projects\. The final recommendation for improving the level of coordination borders on a strategy to minimize the unforeseen turn-over or re-assignment of Bank and client staff during the project cycle\. Solutions proposed are the use of a transition phase for reassignments and establishing back-up project teams to step in during vacancies to avoid project delays\. 93\. Bank Role: More time and resources should be dedicated towards project preparation\. The number of challenges faced during implementation could have been reduced with a more rigorous preparation phase\. In addition, it is highly recommended that Bank continues the practice of providing regular training on Bank policies and instruments for implementing and beneficiary agency staff\. Feedback from agencies indicate the offering of regular trainings led to understanding project requirements which ultimately led to efficiency in project delivery\. 94\. Project Monitoring and Quality Control: Monitoring and quality control under TSP could have been enhanced particularly at the design phase of civil works\. One recommendation in this regard is the formation of an inter-agency design review committee that would review designs before commencement of construction for future projects\. For TSP, this would have greatly reduced construction delays and cost over- runs\. TSP also revealed gaps in communication on monitoring and quality control reporting\. Examples include times when defects pointed out by monitoring teams were not complied with by contractors\. There were also cases where quality control reports produced lagged behind approval of work done by contractors\. As such there is the need for more engagement and improved communication channels with monitoring and quality control teams to guarantee satisfactory service delivery of project components\. The Bank is also encouraged to be diligent in structuring its M&E framework such that it accurately reflects proposals that are agreed at specific times during the project\. 95\. Management of Social and Environmental Impacts: The major issue relating to social and environmental Page 25 of 63  The World Bank Transport Sector Project (P102000) impacts was to do with compensation of project affected persons on the major civil works projects\. Substantial delays and costs in the form of contractual claims were borne, particularly on the Ayamfuri- Asawinso Road Rehabilitation Works because of challenges in the granting of approvals by the Land Valuation Division (LVD) to implementing agencies to pay PAPs\. Consequently, different implementing agencies achieved the task of paying compensations using different approaches with varying degrees of success\. Both the Bank and the Client realized that such a system of operation is untenable and recommend that LVD should be engaged at the early stages in the project cycle, preferably at project preparation to assist in effective planning\. Another challenge related to compensation was to do with the availability of funds to pay PAPs at the required time\. Funds acquired from Government Budget are often not timely; so Government staff requested the Bank to explore ways by which compensation can be paid from Project Funds to enable civil works to proceed seamlessly without delays\. Another option would be for Government to pay compensation and other resettlement costs from a dedicated escrow account during project preparation (this approach is currently mandated by Ghanaian Law, but rarely followed due to the lack of funds)\. Other initiatives that can be pursued include8: • Support to the development of a National Resettlement Law: A national resettlement law would bring clarity to the existing legal framework and strengthen protections of affected persons’ rights\. Such a law can be enacted through policy dialogue support in partnership with relevant ministries and possibly financed through Bank Technical Assistance (TA)\. The TA could include an institutional development and capacity program to support actors in strengthening systems and capacity to manage resettlement with a focus on areas like consultation, vulnerability, screening of resettlement impacts, assessment of losses, livelihoods restoration, benefit sharing, and documentation\. • Improved inter-agency coordination: It is recommended that LVD be directly involved in the preparation of RAPs via consultants, together with the implementing and beneficiary agencies\. It is also recommended to engage Ministry of Finance (MoF) in the process so that Government is aware of its financial obligations well in advance of Negotiations\. Support to a multi-agency dialogue around such institutional changes linked to inter-agency coordination could be part of a proposed TA\. • Use of Frameworks (RPFs): It is recommended that RAPs be prepared to the extent possible in project preparation, as opposed to or alongside RPFs\. While this may not be feasible in all cases, to the extent that RAPs can be prepared during Preparation, doing so where possible allows for a more accurate estimate of the resettlement budget in preparation and reduces costs overruns, as the exact resettlement will be known before project approval\. It is also recommended that regular training in the use and application of RAPs and other safeguard instruments be provided regularly\. • Ex-post evaluation: An ex-post evaluation process is recommended, aimed at following and recording the situation of affected persons after compensation to serve as a basis for both an evaluation of the true success of resettlement actions and the improvement of future practices and policies\. 96\. Sustainability: Different project components had varying levels of sustainable interventions included within their set-up\. For example, whereas results on sustainability of civil works in terms of maintenance of rehabilitated roads were checkered; marked overall success was achieved with the capacity building opportunities offered through the project\. Agencies were highly satisfied with knowledge and skills attained by staff who participated in training seminars and workshops funded through TSP\. Educational entities that 8 Thematic Review of Resettlement Issues and Challenges in Bank-Financed Projects in West Africa; World Bank Page 26 of 63  The World Bank Transport Sector Project (P102000) had capacity building sub-components under TSP have also used successful project activities to gain international recognition and collaborations with well-renowned academic institutions as well as private firms\. Avenues are presently being sought to expand these collaborations\. All participating agencies were advised to have a strategic plan on sustainability to preserve investments made either in personnel, infrastructure or service delivery\. 97\. Financial Management and Procurement\. Initial challenges to do with long list of signatories to approve invoices and certificates were resolved during project implementation\. One example related to long delays in paying contractors for work done was resolved by paying them directly rather than using Ghana’s local government set-up\. Bank is encouraged to strengthen fiduciary compliance of implementing and beneficiary agencies through regular trainings\. Feedback from the client showed a direct relation between quality and frequency of training to the efficient delivery of financial and procurement related project functions\. 98\. Multi-modal coordination: Achieving coordination within the various transport actors is still work in progress\. TSP contributed to the foundation through which integration of different modes could guarantee gains in efficiency for agencies and transport users alike\. A key observation made during this review is that multi-modal coordination will not happen naturally without a proactive effort from stakeholders\. One way to achieving an adequate level of coordination and integration within Ghana’s transport sector is to nominate a champion to rally stakeholders on the benefits to be accrued through such a paradigm shift\. The Bank can also provide TA support for the uptake and mainstreaming of instruments developed under TSP that are aimed at multi-modal coordination\. \. Page 27 of 63  The World Bank Transport Sector Project (P102000) ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS A\. RESULTS INDICATORS A\.1 PDO Indicators Objective/Outcome: Improve mobility of goods and passengers and improve road safety standards Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Average travel time for Minutes 90\.00 65\.00 50\.00 Ayamfuri-Asawinso Road 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Average travel time for Minutes 60\.00 45\.00 45\.00 Burma Road 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Page 28 of 63  The World Bank Transport Sector Project (P102000) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Average travel time for Minutes 40\.00 30\.00 30\.00 Giffard Road 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Average VOC reduced Number 0\.20 0\.17 0\.23 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Increased RAI Number 53\.00 57\.00 66\.60 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Page 29 of 63  The World Bank Transport Sector Project (P102000) Condition of road network in Kilometers 83\.00 88\.00 93\.00 good and fair condition - Trunk roads 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Condition of road network in Kilometers 36\.00 50\.00 54\.00 good and fair condition - Urban roads 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Condition of road network in Kilometers 72\.00 85\.00 75\.00 good and fair condition - Feeder roads 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Fatality rate reduced (per Number 22\.00 19\.00 9\.74 Page 30 of 63  The World Bank Transport Sector Project (P102000) 10,000 vehicles) 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): A\.2 Intermediate Results Indicators Component: Component A - Support to MRH Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Enacted road traffic Text Drafted Enacted Enacted regulations; implement axle load control policy action 27-Oct-2009 30-Jun-2015 31-Dec-2018 plan Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Share of road funds of the Percentage 60\.00 80\.00 60\.00 total road maintenance needs increased 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Component: Component C - Improvement of Trunk Roads Page 31 of 63  The World Bank Transport Sector Project (P102000) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Roads rehablitated Kilometers 0\.00 52\.00 52\.20 20-May-2009 30-Jun-2015 31-Dec-2018 Roads rehabilitated - rural Kilometers 0\.00 52\.00 52\.20 Roads rehabilitated - non- Kilometers 0\.00 0\.00 0\.00 rural Comments (achievements against targets): Component: Component D - Improvement of Urban Roads and Infrastructure Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Roads rehablitated Kilometers 0\.00 14\.80 14\.80 20-May-2009 30-Jun-2015 31-Dec-2018 Roads rehabilitated - rural Kilometers 0\.00 0\.00 0\.00 Roads rehabilitated - non- Kilometers 0\.00 14\.80 14\.80 Page 32 of 63  The World Bank Transport Sector Project (P102000) rural Comments (achievements against targets): Component: Component E - Improvement of Feeder Roads Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Length of road network Kilometers 0\.00 300\.00 462\.00 improved (spot improvement) - Feeder roads 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Roads rehablitated Kilometers 0\.00 250\.00 309\.70 20-May-2009 30-Jun-2015 31-Dec-2018 Roads rehabilitated - rural Kilometers 0\.00 250\.00 309\.70 Roads rehabilitated - non- Kilometers 0\.00 0\.00 0\.00 rural Page 33 of 63  The World Bank Transport Sector Project (P102000) Comments (achievements against targets): Component: Component F - Support to MOT and other Transport Sector Entities Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion GRDA made operational Text Railway Act Passed GRDA Operational Development of business and organizational development plan and railway regulations is completed\. 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Completion of Master Plan Text None Completed National Airport for Regional Airports System Plan completed in December 2014 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Page 34 of 63  The World Bank Transport Sector Project (P102000) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Completion of feasibility Text None Completed Study completed in studies for development of February 2015 landing stages and reception facilities along the Volta Lake 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of courses offered Text 2 8 12 by Regional Maritime University 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Completion of feasibility Text None None Dropped during study for dualization of restructuring Meridian road in Tema 27-Oct-2009 30-Jun-2015 31-Dec-2018 Comments (achievements against targets): Page 35 of 63  The World Bank Transport Sector Project (P102000) B\. KEY OUTPUTS BY COMPONENT Objective: Improved mobility of goods and passengers on selected roads through reduction in travel time, reduction in vehicle operating costs, and enhanced road safety awareness\. 1\. Average travel time (minutes) along project selected roads 2\. Average VOC reduced (in real terms) (US$/veh-km) 3\. Fatality rate reduced (per 10,000 vehicles) Outcome Indicators 4\. Increase in RAI 5\. Condition of road network in good and fair condition in 2018 for trunk, urban and feeder road network (national) 1\. Enacted Road Traffic Regulation (Yes/ No) 2\. Implement axle load control policy action plan (Yes/ No) 3\. Share of road funds of the total road maintenance needs increased (%) 4\. Length of road network rehabilitated nationally (km) Intermediate Results Indicators 5\. Length of road network improved (spot improvement) 6\. Preparation of a National Airport System Plan (Yes/ No) 7\. Completion of feasibility studies for development of landing stages and reception facilities along the Volta Lake (Yes/ No) 8\. Number of courses offered by Regional Maritime University (Number) 1\. Feasibility Studies for MRH program completed 2\. GIS integration pilot for road agencies achieved 3\. Eight road accident emergency response centers established Key Outputs by Component 4\. Vehicle driving test grounds at Tema completed 5\. Provision of road safety equipment, production of handbills, production and distribution of road safety information materials undertaken\. Page 36 of 63 The World Bank Transport Sector Project (P102000) 6\. Training of NRSC staff in identifying black spots, conducting road safety audits undertaken 6\. Provision of laboratory equipment, computers, construction of classrooms, asphalt lab and support to graduate transport program at KNUST completed 7\. Construction of 4-storey classroom block for GTCC completed 8\. Rehabilitation of Ayamfuri – Asawinso Road completed 9\. Improvement of Burma Camp & Giffard Roads completed 10\. Upgrading of 2 transport terminals in Greater Accra Metro 11\. Improvement and rehabilitation of selected feeder roads to support agriculture and growth undertaken 12\. Road Traffic Regulation Enacted 13\. National Airport System Plan drawn 14\. Development of Regulations for the Ghana Civil Aviation Authority completed 15\. Development of Master Plan for the Transportation on the Volta Lake completed Page 37 of 63  The World Bank Transport Sector Project (P102000) ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A\. TASK TEAM MEMBERS Name Role Preparation Ajay Kumar Task Team Leader Anthony Mensah-Bonsu Procurement Specialist Robert Wallace DeGraft-Hanson Financial Management Specialist Arun Banerjee Team Member John Hine Team Member Antoine V\. Lema Social and Environmental Specialist Salli Wondergem Team Member John Richardson Team Member Tawia Addo-Ashong Team Member Rajiv Sondhi Senior Finance Officer Anne Njuguna Program Assistant Charity Boafo-Portuphy Program Assistant Manush Hrsitov Senior Counsel John Stewart Snr\. Environmental Specialist Leslie Nii Odartey Mills ICR Author Supervision/ICR John Kobina Richardson Task Team Leader(s) Bayo Awosemusi, Charles John Aryee Ashong Procurement Specialist(s) Robert Wallace DeGraft-Hanson Financial Management Specialist Arun Banerjee Team Member Kavita Sethi Team Member Demba Balde Social Specialist Antoine V\. Lema Team Member Page 38 of 63  The World Bank Transport Sector Project (P102000) Salli Wondergem Team Member Roger Gorham Team Member Tawia Addo-Ashong Team Member Desta Wolde Woldearegay Team Member Anne Njuguna Team Member Charity Boafo-Portuphy Team Member Marc Marie Francois Navelet Noualhier Team Member Asferachew Abate Abebe Environmental Specialist Leslie Nii Odartey Mills ICR Author 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 6\.050 35,870\.55 FY08 7\.225 70,684\.45 FY09 37\.400 232,969\.28 FY10 0 0\.00 Total 50\.68 339,524\.28 Supervision/ICR FY10 18\.279 64,302\.76 FY11 19\.540 68,402\.31 Page 39 of 63  The World Bank Transport Sector Project (P102000) FY12 33\.345 105,116\.41 FY13 39\.286 169,752\.11 FY14 26\.564 120,558\.13 FY15 21\.209 75,927\.11 FY16 20\.289 99,910\.34 FY17 13\.744 81,900\.65 FY18 23\.170 128,775\.32 FY19 21\.091 97,421\.10 Total 236\.52 1,012,066\.24 Page 40 of 63  The World Bank Transport Sector Project (P102000) ANNEX 3\. PROJECT COST BY COMPONENT Amount at Approval Actual at Project Percentage of Approval Components (US$M) Closing (US$M) (%) Component A - Support to 4\.2 4\.127 98\.26% MRH Component B - Support to Road Sector and Educational 6\.5 5\.238 80\.58% Entities Component C - Improvement 64 86\.965 135\.88% of Trunk Roads Component D - Improvement of Urban Roads and 78 79\.442 101\.84% Infrastructure Component E - Improvement 50\.5 46\.763 92\.6% of Feeder Roads Component F - Support to MOT and other Transport 13\.5 12\.145 89\.96% Sector Entities Project Management 8\.3 8\.320 100\.24% Total 225 243\.000 108% Page 41 of 63  The World Bank Transport Sector Project (P102000) ANNEX 4\. EFFICIENCY ANALYSIS 1\. An economic analysis was conducted for the following: (a) Ayamfuri-Asawinso road (trunk road) and (b) Giffard and Burma Camp Roads (urban roads in the Accra East Corridor)\. Analysis involved comparison of measures of efficiency i\.e\. Net Present Value (NPV) and Economic Rate of Return (ERR) using the road planning model Highway Development and Management Model version 4 (HDM 4)\. The HDM-4 analytical framework is based on the concept of pavement life cycle analysis\. This is applied to predict road deterioration, road works effects, road user effects, and socio-economic and environmental effects\. Economic benefits are calculated as the difference between the “without” investment option (baseline scenario) and the “with” investment scenario (upgraded, improved road)\. 2\. The economic analysis used a 12% discount rate for all cases\. Using design inputs that were developed for detailed road designs, the analysis adopted a design life of 20 years for the urban roads; and a 15year design life for the trunk road\. The analysis was developed based on the scope and costs of the civil works, which consist of reconstruction, rehabilitation, and upgrading of roads\. Consideration was given to the fact that most civil works components would have low residual values by the end of the design lives for respective roads\. Components such as earthworks, culverts and side-drains would have significant percentages of their values remaining\. For the purposes of this analysis, salvage value is estimated at 10% of the investment capital\. To convert financial costs to economic costs, a standard conversion factor of 0\.83 was used\. It is consistent for other road sub-sector projects\. 3\. Using HDM-4, project analysis is undertaken for each of the 3 roads\. It involves analyzing each road section with user-selected treatments, with associated costs and benefits, projected annually over the analysis period\. Economic indicators i\.e\. NPV & ERR are then determined for the different investment options\. Input data required for HDM-4 project analysis is classified as follows: • Road Network: defines the physical characteristics of road sections in a network or sub-network to be analyzed • Vehicle Fleet: defines the characteristics of the vehicle fleet that operate on the road network to be analyzed • Road Work Standards: defines maintenance and improvement standards, together with their unit costs, which will be applied to the different road sections to be analyzed\. Data for the analysis is obtained from the Borrower’s ICR\. 4\. Definition of Road Network / Section Details: In order to establish the base case as a basis for the economic analysis as required in the HDM-4 system, the sectional characteristics of the project roads that existed prior to the project implementation were defined\. Prior to the specification of the road network details, each road was divided into homogenous sections based on variations in the surface class\. In this regard, the Giffard and Burma Camp roads were each considered as a single section whilst the Ayamfuri-Asawinso road was divided into two sections (bituminous & gravel)\. Table 4\.1 identifies section details which include: • General details: section name, road length, carriageway width, number of lanes, shoulder width, surface class, flow direction, speed flow type, traffic flow pattern, etc\. • Geometric details: rises+falls in m/km, number of rises+falls per km, superelevation, average horizontal curvature, speed limit, drainage type, etc\. • Pavement details: type, structural adequacy, ride quality, surface condition, surface material, etc • Condition: roughness, cracks, gravel thickness, rut depth, etc\. Page 42 of 63  The World Bank Transport Sector Project (P102000) 5\. Definition of Vehicle Fleet: Input for vehicle fleet is divided into three segments for the analyses\. These are as follow: • Basic characteristics of vehicle fleet: The vehicle fleet by category using the project roads were established through traffic counts and their basic characteristics such as tire type, number of wheels and axles, number of passengers, passenger car equivalency factors, average vehicle life, etc\. were specified in the HDM-4 system\. Table 4\.2 provides detailed basic characteristics of the vehicle fleet used for the analyses\. • Economic Characteristics of Vehicle Fleet: A market survey was conducted to ascertain the current economic characteristics of the vehicle fleet for input into the HDM-4 system\. The vehicle economic parameters established included price of a new vehicle, tire replacement cost, fuel cost, lubricating oil cost, maintenance labor cost, annual overhead cost, etc\. These provided input for the vehicle operating cost model of the system\. Details of economic characteristics are presented in Table 4\.3\. • Traffic Volumes and Growth Rates: Traffic volume counts were conducted on each of the project roads (Giffard road, Burma Camp Road Ph 1, Burma Camp Road Ph 2 and Ayamfuri – Asawinso Road) to establish the average daily traffic (ADT) after opening to traffic\. The counts were conducted for four days including one weekday 24-hour count, two weekday 12 hour count and one weekend 12 hour count\. Using the counts and historical data traffic, growth rates were developed for both the urban and trunk roads\. Details of traffic volumes and related growth rates are presented in Table 4\.4 6\. Definition of Work Standards: Maintenance and improvement standards (interventions) for the purposes of the economic analysis were specified for two scenarios; base case and ‘with project’ alternatives, for each road project\. Routine and periodic maintenance activities usually undertaken by the respective road agency and the associated costs were specified for the base case\. For the ‘with project’ alternative, the actual improvement interventions that were implemented and the associated costs were specified together with the routine and periodic maintenance activities\. A summary of the work standards is presented in Table 4\.5\. Page 43 of 63  The World Bank Transport Sector Project (P102000) Table 4\.1: Section Details Prior to Project DESCRIPTION SECTION DETAILS Giffard Road Burma Camp Road Ph\.1 Burma Camp Road Ph\.2 Ayamfuri – Asawinso Road General Section name: Giffard Road Burma Camp Road Ph\.1* Burma Camp Road Ph\.2* Ayamfuri-Dominase Dominase – Asawinso Section Road (Section 1) Road (Section 2) Details Section ID: AC-KP-A-0001-076 AC-KP-A-0004-136 AC-KP-A-0004-136 IR8/01 IR8/02 Link name: Giffard Road Burma Camp Road Ph\.1 Burma Camp Road Ph\.2 Ayanfuri-Asawinso Ayanfuri-Asawinso Road Road Link ID: GR BCR01 BCR02 IR8 IR8 Length: 5\.7km 4\.86km 3\.4km 14\.0km 38\.2km Carriageway width: 7m 6\.5m 6\.5m 7\.0m 7\.0m Shoulder width: 1\.5m 0 0 - - Flow direction: 2 way 2 way 2 way 2 way 2 way Surface class: Bituminous Unsealed Unsealed Bituminous Unsealed Speed flow type: Urban 2 lane standard Urban 2 lane narrow Urban 2 lane narrow Trunk 2 lane narrow Trunk 2 lane narrow Traffic flow pattern: Commuter Commuter Commuter Free flow Free flow Accident class: Two lane road Two lane road Two lane road Two lane road in Two lane road in rural rural setting setting Climate zone: Zone 4 Zone 4 Zone 4 Zone 1 (South Zone 1 (South Western (Coastal/Savannah) (Coastal/Savannah) (Coastal/Savannah) Western Equatorial) Equatorial) Calibration item: Surface Treatment on Gravel Gravel Surface Treatment Unsealed roads Granular Base (STGB) on Granular Base (STGB) Page 44 of 63  The World Bank Transport Sector Project (P102000) DESCRIPTION SECTION DETAILS Giffard Road Burma Camp Road Ph\.1 Burma Camp Road Ph\.2 Ayamfuri – Asawinso Road Calibration set: Coastal Zone Calibration Coastal Zone calibration Coastal Zone calibration Rain Forest Zone Set set set Calibration Set Road class: Major Arterial Major Arterial Major Arterial Inter-Regional Inter-Regional Traffic: Urban high Urban high Urban high Trunk medium Trunk medium Number of lanes: 2 2 2 2 2 Motorised traffic (ADT): 16080 12079 8528 1505 862 Non-Motorised traffic (ADT): 146 161 95 62 16 Year of ADT: 2011 2011 2011 2012 2012 Last surfacing/regravel 2000 - - 2007 2004 (year): Geometry: Mostly straight & gently Mostly straight & gently Mostly straight & gently Bendy & gently Bendy & gently undulating undulating undulating undulating undulating Geometry Rise + Fall (m/km): 10 10 10 15 15 Details No\. of rises+falls (no\./km): 2 2 2 2 2 Superelevation (%): 3 3 3 3 3 Average hori\. Curvature 15 15 15 75 75 (deg/km): Adral (m/s2): 0\.1 0\.1 0\.1 0\.1 0\.1 Speed limit (km/hr): 60 60 60 80 80 Speed limit enforcement: 1\.1 1\.1 1\.1 1\.1 1\.1 Page 45 of 63  The World Bank Transport Sector Project (P102000) DESCRIPTION SECTION DETAILS Giffard Road Burma Camp Road Ph\.1 Burma Camp Road Ph\.2 Ayamfuri – Asawinso Road Altitude (m): 54 52 32 143 143 XNMT: 1 1 1 1 1 Road side friction: 1 1 1 1 1 XMT: 1 1 1 1 1 Drainage type: No change in drainage - - Shallow-soft Shallow-soft effect Pavement Pavement type: Surface Treatment on Gravel Gravel Surface Treatment Gravel Details Granular Base (STGB) on Granular Base (STGB) Structural adequacy: Poor - - Poor Poor Construction/compaction Poor Fair Fair Poor Poor quality: Ride quality: Poor Poor Poor Poor Poor Surface condition: Poor Poor Poor Poor Poor Surface texture: Fair - - Fair - Surface material: Double Bituminous Lateritic gravel Lateritic gravel Double Bituminous Gravel Surface Dressing Surface Treatment (DBST) Subgrade material: Well-graded gravel-sands Well-graded gravel-sands Well-graded gravel-sands Clayey gravel/sand Clayey gravel/sand or with small clay content, with small clay content, with small clay content, or sandy clay/silt sandy clay/silt (low to GC GC GC (low to medium medium plasticity) plasticity) Page 46 of 63  The World Bank Transport Sector Project (P102000) DESCRIPTION SECTION DETAILS Giffard Road Burma Camp Road Ph\.1 Burma Camp Road Ph\.2 Ayamfuri – Asawinso Road Most recent surfacing 14mm - - 24mm 25mm thickness: Previous/old surfacing 24mm - - 24mm 25mm thickness: Structural number (Dry 3\.05 3\.33 3\.33 125mm (4\.9in) 125mm (4\.9in) season): Subgrade CBR: 20 20 20 20 17 Last reconstruction: 1995 - - 2004 2004 Last resealing: 2000 - - 2007 - Last overlay: 2000 - - - - Last preventive treatment: 2000 - - 2007 - Compaction method: - Mechanical Mechanical - Mechanical Condition Condition at end of year: 2011 2011 2011 2012 2012 Roughness (IRI-m/km): 7\.0 13 13 8 11 Gravel thickness: - 50mm 50mm - 25 All structural cracks (%): 15 - - 15 - Wide structural crack (%): 9\.5 - - 9\.5 - Thermal cracks (%): 0\.0 - - 0\.0 - Ravelled area (%): 20 - - 20 - Page 47 of 63  The World Bank Transport Sector Project (P102000) DESCRIPTION SECTION DETAILS Giffard Road Burma Camp Road Ph\.1 Burma Camp Road Ph\.2 Ayamfuri – Asawinso Road Number of potholes 8 - - 50 - (no/km): Edge break area (m2/km): 100 - - 100 - Mean rut depth (mm): 15 - - 15 - Rut depth std\. deviation 0 - - 0 - (mm): Texture depth: 0\.5 - - 0\.5 - Skid resistance: 0\.4 - - 0\.4 - Drainage condition: Poor Poor Poor Poor - Page 48 of 63  The World Bank Transport Sector Project (P102000) Table 4\.2: Basic Characteristics of Vehicle Fleet Name Base Type Tire Type Passenge No\. No\. Base Retread Annual Annual Averag Private Pas ESALF Operating r Car of of no\. of cost (% Km Workin e Life in use (%) sen weight Space whee axle recap of new g Years gers (kg) Eqv\. ls s s tyre cost) Hours Bicycles Bicycle Bias ply - 2 - - - 2500 150 10 - 1 - 100 Motor Bikes Motorcycle Bias-ply 0\.5 2 2 1\.3 15 10000 400 10 50 1 0 200 Taxis Small Car Radial-ply 1\.0 4 2 1\.3 15 23000 550 10 0 4 0 1600 Private Cars Small Car Radial-ply 1\.0 4 2 1\.3 15 23000 550 10 100 2 0 1600 Pickups/Vans/4WD Vehs Utilities Radial-ply 1\.0 4 2 1\.3 15 30000 1300 8 0 2 0\.001 2452 Small Buses Mini-bus Radial-ply 1\.2 4 2 1\.3 15 30000 750 8 0 15 0\.004 3468 Medium Buses/Mummy Medium bus Radial-ply 1\.5 6 2 1\.3 15 70000 1750 7 0 40 0\.7 9000 Wagons Large Buses Heavy bus Radial-ply 1\.6 6 2 1\.3 15 70000 1750 12 0 40 0\.89 13395 Light truck (2-axles) Truck light Radial-ply 1\.3 6 2 1\.3 15 30000 1300 8 0 0 0\.10 7755 Medium truck (2-axles) Truck Radial-ply 1\.5 6 2 1\.3 15 40000 1200 12 0 0 2\.10 16601 medium Heavy Trucks (3-axles) Truck heavy Radial-ply 1\.6 10 3 1\.3 15 86000 2050 14 0 0 4\.27 26868 3-axle semi-trailer (light) Truck Radial-ply 1\.8 10 3 1\.3 15 86000 2050 14 0 0 4\.27 26868 articulated 4-axle semi-trailer (heavy) Truck Radial-ply 1\.8 14 4 1\.3 15 86000 2050 14 0 0 4\.27 33338 articulated Page 49 of 63  The World Bank Transport Sector Project (P102000) Name Base Type Tire Type Passenge No\. No\. Base Retread Annual Annual Averag Private Pas ESALF Operating r Car of of no\. of cost (% Km Workin e Life in use (%) sen weight Space whee axle recap of new g Years gers (kg) Eqv\. ls s s tyre cost) Hours 5- axle Truck Trailers Truck Radial-ply 1\.8 18 5 1\.3 15 86000 2050 14 0 0 4\.27 39411 articulated 6- axle Truck Trailers Truck Radial-ply 1\.8 22 6 1\.3 15 86000 2050 14 0 0 4\.27 45187 articulated Extra Large Trucks & Others Truck Radial-ply 1\.8 - - 1\.3 15 86000 2050 14 0 0 4\.27 50725 articulated & constr\. Equipment Page 50 of 63  The World Bank Transport Sector Project (P102000) Table 4\.3: Economic Characteristics of Vehicle Fleet Name New vehicle Replacement Fuel (US$ Lubricatin Maintenance Crew wages Annual Cargo Passenger Passenger (US$) tyre (US$ per per litre) g oil labour (US$ per (US$ per crew- overhead delay (US$ working non- new tyre) (US$/litre) labour-hour) hour) (US$) per hour) time per hr working time per hr Bicycles 125\.00 - - - 0\.0 - 0\.0 0\.36 - Motor Bikes 1895\.83 50\.00 1\.09 4\.20 3\.00 0\.0 200\.00 0\.0 2\.00 0 Taxis 28,541\.67 83\.40 1\.09 4\.20 3\.00 0\.0 400\.00 0\.0 2\.00 0 Private Cars 34,791\.67 83\.40 1\.09 4\.20 3\.00 0\.0 400\.00 0\.0 2\.00 0 Pickups/Vans/4WD Vehs 44,000\.00 250\.00 1\.09 4\.20 3\.00 0\.0 500\.00 0\.0 2\.00 0 Small Buses 40,416\.00 145\.83 1\.09 4\.20 3\.00 4\.00 500\.00 0\.0 Medium Buses/Mummy 84,500\.00 375\.00 1\.09 4\.20 3\.00 4\.00 500\.00 0\.0 1\.50 0 Wagons Large Buses 90,000\.00 520\.83 1\.09 4\.20 3\.00 4\.00 500\.00 0\.0 1\.50 0 Light truck (2-axles) 48,541\.60 375\.00 1\.09 4\.20 3\.00 4\.00 800\.00 0\.0 0 0 Medium truck (2-axles) 28,000\.00 375\.00 1\.09 4\.20 3\.00 4\.00 800\.00 0\.0 0 0 Heavy Trucks (3-axles) 120,000\.00 729\.17 1\.09 4\.20 3\.00 4\.00 800\.00 0\.0 0 0 3-axle semi-trailer (light) 110,000\.00 729\.17 1\.09 4\.20 3\.00 4\.00 800\.00 0\.3 0 0 4-axle semi-trailer (heavy) 120,000\.00 729\.17 1\.09 4\.20 3\.00 4\.00 800\.00 0\.3 0 0 Page 51 of 63  The World Bank Transport Sector Project (P102000) Name New vehicle Replacement Fuel (US$ Lubricatin Maintenance Crew wages Annual Cargo Passenger Passenger (US$) tyre (US$ per per litre) g oil labour (US$ per (US$ per crew- overhead delay (US$ working non- new tyre) (US$/litre) labour-hour) hour) (US$) per hour) time per hr working time per hr 5- axle Truck Trailers 120,000\.00 729\.17 1\.09 4\.20 3\.00 4\.00 800\.00 0\.3 0 0 6- axle Truck Trailers 120,000\.00 729\.17 1\.09 4\.20 3\.00 4\.00 800\.00 0\.3 0 0 Extra Large Trucks & Others 140,000\.00 729\.17 1\.09 4\.20 3\.00 4\.00 800\.00 0\.3 0 0 N/B: US$ 1 = GHS 4\.8 Page 52 of 63  The World Bank Transport Sector Project (P102000) Table 4\.4 Vehicle Volumes & Traffic Growth Rates a\. Giffard Road Vehicle class 2018 ADT 2011 ADT Annual Growth (veh/day) (veh/day) Rates (%) Non-Motorised Traffic (NMT): Bicycles 168 146 2\.03 Total NMT ADT 168 146 Motorised Traffic (MT): Motorcycles 800 490 7\.26 Taxis 4575 3333 4\.63 Private cars 7266 5293 4\.63 Pickup/Van/4WD 5758 4194 4\.63 Small bus 2979 2103 5\.10 Medium bus/Mummy Wagon 206 145 5\.10 Large bus 147 104 5\.10 Light Truck 267 213 3\.27 Medium Truck 149 119 3\.27 Heavy truck 58 46 3\.27 3-axle Semi-Trailer 13 10 3\.27 4-axle Semi-Trailer 7 6 3\.27 5-axle Truck Trailer 3 2 3\.27 6-axle Truck Trailer 13 10 3\.27 Extra-large truck & Others 15 12 3\.27 Total MT ADT 22256 16080 Page 53 of 63  The World Bank Transport Sector Project (P102000) b\. Burma Camp Road 1 Vehicle class 2018 ADT 2011 ADT Annual Growth (veh/day) (veh/day) Rates (%) Non-Motorised Traffic (NMT): Bicycles 185 161 2\.03 Total NMT ADT 185 161 Motorised Traffic (MT): Motorcycles 930 569 7\.26 Taxis 2451 1785 4\.63 Private cars 8061 5872 4\.63 Pickup/Van/4WD 3439 2505 4\.63 Small bus 1186 837 5\.10 Medium bus/Mummy Wagon 24 17 5\.10 Large bus 49 35 5\.10 Light Truck 303 242 3\.27 Medium Truck 178 142 3\.27 Heavy truck 54 42 3\.27 3-axle Semi-Trailer 26 21 3\.27 4-axle Semi-Trailer 6 5 3\.27 5-axle Truck Trailer 4 3 3\.27 6-axle Truck Trailer 3 2 3\.27 Extra large truck & Others 2 2 3\.27 Total MT ADT 16718 12079 Page 54 of 63  The World Bank Transport Sector Project (P102000) c\. Burma Camp Road 2 Vehicle class 2018 ADT 2011 ADT Annual Growth (veh/day) (veh/day) Rates (%) Non-Motorised Traffic (NMT): Bicycles 109 95 2\.03 Total NMT ADT 109 95 Motorised Traffic (MT): Motorcycles 397 243 7\.26 Taxis 2191 1596 4\.63 Private cars 5133 3739 4\.63 Pickup/Van/4WD 2952 2150 4\.63 Small bus 538 380 5\.10 Medium bus/Mummy Wagon 56 40 5\.10 Large bus 42 30 5\.10 Light Truck 242 193 3\.27 Medium Truck 104 83 3\.27 Heavy truck 54 43 3\.27 3-axle Semi-Trailer 16 13 3\.27 4-axle Semi-Trailer 12 10 3\.27 5-axle Truck Trailer 6 5 3\.27 6-axle Truck Trailer 3 2 3\.27 Extra large truck & Others 1 1 3\.27 Total MT ADT 11747 8528 Page 55 of 63  The World Bank Transport Sector Project (P102000) d\. Ayamfuri-Asawinso Vehicle class Ayamfuri-Dominase Road (Section 1) Dominase – Asawinso Road (Section 2) 2012 ADT 2018 ADT Annual growth 2012 ADT 2018 ADT Annual growth (veh/day) (veh/day) rate (%) (veh/day) (veh/day) rate (%) Non-Motorised Traffic (NMT): Bicycles 62 105 9\.21 16 27 9\.21 Total NMT ADT 62 105 16 27 Motorised Traffic (MT): Motorcycles 404 686 9\.21 193 327 9\.21 Taxis 522 886 9\.21 275 466 9\.21 Private cars 92 156 9\.21 60 102 9\.21 Pickup/Van/4WD 172 291 9\.21 131 222 9\.21 Small bus 137 233 9\.21 59 100 9\.21 Medium bus/Mummy Wagon 6 10 9\.21 3 4 9\.21 Large bus 7 12 9\.20 5 8 9\.20 Light Truck 46 78 9\.21 33 56 9\.21 Medium Truck 8 14 9\.21 13 22 9\.21 Heavy truck 9 15 9\.21 2 3 9\.21 3-axle Semi-Trailer 1 2 9\.18 2 4 9\.18 4-axle Semi-Trailer 1 2 9\.18 2 4 9\.18 5-axle Truck Trailer 9 15 9\.21 8 14 9\.21 6-axle Truck Trailer 74 125 9\.21 68 116 9\.21 Extra large truck & Others 17 29 9\.21 10 16 9\.21 Total MT ADT 1505 2554 862 1464 Page 56 of 63  The World Bank Transport Sector Project (P102000) Table 4\.5 Defined Work Standards Road Base case With project alternative name Giffard For this scenario, the road agency performs The road was reconstructed in 2012 from a single carriageway (7m) to a dual carriageway (14m)\. road routine pavement maintenance and periodic Construction took 4 years after which the road became a four-lane dual carriageway road\. From 2016 works only such as pothole patching, edge onwards when the road was opened to traffic, it will receive 50 mm overlay whenever roughness repair, keeping the drainage system in good exceeds 5 IRI or whenever cracked area is 20% or more plus routine maintenance works such as pothole condition, crack sealing and resealing patching, edge repair, keeping the drainage system in good condition and crack sealing\. Burma The road agency performs routine and The road was constructed into a paved dual carriageway (14m) in 2012\. Construction took 5 years after camp road periodic maintenance works only such as which the road became a four-lane dual carriageway road\. From 2017 onwards when the road was Ph 1 grading/reshaping and spot regravelling\. opened to traffic, it will receive 50 mm overlay whenever roughness exceeds 5 IRI or whenever cracked area is 20% or more plus routine maintenance works such as pothole patching, edge repair, keeping the drainage system in good condition and crack sealing\. Burma The road agency performs routine and The road was constructed into a paved dual carriageway (14m) in 2012\. Construction took 5 years after camp road periodic maintenance works only such as which the road became a four-lane dual carriageway road\. From 2015 onwards when the road was Ph 2 grading/reshaping and spot regravelling\. opened to traffic, it will receive 50 mm overlay whenever roughness exceeds 5 IRI or whenever cracked area is 20% or more plus routine maintenance works such as pothole patching, edge repair, keeping the drainage system in good condition and crack sealing\. Ayamfuri – Section 1: This is bituminous surfaced\. The The road was rehabilitated (upgraded) in 2013 from a mix of gravel and surface treated single Asawinso road agency performs routine pavement carriageway to an asphalt concrete surfaced single carriageway for all the sections\. Construction took Road maintenance and periodic works only such as 4 years after which the road became an asphalt concrete surfaced single carriageway road\. From 2017 pothole patching, edge repair, keeping the onwards when the road was opened to traffic, it will receive 50 mm overlay whenever roughness drainage system in good condition, crack exceeds 5 IRI or whenever cracked area is 20% or more plus routine maintenance works such as pothole sealing and resealing\. patching, edge repair, keeping the drainage system in good condition and crack sealing\. Section 2: In the case of this section which is a gravel surface, the road agency performs routine and periodic maintenance works only such as grading/reshaping and spot re- gravelling\. Page 57 of 63  The World Bank Transport Sector Project (P102000) 7\. Summary of Results: HDM-4 simulated, for each road section, year-by-year, the road condition and resources used for maintenance under each strategy, as well as the vehicle speeds and physical resources consumed by vehicle operation\. After physical quantities involved in construction, road works and vehicle operation are estimated, user-specified prices and unit costs are applied to determine financial and economic costs\. Relative benefits are then calculated for different alternatives, followed by present value and rate of return computations\. The following were obtained: • Table 4\.6: 2008 Ex Ante Economic Analysis Road Link NPV (@12%) (US$mil) ERR Ayamfuri-Asawinso 55 17\.9% Giffard Road 2\.5 20% Burma Camp Road 2\.7 15% • Table 4\.7: 2015 AF Economic Analysis Road Link NPV (@12%) (US$mil) ERR Ayamfuri-Asawinso 16\.07 15\.01% • Ayamfuri – New Obuase (26km) 25\.50 21\.1% • New Obuase – Asawinso (26\.2km) -10\.48 7\.6% Giffard Road 23\.82 48\.4% Burma Camp Road 1 8\.76 21\.7% Burma Camp Road 2 24\.88 60\.8% • Table 4\.8: Results of Ex-Post Analyses Road Link NPV (@12%) ERR Savings in MT Savings in MT Travel (US$) VOC ($US) Time Cost (US$) Ayamfuri-Asawinso -15\.275mil 1\.9% -3\.55mil 4\.35mil Giffard Road 2\.797mil 12\.9% 9\.51mil 14\.04mil Burma Camp Road 1 84\.849mil 33\.1% 77\.49mil 16\.74mil Burma Camp Road 2 45\.822mil 40% 43\.21mil 8\.98mil 8\. Sensitivity analysis was conducted to test the effect of variations in key parameters that may arise due to unforeseen events\. The selected parameter was traffic growth rate; and the percentage variation was taken as ±20 percent for normal traffic growth rate\. The results are shown in table 4\.9\. Trend of NPVs was similar to trend in Table 4\.8\. Table 4\.9: Results of Ex-Post Analyses +10% ADT +20% ADT -10%ADT -20%ADT Road Link NPV ERR NPV ERR NPV ERR NPV ERR (US$m) (US$m) (US$m) (US$m) Ayamfuri-Asawinso -14\.337 3\.0% -13\.297 4\.1 -16\.243 0\.7 -17\.222 -0\.8 Giffard Road 8\.120 14\.6% 13\.355 16\.3 -2\.674 11\.1 -8\.193 9\.1 Burma Camp Road 1 95\.542 34\.9% 105\.979 36\.7 74\.080 31\.2 63\.396 29\.1 Burma Camp Road 2 51\.778 42\.8% 57\.738 45\.4 39\.881 37\.2 33\.955 34\.2 Page 58 of 63  The World Bank Transport Sector Project (P102000) ANNEX 5\. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS We appreciate and concur to the findings of the ICR and wish to assure the Bank that the lessons learnt and challenges within the ambit of the Ministry are being addressed on all projects and especially on the Bank funded projects especially the ongoing TSIP\. We also acknowledge the gaps in identification of PAPs and the overall increase in the compensation cost on the trunk road component\. This as has rightly been indicated, was due to delays in paying Project Affected Persons (PAPs)\. This delay also curtailed some civil works and resulted in additional costs to the project\. We wish to indicate that, this could have been avoided if the compensation is built in the cost of the funding for the project\. The Bank should consider this decision to enable us achieve the full social and economic benefit of projects with funding from the Bank\. Once again, we are grateful for the cooperation in handling and implementing the TSP\. Page 59 of 63 The World Bank Transport Sector Project (P102000) ANNEX 6\. SUPPORTING DOCUMENTS (IF ANY) • Borrower’s ICR Main Findings from Borrower’s ICR are presented here 1\. LESSONS LEARNED FROM TSP A\. Effectiveness of Roles of Bank & Borrower A\.1 Bank Supervision • The Bank made sure it coordinated its activities with those of other technical and financial partners\. • Thanks to the Bank’s vigilance through its supervision missions, and that of the Borrower through the PMU, works quality was consistent and implementation schedules were respected, for the most part\. In addition, although cost overruns in the parent project triggered the need for additional funding, all the objectives were achieved\. • The Bank carried out supervision missions; and recommended interventions through these missions was capital for the project\. It made it possible to resolve problems in a concerted and effective manner, and with minimum delay\. The performance of the Borrower/Donor, and that of the PMU, was equally satisfactory\. The performance of the Bank also was satisfactory\. • Bank supervision was adequate in terms of the skills-mix and the practicability of the solutions proffered\. • Bank supervision was satisfactory and made it possible to resolve some technical issues encountered during the implementation phase\. In all the Bank management supervision was rated to be satisfactory by the borrower\. A\.2 Effectiveness of Supervision by the Borrower • Mitigation measures in respect of the works were set out in the ESMP\. The Borrower took all the required measures\. • The Borrower paid attention to the conclusions and recommendations made by the Bank during its supervision of the project\. • The country implemented the recommendations of the supervision missions for the most part\. • The Borrower collected and used information from the monitoring process in its decision- making\. • The Borrower was able to redesign the project upon discovery of unanticipated obstacles during organization and operation\. • For the most part, the Borrower/Donor used the works progress reports, project account audit reports and the recommendations of supervision missions in their decision-making\. • Administrative capacity was inadequate for complex project components especially with regard to bureaucracy: legalistic, centralized and regulatory procedures which did not match the demands of the dynamics of such a project\. • Training did not include developing broader management skills and capabilities\. As a result, there was failure to develop indigenous management skills by using project sub-components as training operations for staff to develop capacity to handle complex project components\. • Government did not readily have available resources to meet its obligations\. Page 60 of 63 The World Bank Transport Sector Project (P102000) • There was excessive fragmentation of responsibility for implementation among government organizations and agencies and insufficient coordination among organizations operating projects and programs in related development sectors\. • There was no cross exchange between organizations in setting project investment goals and establishment of overall development policies\. • There were delays in granting necessary national and international approval for project activation; procedural and bureaucratic delays within assistance agencies and national governments • Resource and work scheduling systems were inadequate\. • Parallel project implementation mechanisms did not promote donor partnerships which might have helped other stakeholders to better respond to needed omitted project aspects\. • The borrower ensured the amendment of the Road Fund Act to grant the Road Fund a corporate status\. 2\. RECOMMENDATIONS A\. Project Implementation • The lapses identified on this project has brought to fore the need to go through all the stages of project preparation before procurement\. There is therefore the need for greater standards of due diligence during the project preparation and pre-appraisal stage to allow for adequate design decisions, relocation of utility assessments, time requirements for land acquisition, compensations etc\. so as to minimize the opportunity for changed conditions and contract variations during construction with consequent costs in time and money\. Specifically ▪ Ensure prompt processing and payment of invoices and payment certificates ▪ Crosscheck the BOQ with approved designs ▪ Checks on indices for fluctuation ▪ Review utility lines and cost by utility companies ▪ The need for timely visits to project site • Dealing with compensation payments could aid in seamless project implementation\. • The need to procure relocation contractors about six months ahead of construction works is critical for proper implementation\. • The presence of a communication specialist on projects could also help in implementation\. • Public transport operators should be engaged on the proper use of the facility to prevent unnecessary congestion on the corridors\. • There should be good maintenance regime by committing sufficient resources to it\. • Simple project implementation guidelines accompanied with work break down structures for different project activities should be defined within the PIM\. • Project should be implemented effectively and efficiently, such that they can generate greater value for money\. B\. Safeguard Concerns • There should be timely and adequate assessment of properties affected by project works during the pre-project appraisal phase to avoid delays during the project implementation phase\. • Standard rates for items to be compensated for should be established to streamline the property valuation process\. • Biodata of project affected persons (PAPs) should be recorded at the project valuation stage to Page 61 of 63 The World Bank Transport Sector Project (P102000) avoid discrepancies at a later stage\. • There should be improved stakeholder engagements with PAPs and other stakeholders\. • Adequate funding should be made available for prompt payment to PAPs to avoid delays which also affects the progress of works with associated cost overruns\. C\. Project Management • Building blocks of project activities must be identified and defined within a specific policy and program context linked to national plans for a broader development context\. • Increase in capacity building in project administration for good project governance in the transport sector is recommended\. • Creation of an incentive framework to attract and retain suitable technical manpower to address sectoral issues in a comprehensive manner\. • Project staffing set up should be institutionalized in the PIM to ensure appropriate rewards\. • Key project members should not be transferred till the project ends, if possible\. Where this happens, the PIT needs to work on periodic refreshers for new staff coming on stream so that the defining project concepts are well understood by the team\. 3\. SUSTAINABILITY • There should be continued coordination among the agencies through knowledge sharing, analytical and advisory services to sustain project gains\. • Maintenance capacity should be stepped up\. • Consideration should be given to design upgrades of some feeder roads with alternative surfacing types\. • Aspects of project scope not achieved such as support to the road fund and contractor capacity development should be implemented with alternative funding\. • Lessons from the project should inform future projects\. • There is need to build recommendations from institutional, regulatory and other essential studies developed for the different agencies\. • The practice whereby pre-financing of compensation payment by contractors was made to reduce delays could be considered in future projects\. • Innovative practices such as outsourcing the management of the Kasoa terminal to a private entity could be considered for future projects\. • Donor partners could consider allocating funds for compensation as part of the project cost to mitigate cost escalations due to delays in payment of compensation which result in contract idle time with related cost add-ons\. For example, the contractor’s claim for idle time resulting from delayed payment of compensation on the Ayamfuri-Asawinso road project could have been avoided\. Page 62 of 63 The World Bank Transport Sector Project (P102000) Page 63 of 63

REVIEW

P008771

 ICRR 10379 Report Number : ICRR10379 ICR Review Operations Evaluation Department 1\. Project Data : OEDID: OEDID : L3593 Project ID : P008771 Project Name : Transport Project Country : Romania Sector : Other Transportation L/C Number : L3593 Partners involved : EBRD, EIB, EU (Phare Program) Prepared by : Hernan Levy, OEDST Reviewed by : Gregory Ingram Group Manager : Gregory Ingram Date Posted : 06/30/1999 2\. Project Objectives, Financing, Costs and Components : Objectives To improve the economic and financial performance of the transport sector, while helping reduce the role of the state, to increase the role of the private sector, and to introduce competition in the public works market \. Components (i) rehabilitation of about 1,000 km of national roads and related bridges (ii) improvement of border posts (iii) material and equipment for road safety, road maintenance, vehicle inspection and training (iv) technical assistance and training for studies and human resource development in areas such as axle control, equipment management, maintenance by contract (v) railway investment urgently needed, notably track maintenance, data processing and spare parts \. Costs $454 million actual, $405 million at appraisal Financing World Bank $120 million, EBRD $80 million, EIB $80 million, Eu-Phare: $23 million\. The WB, EBRD and EIB contributions were as expected at appraisal, while the EU -Phare contribution was not originally contemplated \. The WB loan was approved on April 30, 1993 and closed on December 31, 1998, the original closing date\. The loan was fully disbursed\. 3\. Achievement of Relevant Objectives : The objectives were achieved and the loan was disbursed ahead of schedule \. The rehabilitation of 924 km of roads significantly improved the condition of the national road network \. Economic analysis was introduced as a standard requirement in highway investments, and the project -financed investments had economic returns ranging from 23 to 54 percent\. A Road Fund fed with revenues from highway uses was established and is working satisfactorily \. The highway organization became leaner and more effective as the regional maintenance divisions were corporatized \. Competition in the roads markets improved significantly as road maintenance was shifted in large measure (nearly completely for periodic maintenance operations ) from in-house to contract\. The new vehicle inspection equipment is being used effectively to conduct annual inspection of vehicle's mechanical condition and emissions, and to recertify privately-operated control stations\. The railway investments were useful to prepare the railway for its subsequent restructuring into five autonomous companies under a follow -on railway project\. 4\. Significant Achievements : In only five years, a brief period of time in the institutional and policy scale, significant institutional reforms were accomplished\. The Road Fund was created and underwent several fine -tuning during this period\. Today, funded by a well-balanced mix of earmarked levies on gasoline, diesel, vehicle's first registration and capacity of freight vehicles, it provides substantial funding for road maintenance expenditures, while approximately covering costs \. The corporatization of all 8 regional maintenance units of the highway agency is a major achievement, even possibly too fast given the complexities of this process as large numbers of highway personnel are taken off government payrolls and now depend on the corporations' business and revenues \. 5\. Significant Shortcomings : Engineering designs prepared by the (then) national road engineering company were not up to standards and caused problems during construction \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Highly Satisfactory Achievements in the institutional /policy area were major\. While it is impossible to attribute all achievements to project-induced activities, the project was instrumental\. Institutional Dev \.: Partial High Ditto Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Satisfactory Highly Satisfactory On time execution, satisfactory quality, faster than expected disbursements and major ID achievements in a sector the Borrower had no recent experience with Bank operations warrant the highest rating\. Quality of ICR : Satisfactory 7\. Lessons of Broad Applicability : Two key lessons: -difficult institutional reforms such as creating a Road Fund, corporatizing maintenance agencies and contracting out maintenance activities can be done in a short period when led by strong political leader, find support in the central ministries, and are designed and implemented by a well qualified team -fast implementation can be achieved when it is led by a highly professional agency empowered to implement the project reporting to, but not controlled by, the line ministry \. 8\. Audit Recommended? Yes No Why? Learn from successful first project in the sector after a long lending hiatus \. 9\. Comments on Quality of ICR : The ICR is satisfactory\.

REVIEW

P004820

 ICRR 10342 Report Number : ICRR10342 ICR Review Operations Evaluation Department 1\. Project Data : OEDID : OEDID: C2262 Project ID : P004820 Project Name : Housing Country : Vanuatu Sector : Urban Housing L/C Number : C2262 Partners involved : Government of Japan Prepared by : Roy T\. Gilbert Reviewed by : Hernan Levy Group Manager : Gregory K\. Ingram Date Posted : 06/29/1999 2\. Project Objectives, Financing, Costs and Components : The project was approved in June 1991 and completed in September 1998 three-and-a-half years behind schedule \. Operating within a universe of only 1,500 potential beneficiary households (the poorer indigenous 25% of the population of Vanuatu's two main towns ) the project's objectives were to : (i) provide affordable housing to middle and lower income groups; (ii) improve sector policies to develop a market -based housing development and finance system and a sound institutional framework [ - A poorly worded objective since the project's main thrust was its unsuccessful attempt to create a market-based finance system through a newly created Housing Refinance Facility - HRF]; (iii) increase long-term finance from the private sector for housing for middle and lower income groups \. ( - Together these objectives aiming to meet the demands of the poor through market -based supply using the private sector, while consistent with the Bank's own housing policy, were not relevant to Vanuatu's sector strategy which does not address a similar goal \. As outlined in Vanuatu's II Development Plan (1987-91), the country's housing strategy consisted of: (a) making available acceptable housing for the urban population; (b) reducing overcrowded housing; (c) passing legislation to establish appropriate standards for housing; and (d) increase the supply and range of housing options available for purchase \. The key difference was the Bank's ambitious desire to promote a market-based system for lower-income housing development and finance, something that the government was not commited to\. Vanuatu's private sector propensity to serve higher incomes is recognized by the SAR which notes that it produced "luxury expatriate housing"\. To achieve these objectives, the project had five components (with share of final total costs ): (i) housing finance through a (newly created) HRF to fund the construction of 400 sites and service lots and 250 housing units for lower and middle income households (16\.4%); (ii) institutional strengthening of Vanuatu's National Housing Corporation (NHC) (8\.2%); (iii) off-site water supply improvements (26\.0%); (iv) relocation of main town's solid waste disposal site and provision of solid waste collection equipment (49\.1%); (v) strengthening borrower's capacity to formulate sound and appropriate housing and urban development policies (0\.3%)\. ( - For the most part the package of components was similar to those of sector projects in other countries \. The solid waste component (iv)--which accounted for nearly half of project costs --did not directly address any of the objectives of the operation\. In fact, the relocation of the solid waste site was necessary to allow the project's land development, and could be reckoned as a costly element of the sites and services component (ii)\.) Total costs at appraisal were estimated at US$ 4\.95 million, falling to US$2\.76 million at closure since the project was not fully implemented\. An IDA Credit of US$1\.60 million (less than half the credit committed ) financed 58\.0% of final total costs\. The remainder was funded as follows : Government of Vanuatu - 35\.5% and Government of Japan - 6\.5%\. 3\. Achievement of Relevant Objectives : The project failed to achieve any of its major objectives \. Of the 250 lower-income units planned at appraisal, only a small number were built by project completion and these plots were allocated to higher income households according to the ICR\. Although 570 plots were prepared under the project, 207 have no basic services of water and electricity and there was very limited housing construction, an incomplete sites and services component could only make a minor contribution to the project objective of providing affordable housing \. Vanuatu sector policies did not develop market-based housing provision, but continued to rely upon the public sector provision through NHC \. Furthermore, the ICR points to poor results of NHC institutional strengthening : problematic management and heavy financial losses for the project's key executing agency are consistent with a negligible ID impact \. Since neither commercial banks nor other private financial intermediaries became involved in funding housing, private sector long-term housing finance for middle/lower incomes did not materialize and increase as intended \. According to the ICR, the refinancing instrument HRF--specifically designed by the project to intermediate private sector financing--was never used\. Although a market-based housing development and financing system was not developed as planned, private developers became more involved in housing delivery and some NHC functions were contracted out to the private sector\. 4\. Significant Achievements : Despite the overall failure of the project, the relocation of the sanitary landfill site did bring some improvement to sanitary services to Port Vila \. 5\. Significant Shortcomings : Among the most important: Lack of relevance of project objectives to government sector strategy (project focus upon lower/middle incomes via private sector versus government attention to higher incomes through the public sector )\. Largest project component--solid waste--not related directly to project objectives \. In fact, solid waste site relocation was necessary to enable sites and services component to proceed \. In this way, the solid waste component can be seen as a major cost element of land development, considerably adding to the unit cost of the sites and services component \. Financial failure of principal executing agency NHC \. Current government's inability to agree project housing standards and approach \. Appraisal mission's did not assess key financial and social issues related to the project \. These included HRF pricing and commercial bank lack of interest and the nature of housing demand by low -income households in Vanuatu\. Bank staff and management reluctance --according to ICR para\. 28--to recognize the low likelihood of success of this project (and hence take remedial action )\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Highly Unsatisfactory For the failure of achieve any of the major objectives and their lack of relevance to the country's sector strategy which did not embrace the private sector/lower-middle income principles espoused by the project\. Institutional Dev \.: Partial Negligible In general, for the failure to make progress developing the project's private sector/lower-middle income model\. More specifically, for the failure to operate the HRF and the continued weakness of NHC, itself the target of strengthening through the project\. Sustainability : Unlikely Unlikely Bank Performance : Deficient Highly Unsatisfactory For a very weak Bank performance throughout, from poor initial project design to reluctance to recognize the risk of failure and consequent need to redesign or take other key decisions mid -term\. Borrower Perf \.: Deficient Unsatisfactory Quality of ICR : Satisfactory 7\. Lessons of Broad Applicability : Even though a borrower's strategy may contradict current Bank housing sector policy, Bank preparation/appraisal missions should carefully review --on a country by country basis --borrower reluctance to adhere to private sector housing solutions and then assess the likelihood of government shifting toward the  market friendly solutions espoused by the Bank \. If the chances are low--as development plan documents and long tradition indicate in Vanuatu --proceeding with such an operation without government ownership and commitment is fraught with the risk of failure, as happened in this case \. To guarantee project quality at entry, Bank appraisal teams should harness appropriate sector skills; housing and finance in this case\. In support of the ICR recommendation, Bank supervision should include constant and continuous monitoring of the relevance and scope of project objectives and call for a radical redesign when a project is clearly no longer consistent with a borrower's sector strategy \. 8\. Audit Recommended? Yes No 9\. Comments on Quality of ICR : Satisfactory for giving a frank account of all aspects of the project experience \.

REVIEW

P040521

 ICRR 10831 Report Number : ICRR10831 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 03/20/2001 PROJ ID : P040521 Appraisal Actual Project Name : Second Village Project Costs 159\.6 138 Infrastructure Project US$M ) (US$M) Country : Indonesia Loan/ US$M ) 140\.1 Loan /Credit (US$M) 119\.2 Sector (s): Rural Roads Cofinancing US$M ) (US$M) L/C Number : L4100 Board Approval 97 FY ) (FY) Partners involved : Closing Date 12/31/1999 07/31/2000 Prepared by : Reviewed by : Group Manager : Group : 2\. Project Objectives and Components a\. Objectives The main objective of the project was to reduce rural poverty by building small infrastructure in poor villages in Java (including Madura) and Sumatra\. Secondary objectives were to increase decentralization and community participation\. b\. Components Village infrastructure works as requested by communities - such as access roads, bridges, water supply schemes, sanitation facilities, drainage, markets, piers or other small works; Technical assistance to support design and implementation of schemes; and Technical assistance to monitor and evaluate project impacts\. c\. Comments on Project Cost, Financing and Dates Project costs were lower largely due to depreciation of the rupiah\. The costs in rupiah were more than twice the original estimate\. 3\. Achievement of Relevant Objectives: The project achieved most of its objectives and far exceeded its target\. Infrastructure was built in 7,044 villages compared to the intended 2,600\. The construction of 15,069 km of roads and 42\.5 km of bridges provided critical access to poor communities\. With new access roads, t ransportation costs are estimated to have decreased by 40%\. Also, few villages received electricity connection\. Clear drinking water available through construction of 8,722 communal water supply units not only improved health but also reduced the time spent on obtaining water\. Communities access to sanitation improved as 4,877 communal sanitation units were constructed\. The project encouraged community participation and improved the ability of villagers to undertake public works and to maintain them\. The field engineers gained valuable experience that can be used in subsequent projects\. 4\. Significant Outcomes/Impacts: The project provided affordable basic infrastructure to poor rural communities in Indonesia\. The project established procedures for undertaking development works in the villages\. These include the delivery of funds to the village with a minimum of leakage and bureaucracy, the accounting for expenses and receipts in the village through standardized bookkeeping and payment  procedures, the selection of suppliers, the receipt of materials from suppliers or villagers, the control of quality in the field, and the promotion of transparency in implementation\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): Even though the project gave training to villagers on maintenance, inadequate maintenance may still be a problem, particularly for roads in high sloping areas\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Highly Satisfactory Highly Satisfactory Institutional Dev \.: High High Sustainability : Likely Likely Bank Performance : Highly Satisfactory Highly Satisfactory Borrower Perf \.: Highly Satisfactory Highly 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 key lessons from this project are: Beneficiaries will take advantage of the opportunities offered by programs if: (a) the programs are advertised and communities are well informed about their eligibility, and (b) they are involved in program design\. For programs covering a large proportion of villages and not just poor villages, self-targeting instead of village targeting is preferable as self targeting will benefit the poorer segments within villages\. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: ICR's analysis of implementation experience and results and the project outcome is comprehensive and of high quality\. The section on "Transition Arrangement to Regular Operations" is noteworthy\. A table on total cost by type of infrastructure constructed under the project would have been extremely useful\.

REVIEW

P010310

 ICRR 10239 Report Number : ICRR10239 ICR Review Operations Evaluation Department 1\. Project Data : OEDID: OEDID : C1924 Project ID : P010310 Project Name : Mahakali Irrigation II Project Country : Nepal Sector : Irrigation & Drainage L/C Number : C1924-NEP Partners involved : None Prepared by : George T\. K\. Pitman, OEDST Reviewed by : Ridley Nelson and Hernan Levy, OEDST Group Manager : Roger Slade Date Posted : 12/21/1998 2\. Project Objectives, Financing, Costs and Components : Approved: June 1988; Effective: November 1988; Closed: March 1997 (one year late) Project Costs (US$ million) Appraisal Actual Total 46\.7 47\.2 IDA credit 41\.3 41\.9 Farmers 1\.1 0\.8 Government 4\.3 4\.5 Objectives: 1\. to raise agricultural production and farm incomes through expanding the area and improving the management of public schemes, construction and rehabilitation of farmer -managed schemes, and restoration of irrigation and river bank protection works damaged by the 1987 flood; 2\. improve O&M and cost recovery through increased farmer participation in the project cycle; and 3\. strengthen the Department of Irrigation's (DOI) capability to implement a long-term subsector program\. Components: 1\. new public sector irrigation and drainage facilities to serve 6,800 ha; 2\. an Irrigation Line of Credit (ILC) to enable implementation of the government's new participatory Irrigation Policy in farmer-managed schemes over 9,000 ha; 3\. emergency flood rehabilitation over 100,000 ha in 17 Districts; and 4\. support for institutional development and strengthening of the Department of Irrigation \. 3\. Achievement of Relevant Objectives : 1\. Increased agricultural production and farm income from new surface water irrigation schemes is modest \. Conversely, the rehabilitation and groundwater schemes that have high returns were transferred and completed under another Bank funded project \. The flood rehabilitation was fully completed \. 2\. New public irrigation is partially (30%) functional and neither improved cost recovery nor increased farmer participation is evident\. 3\. A subsector program for rehabilitated and groundwater schemes was successful, but the program for new schemes was frustrated by DOI's lack of commitment \. 4\. Significant Achievements : 1\. Public sector irrigation and drainage construction target were fully achieved for main and secondary canals and regulating structures, and tertiary structures (but not canals) serving 6,800 ha\. 2\. Structures damaged by flood were fully rehabilitated \. 3\. Physical improvements to and building of new DOI offices was completed, as was a MIS \. 4\. Government has issued regulations and implemented plans to legalize Water user Groups (WUGs) and Farmer Irrigation Associations (FIAs)\. 5\. The phase I project had an important demonstration effect in the region and spawned substantial development of private sector investment in groundwater irrigation during implementation of phase II \. 5\. Significant Shortcomings : 1\. Only 2,000 ha (30 percent) of public sector schemes was operational at project closing because revised government policy (following Bank advice) required farmers to participate in and contribute towards construction of tertiary irrigation works (earlier done by DOI and contractors )\. The ICR reports that only 20 percent of tertiary canals works devolved to farmers were completed and that there is some doubt after Credit closing that sufficient DOI and extension staff would be made available to motivate farmers to complete this task\. Less than 10 percent of completed tertiaries have been handed over to WUGs \. 2\. Project design intends to replace private tubewells (currently irrigating a third of the area ) with economically inferior public sector surface irrigation \. 3\. Slightly over half of the physical works target area (54 percent or 4,840 ha) for farmer-managed ILC schemes was completed (because changed government policy excluded 3,096 ha of rehabilitation and groundwater schemes that were transferred to Bhairawa -Lumbini Irrigation III Project (Cr\.2430-NEP))\. Although the ILC was designed to support demand -driven investments, the evidence shows a largely supply -driven program of poorly selected and more expensive new schemes \. Farmer co-financing at 4 percent of new scheme cost was less than the 10-50 percent assumed at appraisal \. Sustainability is uncertain because of inadequate participation and training of WUGs and FIAs \. 4\. DOI lacked commitment to train regional DOI irrigation staff, provide FIA organizers and cooperate with the Department of Agriculture to utilize the credit provided under the project for farmers \. Frequent changes in project managers of all major project components adversely affected implementation \. Pilot joint management of new schemes using the principles of the Irrigation Policy were unsuccessful \. 5\. Cost recovery in the Stage II area is negligible \. Although recovery was high (87 percent) in the Stage I area, charges were doubled in 1997/98 and the ICR reports farmers are dissatisfied with the steep rise of charges and are reluctant to comply\. Even so, irrigation charges meet only 40 percent of current O&M costs and how the gap will be closed is unclear \. 6\. Monitoring and evaluation (M&E) was inadequate\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Unsatisfactory Only a third of the main project component is operational; low ERRs\. Institutional Dev \.: Substantial Modest Formation of FIAs and WUGs incomplete, DOI shows little evidence of ownership \. Sustainability : Likely Uncertain Capacity for sound water management not developed\. Full funding of O&M unresolved\. Bank Performance : Satisfactory Unsatisfactory Too much attention to engineering, not enough to institutional development Borrower Perf \.: Satisfactory Unsatisfactory Lacked commitment to institutional development\. Quality of ICR : Unsatisfactory 7\. Lessons of Broad Applicability : Successful projects should be given time to develop as local growth centers for agricultural innovation and to allow evolution of private sector initiative \. When projects share common resources (water, a DOI management unit ) project appraisal should ensure that project expansion does not jeopardize the feasibility of, or administratively overload, the parent project \. Timely M&E would have helped identify redundancies in project design (caused by private sector irrigation development ) and restructuring of the project \. Building the whole system simultaneously from head -to- to -tail risks too little and too late attention to developing water management and water users' groups, agricultural linkages, and maintenance \. If physically feasible, irrigation project should be completed sequentially, section -by- by -section from head to tail, to enable a gradual build up to full operation, provide models for institutional development, and generate early benefits \. It would also allow efficient downsizing as needed \. 8\. Audit Recommended? Yes No Why? What happened to the private sector initiatives in the project area? Did the farmers ever organize and complete the tertiary canal works? Has effective rotational water management and farmer participation been introduced? Does the operation of the phase II project undermine the viability of the phase I operation? Has cost recovery been affected by the rate hike? Were any lessons learned from the unfortunate experience of Narayani III? 9\. Comments on Quality of ICR : There are unresolved contradictions between the main text, the Aide Memoir and the Borrower's Evaluation \. The ICR recalculates the Economic Rate of Return (ERR) for the public sector component at 11\.5 percent compared with 16 percent at appraisal, and the ILC new surface water schemes have ERRs in the range -2 to 9 percent\. These ERRs are questionable due to optimistic assumptions about increases in crop yields (e\.g\. rice from 1\.8 to 4 tons/ha, and wheat from 1\.6 to 3 tons/ha, over a period of 3 years)\. As it may take 2-4 years for an effective water distribution system to develop, and another 2-4 years for farmers to accept that the system is reliable and take the risk with better quality inputs, it is probably more realistic to allow 10 years to achieve full project yields \. Allowing benefits of the public sector schemes to build -up over 10 years reduces the ERR to 8 percent\. A comparison with recently audited irrigation projects in Nepal (Narayani III and Sunsari Morang II and Headworks ) shows that the Region needs to standardize methodology and coefficients used for the economic pricing of agricultural commodities in Nepal\.

REVIEW

P065471

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 22297 IMPLEMENTATION COMPLETION REPORT (IDA-33410; SCL-45460) ONA LOAN/CREDIT IN THE AMOUNT OF US$251\.3 MILLION TO INDIA FOR THE UTTAR PRADESH FISCAL REFORM & PUBLIC SECTOR RESTRUCTURING 06/21/2001 Poverty Reduction and Economic Management Unit South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective April 30, 2001) Currency Unit = Rupees (Rs\.) Rs\.1 = US$ 0\.02134 US$ 1 = Rs\.46\.86 FISCAL YEAR April 1 March 31 ABBREVIATIONS AND ACRONYMS C&AG Comptroller & Auditor General DECRG Development Research Group GSDP Gross State Domestic Profit HIPCs Heavily Indebted Poor Countries HPDE High Priority Development Expenditures ICR Implementation Completion Report MTEF Medium-Term Expenditure Framework O&M Operation and Maintenance PRIs Panchayat Raj Institutions PSMS Poverty and Social Impact Monitoring System SMEs Small and Medium-scale Enterprises TTD Trade Tax Department UP Uttar Pradesh UPFRPSR Uttar Pradesh Fiscal Reform and Public Sector Restructuring VAT Value Added Tax Vice President: Mieko Nishimizu Country Manager/Director: Edwin Lim Sector Manager/Director: Roberto Zagha Task Team Leader/Task Manager: Manuela Ferro and V\.J\. Ravishankar  FOR OFFICLAL USE ONLY INDIA UTTAR PRADESH FISCAL REFORM & PUBLIC SECTOR RESTRUCTURING 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 5 5\. Major Factors Affecting Implementation and Outcome 11 6\. Sustainability 13 7\. Bank and Borrower Performance 14 8\. Lessons Learned 15 9\. Partner Comments 16 10\. Additional Information 26 Annex 1\. Key Performnance Indicators/Log Framne Matrix 28 Annex 2\. Project Costs and Financing 29 Annex 3\. Economic Costs and Benefits 30 Annex 4\. Bank Inputs 31 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 32 Annex 6\. Ratings of Bank and Borrower Performance 33 Annex 7\. List of Supporting Documents 34 Annex 8\. Overview of Fiscal Reform and Public Sector Restructuring Program 35 Annex 9\. Reform Output/Process/Outcome Indicators - Fiscal Reforms 40 Annex 10\. Reforrn Output/Process/Outcome Indicators - Governance Reforms 42 Annex 11\. Poverty and Social Impact Indicators: Table 1 49 Annex 12\. Poverty and Social Impact Indicators - Table 2 54 Annex 13\. Background and Task Team 59 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: P065471 Project Name: UTTAR PRADESH FISCAL REFORM & PUBLIC SECTOR RESTRUCTURING Team Leader: Manuela V\. Ferro TL Unit\. SASPR ICR Type: Core ICR Report Date: June 21, 2001 1\. Project Data Name: UTTAR PRADESH FISCAL REFORM & PUBLIC LIC/TF Number: IDA-33410; SECTOR RESTRUCTURING SCL-45460 Country/Department\. INDIA Region: South Asia Regional Office Sector/subsector: BY - Other Public Sector Management KEY DATES Original Revised/Actual PCD: 10/22/1999 Effective\. 05/23/2000 05/23/2000 Appraisal: 11/04/1999 MTR: Approval: 04/25/2000 Closinig: 10/30/2000 10/30/2000 Borrower/lImplementing Agency: Govemment of India/Govemment of Uttar Pradesh; Government of India/Office of the Chief Secretary and Departments of Finance; Government of India/Planning; Government of India/Personnel and Administrative Reforms Other Partners: STAFF Current At Appraisal Vice President: Mieko Nishimizu Mieko Nishimizu Country Manager: Edwin Lim Edwin Lim Sector Manager: Roberto Zagha Roberto Zagha Team Leader at ICR: M\. Ferro and V\.J\. Ravishankar S\. Fardoust and V\.J\. Ravishankar ICR Primary Author: 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=Substanfial, M=Modest, N=Negligible) Outcome: S Sustainabilitv: 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:  3\. Assessment of Development Objective and Design, and of Quality at Entry 3\.1 Original Objective: Background\. Around 8 % of the world's poor live in Uttar Pradesh (UP)\. With around 160 million inhabitants, UP is India's most populous state and one of the poorest\. By the mid-1990s, while India's growth had accelerated, economic and social development in UP was falling behind\. Per capita income in UP, US$230 in 1997, was the third lowest amongst the country's 28 states, ahead only of the states of Bihar and Orissa and only 65% of India's average\. In other (non-income) dimensions of poverty, such as literacy and infant mortality rates, UP was also well behind most other Indian states, ranking second to fourth from last out of the 14 major states\. Uttar Pradesh plays an important role in Indian national politics and the state provides over 15 % of the members of the national Parliament\. UP is a politically unstable state, which over the past decade has been ruled by short-lived, coalition governments (nine between 1988 and 1998)\. Some of the political instability is linked to the deep social stratification of UP's population, and efforts on the part of various groups, particularly those from lower social strata, to use political power to improve economic and social well-being\. World Bank Assistance Strategy to Uttar Pradesh\. The Bank has assisted the State of UP with technical and financial assistance since the mid- 1990s\. Early dialogue focused mostly on the power sector\. Largely as a result of the state's political instability, the state govemment did not seek to deepen and broaden this dialogue until the late 1 990s\. After a decade of frequent changes in government, a coalition government led by the BJP took office in late 1997\. A core of reform-minded officials assumed key positions in the administration and invited the Bank to collaborate in the formulation and implementation of economic reforms to enable UP to extricate itself out of the mediocre performance of the past decade\. The Bank recognized this as an opportunity to support the turnaround of the state, with benefits not only for the people of UP, but potential demonstration effects for all of India\. Support to reforming states was at the heart of the 1998 Bank's Country Assistance Strategy to India\. The Indian constitution gives the states considerable autonomy to define their development policies, including those influencing education, health, power, agriculture and irrigation, water, road transport, and urban services\. The 1999 Country Assistance Strategy Progress Report highlighted the need to devote substantial attention and resources to Uttar Pradesh and to develop a multi-year, policy-based lending program, with the overarching goal of reducing poverty\. [World Bank, India: Country Assistance Strategy - Progress Report, January 27, 1999\.] An innovative aspect of the Bank's involvement in UP was the development of a State Assistance Strategy for Uttar Pradesh, which outlined the objectives and the content of the Bank's program of assistance to the state\. [World Bank, India: Uttar Pradesh State Assistance Strategy - Revitalizing Government to Reduce Poverty, October 1999\.] According to the strategy, Bank assistance would be based on four main principles: (i) support should be large enough to have an impact on this poor, heavily populated state; (ii) the Bank would assist the Govemment of Uttar Pradesh in developing, articulating, and implementing its own policies; (iii) Bank support would be integrated: different lending and non-lending instruments would be used to develop an integrated and cohesive package of assistance to the state; and (iv) Bank support would be sequenced, to take into account the difficult initial conditions in UP and the possibility of delays in reform implementation\. The design and sequencing of lending instruments were selected to manage risks, while encouraging and supporting reforms in UP\. Program and Loan/Credit Design: The UP reform program was based on collaborative, GoUP and World Bank technical work\. In 1998, the GoUP initiated a public debate with the issuance of a White Paper highlighting the state's fiscal stress, potential debt trap and deteriorating economic performance\. At the same time, the Government approached the Bank for assistance in formulating and implementing an economic restructuring program to lift itself out of the crisis\. A World Bank economic report, India-Uttar Pradesh: From Crisis to Renewed Growth, later published in Hindi by the GoUP, identified three factors as holding down growth and poverty reduction in UP\. First, inadequate infrastructure in general, but in particular shortages and unreliability in power supply, affected investment and growth in agriculture and industry adversely\. Second, due to years of inadequate and ineffective spending on education and health, development of human resources lagged, - 2 -  contributing to low living standards and lowering both productivity and incentives for private investment in the state\. Third, a decline in the quality of governance had raised transactions costs in the economy, and negatively affected the business environment and the perception of businesses and external donors about investing in the future of Uttar Pradesh\. The report portrayed UP as being caught in a vicious circle, with low growth not only holding living standards down, but also reducing GoUP's revenue yields, and the fiscal crisis preventing the state from investing enough to provide the foundation for higher growth and improved social indicators\. Governance and fiscal reforms, complemented with reforms and investments in infrastructure (such as power) and the social sectors, were identified as the core of the Government's reform program\. Key reforms in the power sector, including the necessary reform legislation and the unbundling of the state power monopoly into generation, transmission and distribution companies, were a key trigger for the Bank's strategy of assistance to UP\. The GoUP passed the reform legislation and unbundled the State Electricity Board in January 2000 and brought to an end a 1 -day strike by 88,000 power sector employees, without any concessions on policy matters, thereby advancing in this important sector\. Both the 1998 Report and the loan/credit documentation rightly recognized that World Bank assistance to UP was high-risk, but also high-return\. The main risks emanate from low administrative capacity, political instability, uncertainty surrounding the pace of reform in the power sector and resumption of economic growth\. The potential benefits include a potentially strong impact on poverty and on India's fiscal correction, both direct and indirectly through the demonstration effect that success of reforms in UP would have on other states\. The Uttar Pradesh Fiscal Reform and Public Sector Restructuring credit/loan was the first of a potential series of 3 to 4 adjustment operations aimed at supporting the GoUP's multi-year reform program to break out of this vicious circle\. This would provide some degree of assurance about the level of financial assistance the Bank could provide to support the multi-year reform program\. However, due to the absence of a track record and the uncertainties of the political situation, policy actions within each phase were designed to be implemented before Board approval of each operation\. This approach created the conditions for a long-term engagement, while providing the Bank with a very clear exit strategy\. Loan/Credit Objectives: The agenda of reforms and the goals supported by the Uttar Pradesh Fiscal Reform and Public Sector Restructuring credit/loan are comprehensive and appropriate\. The objective of the first operation was to support the launch of a program of needed fiscal and governance reforms\. It also supported the establishment of a poverty and social monitoring system\. The medium-term objectives of the reform program are listed below in Table 1; the specific reform measures supported by the UPFRPSR credit/loan are listed in Annex 8 (Overview of Fiscal Reform and Public Sector Restructuring Program, 1999-2004)\. - 3 -  Table 1\. Goals of the Fiscal Reform and Public Sector Restructuring Program in Uttar Pradesh, 1999-2004 Reforn Areas Stated 1999-2004 Program Goals 1 MDC& A&WS Achieve Fiscal Sustiinability Achieve substanbal reducton in fiscal deficit and create sufficient fiscal space for adequate levels of development outays and a gradual decline in the debt-to-GSDP and interest-to-revenue rabos\. Improve Expenditure Management and Composibon of Improved budget compliance and fiscal discipline; Improved poverty targetng and Public Spending to enhance Development Impact developmental impact of govemment spending; Expenditure composition linked to policy priorities\. Increase in the rate of recovery of recurring cost of canal irrigafion - from less than 20% currently to 50% by 2003-04\. Reform Tax System to Improve Efficiency in Resource Improved voluntary tax compliance; Reduced transactions costs for private business Allocation and Enhance Tax payer Compliance operating in UP; Increase in the State's Own Tax Revenue - from 5\.4% GSDP in 1998-99 to 7\.6% by 2003-04\. L GOLER#A"REF"S Reform the Civil Service to Enhance Efficiency, Substantial reducton in the number of departments towards international norms; Effectveness and Productivity and Reduce Overhead Significant improvement in the rato of front-line staff vis-a-vis support and Costs administrative staff; Significant increase in the number of functions that are privatized and/or commercialized; Improved staffing in key skill categores\. Implement Anti-Corruption and Deregulaton Strategies Increased awareness and utilization of Lok Ayukta function by the public and to Reduce Corruption and Maladministration, as well as Vigilance Establishment by civil service; Radical reduction (more than 500%) in Administrative Burden on the State average investigabon time; Improved sancton and convicton rate; Stakeholder surveys indicate decreasing perceptions of corruption\. Implement Fiscal Decentralization to Enhance Beneficiary and Stakeholder Participation and Income Enhanced beneficiary & stakeholder participation in overseeing government Accountability performance; Improved quality of social services and infrastructure maintenance in the rural areas; Increased public accountability\. Reform Public Enterprises and Privatize to Reduce Reducton in fiscal drain due to public enterpnses; Release of assets to private Scope of Govemment, Reduce Fiscal Burden and owners; Reorientation of govemment role\. Improve Economic Performance Modemize Financial Managenent & Control Architecture Improved quality of financial information available to the public; Improved and bmely and Enhance Accountability to Promote a more Honest, information for financial management; Computerized performance recording and Efficient and Answerable Govemment result-based management; Effectve legislabve scrutny over financial management by the Execubve\. 5Z PORIEYAADSXomL EVWW Track progress at reducing poverty and improving living conditons using a range of indicators; measure the impacts of key reform measures on poor, vulnerable, and socially-excluded; based on this information, identify factors responsible for adverse outcomes and design appropriate mitigabon measures, also improve impacts of policies on the poor\. Over the medium term, the objectives of the fiscal reforms are to improve fiscal balances and to create additional fiscal space for well-targeted public expenditures in priority programs, including quantitative and qualitative improvement in social sector and infrastructure spending, and relieving infrastructure bottlenecks, particularly power shortages and the road network, in order to accelerate economic growth and expand employment opportunities\. The public sector restructuring reforms are intended to improve the quality of service delivery by reorienting the role of govemment, by reforming the civil service, by reducing corruption through improved transparency, deregulation and strengthening of anti-corruption institutions, by closing down, reforming or privatizing public enterprises, and by improving financial management and accountability\. Information collected through the Poverty and Social Monitoring System would aid in identifying the emerging outcomes in the program that impact on the poor, and suggest areas for mid-course correction or intensified efforts\. The overall reform program was explicitly linked to poverty reduction and based on indicators proposed by the Govemment of UP\. The Poverty and Social Monitoring System was developed with three broad objectives: - 4 -  (i) to measure progress at reducing poverty and improving living conditions over the course of the state's reform period, with a particular focus on identifying any adverse impacts linked to reform initiatives; (ii) to support better performnance in the delivery of basic services; and (iii) to keep the public informed regarding the progress and outcomes of reform measures\. Poverty and social impact indicators (see Annex 11) focus on consumption and income measures, employment rates, health and education indicators, participation in government programs, awareness of health programs and social rights, access to and quality of facilities and services\. While supported by the UPFRPSR Credit/Loan, the Poverty and Social Monitoring System was not designed to monitor the outcomes of specific actions implemented under the loan\. It was recognized that it is impossible to establish causality between reforms and outcomes\. Instead, the system would aid in the tracking of key indicators reflecting overall progress in UP's development and would be anchored in local institutions\. 3\.2 Revised Objective: Not applicable 3\.3 Original Components: Not applicable 3\.4 Revised Components: Not applicable 3\.5 Quality at Entry: No applicable 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective: The objectives of Bank assistance under the UPFRPSR Credit/Loan were achieved\. Performance in the three areas supported by the UPFRPSR Credit/Loan was satisfactory\. All the agreed reform measures were implemented prior to approval and disbursement of the operation, by design; the GoUP also has continued to implement the reform measures in the second year, following disbursement of the credit/loan, as originally envisaged in the multi-year program\. No reform measures explicitly supported by the operation were reversed\. As envisaged, the operation also has helped the GoUP launch a medium-term program of fiscal and governance reforms While there have been shortcomings in program implementation since disbursement took place, these have been relatively few and mostly in the nature of slower than desired pace of progress\. [For a more detailed review of component implementation, please see attached Aide Memoire of the ICR mission, as well as the Matrix of Reform Output/Process/Outcome Indicators on Fiscal, Governance, and Poverty and Social Impact indicators attached as 4nnex I\.] There are indications that the UPFRPSR operation has also had a broader impact in the form of helping the Government of India to strengthen rules-based mechanisms of resource transfers to encourage improved fiscal management at the state level\. The fiscal and govemance reforms initiated in 1999-00 and supported by the UPFRPSR Credit/Loan have led already to an improvement in the state's fiscal performance and first steps in reversing the situation of deteriorating govemance have been taken\. The trend of fiscal deterioration and widening budget deficits, witnessed especially during 1996-99, has been arrested and begun to be reversed\. Reforms were further advanced in 2000-01\. The fiscal deficit of GoUP has declined for two consecutive years, from a peak of 7\.5% of GSDP in 1998-99 to an estimated 6\.0% in 2000-01 [refers to the estimatedfiscal deficit of undivided UP in 2000-01, ie\., including the newly created state of Uttaranchal, consisting of about 5% of the population and 6% of income of the erstwhile Uttar Pradesh], i\.e\., achieving a correction of 1\.5 percentage points over two years\. [In order to maintain consistency with the historical series and the ratios quoted in the Medium-Term Fiscal Framework of the reform program, all ratios to GSDP in this ICR have been calculated with respect to the 1980-81 GSDP series, and not the 1993-94-base GSDP series\. ] The consolidated fiscal deficit (of the govemment and power utility combined) is estimated to have declined by 1 percentage point of GSDP in the same period\. - 5 -  It is difficult to assess the specific impact of this operation on economic performance and poverty reduction, as it was part of a wider reform agenda and supported only the first year of implementation of a multi-year program\. Economic growth has accelerated during 1999-00 and 2000-01, compared to the average performance in the 1990s\. However, causality between the measures supported by this operation and aggregate economic performance cannot be argued\. A large part of the growth acceleration is likely to be explained by factors unrelated to the implementation of reforms, such as improved agricultural output thanks to good rainfall\. 4\.2 Outputs by components: Fiscal Reforms\. Substantial progress was achieved in this first stage of the multi-year program, as evidenced by UP's improved fiscal outcomes in 1999/00 and estimates for 2000/01\. According to audited accounts published by the Comptroller & Auditor General (C&AG) of India for the year 1999-00, the majority of key fiscal indicators in UP recorded significant improvement (Table 2)\. The targeted fiscal correction - a planned reduction in the overall fiscal deficit by 0\.5% of GSDP- was more than accomplished, with the overall deficit declining from 7\.5% of GSDP in 1998-99, to 6\.4% of GSDP in 1999-00\. Part of the correction, however, was dictated by a financing shortfall that became known only towards the end of the 1999-00 fiscal year and led to a larger-than-expected expenditure contraction\. The GoUP Budget for 1999-00 was formulated assuming that the proceeds of the UPFRPSR Credit/Loan would reach UP in that fiscal year (India's fiscal year starts April 1 and ends March 31); it later became clear that this was not a realistic assumption, and indeed the proceeds of the operation reached UP only in June 2000; while GoI was expected to make up for the temporary cash crunch with some compensatory short-term financing, such compensation fell short of expectations as the fiscal year came to a close\. The quality of fiscal correction has been good during 1999-2001, both compared to other Indian states and to UP's own past\. Expenditure composition has started to improve, as envisaged under the operation\. However, deeper improvements in the composition and quality of public expenditures will take more than one year to materialize and will require deeper public expenditure management reforms in UP, which were envisaged under the multi-year program of reforms\. The ratio of Revenue Deficit to Revenue Receipts, an indicator currently being used by GoI to monitor the fiscal performance of states, has declined steadily over the first 2 years of the reform program, from a peak level of 47% in 1998-99\. It declined to 29% in 1999-00 and an estimated 17% in 2000-01\. The Budget for 2001-02, presented by the GoUP in March 2001, projects this ratio to decline further to 9% in the coming year\. -6 -  Table 2: UP Government Finances, 1995-2000101 Percentage of GSDP /a 1995-98 1998/99 1999/00 1999/00 2000/01 2000/01 Average Target Actual Target Estimated Revenue 13\.9 11\.6 13\.5 13\.1 14\.8 15\.8 State's Own Revenue 6\.7 6\.2 6\.9 6\.6 7\.3 7\.3 Tax 5\.4 5\.4 6\.2 5\.8 6\.5 6\.3 Non-Tax 1\.2 0\.8 0\.7 0\.7 0\.9 0\.9 Central Resources 7\.2 5\.5 6\.6 6\.5 7\.5 8\.5 Mandated Tax Share 5\.3 3\.9 4\.4 4\.6 4\.7 5\.9 Grants 2\.0 1\.5 2\.2 1\.9 2\.8 2\.6 Expenditure and Net Lending 21\.0 19\.1 20\.5 19\.5 20\.8 21\.8 of wtich\. Interest 3\.3 4\.0 4\.2 4\.1 4\.2 4\.9 Salares 4\.4 4\.6 4\.6 4\.5 4\.6 4\.8 Pensions 0\.9 1\.2 1\.3 1\.3 1\.2 1\.3 Major Non-Merit Subsidies (explicit) 2\.9 1\.4 1\.2 1\.5 1\.0 1\.5 High Priority O&M 0\.9 0\.5 0\.7 0\.8 0\.9 0\.9 Capital Outlays 1\.2 1\.4 1\.4 1\.6 1\.7 1\.8 Revenue Deficit -4\.9 -5\.4 -4\.5 -4\.1 -2\.8 -3\.0 Overall Fiscal Deficit -7\.2 -7\.5 -7\.0 -6\.4 -6\.0 -6\.0 Non - Power Deficit -6\.4 -6\.7 -6\.0 -5\.8 -4\.6 -4\.6 Memo Ites: Debtstock 507\.68 603\.36 604\.04 715\.69 717\.20 Debt Stock I GSDP 34\.7% 37\.3% 37\.4% 40\.3% 41\.7% GSDP Annual Real Growth /b 3\.3% 3\.3% 5\.7% 3\.6% 4\.7% Interest / Revenue 34\.6% 30\.8% 31\.0% 28\.2% 31\.0% Revenue Deficit / Revenue Receipts 46\.7% 33\.3% 31\.2% 19\.0% 18\.9% la The denominator has been adjusted downwards in 200001, to account for the creaton of Uttaranchal state in November 2000\. lb GSDP is 1980-81 base, exceptfor years 1999/00 and 2000/01 (1993-94 based series) Sou're: Govemment of Uttar Pradesh\. There have also been significant improvements in budgetary and accounting practices in UP\. As part of the first phase of the program, the GoUP put an end to the practice of spending departments or project directors to deposit unspent funds into "personal ledger accounts" at the end of the year, a practice that led to overstatement of expenditures and deficit financing, and weakened expenditure management and control\. The Government also reclassified expenditure on operation and maintenance of roads and canal irrigation systems, to exclude payments to "workcharged" employees, so that the true non-wage O&M could be monitored\. Initial steps have been taken to move towards regularly monitoring the consolidated deficit of the public sector, such as agreeing on a ceiling for guarantees issued to state-owned enterprises for their borrowing from the market (with the exception of only guarantees that may be required to support the financial restructuring of the power sector)\. Although the Non-Power Deficit was monitored and targeted in the initial years of the program, due to the uncertainty surrounding the fiscal costs of power sector restructuring, subsequent steps in the program envisaged monitoring the Overall Deficit\. In particular, the key medium-term targets were set in terms of reducing the overall fiscal deficit, including budget support to power (see Annex 8, Overview of Fiscal Reform and Public Sector Restructuring Program, 1999-2004)\. Revenues\. Revenue performance improved, although by less than targeted\. As a result of the reforms - 7 -  implemented in tax policy and administration, the state's tax-to-GSDP ratio, which had stagnated at 5\.4% of GSDP during 1996-99, increased to 5\.8% in 1999-00\. It increased further to an estimated 6\.3% in 2000-0 1\. Overall, the tax revenues raised by the GoUP increased by about 15% in real terms in 1999-00, compared to an average of 13\.5% for all the major states\. Sales tax revenue increased by 12% in real terms in 1999-00, and by about 15% in the first 9 months of 2000-01\. The GoUP eliminated sales tax holidays and deferral schemes for new investment and introduced uniform floor rates, in compliance with the agreement reached among all states and Gol in January 2000\. Sales tax rates have been further rationalized in UP during January 2001, reducing the total number of rates from 1 1 main and 6 special rates to 8 main and 4 special rates\. The GoUP is implementing this program of rate rationalization in a phased manner, based on advice from a professional tax policy consultant\. While the pace of progress towards reducing the number of rates to 5 (plus at most 2 special rates) has been slower than envisaged under the program, progress has nevertheless been steady and in the right direction\. Administrative improvements in Trade Tax have been significant under this operation\. A computerized system for administering this tax has been tested for acceptance and is being piloted in 3 selected zones\. The annual turnover limit for self-assessment has been raised and as a result, 92% of the tax payers are now covered by the scheme of self-assessment\. Deterrence against tax evasion has been strengthened as a result of criminal proceedings initiated by the Trade Tax Department (TTD) against fraudulent practices\. The process and intermediate output indicators (Annex 9) suggest that constant and consistent pressure against tax evasion has led to increased compliance, especially among manufacturers within UP\. The rise in the tax ratio has thus been achieved through a combination of rate rationalization and administrative improvements aimed at reducing evasion and improving compliance\. However, while much of the emphasis of administrative reforms has been focused so far on curtailing tax evasion by strengthening deterrence, greater emphasis should be placed on lowering compliance costs and lowering the statutory tax burden\. The fact that significant increases in tax collections were sought in the short-run limited the scope for greater tax rate rationalization and other reforms that, while likely to yield higher revenues in the medium run with a lesser distortionary impact than current policies, risked yielding lower revenues in the short run\. There was one tax reform measure aimed at curbing under-valuation of goods brought into UP from outside, initiated in 1999-00, whose implementation was held up in 2000-01\. Following opposition from wholesale traders in the state, on the grounds that this measure would increase the scope for taxpayer harassment, the GoUP is now considering a modified plan and a phased implementation\. Expenditure\. The main thrust of restructuring expenditure composition in 1999-00 and 2000-01 consisted of (i) containment of salary bill and pensions; (ii) containment and reduction of subsidies; and (iii) enhancement and protection against budget cuts of High Priority Development Expenditures (HPDE)\. While attempts to contain salaries and pension payments and to protect HPDE have been generally satisfactory, with relatively minor shortfalls, attempts to reduce subsidies have had only limited success\. Transfers to the power sector were lower than expected, mostly as a result of a slow down in the pace of reform in the sector\. Salary (of regular staff) and pension payments were contained at 5\.8% of GSDP in 1999-00, at the same level as the previous year and in line with the program target\. However, the ratio rose to an estimated 6\.1% in 2000-01, a slippage of 0\.3 percentage point compared to the program target\. This was the combined result of two factors: (i) the impact of the separation of the state of Uttaranchal, including transitional costs and (ii) the impact of accepting the demand of school teachers for enhancement in their pay package\. The first factor was beyond the state's control; even though a separate state was created in November 2000, the bulk of the salary bill continued to be borne by the mother entity for almost the whole fiscal year due to delays in transferring staff to the new state\. The second factor was a slippage on the part of the GoUP, resulting from yielding to political pressures during a year when the state was perceived to be relatively cash rich due to unexpectedly large transfers from Gol, resulting from the award of the Eleventh Finance Commission\. Although some implicit subsidies have been reduced through higher user charge hikes, the attempt to cap - 8 -  explicit budgetary subsidies to higher and secondary education (i\.e\. grants to govemment aided private institutions) at their 1998-99 level has not been successful\. One of the main reasons why the Finance Department could not succeed in imposing a hard budget constraint on govemment aided privately managed educational institutions is that such institutions are highly constrained in the fees that they can charge\. However, available information is insufficient to demonstrate that such caps would have been desirable\. Whether to contain this subsidy and what level to do so requires a better understanding of the education market, of potential fiscal and social impacts of deregulation of the fee structure and of institutional issues in the sector\. In spite of the financing shortfall in 1999-00, the GoUP managed to protect a large part of the expenditures on high priority social services (97% of target) and physical infrastructure (89%)\. [High priority social sector spending refers to elementary education, health excluding medical education subsidy, anti-poverty programs, devolution to rural local bodies and separation payments to workers in public enterprises that have been closed\. High priority infrastructure spending refers to capital outlays and non-wage O&M in roads and irrigation\.] This is an improvement in the funding of such programs relative to the past, when the impact of a resource shortage fell disproportionately on many of these developmental components of the budget\. The main shortfall, as mentioned above, was on support to the power sector\. A Special Audit of High Priority Development Expenditures agreed upon as part of the UPFRPSR operation was carried out by the Comptroller and Auditor General of India (C&AG) and delivered to the Bank on June 20, 2001\. The UPFRPSR Credit/Loan may have placed too strong an emphasis on the definition and requirement of a special audit of High Priority Development Expenditures within the budget\. This was due partly to the fact that concems about UP's poor governance led to strong safeguards against financial and fiduciary misuse\. [According to the minutes of the Operations Committee review for this operation (held shortly after fiduciary problems emerged on Bank operations in Russia), the Bank team was advised to strengthen fiduciary safeguards in the UPFRPSR Credit/Loan\.] However, these financial safeguards must be balanced against the need to strengthen the state's own budgetary procedures\. While the effort to protect and enhance HPDE enabled the GoUP to begin improving its expenditure composition from the first year of the program, the level of detail adopted in specifying these expenditures and auditing them contradicts efforts to develop an effective government budget system\. It has tended to create a "budget within a budget"\. Concems about transparency and audit/certification of specific subsets of expenditure could be better addressed through improving the government's general financial reporting and audit, rather than through a special audit conducted at the Bank's request\. This issue arises also in Heavily Indebted Poor Countries, which often also have poor budget processes\. [International Monetary Fund and International Development Association, Tracking of Poverth'-Reducing Public Spending in Heavily Indebted Poor Countries (HIPCs), March 27, 2001\.] In India, there is also the further complication that a "special audit" carries the connotation of going after some specific misappropriation or corruption scandal\. Since 1999 the Department of Finance has continued to encourage fiscal responsibility and discipline in the state govemment\. The Finance Minister has personally attended a series of public consultations held in major towns all over UP, to discuss ways to cut wasteful public spending and improve revenue performance\. In the recent Budget for 2001-02, presented to the UP Legislature on March 23, 2001, the Finance Minister has announced the establishment of a Resource and Expenditure Commission to lead a comprehensive review and rationalization of spending programs and to strengthen resource mobilization efforts\. Governance Reforms\. Govemance reforms explicitly supported under the operation were satisfactorily implemented\. While governance reforms, by their very nature, take considerably longer than a year or two to bear fruit, there are nevertheless a number of achievements that are creditable, especially given the initial conditions of UP\. The target of abolishing 10,000 vacant positions was met in 1999-00; subsequently, the GoUP went beyond this target and a further 5,000 were abolished during the first half of 2000-01\. The first phase of GoUP's public enterprise reform and privatization policy has been implemented; 20 public enterprise units have been closed since the program was initiated; about 11,000 employees have left with VRS packages\. Transparency of information and accessibility to official forms have improved significantly, with 16 major departments, 31 agencies and 17 educational institutions/universities hosting interactive websites where official forms can be downloaded and complaints may be communicated online\. -9-  However, progress in program implementation (beyond the reforms supported under the UPFRPSR loan/credit) has been slower than expected, partly as a result of weak implementation capacity and the ambitious scope and pace of the governance agenda\. No governance reform measures were reversed after approval of the operation, and the GoUP has continued to implement reforms in 2000-01, partly with support from the Bank's Technical Assistance operation to India\. Certain aspects of govemance reforms, such as Civil Service Reform, have only been initiated, and will need to be furthered if they are to bear fruit\. There have been visible gains in (i) public access to information and official forms through the Intemet and (ii) activation and strengthening of accountability and anti-corruption institutions\. Progress in dealing with the problem of transfers has been limited\. Although a consultative mechanism was established and the annual Transfer Policy was placed on the web, as part of the program, premature transfers remained high during 1999-00 and early 2000-01\. The situation improved after September 2000\. However, in the absence of effective systemic safeguards, the danger remains that transfers may once again become problematic with a change in political leadership\. By the very nature of the problem, it is difficult to say whether corruption has declined or not\. However, the GoUP has started stepping up publicly its fight against corruption\. The number of corruption related cases in which prosecution was approved increased to 375 during April-December 2000, compared to around 100 in the same period of the previous year\. There were 44 "trap" cases during the year 2000, involving 49 officials who were caught red handed, for the first time in many years\. The budget allocations for the Vigilance Establishment and the Lok Ayukta (Ombudsman) has begun to increase\. The role and functions of Lok Ayukta are being given wide publicity\. The GoUP has formally tabled pending reports of the Lok Ayukta in the State Assembly\. Heads of departments have been designated as Chief Vigilance Officers in an attempt to strengthen accountability for corruption free services\. Attrition-based downsizing has resulted in a reported 2\.5% reduction in the size of the civil service in UP\. However, the database on actual civil servants remains weak, so the reliability of quantitative measurements and targets is limited; it is expected to become more reliable once payroll computerization and a civil service census (expected within the coming year) are completed\. Shortcomings in achieving targeted milestones under the governance components of the multi-year program include: (i) delayed progress in conducting a reliable Civil Service Census and inter-departmental functional review to achieve major rationalization in the number, size and structure of departments; and (ii) delay in publicizing an Anti-Corruption Strategy that uses the results of the 3 surveys conducted in 1999-00 on public perceptions about corruption and service quality\. UP is the first Indian state to formally adopt a strategy for strengthening financial management and accountability\. It is ahead of most Indian states in treasury modernization, which lays the foundation for modernization of the state's accounting and financial reporting\. The treasury payment system has been computerized; and most of the expenditure data is available in the system\. The computerized payroll statements, payment of salaries into employees' bank accounts directly by the Treasuries, and handling of all payroll-related functions by the Treasury is expected to roll-out by June/July 2001\. Progress on the public financial accountability and management improvement program has been highly satisfactory in certain aspects, such as (i) adoption of strategy, (ii) modemization of the treasury payments system and improved financial information for management, (iii) strengthening legislative oversight (the Public Accounts Committee, which became dysfunctional during 1990-97, has been reactivated) and (iv) intemal audit\. Progress has been slower than expected in the case of (a) building implementation capacity in the Controller's Office (with a full-time Controller and qualified finance/accounts professionals), (b) improving response to external audit and (c) preparing of departmental annual reports\. Poverty & Social Impact Monitoring\. As envisaged under the UPFRPSR operation, an independent monitoring unit has been set up, originally under the Chief Secretary's office\. Progress to date in further implementing the UP PSMS has been good in some respects and slower than expected in others\. There has been progress in (i) strengthening of capacity of the Directorate of Economics and Statistics and (ii) implementing a - 10 -  household survey, initiated by DES in 1999-00 and completed in 2000-01 - attached to the state-sample NSS 55th round - being used to develop a baseline of key poverty and social indicators\. Analysis of these data are currently underway and a joint GoUPI World Bank report presenting and disseminating key findings is expected to be produced shortly\. In other areas, however, progress has been slower than anticipated\. Training, acquisition of equipment, and hiring of specialized technical assistance has progressed more slowly than expected\. The independent monitoring capacity also has been transferred from the Chief Secretary's office to the Department of Planning, which, while useful in terms of better linkages with the Directorate of Economics and Statistics (which is under Planning), nonetheless makes coordination across government departments more difficult\. Slower-than-envisaged implementation has been due mostly to weak implementation capacity (also affected by frequent transfers of key government officials) and difficulties in coordinating across different departments of government\. In the future, given that the baseline (1999-00) has been established, emphasis will need to be put on setting up additional periodic surveys and district-level monitoring efforts to track changes in baseline indicators\. The UP poverty and social monitoring system was designed with a great deal of flexibility\. The presumption was that key decisions (e\.g\. on launching periodic monitoring surveys) would be finalized once the previous step neared completion (e\.g\. completing and discussing a baseline survey)\. Given the magnitude of the exercise involved in establishing the baseline, relatively less emphasis was placed on defining explicitly the periodicity and subsequent data collection and dissemination activities\. In retrospect, the specifics of the monitoring system, in particular the periodicity, timetable, and institutional arrangements for the key data collection and dissemination activities that form the structure of the system should have been agreed upon at the outset\. 4\.3 Net Present Value/Economic rate of return: Not applicable 4\.4 Financial rate of return: Not applicable 4\.5 Institutional development impact: Not applicable 5\. Major Factors Affecting Implementation and Outcome S\.] Factors outside the control of government or implementing agency: Not applicable 5\.2 Factors generally subject to government control: Not applicable 5\.3 Factors generally subject to implementing agency control: Ownership of the program by the political executive helped implementation of the reforms supported by the operation \. As evidence of political ownership of the reform program, the 5 key policy papers that underpin the program were all approved by the Cabinet and tabled in the State Legislature in March 2000\. Substantive fiscal correction in the first year of the reform program, i\.e\., in 1999-00, as reflected in the official "revised estimates" published in March 2000, provided additional evidence of govemment commitment to the reform program\. Beyond the specific reforms supported by the operation, however, the pace of implementation has been negatively affected by changes in key personnel\. For instance, a change at the top of the bureaucracy (necessitated by a promotion and transfer to the Gol of the former Chief Secretary and Principal Secretary of Finance), about half way in the second year of the program, had a significant negative impact on the pace of implementation of governance reforms\. In particular, the Governance Reform Task Force, that used to oversee the progress of all the different components of the governance program, became temporarily inactive during the transition period, resulting in a certain loss of - 11 -  momentum\. This risk was anticipated in the design of the operation\. A second factor which affects overall program implementation is the nature and pace of progress with power sector reforms\. While the reforms envisaged as part of UP's fiscal and governance reform program have succeeded in reducing the state govermment's budget deficit, slow progress with power sector reforms during 2000-01, which translates into higher quasi-fiscal pressures, has compromised some of the gains made in the strictly fiscal area\. Power sector reforrn in UP will be a long-haul endeavor, and as experience worldwide -- in developing and developed countries alike -- demonstrates, the road ahead poses an enormous challenge, given the very poor state of the sector, its size, the very strong trade-union movement, the low level of income of a majority of electricity consumers, and the political economy of the sector in UP\. Finally, the separation of the hill districts into a separate state of Uttaranchal, with effect from November 2000, has necessitated the formulation of a revised Fiscal Framework for the reform program by the new state of Uttar Pradesh minus Uttaranchal\. Linkages with other operations The Uttar Pradesh Fiscal Reform and Public Sector Restructuring credit/loan was a fundamental vehicle, but not the only one, for World Bank support to UP (Table 3)\. A UP Power Sector Reform Project is assisting the state to restructure the power sector\. Recent assistance to UP includes five projects for US$700 million, one Economic Report, and a forthcoming Poverty Assessment, which will highlight outstanding analytical issues and guide the Bank in subsequent phases of our program of support\. Investment projects under implementation include the sectors of elementary education, primary and secondary health care, agriculture, forestry and rural drinking water\. Substantial financing for technical assistance is also being provided through the all-India Technical Assistance for Economic Reforms Project, which is supporting governance and fiscal reforms in UP\. Lending volumes in future years will depend on the pace at which GoUP implements reforms as well as the successful implementation of the projects being proposed\. Some important synergies have been achieved as a result of the Bank's comprehensive strategy of assistance to UP through a diverse set of instruments\. For instance, the publication of an overarching Policy Paper on Civil Service Reforms has created an enabling environment to support the reform and re-engineering of business processes in the Irrigation Department, as part of a program of reforms in the Water Sector\. - 12 -  Table 3: Related Bank Loans Lo tei Purposs Yeard Sta AWoval UP Rural Water Deliver sustainable health and hygiene benefits to the rural population and 1996 Ongoing promote long-term sustainability of the rural water supply and sanitation sector\. UP Forrsry Development of the forestry sector\. 1997 Ongoing UP DASP (Credit Increase agricultural producivity, to promote private sector development, 1998 Ongoing UP DASP (Loan) and to improve rural infrastructure\. 1998 Ongoing UP Sodic Lands II Increase agricultural productivity in ten disticts of Uttar Pradesh\. 1998 Ongoing UP Health Systems Development Establish an appropriately managed Health Care System\. 2000 Ongoing UP Power Sector Restructung To support the initiation of the power sector reform process\. 2000 Ongoing mumP" _*b Catarad Blindness Contro Project Improve the Natonal Program for the Control of Blindness' (NPCB's) quality 1994 Ongoing of service and expand its treatment capacity\. Coal Environ\. & Social itgationMak e coal production more environmentally and socialy sustainable\. 1996 Ongoing DPEP II Extend the District Primary Educaton Program (DPEP) into about 50 to 60 1996 Ongoing new districts chosen from UP and the seven states already participatng in the First Distict Pimary Educaton Project (DPEP I)\. TA for States Roads Reform provision, financing and maintenance of road infrastrucure\. 1996 Ongoing Tuberculosis Control Revise strategy for Tuberculosis control with the goal d reducing mortaity, 1997 Ongoing morbidity, and disability Rural Women's Development Strengthen processes that promote economic development of women and 1997 Ongding create an environment for social change\. Women & Child Development Improve the nutriton and health of pre-school-aged children and women, by 1998 Ongoing increasing the quality, impact and costeffectveness of the Integrated Child Development Services (ICDS) program Watrshed Management Hils II Improve productve potential\. five states, using evolving watershed 1999 Ongoing treatment technologies and community partidpatory approaches\. 5\.4 Costs andfinancing: Not applicable 6\. Sustainability 6\.1 Rationalefor sustainability rating: In spite of leadership changes (there have been two changes of Chief Ministers in UP since 1999), there are encouraging signs that several of the reforms supported by the Uttar Pradesh Fiscal Reformn and Public Sector Restructuring creditfloan will be sustained and in some areas furthered\. GoUP has displayed a strong and continued commitment to strengthen fiscal discipline and reduce the budget deficit\. The Budget for 2001-02, presented on March 22, 2001, suggests continued commitment to improve economic performance and fiscal health of the state -- through concerted revenue enhancement efforts, institutional reforns and targeted investments in major sectors, and improved expenditure management\. - 13-  However, medium-term sustainability of reforns is uncertain\. Slow progress in power sector reforms, if continued, could further increase actual and contingent liabilities on UP's budget\. It could reverse the gains achieved so far in fiscal consolidation\. Progress in governance reforms in late 2000 and early 2001 has also been slower than expected\. Sustainability of the reform process depends on greater political consensus and public support for the program\. The first major challenge to the sustainability of reforms in UP lies in achieving adequate progress in structural reforms in key sectors that have a major impact on governance and fiscal performance, such as power sector reforms\. A second challenge is to communicate effectively to the public and muster support from those who stand to gain from the success of reforms in UP\. Such consensus and support are uncertain at the present time\. It should be noted, however, that this first operation provides a higher level of readiness to take up further reforms\. This is an achievement in itself, whose benefits will persist over a number of years in UP, with demonstration effects for other states\. 6\.2 Transition arrangement to regular operations: Not applicable 7\. Bank and Borrower Performance Bank 7\.1 Lending: Identification: Highly Satisfactory\. The project concept is consistent with the Bank's Country Assistance Strategy in India, viz\.: to focus part of the Bank's resources on states that demonstrate willingness to implement the reforms needed to improve economic performance and reduce poverty\. It identified the window of opportunity provided by reform minded administrations both at the national and state levels and encouraged a high degree of leadership and participation by state officials and stakeholders in development of the reform package\. The Bank also correctly identified the need for fiscal and governance reforms, along with power sector reform, as the twin backbones of its strategy of assistance to Uttar Pradesh\. The choice of instrument, namely a one-tranche adjustment operation with measures implemented upfront -within the context of the broader state assistance strategy - was appropriate given the absence of a track record in UP and the uncertainties of the political situation\. This approach allowed the Bank to adjust the level and nature of support to the pace of reform in UP\. Recent research by the Bank's Development Research Group (DECRG) in collaboration with the Confederation of Indian Industry suggests that the costs of doing business in UP are considerably higher than in other states in India\. These costs are likely to be relatively higher for small and medium-scale enterprises (SMEs), thus hampering their job creation potential and growth in the state\. While the reform program needed to be selective in choosing high priority areas for action, it was relatively weaker on this front and could have included specific measures to improve the business environment and lower transactions costs for SMEs, for instance in connection with the deregulation agenda\. Preparation and Appraisal: Satisfactory\. The Bank's performance was satisfactory with respect to operationalizing the technical aspects of the program and identifying a Matrix of Benchmarks/Policy Actions that underpins the multi-year fiscal and governance reform program\. The Bank team displayed flexibility in arriving at a package of measures that was fully owned by the state government, while providing it with relevant cross-country expertise\. However, the matrix of benchmarks and policy actions included an excessive number of measures, in particular processing steps\. Such a large number of measures or benchmarks, some of which of lesser importance, led to the efforts of the reformers in the state as well as of Bank staff to get spread too thinly\. A more strategic design, with a greater focus on a smaller set of higher-payoff reform actions could allow for a more concentrated, deeper dialogue on strategic reform areas\. This is particularly important in the case of UP, where administrative capacity is weak\. Setting priorities (and sequencing) is difficult, especially when a rapid and visible turnaround is desired, as was the case in UP\. Still, realism about the govemment's implementation capacity -- both technical and - 14 -  political -- requires that priorities be set\. The measures that have had the most impact in bringing about the desired outcomes include: (i) nominal rupee ceilings on the non-power fiscal deficit and on salary and pension payments in the first year; (ii) protection of high-priority developmental expenditures; (iii) rationalization of sales tax rates and tax holidays, (iv) amendment of the Motor Vehicles Tax Act to enable annual rate revisions, (v) adoption and publication of Policy Paper on Civil Service Reform, (vi) establishment of a Divestment Commission and an institutional framework for implementing the program of public enterprise reform and privatization and (viii) adoption and publication of a Strategy Paper on strengthening Financial Management and Accountability\. 7\.2 Supervision: Not applicable 7\.3 Overall Bankperformance: Satisfactory based on the ratings for lending and outcomes\. Borrower 7\.4 Preparation: Highly Satisfactory\. Identifying the key constraints to growth and poverty reduction in UP, designing the multi-year reform program, and implementing the first set of reforrns of this program required intense engagement from the Government of UP, and support from the Government of India\. Preparatory work involved extensive collaboration from state government officials and academics in UP, starting with the 1998 GoUP White Paper and the 1998 Economic Report produced in November 1998\. Collaboration with the central government has developed more recently, especially in the context of the UP Development Report being prepared by the Planning Commission in New Delhi\. Stronger support and leadership through example from the central government would be needed to achieve significant progress in some areas, such as Civil Service Reform, where the states are served by all-India cadres of senior bureaucrats\. 7\.5 Government implementation performance: Not applicable 7\.6 Implementing Agency: Satisfactory\. All the key reform actions supported by the UPFRPSR CreditlLoan were implemented prior to Board approval\. While there have been delays in follow-up actions with respect to some of the actions, there has been no reversal of policy\. 7\.7 Overall Borrower performance\. Satisfactory based on the ratings for project preparation, implementation and outcomes\. 8\. Lessons Learned * Programmatic adjustment lending to selected states of India can be an effective instrument for supportingfiscal reforms at the state level\. Reforms will take several years to be effective and support needs to be flexible enough to withstand the uncertainties of the political environment, but consistent enough to build broad ownership for reforms\. Support to the reform program can thus be modulated to the nature and pace of reform implementation\. The successful implementation of the UPFRPSR Credit/Loan underscores the importance of setting the single tranche operation within a medium-term fiscal and reforn framework\. * When policy formulation and reform implementation capacity is weak, as in the case of UP, a more strategic design can lead to a more focused but deeper dialogue\. The UPFRPSR Credit/Loan involved a very large number of measures and in particular processing steps\. This may have been partly a result of the perception that Uttar Pradesh had serious problems of economic management and to push as many elements of reform as possible through the window of opportunity offered by the government's open - 15 -  recognition of governance and fiscal crisis\. However, as a result, dialogue in all reform fronts could not be deepened and pursued equally and implementation of further institutional reforms, in particular in the governance and poverty monitoring areas, slowed\. Setting priorities (and sequencing) is difficult, especially when a rapid and visible turnaround is desired\. Still, realism about the government's implementation capacity - both technical and political -- requires that priorities be set and that comprehensiveness in the policy dialogue be accompanied with selectivity in actions supported by the operation\. * Detailed listing and auditing of a subset of line items within the expenditure budget, identified as High Priority Development Expenditures, tends to create a 'budget within a budget'\. A better approach would encourage reprioritization within the budget, in the context of an improved budget process, whilst avoiding micro-management\. While the effort to protect and enhance HPDE enabled GoUP to begin improving its expenditure composition, the level of detail adopted in specifying these expenditures and auditing them contradicts efforts to develop an effective government budget system\. Since expenditure is fungible, reprioritizing within the budget requires that the entire expenditure profile be analyzed and accounted for\. Concerns about transparency and audit/certification of specific subsets of expenditure could be better addressed through improving the government's general financial reporting and audit, rather than through a special audit conducted at the Bank's request\. = In establishing an effective poverty and social monitoring system, emphasis should be placed from the outset on: (i) institutionalizing a system ofperiodic collection and analysis of data; and (ii) fostering demandfor the use of such data, both within and outside the government In UP, the poverty and social monitoring system was designed with a great deal of flexibility and much of the effort in the initial 18 months was focused on creating capacity and collecting, entering, and analyzing the first round of household data\. The presumption was that decisions regarding the use of the data and the periodicity of monitoring would be taken once the baseline survey was completed\. As a result, however, ownership and interest in sustaining this system remains narrow, and circumscribed to a relatively narrow circle, centered around the Planning Department (responsible for generating these data)\. 9\. Partner Comments (a) Borrower/implementing agency: -16 -  \.-IN :\.; xWA,c1 \.ir I rwvw Qrs," I I W"n Aw~~~~~I #ri ^ rt ' Ql-lr IiA *~~~~~~~~~AO *MY 3f11witi¢tt ~~0~~~o* 1> f tiaw FMu )O1 I=2 EATW ~~p1JI sit\. I 4gatod to \.r s \.b v\.m \. E~m Miuiry o ' t f 1d -$ I , lthoe via", of the Ooew fbdatm ki t emts ' hy?Qwinr\. A X ,'; A** NUu- LtmO) The Uttar Pradesh Fiscal Reforms and Public Sector Restructurins! (UPFRPSR) Loan/Credit - 17 -  Implementation Completion Report - Borrower's Perspective - Government of India 1\.0 The Government of India's perspective on the UPFRPSR will be dealt with in two parts\. The first would refer to GOI's views on the general World Bank structure of such loans/credit\. The second will specifically refer to the UPFRPSR\. 2\.0 Assistance for Loan/Credit for Fiscal Reforms should not be a one off assistance\. There should be some commitment upfront to assistance over the medium term of course subject to the state achieving key milestones set a priori\. This would enable both the States and the Bank to negotiate progress of actions in a more realistic time frame\. 3\.0 Normally, the Bank and the States agree upon a significant number of milestones in different areas such as fiscal improvement through better tax compliance, expenditure prioritization, civil service reforms like a transfer policy, etc\. Yet out of the twenty or thrift milestones, there is an urgent need to cull out one or at most two key milestones in each sector, which are key-critical\. For any subsequent tranched releases from the Bank, the attainment of these milestones should be non-negotiable once the loan/credit is approved\. Regardless of whether the State concerned achieves all other milestones, subsequent disbursements must be a function of these 4 or 5 critical milestones, alone\. 4\.0 The critical milestones mentioned above must directly impact upon the Fiscal betterment of States on a sustainable basis\. Mere policy papers however necessary cannot and should not constitute a necessary and sufficient condition for loan/credit disbursement\. 5\.0 In the current context of States it is vitally necessary to integrate the Power Sector Reforms within the general rubric of Fiscal Reforms\. Also off budget borrowing of States should be integrated in their debt profile\. Power Sector loans/credit cannot be a stand-alone credit, divorced from the general fiscal correction of the States and their need for budgetary support\. The cases of Andhra Pradesh Power Reforms Loan/credit, the Orissa Power Sector Reforms Loan/credit, are examples in point\. 6\.0 The UPFRPSR does suffer from most of the general infirmities mentioned above\. Though the State has performed credibly in fiscal consolidation alone, a contrary picture emerges once the Power Sector deficit is factored in\. The bottom line is that the consolidated fiscal stance of the State has worsened since the program loan\. Secondly, many of the policy papers, such as those on Civil Service Reforms have been long on promises and short on performance\. A holistic view needs to be taken as to what and how much the State of Uttar Pradesh has gained out of the credit/loan\. [The original is on file] - 18 -  pl:rK w 01 :SWU WePM Bkwl ' +\. EF-U1 P\. 2 , # ~~~~No5 4t /72EAPI0 \. S\.MNShulda IAS ~riatpai secretar Ggot uttuft'aPh" Ded; t- ¢-4°cJ Please reftr to your letter dated May 7, 2001 in which you deired a formal copy of evluation of the U\.P\. Fcl Refirm & Prli Sect Rstrctuing Project\. In this conneion Secretary, Extally Aided Project Depatment has already sent to you the evaluation report trougb an e-mail on April 30, 2001 Hereby sined a op of the same is being sent to you for your kind iformation and necessary action\. Speia audit report of igh Pioty Dentopown Exenditre E) from C&AG will be seot sortly to you Eci\. As above 6l WWI, Sinmery yom M\. YV\.Rvisha Senior Economist\. The World Bank 70, Lodi Estat, Neow Delhi Cc tw- M\. Adarsh Kishore, Additional Serty, DepttmanC t of Ecowmic Affairs, Ministy of Finsnce\. Govt\. of India, North block, New Delhi with all above eneules\. - 19-  EVALUATION OF GOVERNMENT OF UTTAR PRADESH ON UP FISCAL REFORMS AND PUBLIC SECTOR RESTRUCTURING LOAN I\. The Government of Uttar Pradesh has formulated a comprehensive medium term strategy to stabilize the financial position of the state and reverse the trend of declining econornic performance and persistence of poverty\. The comprehensive strategy includes govemance and civil service refonns, fiscal policy reform, public enterprise reform, financial management reform, power sector restructuring, as well as reforms in other key infrastructure sectors, such as Roads and Irrigation and social sectors such as education and health\. The aim of the comprehensive reform strategy is to achieve fiscal sustainability and create an enabling environment for improved economic performance and more rapid poverty reduction, so that over the medium term, Uttar Pradesh can reach the top half among Indian states in terms of physical, social, and human indicators\. 2\. Recognizing the needs for sustainability of recent improvements, the State Government has decided to launch a medium-term fiscal reform strategy to achieve the following objectives: (a) to ensure a decline in debt: GSDP and debt repayment : revenue ratios, so that these ratios are on a declining trend by 2004-05, (b) to improve the composition of public expenditure giving greater thrust to development expenditure and (c) to reform taxation with a view to improving the efficiency of resource allocation\. In order to stabilize the level of its debt and debt service ratios over the medium-term, the Government of U\.P recognized the need to eliminate the primary deficit (the gap between revenue and non-interest expenditure) and turn it into a surplus by 2003-04\. The gross adjustment have so far been greater, because the state had to meet the upfront cost of reforms (including the cost of restructuring power and other PEs) and increase its spending on infrastructure and human resources, while at the same time reducing the deficit\. Fiscal Reforms Fiscal correction Long-Term Objectives: offiscal correction is to achieve fiscal sustainability over the medium-term through growth oriented revenue and expenditure measures\. The following achievement has been made: * Cabinet Approval obtained and Policy Paper on Fiscal Reforms tabled in the State Legislative Assembly in March,2000 + Contingency Plan to manage potential revenue and financing shortfalls finalised in January 2000 for 1999-2000\. Contingency Plan for 2000-01 has also been finalesed in January 2001 * Ceiling on Debt and Guarantees\. in the fiscal deficit target for 1999-00 has been overfulfilled\. + Fiscal Deficit - in Rupees and as % GSDP- The gross fiscal deficit reduced from Rs\. 116\.31 bn (6\.8% of GSDP) in 1998-99 to Rs 110\.97 bn (5\.9% of GSDP)\. The adjusted fiscal deficit reduced from Rs\. 109\.60 bn (6\.4% GSDP) to Rs\. 108\.73 bn (5\.8% GSDP)\. The - 20 -  non-power deficit in 1998-99 was Rs\. 98\.43 bn (5\.7%GSDP) and in 1999-00 Rs\. 97\.85 bn (5\.2% GSDP)\. * Revenue Deficit - in Rs\. and as % GSDP- Revenue deficit came down to Rs\.72\.52 bn (3\.9% GSDP) to Rs\.86 \.97 bn (5\.1% GSDP)\. * Interest and Total Debt Servicing - as % Total State Revenue - Interest /Revenue is 31\.4% compared to the fiscal framework target of 30\.8%\. Debt servicing /Revenue ratio is 40\.1% against the targeted benchmark of 39\.5%) Interest as % Revenue Expenditure - The interest payments constituted 22\.8% of the total revenue expenditure during 1999-00 as against the target of 22\.08%\. * Fiscal Deficit - in Rupees and as % GSDP- The gross fiscal deficit reduced from Rs\. 116\.31 bn(6\.8% of GSDP) in 1998-99 to Rs 110\.97 bn (5\.9% of GSDP)\. The adjusted fiscal deficit reduced from Rs\. 109\.60 bn (6\.4% GSDP) to Rs\. 108\.73 bn (5\.8% GSDP)\. The non-power deficit in 1998-99 was Rs\. 98\.43 bn (5\.7%GSDP) and in 1999-00 Rs\. 97\.85 bn (5\.2% GSDP)\. * Revenue Deficit - in Rs\. and as % GSDP- Revenue deficit came down to Rs\.72\.52 bn (3\.9% GSDP) to Rs\.86 \.97 bn (5\.1% GSDP)\. * Interest and Total Debt Servicing - as % Total State Revenue - Interest /Revenue is 31\.4% compared to the fiscal framework target of 30\.8%\. Debt servicing /Revenue ratio is 40\.1% against the targeted benchmark of 39\.5%) Interest as % Revenue Expenditure - The interest payments constituted 22\.8% of the total revenue expenditure during 1999-00 as against the target of 22\.08%\. Expenditure Measures Long-Term Objectives is to improve expenditure management, efficiency ofpublic resource allocation and the composition of public spending so as to enhance its developmental impact\. The following achievement has been made:\. * High Priority Developmental Expenditure was enhanced from Rs 100 bn in 99-00, wherein social sector was protected up to 97% and physical infrastructure up to 89%, to Rs 124 bn in 2000-01\. * Strategy for Medium-Term Expenditure framework (MTEF) has been adopted * Computerization of treasury transactions in 2000-01 is completed * Pension & Provident Fund Reforms initiated in 2001-02\. * Full computerization of budgeting, accounting and expenditure management by * 2002-03 Revenue Measures Long-Term Objectives is to enhance the state 's own revenue base, create a fair, simple and high compliance tax system and improve cost recovery from publicly provided private and semi-private goods and services\. The following achievement has been made: - 21 -  * Reduction in the number of Trade Tax rates from 17 to 12 implemented\. * Measures to strengthen anti-evasion efforts taken\. * Survey for identification of potential taxpayers who are outside the tax net conducted\. * Introduction of New Entry Tax extended on tobacco and non-levy sugar\. * Phasing out of Tax Holidays\. * Reorganization, modernization and computerization of Trade Tax Administration \. * Increase in user charges for higher education and hospital care- Total revenue from user charges increased from Rs\. 717 crores in 1998-99 to Rs\. 1033 crores in 1999-00\. Revenue from user charges in education increased from Rs\. 101 crores to Rs\. 138 over the same period\. + Value of "recorded" goods imported by road and recorded on form 31 compared to previous period, rose from Rs\. 4545 crores in September 1999 to Rs\. 4767 in September 2000, or by 4\.9%\. Cumulative total value up to September 2000 was Rs\. 26685 crores compared to Rs\. 25120 crores up to September 1999, an increase of 6\.2%\. * Total monthly collections from Trade Tax, with and without petroleum products (Trade tax collection, including Entry Tax was Rs\. 345 crores excluding petrol/diesel, and Rs\. 453 including petrol/diesel, or increases of about 28% over the previous year\. Total cumulative trade tax collected up to September 2000 was Rs\. Rs\. 1905 crores, excluding petrol/diesel (increase of 20% over previous year) and Rs\. 2703 crores including petrol/diesel (increase of 22% over previous year)\. * Number of taxable dealers who file declarations - Number of 'registered' dealers increased by 3% from 190,398 in 1999-00 to 196024 in 2000-01\. Net Recoverable Arrears - in Rupees and as ratio of total taxes due (Net recoverable arrears (provincial) were Rs\. 1000 crores in August 2000\. * Annual number of cases under appeal and value under dispute - In 1999-00, there were 115,780 appeals (60,586 past and 55,194 new appeals)\. There were 64,133 disputed appeals amounting to Rs\. 3324 crores\. The number of pending appeals were 51,647 and amounted to Rs\. 960 crores\. * Proportion of staff in Trade Tax Department assigned to enforcement (In 1999-00, of a total of 1206 officers and 1419 employee in the Trade Tax Departments, 42% and 22% respectively were involved in enforcement work\. * Number of staff in Trade Tax Department using computers in daily work (During July-September 2000-01, 17\.0% of officers and 0\.09% of employees were using computers compared to 0\.5% and 3\.03% over the previous quarter (April-June 20001-01)\. * Improved voluntary tax compliance * Reduced transactions costs for private business operating in UP * Increase in the State's Own Tax Revenue - from 5\.4% GSDP in 1998-99 to 7\.6% by 2003-04; * Increase in the rate of cost recovery from canal irrigation - from less than 20% currently to 50% by 2003-04 The ground, as per the aforementioned indicators has been covered under difficult circumstances such as bifurcation of the State and elections to rural/urban local bodies\. Even though the power sector reforms will eventually reduce the burden on the budget of the state, the present requirement of power sector reforms constitutes a substantial portion of the fiscal deficit\. There is an urgent need to ensure adequate assistance to the state Government by the Government of India and the World bank, to enable the GoUP to support the power sector restructuring\. Too little or too late assistance will jeopardize the success of the reform program\. The GoUP has decided to constitute a Resource and Expenditure Commission which will not only look into - 22 -  the issues related to the whole gamut of resource raising but also expenditure reprioritization and expenditure management\. The Finance minister UP has announced this while presenting the budget for the year 2001-02 The Commission will review schemes and programs and will recommend phasing out of those schemes which have outlived their utility\. In this context, the Commission will also advise the government on developing and implementing a Medium term Expenditure framework\. We are well on our way to a fairer and simpler tax system\. Our efforts at computerization are aimed at introduction of VAT by 2004\. Governance Reform In the area of civil service reform, the Government faces three critical challenges\. It must enhance productivity of the civil service and ensure that every employee is performing socially relevant tasks\. At the same time, affordability must be adhered to\. Thirdly, it must enforce procedures for rewarding merit, disciplining malfeasance and misconduct and strengthen accountability and performance quality\. The fiscal consequence of implementing the 5th pay commission's recommendation was only partially neutralized by rightsizing by 1% in 99-00 and by another 1\.6% in 2000-01\. The abolition of approximately 15000 vacant positions has impacted positively on the fiscal position\. We will be in a better position to assess the exact number once the treasury operations are fully computerized\. The introduction of a new work culture both at the managerial and the cutting edge level is proposed through a full fledged functional review with the objective to rationalize and restructure departments\. The recommendations of the Deregulation conmmittee and similar such Committees have been reviewed by the Core Group constituted in the Administrative Reforms Department\. A Technical working Group will supervise the Consultant appointed for collating and finalizing a set of recommendations from all the aforementioned committees\. We have received a measure of success in creating apex positions in the Social sector and the Urban development sectors\. Similar structures exists in the agriculture and Industrial development sectors\. Training for all is the declared national policy and under this we have refurbished our training institutions\. Information Technology and computer skills have been given a priority\. Our transfer policy subserves the basic dictum of the best man in the right place\. We will enhance meritocracy by ensuring stable tenures\. Civil Service Reform Policy planning cells established in the 53 Major departments and intra-departmental reviews initiated\. Approximately 38 functional reviews have been completed and submitted to relevant secretaries\. The cells are meeting every three months\. We have done the following: * Technical working group has been established\. * Phased rationalization of departments to begin from October, 2001 and be completed by December, 2004\. Number of departments rationalization will be carefully monitored to ensure implementation does not slip\. + Rationalization of organizational structure, business process, staffing, and products and services for remaining departments, starting with PWD, Irrigation, Forestry, Health and Trade Tax to be completed by December, 2002\. * Significant increase in the number of functions that are privatized and/or commercialized consistent - 23 -  with best practice in Indian states and elsewhere\. Ensure A Global Annual Reduction In Civil Service Size by at least 2% for Next Five Years\. * TOR for a TA proposal for reviewing civil service terms and conditions as part of functional review and Human Resource Management have been finalized\. * Approximately 15000 posts abolished to date in financial year 2000-01\. * Exercise for identifying alternatives to the practice of compensatory/compassionate employment is under process\. * Size of civil service downsized by 1% during financial year 1999-2000 and estimated 1\.6% for financial year 2000-01\. * Over 60 divisions abolished in PWD and Irrigation\. Approximately 5000 staff awaiting transfer for surplus labor pool in Departnent of Admiinistrative Reforms for redeployment\. * Major reduction in casual and work charged employees by financial year 2004\. Improve Human Resource Management + Computerized human resource database being developed, so GoUP can immediately produce accurate and timely information on the size and composition of the civil service\. * Annual Transfer Policy published in May, 2000\. * Activity being taken up in Functional Review and Human Resource Management to study Annual Confidential Report (ACR) process to improve its effectiveness\. * Government order to allocate 1% of annual departmental wage bill for training issued\. ANTI CORRUPTION AND DEREGULATION STRATEGY The key objective of the Government is to reduce wastage of public resources and increase transparence and accountability\. The series of surveys were extremely useful as it provided an insight in to perceptions of general public as well as governnent officials and businesses\. This insight has been incorporated in our anti corruption strategy which has been adopted by the Government\. It will be publicized soon\. Deregulation and internal reviews by Policy Planning cells are now a regular feature in the departments\. Strengthening of key accountability institutions has commenced\. The introduction of Information technology to make Government totally accessible to the citizen is a major thrust of the Government\. Availability of vital information pertaining to departments and their function is facilitated through websites\. Tender documents and forms are available on line\. All government departments are accessible through a government portal and a grievance button is displayed prominently\. Deregulation * Deregulation committee established in October, 1999\. Committee began functioning in January, 2000\. It has held 49 meetings with departmental secretaries and 68 internal meetings\. * Approximately 58 departments completed its internal review and submitted the report to deregulation committee\. * Deregulation committee submitted its first review and recommendations to Government in November, 2000\. The initial report makes 615 recommendations concerning the work of 40 departments\. * Based on recommendation of the Deregulation committee Government is formulating a time bound program to streamline and modernize the laws, rules and regulations\. - 24 -  Strengthening Key Accountability Institutions and Anti Corruption Bodies\. + Surveys conducted to find out perception of general public, traders and civil servants towards corruption\. * Vigilance establishment budget for the year 2000-01 increased by 12\.9% over the expenditure 1999-00, to ensure to proper funding and staffing for key accountability institutions to compare favorably with per capita funding in other states\. * The Lok Ayukta is empowered to recruit and appoint more junior staff (Class III and IV)\. Class I and II are appointed only with the concurrence of the Lok Ayukta to have greater independents in recruitment and transfer to staff in vigilance establishment and Lok Ayukta\. * A proposal is being formulated that would allow 50% of the staff of the vigilance establishment to be recruited by the Directorate of Vigilance\. PUBLIC ENTERPRISES REFORM We are governed by the dictum that the State should withdraw from manufacturing or servicing in areas where the private sector exists or is ready to move in\. Towards this divestment and closure is one aspect and privatization is the other\. The Divestment Commission has made its recommendation and we are now processing these in the Empowered Committee\. Five enterprises have been closed\. The Technical assistance available under this program was used fruitfully to write the divestment procedure manual as well as the guidelines for environment audit for closed units\. PE Reformn poliy has been approved\. Divestment Commission and Working Commrittee established\. - The detailed procedure for sale and closure of PE's prepared\. -\. The transaction Manual on enviromnental matters being prepared\. Three public enterprises (UPSMDC, UPIL and UP Pashudhan Udyog Nigam Ltd\.) have been divested and closed\. * The Technical Secretariat, PICUP has committed that the environmental audit of phase -I enterprises will be completed by 31 st March 2001\. * The decision to refer remaining 14 enterprises to divestment commission will be taken shortly\. * Divestment Commission has submitted recommendation of the following 10 PE's i\. The Indian Turpentine & Rosin Co\. Ltd\. 2\. UP Bhumi Sudhar Nigam\. 3\. UP (Purva) Ganga Beej evam Vikas Nigam 4\. UP (Pashchim) Ganga Beej evam Vikas Nigam 5\. UP (Ruhelkhand) Ganga Beej evam Vikas Nigam 6\. UP (Madhya) Ganga Beej evam Vikas Nigam 7\. UP Tarai Ganga Beej evam Vikas Nigam 8\. UP State Leather Development Corporation\. 9\. UP Project and Tubewells Corporation 10\. UP Poltry and Live Stock Corporation\. FINANCIAL MANAGEMENT AND ACCOUNTABILITY The State govenmuent has modernized and computerized its financial management and control architecture\. The Financial Controller is in place and is providing valuable inputs in developing strategy and policy direction to strengthen internal audit functions\. The Conference on Parliamentary Control of the Public - 25 -  Purse has helped build a national consensus on this important aspect of Financial accountability\. The C&AG has completed special audits of the HPDE\. * Strategy for Strengthening Financial Management and accountability is approved\. * Controller of Accounts appointed\. * Task Force has completed its work on recommendation on form content and presentation of financial statements for public disclosure\. * Feasibility study for accrual according and financial statements and the accounting system required is under process\. * Recruitment of consultant to study to modernization State Finance and Accounts cadre is underway\. * Timely response to observation in the C&AG audit reports\. * Special audit of HPDE is under way\. POVERTY AND SOCIAL MONITORING We share the vision of the President of the World Bank the underlying objective of all reform is that it should reduce poverty\. The benchmarking survey has been completed and we are awaiting the result of the statistical investigator\. We have positioned key officers to develop skills in analyzing the infonnation to understand the impact of reforms on the poor and in making informed policy decisions\. Technical Assistance for Economic Reform Proiect Given the magnitude and range of the fiscal, governance and sector reform being initiated and contemplated by the Government, there is a clear need for Technical Assistance to assist with both conceptualization and implementation of reform\. Technical Assistance is an integral part of Reform Program of Govt\. of UP\. The departments have already submitted a number of T\.A\. proposals covers the following main areas: tax reform, expenditure management, audit and financial management, poverty monitoring, public enterprise reform, civil service reform, deregulation, urban reform and restructuring of the irrigation department\. - 26 -  D\.O\.No*N(27)vicw-UP1MCt I\. Baner ir *u wTitf Join Secrcwy (PP\. I) g t Tek 301411 w Far 3011022 WVOVNAAENT Of ND\.A 4E ~~~~~~~~~~~~~~MIN\.ST1Y OF F\.NANC::S _FPARTIVNT Or EXPENDflfUL DW Jw\. L'l This has reference to iP Fiscsl a Publi Sctor R Pstroaurin CroditLan -inal laimemeation Copi ion Repot Subswt to this Ministry's earlia e#U of 30h April, 201\. ctsu but beenude to rae ft Power Sector defich in ftte Ste of UP\. t wil alp_, in the li of dcussias wih World Bank Otlice tt thd Pwer Scto d*i wil\. peaps be bwu thn om iniial umeMuaniWhile the eact dianeet of the PoWr Seto de&k iS yCt to eaxeW, te Consolided fP=W Deftic of the Ste appea to hao- swe $cave ;,ovmt\. Howe,I a" qi*\. t nwks above by eite thb the dot in respect of the Power Sctr rquis to be o1eS-, pecilsy in he mata of ThD oses and th operang losses ofdweUppowercorporstlo In view of the abow advisedy, th comobdumad flicstaucc of die Stw has bswn magiul iwovunt\. To ts end ou earlie wisipoir of 30' Apail 20!\. stand modiia\. 'The othba gneavl rmoarks r\.atg a tanwab sot oproe and o ome Indkatow stil emann "MineD\. t4 Mr Edwin R\. Lion, County Diretor - India\. The Worki Bank\. 70\. Lo EBtafte (b) Cofinanciers: NA (c) Other partners (NGOs/private sector): NA 10\. Additional Information - 27 -  Annex 1\. Key Performance Indicators/Log Frame Matrix - 28 -  Annex 2\. Project Costs and Financing Not applicable - 29 -  Annex 3: Economic Costs and Benefits Not applicable - 30 -  Annex 4\. Bank Inputs (a) Missions: Stage of Project Cycle No\. of Persons and Specialty Performance Rating (e\.g\. 2 Economists, I FMS, etc\.) I Implementation Development Month/Ycar Count Specialty Progress Objective Identification/Preparation April 1999 - 6 Economist S S Oct\. 1999 2 Public Sector Specialist 2 Private Sector Dev\. Specialist 3 Financial Mgmt\. Specialist I Procurement Specialist 1 Legal 2 Reseach Analyst Appraisal/Negotiation Nov\. 1999 - 5 Economist S S March 2000 1 Public Sector Specialist 2 Private Sector Dev\. Specialist 3 Financial Mgmt\. Specialist I Procurement Specialist I Legal I Research Analyst Supervision NA ICR January 2001 - 4 Economist February 2001 2 Public Sector Mgmt\. Specialist I Research Analyst (b) Staff j Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks US$ ('000) Identification/Preparation 195\.4 660\.00 Appraisal/Negotiation (included (included above) above) Supervision NA NA ICR 19\.8 58\.00 Total 215\.2 718\.00 Includes labor, travel and other costs\. - 31 -  Annex 5\. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies O H *SUOM O N O NA ?Sector Policies O H OSUOM ON O NA ER Physical O H OSUOM O N * NA N Financial OH *SUOM ON ONA X Institutional Development 0 H O SU 0 M 0 N 0 NA Environmental O H OSUOM O N * NA Social F Poverty Reduction O H *SUOM O N O NA Z Gender O H OSUOM O N * NA M Other (Please specify) O H OSUOM O N * NA Not applicable • Private sector development 0 H O SU O M 0 N 0 NA ? Public sector managementH 0 O SU O M 0 N 0 NA M? Other (Please specify) O H OSUOM O N * NA Not applicable - 32 -  Annex 6\. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6\.1 Bank performance Rating • Lending *HSOS Ou OHU • Supervision OHS OS Ou OHU Z Overall OHS OS O u O HU 6\.2 Borrowerperformance Rating 1 Preparation OHS Os O U O HU Z Government implementation performance O HS 0 S 0 U 0 HU Z Implementation agency performance 0 HS 0 S 0 U 0 HU M Overall OHS OS O U O HU - 33 -  Annex 7\. List of Supporting Documents 1\. Aide-Memoire of the ICR Mission - 34 -  Additional Annex 8\.Ov erview of Fiscal Reform and Public Sector Restructuring Program, 1999-2004 Overview of Fiscal Reform & Public Sector Restructuring Program In Uftar Pradesh, 1999-2004 Benchmarks/ Policy Actions Supported under the UPFRPSR creditiloan Objectives 1999-00 (April-March) Outcomes 1\. FISCAL REFORMS Obtain Cabinet approval and table in the State's Legislative Achieve substantial reduction in fiscal Achia ve Fl'scsl Assembly Policy Paper on Medium-Term Fiscal Reforms; deficit and create sufficient fiscal space SAc WveF?Irc1 with objective of reducing overall deficit from 7\.5% of GSDP for adequate levels of development to 4% by 2003-04; Reduce non-power fiscal deficit from outlays and a gradual decline in the debt- Rs\.99 billion (6\.7% of GSDP) in 1998-99 to Rs\.98 billion to-GSDP and interest-to-revenue ratios\. (6\.0%) in 1999-00; Adhere to agreed debt and guarantee ceilings\. Improve pae,di'tre Protect High Priority Development Expenditures from Improved budget compliance and fiscal hAw amgsw\.iutand potential budget cuts; Contain Salary and Pension payments discipline ; Improved poverty targeting Composition of Public to within Rs\.101 billion in 1999-00; Abolish leave and developmental impact of government SPendingto enhnNCe encashment facility; Ban new loans to public enterprises spending; Expenditure composition linked Development moact except in power and for VRS; Freeze higher and secondary to policy priorities\. education grants at their 1998-99 level; Obtain Cabinet Increase in the rate of recovery of approval of user charge hikes in irrigation, professional recurring cost of canal irrigation - from education and hospital care so as to cut implicit subsidies; less than 20% currently to 50% by 2003- Computerize treasury transactions; Prepare a strategy for 04\. developing a Medium Term Expenditure Framework (MTEF) to be implemented with technical assistance\. Reform Taxr Sy\.riw lo Policy Paper on Govemance Reforms to be approved by Improved voluntary tax compliance; Improve Efficiency in Cabinet and tabled in the State's Legislative Assembly; Reduced transactions costs for private Resource Allocation and business operating in UP; Increase in the Enhance Taxpayer Policy Paper on Civil Service Renewal (CSR) to be State's Own Tax Revenue - from 5\.4% Compliance approved by Cabinet and tabled in the State Assembly; GSDP in 1998-99 to 7\.6% by 2003-04\. Reduce the size of the civil service by at least 2% through attrition and abolish about 10,000 unfilled and unnecessary positions; Initiate a review of civil service terms and conditions to identify changes that will allow for greater flexibility in downsizing and redeployment; Publicize Annual Transfer Policy and initiate monitoring of compliance; Begin to implement a consultative mechanism to oversee transfers\. IL\. GOVERNANCE Policy Paper on Governance Reforms to be approved by Substantial reduction in the number of REFOr=MS Cabinet and tabled in the State's Legislative Assembly; departments towards international norms; Significant improvement in the ratio of Reform the Clv#Servrs Policy Paper on Civil Service Renewal (CSR) to be front-line staff vis-A-vis support and to Enhance Efficiency, approved by Cabinet and tabled in the State Assembly; administrative staff; Significant increase Effective -ness 8end Reduce the size of the civil service by at least 2% through in the number of functions that are Product-ivity and Reduce attrition and abolish about 10,000 unfilled and unnecessary privatized and/or commercialized; Overhead Costs positions; Initiate a review of civil service terms and \. \. X \. conditions to identify changes that will allow for greater Improved staffing n key skil categores\. flexibility in downsizing and redeployment; Publicize Annual Transfer Policy and initiate monitoring of compliance; Begin to implement a consultative mechanism to oversee transfers\. ImplementAtA Complete the first surveys of perceptions of public service Increased awareness and utilization of Cemnrt6bo aad quality and corruption among households, business Lok Ayukta function by the public and DfrnI/sffeW Stfrategies enterprises and civil servants; Establish a broad based Vigilance Establishment by civil service; to Re'uce Corruption and Governance Reform Task Force including civil society Radical reduction (more than 50%/6) in maladministration, as wail asAdmlnistrative Surden representatives, for rationalizing and strengthening key average investigation tme; Improved on the State accountability institutions; Publish Citizen Charters for 18 sanction and conviction rate; departments with public interface; Cabinet approval of a Stakeholder surveys indicate decreasing code of access for documents of local governments, state perceptions of corruption\. financial institutions, and development agencies; Establish Deregulation Committee to review existing laws and regulations and streamline and modernize them\. - 35 -  Benchmarkul Policy Actions Supported under the UPFRPSR credit/loan Objectives 1999-00 (April-March) Outcomes mpA/wwtFiscal Transfer selected functional responsibilities to local bodies - Enhanced beneficiary & stakeholder Deceatralizaton to Panchayat Raj Institutions (PRIs), including primary schools, participation in overseeing government fEid7c 8-6w1* tube wells, health sub-centers, agriculture and rural performance; Improved quality of social sqdJ%#a*vA6r development; Transfer staff of corresponding government services and infrastructure maintenance locamAccoai,tibI) departments to local bodies; Transfer 11% of the state's in the rural areas; Increased public own tax revenue to local governments; Initiate short-term accountability\. training programs; Prepare a Training Manual for all functions in the PREs and empowered local bodies to recruit new staff\. Reform PlOc Obtain Cabinet approval of the Public Enterprise Reform Reduction in fiscal drain due to PEs; E&Avprisosand and Privatization Policy Paper and related guidelines and Release of assets to private owners; Pniaize to Reduce procedures, including sale, closure, labor and environmental Reorientation of government role ScoR,e OfGovemmeaet issues, Establish Divestment Commission, a working and lmprove Economic Committee and designate PICUP as the technical PerformaIce secretariat; Complete closure and sale of Uttar Pradesh Instruments Ltd\. (UPIL) assets\. Modernize Fze&/I Cabinet approval of the Strategy Paper on strengthening Improved quality of financial information hAGA wwitd Control financial management and accountability; Appoint a available to the public; Improved and Architecture andEnhaence Controller' to coordinate and provide leadership in timely information for financial Accounrabetonsto PEmote modernizing the systems of Financial Management\. GoUP management; Computerized performance andAnswerable departments to respond to the audit observations of the C & recording and result-based management; Govemmenlt AG for the year 1997-98 to facilitate review by the Public Effective legislative scrutiny over financial Accounts Committee; Establish Task Force, including management by the Executive\. stakeholders from outside government, to recommend ways of modernizing accountability including presentation and frequency of government financial statements for public disclosure; Request C &AG for conduct of special external audits of procurement, and high priority expenditures; Ban year end transfers to PLAs, Ill\. POVERTY AND Finalize detailed implementation plan for the first 18 months Track progress at reducing poverty and SOCIAL of the project; Set up independent monitoring unit in the improving living conditions using a DEVELOPMENT Chief Secretary's Office\. range of indicators; measure the impacts of key reform measures on poor, vulnerable, and socially-excluded; based on this information, identify factors responsible for adverse outcomes and design appropriate mitigation measures, also improve impacts of policies on the poor\. - 36 -  Benchmarks/ Polcy Actions 2000-01 2001-02to2003-04 ObJectives (April-March) (Aprl 2001-March 2004) Outcomes 1\. FISCAL REFORMS Reduce the non-power fiscal deficit Reduce the overall fiscal Achieve substantial reduction A cliia ve Aftal from Rs\.98 billion (6\.0% of GSDP) to deficit to below 4% of GSDP in fiscal deficit and create AchieveAas Rs 82 billion in 2000-01 (4\.6% of by 2003-04, reduce non- sufficient fiscal space for GSDP); Adhere to agreed debt and power fiscal deficit to below adequate levels of guarantee ceilings\. 3% and achieve primary development outlays and a surplus by then; Adhere to gradual decline in the debt-to- agreed debt and guarantee GSDP and interest-to-revenue ceilings in the period 2001-04\. ratios\. /mprove E*_Xft# Enhance allocations for High-Priority By March 2002: Full Improved budget compliance AAh WM'and Developmental Expenditures and implementation of MTEF; and fiscal discipline; Com,oos/on ofPub//c implement plan to protect the same in Begin implementation of Improved poverty targeting Spending to enhance 2000-01; Reduce salary bill of regular Pension and Provident Fund and developmental impact of DevelopmentlImpact government employees as Reform; Conduct Public government spending; percentage of GSDP; Begin Expenditure Review\. Further Expenditure composition implementation of a Medium-Term increases in user charges in linked to policy priorities\. Expenditure Framework (MTEF) with irrigation, higher & Increase in the rate of Technical Assistance for the budget professional education & recovery of recurnng cost of for 2001 -02;Carry out a study of specialized hospital services\. canal irrigation - from less options for Pension and Provident By March 2003: Achieve full than 20% currently to 50% by Fund Reform (with TA); Conduct computerization of budgeting, 2003-04\. Public Expenditure Review\. accounfing and expenditure management; Conduct Public Expenditure Review\. Reform TarSysAwuto Implement the decision to reduce the By March 2002: I ntensify audit Improved voluntary tax ImpoDve EfficIencyi/ number of sales tax rates from 11 to efforts, through well designed compliance; Reduced Resource A/local/on and 5 and reduce commodity inspections; Complete the transactions costs for private Enhance Tax payer classification to 200; Begin to reorganization of Tax Dept\.; business operating in UP; Comp//ance implement a strategy of functional Expand scanning and storage Increase in the State's Own reorganization of the Trade Tax of registered conveyance Tax Revenue - from 5\.4% Department; Implement extemal audit deeds state wide; Implement GSDP in 1998-99 to 7\.6% by of the Trade Tax Department on a external audit of the Tax Dept\. 2003-04\. sample basis by an external By March 2003: Complete a professional auditing firm; Make comprehensive review of officials of the trade tax department business procedures; subject to Vigilance supervision and Implement extemal audit of require all tax officers to make an the Tax Dept\.; Change from annual declaration of their family assessing 100% of periodic assets; Institute formal monitoring of and annual retums to modern up to 2000 largest tax payers; Begin self- assessment; Begin to modernizing property valuation for implement core computer levying stamp duties; Begin to application system\. develop a strategic plan for By March 2004: Adopt a introduction of VAT\. Value Added Tax system\. - 37 -  Benchmarksl Policy Actions 2000401 2001-02 to 2003-04 Objectives (Apriil-March) (April 2001-March 2004) Outcomes 11\. GOVERNANCE Continue to reduce the size of civil By March 2002: Continue Substantial reduction in the REFORMS service by at least 2% a year; Freeze implementation of number of departments all non-regular hiring and target rationalization of government towards international norms; Reform the CA'Swvie further reductions (by more than departments based on GoUP Significant improvement in the to Enhance Efficiency, attrition) in PWD and Irrigation report on positions;\. ratio of front-line staff vis-A-vis Effective-ness and Departments; Carry out a phased support and administrative Produc-vIfy and Reduce rationalization and consolidation of 2002-04: Ongoing annual staff; Significant increase in Overhead Costs departments; Publicize Transfer reduction in the size of civil the number of functions that Policy on an annual basis, including service employment of at least are privatized and/or guidelines for transfer of senior and 2% per annum; Publish commercialized; Improved mid-level officers; Formulate and annual report on progress in staffing in key skill categories\. implement an altemative policy to CSR; Conduct detailed compensatory/ compassionate monitoring of performance employment; Develop set of indicators of all departments organizational performance and publish them annually\. indicators; Conduct follow up civil service census; Implement the By March 2004: Complete recommendations from the review of phased rationalization of Civil Service terms and conditions; departments\. Begin implemenfing a human resource development and training plan\. /rn,maerenftAe Conduct series of public workshops By March 2002: Enact UP Increased awareness and a£i7l4dUbAMY on corruption survey's results; Right to Information Act; utilization of Lok Ayukta taguhibu,S tfateg6'es Develop and publish Anti-corruption Implement the function by the public and to Reduce Conruption and Strategy; Enhance budget allocation recommendations of the Vigilance Establishment by Maladm,ist,afion, as wel significantly above the level of Governance Reform Task civil service; Radical reduction asAdminin/strafve expenditure in 1999-0 on Vigilance Force to strengthen (more than 50%) in average and the Lok Ayukta (ombudsman); accountability institutions; investigation time; Improved Strengthen the staffing of Vigilance Each Department to prepare sanction and conviction rate; and facilitate the Lok Ayukta its own anti-corruption Stakeholder surveys indicate (Ombudsman) to fill all existing strategy, including preventive decreasing perceptions of vacancies in investigative positions; and curative measures; corruption\. Submit Lok Ayukta reports from 1991 Expand Citizen's Charter to all through 1998 to the Assembly; departments that interface Update the Conduct Rules for GoU P with the public; Conduct civil servants on the basis of regular follow-up surveys intemational best practice; Make among employees, Vigilance Directorate the appointing businesses and households authority for 50% of its staff; Obtain and publish the results\. Cabinet approval of UP Right to By Mamh 200 Corruption Information Act for presentation to Legislabive Assembly; Deregulation Prevention Unit to assist all Committee to conduct review and departments in preparing and submit recommendation to GoUP for implementing anti-corruption implementation, strategies and streamlining implementation\. ~~business processes\. 2001-04: Publish annual reports for Lok Ayukta and Vigilance Commission; Conduct regular follow-up surveys of perception of corruption; Complete implementation of the deregulaton program\. -38a-  Benchmarksl Policy Actions 2000-01 2001-02 to 2003-04 Objedives (ApriilMarch) (April 2001-March 2004 Outcomes h4p*MtFFlsca/ Begin implementation of Initiate sample surveys of Enhanced beneficiary & 0cen&a&abon to comprehensive training and capacity public perception and stakeholder participation in 5ZU"B*vA*7 building in the PRIs; Inibiate satisfaction with the overseeing govemment AWSA*4kVbW strengthening of accounts and audit functioning and quality of performance; Improved AhAc&ft&ffd of local body finances; Conduct a services provided by the PRIs; quality of social services and detailed evaluation of the Scale up the comprehensive infrastructure maintenance in effectiveness of decentralized training program for PRI the rural areas; Increased management of state tubewells\. functionares; Implement public accountability\. corrective measures for tubewell management; Publish the results of the first annual audit of PRI finances\. RefomP,6* Complete the divestment or closure By March 2002: Divestment Reduction in fiscal drain due Eide\.rls\.and of 20 units of public enterprises or closure of at least eight to PEs; Release of assets to Phah&ze to Reduce selected for the first phase including PEs by March 2002\. private owners; Reorientation Scope of Govemrnent 11 Sugar Mills, and 5 Textile Mills\. By March 2003: of government role\. Reduce rsca/Bulden DivestmentVclosure of at least Palrobmanco 8 additional PEs by the Working Committee By March 2004: Divestment or closure of remaining PEs by the Working Committee\. Modem0 'zeM4A=& Appoint an 'Internal Auditor' and Complete conversion of Improved quality of financial Akw e,& Control inibate the process of modernization treasuries into IPAOs; information available to the Arcdecfture ernd ETh'/7c8 of the internal audit function; Enhance Implement computerized public; Improved and timely Accountab/htv to Promote the State's treasury function by performance recording and information for financial endAns"werable beginning to convert the treasury reporting systems for more management; Computerized Govemment offices into Integrated Pay and result-based management; performance recording and Accounts Offices (IPAO); Require all Implement the result-based management; departments to publish an Annual recommendations of the Effective legislative scrutiny Report outlining their objectives, feasibility study for over financial management by activities, costs and actual introduction of an appropriate the Executve\. achievements; Implement the form of accrual accounting; recommendations of the task force on Implement the the goveMment's financial recommendations of the study statements for public disclosure; on modernization of the Implement the rules for ensuring existing State Finance and timely response from offices to the Accounts cadre; Consolidate observa-tions in the C &AG audit the internal audit function, reports\. Implement the agreed modemize the intemal audit special external audits by C & AG; practices, and address the Conduct a feasibility study for skills mix required for a introducing an appropriate form of modern internal audit function\. accrual accounting\. Ill\. POVERTY AND Collect, enter, and tabulate data Collect information on poverty Track progress at reducing SOCIAL collected for the state sample of the indicators on an annual basis; poverty and improving living DEVELOPMENT NSS 55t round; Develop sample Use new information to conditions using a range of frame and listing for community and assess impact of reforms on indicators; measure the household monitoring system; the poor and socially impacts of key reform Develop and implement a community disadvantaged groups; measures on poor, vulnerable, monitoring system; Implement Publish periodic reports on and socially-excluded; based second round of data collection by progress at reducing poverty, on this information, identfy ESD; Publish and make available to impact of reforms\. factors responsible for the public the results from NSS 55Fh adverse outcomes and design round and poverty module\. approprate mitgation measures, also improve impacts of policies on the I_________________________________________________________ poor\. - 39 -  Additional Annex 9\.Re form Output/Process/Outcome Indicators - Fiscal Reforms Item Indicators 1\. Fiscal Correction Output Indicators I \. Cabinet Approval and tabling in the Assembly of Policy Paper on Fiscal Reforms\. [Done on March 2 7, 2000] 2\. Finalization of Contingency Plan to manage potential revenue and financing shortfalls\. [Done for 1999-00 by January 2000; andfor 2000-01 by January 2001] Long-Term Objectives: 3\. Ceiling on Debt and Guarantees\. [Debt ceiling was implicit in thefiscal deficit targetfor 1999-00, which has been overfulfilled\. Guarantees - The guarantee given by the GoUP during 1999-2000 and outstanding guarantees at the year end, were within the agreedprogram targetsI Outcome Indicators (to be monitored annually) To achievefiscal 4\. Fiscal Deficit - in Rupees and as % GSDP\. [Overallfiscal deficit (adjusted) declinedfrom Rs\. 109\.6 billion sustainability over the (7\.5% GSDP) in 1998-99 to Ps\. 103\.6 billion (6\.4%) in 1999-00, 0\. 6percentage point below the agreedprogram target; medium-term through growth non-power deficit was reducedfrom Rs\. 98\.5 billion (6\. 7%) to Rs\. 93\.5 billion (5\.8%\.), Rs\. 4 billion lower than the agreed oriented revenue and benchmark\.] expenditure measures 5\. Revenue Deficit - in Rs\. and as % GSDP\. (Revenue deficit declinedfrom Rs\. 83 billion in 1998-99 (5\.6% GSDP) to Rs\.67\.2 billion (4\.2% of GSDP) in 1999-00] 6\. End-of-year Outstanding Debt and Guarantees - in Rs\. and as % Revenue Expenditure\. [Outstanding debt was Rs 604 billion (3 7\.4% of GSDP) on March 31, 2000, compared to the target ofRs 603\.4 billion (37\.3%); outstanding guarantees were 2\.7% of GSDP] 7\. Interest and Total Debt Servicing - in Rs\. and as % Total State Revenue [Interest rosefrom Rs\. 58\.8 billion in 1998-99 to Rs\. 65\.5 billion in 1999-00; in proportion to total revenue, interest declinedfrom 34\.6% to 31\.4% while total debt servicing declinedfrom 41\.3% to 40\.1%] 8\. Fiscal stress ratio: Interest as % Revenue Expenditure\. [Interest as a percentage of Revenue Expenditure remained at 23\.6% in 1999-00, same as in the previous year; Revenue Deficit as a ratio of Revenue Receipts declined from 45\.6% to 28\.9%] 2\. Expenditure Output Indicators Measures 1\. Finalzation of High Priority Development Expenditures to be protected each year\. [The targetfor HPDE was enhancedfrom Rs\. 100 billion in 1999-00 to Rs\. 124 billion in 2000-01\.A Government Order issued on July 5, 2000, directed the departments and treasuries to give priority to the items in the HPDE list] 2\. Preparation of Strategy for Medium-Term Expenditure framework (MTEF) in 1999-00 [Strategy under Long-Term Objectives: discussion; Workshop by Bank experts held on December 6, 2000] 3\. Complete computerization of treasury transactions in 2000-01\. [Treasury payment systemfully computerized; Computerizedpayroll system expected to be in place by July 2001] 4\. Implementation of MTEF, beginning with 2001-02 Budget preparation \. To improve expenditure [Decided to establish a Resource & Expenditure Commission to oversee development of MTEF beginning with 2002-03 management, efficiency of budget preparation] public resource allocation 5\. Pension & Provident Fund Reforms initiated in 2001-02\. [Background Study has been initiated] and the composition of 6\. Full computerization of budgeting, accounting and expenditure management by 2002-03 public spending so as to Process Indicators (to be monitored each year) enhance its developmental 7\. High Priority Development Expenditures during first 6 months of fiscal year, in Rupees and as ratio of impact annual target [Data awaited] 8\. Expenditure on Salary and Pensions during the first 6 months of 2000-01\. [Salary expenditure during April-Sept 2000, at Rs 40\.7 billion, was 50% ofthe annual target; and at Rs 12\.2 billion, pension was 57% ofthe annual target] 9\. Expenditure on Explicit Subsidies (Grants-in-Aid) during first 6 months of fiscal year, in Rupees and as ratio of annual target\. [Data awaited] 10\. Net Additional Expenditure approved in Supplementary Demands during the year\. [Net additional expenditure approved in the Supplementary Demand in October 2000 was Rs\. 17\.4 billion or 4\.7% ofthe original expenditure budget] Outcome Indicators 11\. Improved budget compliance and fiscal discipline\. [Deficit reduction target achieved in 1999-00; financing shortfall was managed without any signifi cant cut in developmental expenditures] 12\. Priority to maintenance of existing assets over creation of new assets, and to completion of ongoing projects over new starts [Hasformedpart of the guidelines contained in the Budget Call Circular since 1999-00] 13\. Satisfactory Performance in protecting and enhancing High Priority Developmental Expenditures\. [About 93% ofthe targeted level of High Priority Development Expenditure wasprotected in 1999-00\.] 14\. Reduction in the share of salary and pension payments in total expenditure\. [Salaries declinedfrom 24% of total expenditure and net lending in 1998-99 to 23% in 1999-00\. Pensions rosefrom 6% to 7% in the same period] 15\. Reduction in the share of explicit subsidies in total expenditure [Total grants-in-aid declined from 28\.6% of total expenditure in 1998-99to 26\.4% in 1999-00] 16\. Increased expenditure flexibility [Share of salaries, pensions and interest payments in total expenditure declined from 51\.4% in 1998-99 to 49\.8% in 1999-00] 17\. Increase in the share of capital outlays and non-wage O&M [Capital outlays increasedfrom 1\.4% of GSDP in 1998-99 to 1\.5% in 1999-00] -40 -  3\. Revenue Measures Output Indicators I \. Reduction in the number of Trade Tax rates\. [Subsequent to the introduction of uniformfloor rates in January 2000, the number of rates werefurther reduced to 8 main and 4 special rates in Jan 2001, from 11 main and 6 special rates;further rationalization under consideration, based on consultant report of Dr\. Govinda Rao] Long-Term Objectives: 2\. Amendment of Trade Tax Act to strengthen anti-evasion efforts\. [Amendment enacted in March 2000; implementation being initiated in a phased manner starting in March 2001] 3\. Identification of potential taxpayers who are outside the tax net [Survey conducted in 1999-00 showed that 15% of those surveyed needed to be registered but were not] TO enhance the state's own 4\. External Audit of Trade Tax Department [Following an objection by the Law Department of the State to the revenue base, create afair, violation ofprivacy rights of businesses, internal audit has been strengthened instead of external audit] simple and high compliance 5\. Introduction of New Taxes (Entry Tax) [Entry Tax introduced in November 1999\. Cabinet gave clearancefor tax system and improve cost tax on crude oil, machines and spare parts and natural gas in December 1999\. Extended to include tobacco and recoveryfrom publicly non-levy sugar in 2000-01] provided private and 6\. Phasing out of Tax Holidays [Accomplished effectivefrom February 2000] semi-private goods and 7\. Reorganization, modernization and computerization of Trade Tax Administration [Computerization piloted; services Functional reorganization ongoing with technical assistance] 8\. Increase in user charges for irrigation, higher education and hospital care [Total revenuefrom user charges increasedfrom Rs\. 7\.2 billion in 1998-99 to Rs\. 10\.3 billion in 1999-00\. Revenuefrom user charges in education increasedfrom Rs\. 1\.01 bin to Rs\. 1\.38 bin over the sameperiod] Process Indicators (to be monitored monthlvl/uarterlvlannuallv) 9\. Percentage rise in tax collected from manufacturers within UP, adjusted for inflation [Registered an increase of about 75% in real terms, during thefirst 3 quarters of2000-01, compared to the same period of the previous year] 10\. Percentage rise in tax collected from non-manufacturing dealers, adjusted for infin [Data awaited] 11\. Value of "recorded" goods imported (i\.e\. from outside UP) through railway /post offices compared to previous period 12\. Value of "recorded" goods imported by road and recorded on form 31 compared to previous period [There was an increase ofabout 7% during thefirst 3 quarters of2000-0l\. Compared to the same period of the previous year] 13\. Total monthly collections from Trade Tax, with and without petroleum products [Trade tax collected during April 2000-January 2001, excludingfrom petrol/diesel, was Rs\. 32\.68 billion (increase of2O\.6% over previous year in nominal terms); including petrol/diesel it was Rs\. 45\.72 billion (increase of 19\.6% over previous year] 14\. Number oftaxable dealers who file declarations [Number of 'registered' dealers increased by 3ofrom 190,398 in 1999-00 to 196024 in 2000-01] 15\. Half-yearly collections from the 1000 dealers with the largest turnover [The total tax recovered during April-September 2000 was 76% higher than during the same period of the previous year] 16\. Net Recoverable Arrears - in Rupees and as ratio of total taxes due [Net recoverable arrears (provincial) were Rs\. 964 crores in August 2000] 17\. Annualnumber ofcases under appeal and value under dispute [In 1999-00, there were 115,780appeals (60,586past and 55,194 new appeals)\. There were 64,133 disputed appeals amounting to Rs\. 33\.24 billion\. The number ofpending appeals were 51,647 and amounted to Rs\. 9\.6 billion] 18\. Proportion of staff in Trade Tax Department assigned to enforcement [In 1999-00, ofatotal of 1206 officers and 1419 employee in the Trade Tax Departments, 42% and 22% respectively were involved in enforcement work] 19\. Number of staffin Trade Tax Department using computers in dailywork[During July-September 2000-01, 17% of officers and 0\.1% of employees were usingcomputers compared to 0\.5% and 3% over the previousquarter, i\.e\., April-June 2000-01] Outcome Indicators 21\. Improved voluntary tax compliance 22\. Reduced transactions costs for pfivate business operating in UP 23\. Increase in the State's Own Tax Revenue - from 5\.4% GSDP in 1998-99 to 7\.6% by 2003-04; 24\. Increase in the rate of cost recovery from canal irrigation - from less than 20% currently to 50% by 2003-04 - 41 -  Additional Annex 10\.Re form Output/Process/Outcome Indicators - Governance Reforms Item Indicators 1\. Establish Polcy and Process/Output Indicators Institutional Frame-work for 1\. Approval ofPolicy Papers on Governance and Civil Service Renewal [Done\. Papers were Major Govern-ment Reform app vedbyCabinet and tabledin theAssembly in March 200\.] Program 2\. Cabinet Committee to provide overall guidance and direction for reform effort [Cabinet Long-Term Objective: Committee on EconomicAffairs headed by the Chief Minister has been given responsibilityfor this effort\.] 3\. Governance and CSR Core Group, headed by the Chief Secretary [CSR Core Group To ensure successful reforms by Headed by Chief Secretary functioning actively] creating appropriate policyand 4\. Publication of Departmental annual reports [Performance budget being published and institutionalarrangementsfor presented in the Assembly]\. providing guidance and oversight I\. CIVIL SERVICE REFORM I\. Review and Rationalize Process/Output Indicators All Departments I\. Establish Policy Planning Celis and complete intra-departmental functional reviews [Policy Planning Cells established in 53 major departments and intra-departmental reviews initiated\. The Long-Termn Objectives: cells are meeting every three months on average\. Approximately 38functional reviews have been completed and submitted to relevant secretaries] To enhance efficiency, 2\. Establsh Technical Working Group to the CSR Core Group and complete effec-tiveness andproductivity by inter-departmental functional reviews [Technical Working Group yet to be established, due to delays in rationalizing, realigning and procuring appropriate technical assistance for implementation\.] reengineering departments and 3\. Integrate reviews into a comprehensive report for rationalization (with TA), which is reenginering deprtmentsapproved by Cabinet [Yet to be done] To eliminate functions andi tasks 4\. Phased rationalization of departments to begin on I October 2001 and be completed by December 31, 2004\. Number of departments rationalzed to be carefully monitored to e;\.sure that are no longer needed or bring implementation does not slip [Clustering of related departments along sectoral lines has begun] little value added so that the 5\. Develop and implement appropnate organizational performnance indicators for all Departments government can con-centrate upon by December 31, 2004 high priority areas Outcome Indicators To save overhead costs by 6\. Substantial reduction in the number of departments towards intemational norms, with significant reduc-ing administrative and savings in overhead and administrative costs supportfunctions and involving 7\. Ratiosialization of organizational structure, business processes, staffing, and products and more staff in front-line tasks of services for remaining departments, starting with PWD, Irrigation, Forestry, Health and Tax and service delivery Trade, by December 31,2002 [Signif cant progress has been made in Forestry\. Detailed plans are currently being made in Health, PWD and Irrigation\. Exercise on functional reorganization is ongoing in To enhance effectiveness by the Trade Tax Department\.] increasingly shifting focus from 8\. Significant improvement in the ratio of front-line staff vis-a-vis support and administrative staff compliance to outputs and for all departments consistent with best practice in Indian states and elsewhere\. outcomes 9\. Significant increase in the number of functions that are privatized and/or commercialized consistent with best practice in Indian states and elsewhere [Selective progress to date in some departments, such as PWD\.] -42 -  2\. Ensure a Global Annual ProcessOutsst Indicators Reduction in av2 l Service Size I Initiate a review of civil service terms and conditions in comparison with global and by at Least 2% for Next Five Indian best practice to identify opffons for greater flexibility in downsizing and redeployment and Years implement study recommendations [Yet to be done] 2\. Abolish unfilled positions identified as redundant [Approximately 15,000 posts, or 1\. 7%O, Lo\.g-Ter-m Objectives: have been abolished to date, since the program began in 1999-00] Long-Term ObJectives: 3\. Identify alternatives to the practice of compensatory/compassionate employment [ e \.afforda-bilty Alternatives under consideration] ofsrhe civil service Outcome Indicators 4\. Global reduction in civil service size of at least 2% annually [Size ofcivil service Improve productivity by reportedly declined by 1% during FY 1999/2000 and an estimated 1\.6% in FY2000/01\. More reliable re-deploying staff to more data on personnel in place are expected once the computerizedpayroll is infunctional, i\.e\., by July 2001] valu-able tasks 5\. Number of position establishments abolished or redeployed annually by department, with substantial savings in staffing and wage bill in key departments (Le\. PWD, Health, Irrigation and Alow for greater managerial Forestry), consistent with findings of institutional reviews [Over 60 divisions abolished in PWD and flexibility by expanding optionsfor Irrigation; however, excess staffstill remain\. Approximately 5,000 staff awaiting transfer to surplus labor redeployment and re-trenchment pool in Department ofAdministrative Reformsfor redeployment\.] 6\. Major reduction (i\.e\. greater than 50%) in casual and work charged employees by FY 2004 End "entitlement mentality" regardingjobs in the public sector -43 -  3\. Process/Output Indicators 1\. Computerized human resource database established and regularly updated, so GoUP can Improve Human Resource immediately produce accurate and timely information on the size and composition of the civil service\. Management [Ongoing]\. Long-Tern Objectives\. 2\. Annual Transfer Policy to be finalized and guidelines publicized; consultative mechanism adopted to oversee transfers for all classes and cadres; and departmental budgets for transfers To ensure access to accurate, desegregated and strictly monitored\. [Annual Transfer Policypublished in May 2000\. Frequency of timely information regarding the transfers continued to be a major concern until September 2000, although there has been some size and composition ofthe civil improvement in recent months\. Effectiveness of consultative mechanism to oversee transfers is doubtful\.] service 3\. Class I and 1I positions classified for rational and judicious placement [Requirement for thepost and officers background are kept in view while makingplacements] To improve productivity by4\. GoUP to study Annual Confidential Report (ACR) process to improve its effectiveness as To improve productivitye by a tool for human resource management and implement recommendations\. fImplemented in the stafferansfers and postings and Forestry Department, U\.P\. Jal Nigam, Irrigation Department Under considerationfor secretariat / Head allowing public sector managers ofDepartment] andb disctretionagins 5\. GoUP allocates 1% of annual departmental wage bill for training aggregate and by greaterfreedom and discretion In department [A Government Order to this effect has been issued\. Expenditure on training rosefrom Rs 3\.2 managing their staff crore in 1999-00 to an estimated Rs\. 11\.7 crore in 2000-01] To enhance meritocracyby6\. Department of Personnel arid Appointments to publish regular annsual report on size and To enhance meritocracy by composition of the senior civil service, demographic profile, average tenure in office, annual screening strengthening the process of procedures, and number of staff reprimanded for corruption and maladminisitration; other departments to also performance monitoring and do the same for senior officials in their annual reports evaluation 7\. Departments certify that screening is performed on an annual basis [Done\.] Outcome Indicators To improve the quality and skills mix ofthe workforce by improving 8\. Average tenure increases for Class I and 11 officers human resource development 9\. Improved utilization of ACR process in transfers and promotions 10\. Significant increase in the numbers of staff given early retirement through screening 11\. Improved staffing in key skill categories (i\.e\. water resource management, traffic management rural nursing) 12\. Numbers of staff rewarded for good performance and reprimanded for non-performnance 13\. Expenditure on training and number of staff trained by department; number of staff with multi-task skills - 44 -  II\. DEREGULATION AND ANTICORRUPTION 1\. Deregulation Process/Output Indicators Long-Term Objectives: 1\. Establish Deregulation Committee [Committee established on October 28, 1999 and began functioning on January 13, 2000\. It has held 49 meetings with Departmental Secretaries and 68 internal To reduce the administrative meetings\.] burden on the state, facilitate 2\. Each department complete its internal review and submit theem to the Deregulation private sector growth, and Committee for consideration by I July 2000 [Approximately 58 departmentsformed Deregulation enhance equity and access among Committees and submitted reports\.] impoverished groups 3\. Deregulation Committee to submit its first review and recommendations to GoUP by 1 October 2000 [Reportpublished on November 5, 2000\. The initial report made 615 recommendations To radically simplify regula-tions concerning the workof4Odepartments\. The quality ofthese recommendations is variable\. The to ensure they are readily Committee's tenure was recently extended by six months, with theprospect offurther extensions as understood, unambiguous in their needed\.] application, andstraightforward 4\. Based on these recommendations, GoUP to formulate a time-bound program to to implement streamline and modernize the laws, rules and regulations applicable in UP and inifate the implementation of such a program [Underprogress; yet to be completed] To make the rule-making process more transparent Outcome Indicators 5\. Substantial reduction and modemization in the number of state acts, rules and regulations/orders currently being administered by the departments, in line with best ptactice among Indian states 6\. Enhance transparency and stakeholder partcipation in the regutatory process by engaging business and civil society in the work of the Deregulation Committee -45 -  2\. Process/Output Indicators \.Accountabity 1\. Regular stakeholder surveys to monitor performance [Initial three surveys conducted of Strengthen Key ACouption generalpublic, traders and civil servants towards corruption\. Further surveys are plannedfor some key Bnis a departments\.] BodIes 2\. Increase in funding and staffing for key accountability institutions to compare favorably Long-Term Objectives: with per capita funding in other Indian states [Increases occurring in a phased manner in line with agency absorptive capacity\. Vigilance Establishment budgetforyear FY2000-01 has increased by 12\.9% Ta reduce corrup-tion and over expenditure in FY 1999-00, albeitfrom a very low base\.] mal-administrahion by 3\. Vigilance Establishment and Lok Ayukta to have greater independence in recruitment maren-adninirainsm by and transfer of staff, and improvement in the ratio of front-line staff to administrative staff to strengthening mecha-nisms for compare favorably with other Indian states [The Lok Ayukta is empowered to recruit and appoint more detecting, investigat-ing and juniorstaff while seniorstaffare appointed only with the concurrence ofthe LokAyukta\.J sanctioning improper behavior, 4\. Task Force report on mandate, staffing, budget, organizational structure, business processes, while ensuring these nst tuti ons regulations and guidelines and performance indicators completed and integrated into broader GoUP operate within an appropriate anticoruption strategy, along with surveys, stakeholder workshops, and anticorruption strategies for key accountabilityframework departments with significant revenue, expenditure or regulatory responsibilities 5\. Publication of survey results, along with GoUP anticorruption strategy, by 31 October To combat corruption pro-actively 2000, with implementation to begin immediately [ To bepublished] by strengtheningpreventive 6\. Update and disseminate Conduct Rules for GoUP civil servants not subject to All India rules on measures in central and line the basis of international best practice departments 7\. Regular submission of annual Lok Ayukta reports to the Assembly [GoUP hasformally tabledpending reportsfrom 1990 to 1994 in the State Assembly\. Remaining reports to be tabled in the budget session in early 2001\.] S\. Corruption Prevention Unit established and actively working with core and depatrnental 3\. Develop and Isplement agencies to reduce opportunities for corruption (by March 2003) Anticorruption Strategies Outcome Indicators 9\. Increased awareness and utilization of Lok Ayukta function by the public and of Vigilance Long-Term Objectives: Establshment by civil service [Role andfunctions of Lok Ayukta are being given widepublicity\. Additionalfunds sanctionedfor the LokAyuktafor thispurpose\. A websitefor the Vigilance Department To create an integrated,flexi-ble has been set up\. Role andfunctions of the Vigilance establishment and other anti-corruption bodies are and responsive ant-icorruption publicized through the website\.] strategy based upon solid t0\. Reduction in average investigation times and adjudication times for administrative and criminal empirical evidence and regular cases stakeholderfeedback 11\. Increased number of investigations and reduction in case backlogs [Number of corruption related cases in which prosecution was approved was 3 75 during April-December 2000, compared to To effectively implement the around 100 in the same period ofthe previous year\.] strategy, with particular atten-tion 12\. Improved sanction and conviction rate [There were 44 "trap" cases during the year 2000, tofosteringsuccessful involving 49 ofxicials who were caught red handed] anticorruption efforts at the 13\. Successful prosecution of a few "high profile' cases [A senior lASofficer was recently departmental level compulsorily retiredfrom servicefor corruption\.] 14\. Number of concrete examples where regulatory reform, processes reengineering and other preventive measures have significantly reduced corruption\. 15\. Stakeholder surveys indicate increasing public satisfaction with anticonuption effort and decreasing perceptions of corruption, particularly in departments with substantial revenue and expenditure responsibilities or regulatory functions\. -46 -  4\. Undertake Actions to Process/Output Indicators Make Government More Open and Responsive To Citizen Needs 1\. Citizen's Charters with clear specification of service standards and remedial measures prepared and widely publicized for all departments with major public interface\. [Citizen charters have been issuedfor several departments; they need to be widely publicized and steps need to be taken to Long-Term Objective: ensure effective implementation of charters (redesigning business procedures providing managerial flexibility, sensitizing employees to the new standards, and instituting userfeedback mechanisms)] To improve government 2\. Cabinet approval of a code of access for government documents based upon United per-formance, accountability and Kingdom practice and draft UP Right to Information Act\. [Go UP has approved a code of accessfor responsiveness by improving the government documents but it is very restrictive and applied to only three departments sofar\.] public's access to informa-tion 3\. Each department to publish a brochure outlining their organ-izational structure, mission and engaging civil society in and objectives, staffing profile, annual budget, services, compendium of relevant govemnment orders providing informedfeedback on and contact points for further information by I March 2000 [ This information is available in Annual the quality of government services reports websites and official directories]\. 4\. Each department to review and redesign public grievance redress system and publicize relevant procedures\. [ Government oders already exists\. Grievances are being monitored by the Directorate of Lok Shikayats (Public grievances) ] 5\. Number of departmental web pages and accessibility of GoUP forms ontheInternet\. [At least 16 major departments have created their respective web pages; the Transport Department has 30 forms available to be downloaded, including the applicationform for a driver's license Major initiative taken by Information Technology Department to develop a single U\.P\. Govt\. Website\.] Outcome Indicators 6\. Survey data indicates increased awareness on the part of the public (and particularly the poor) regarding the quality of services they can expect and utilization of grievance procedures 7\. Survey data for officials indicates increased awareness and concern about transparency and the public's right of access to information 8\. Enhanced information flow regarding service standards and quality measured through by web page use and surveys ofNGOs and civil society 111\. PUBLIC ENTERPRISE REFORM AND PRIVATIZATION Outut Indicators Long-Term Objectives: I\. Cabinet approval of the PE Reform Policy (Done; Policy tabled in the Assembly in March Government to withdrawfrom the 2000] provision of goods and services 2\. Cabinet approval of procedures for implementation [Drafts of the overall transactions that can be provided more manual and of the environmental guidelines having been produced during February 2001] efTiciently by the private sector, 3\. Divestment/closure of PEs selected for the first phase, by March 2001 [Done; 20 units, through divestment or closure of including 1/ sugar mills and S textile mills, have been closed; the assets of two enterprises have been those public enterprises that either sold] compete with the private sector or 4\. Number of units divested or closed on an annual basis [See point 31 are commercial in nature Process Indicators 5\. Value of assets sold each year [Value of assets sold from Ist Phase enterprises is Rs 50 crores] 6\. Number of employees retrenched/retired in each year [About 11 000 workers have departed with VRS packages in thefirst phase of the program] 7\. Number of enterprises remaining under public ownership at the end of each year iThere will be 4 7 remaining under public ownership by the end of March 2001] 8\. Fiscal savings from closure/privatization ITo be calculated] Outcome Indicators 9\. Substantial fiscal savings 10\. Improved economic efficiency IV\. FINANCIAL MANAGEMENT AND ACCOUNTABILITY - 47 -  Outnut Indicators Long-Term Objectives\. 1\. Cabinet approval of Strategy for Strengthening Financial Managenent and Greater availability of information Accountability [Done in March 2000; Next step is to prepare a more detailed implementation plan] concerning thefinances of the 2\. Task Force to recommend the form, content and presentation of finandal statements for State amongst the general public public disclosure [Task Force has almost completed its work on theformat of the half-yearlyfinancial and media, leading to increased statements and the accounting system required tofacilitate preparation of these statements; finalization of transparency Report is pending] 3\. Feasbility Study for accrual accounting financial statements and the accountng system Enhanced accountability of the required to facilitate preparation of these statements\. [Recruitment of consultants is underway] Executive to the Legislature 4\. Study to modernize State Finance and Accounts Cadre\. [Recruitment of consultants is underway] Integrated computerizedfinancial S\. Timely Respone to observations In the C&AG audit reports\. [Progress is slow\. management system that would Government has set a 90-day rulefor responding to CAG reports\. However, responses to 550 out of 583 facilitate results-based "paras" in the CAG's Reportfor 1998-99 (tabled on May 17, 2000) are pending, and to 158 Out of 587 7 management paras " in the CAG 's reportfor 1997-98 are pending] Process Indicators Modern internal auditfunction 6\. Time taken between C&AG audit queries and departmental responses [Data on time taken which provides continuous to respond is not available, eitherfor responses to 'Drafi Paras' orfor response to thefinal CAG Report] oversight over the activities of the 7\. Deviations between Budget Etimates, Revised Estimatu and Audited Accounts figures of State revenue and expenditure, by major categories\. Outcome Indicators I Too early to measure outcome indicators since the process is only starting noa4 Reconstituted and better trained finance and accounts cadre 8\. Improved quality of financial infomnation available to the public capable ofproviding efficient 9\. Improved and timely information for financial management financial management services\. 10\. Computerized performance recording and result-based management -48 -  Additional Annex 11\.Pover ty and Social Impact Indicators: Table 1 Item Indicators 1\. Establish a system to Process/Output Indicators monitor and evaluate the 1\. Set up monitoring units in the Chief Secretary's Office and the Department of impacts of the overall Planning reform program on the 2\. Agree on initial set of quantitative poverty monitoring indicators, viz\. poor and other socially disadvantaged groups\. Consumption and Income 1\. GSDP growth (Agriculture, Manufacturing, Industry, Services, Total) Long Term Objectives: Source and Periodicity: UP Directorate of Economics and Statistics ( DES), Annual To maximize impacts of state series\. reform-led growth on the Current Baseline Estimates: Here and below see "Poverty and Social Impact Indicators poor; --Table2\." To identify emerging 2\. Per-capita monthly expenditures (Food items, Education, Health, Other, Total) adverse impacts of specific reform measures Source and Periodicity: Quinquennial NSS Consumer Expenditure Survey, central and and design appropriate state samples\. Every five years\. Most recent estimates, 1999-00 mitigation measures; 3\. Poverty: Headcount, Poverty-gap, FGTP2 measure (i\.e\. severity of poverty) To support better informed policy making Source and Periodicitv: Quinquennial NSS Consumer Expenditure Survey central and and program design state samples\. Every five years\. Most recent estimates, 1993-94 (Proposed: annual To inform the pubic at poverty estimates forecast based on trends in key determinates of poverty - levels and large about the success or structure of growth, development spending, inflation) otherwise of the reform piogram\. Emplovment and Wages 4\. Wages (Agriculture, Non-Agriculture) and (proposed) prices Source and Periodicit : UP DES, monthly monitoring at block and district level\. 5\. Employment Status (Employed, Under-employed, Unemployed, Out of Labor force, ) Source and Periodicitv: UP DES, baseline set by Poverty Module, state-sample 55 round, follow-up through light/priority survey agreed in project proposal, sampling, periodicity and design to be discussed and finalized with GOUP after release of baseline report and internal discussions\. To be supplemented by multiple sources such as Quinquennial NSS Consumer Expenditure Survey, Employment/Unemployment module(every 5 years) and Population Census of India (every 10 years)\. Most recent estimates, 1999-00 (forthcoming) - 49 -  Health 6\. Percentage of children that have been immunized (Boys, Girls, Overall) Source and Periodicit : UP DES, baseline set by Poverty Module, state-sample 55 round, follow-up through light/priority survey agreed in project proposal\. To be supplemented by administrative data from the relevant line departments and cross-checked against National Famnily Health Survey (NFHS), NSSO special purpose surveys state and central samples, and Department of Health data\. Most recent estimates, 1999-00 (forthcoming) 7\. Infant Mortality Rate (Boys, Girls, Overall) Source and Periodicity: UP DES, baseline set by Poverty Module, state-sample 55 round, follow-up through light/priority survey agreed in project proposal\. (Note that PSMS module uses a different method to estimate IMRs and CMRs) Alternative estimates provided by the Sample Registration System (SRS) on annual basis\. Cross-checked against National Family Health Survey (NFHS-2), repeated every five years\. Most recent estimates, 1999-00 (forthcoming)\. NFHS-2 in 1998-99\. Education 8\. Literacy (Men, Women, SC/ST, Overall) Source and Periodicitv: UP DES, baseline set by Poverty Module, state-sample 55 round, follow-up through light/priority survey agreed in project proposal\. To be supplemented by administrative data from the Department of Education, and cross-checked against National Family Health Survey (NFHS-2), NSSO Quinquennial and special purpose surveys, state and central samples\. Most recent estimates, 1999-00 (forthcoming), also Feb, 2001 - India Population Census\. 9\. Enrollment rates for children aged 5-14 years (Boys, Girls, SC/ST, Overall) Source and Periodicitv: UP DES, baseline set by Poverty Module, state-sample 55 round, follow-up through light/priority survey agreed in project proposal\. To be supplemented by administrative data from the Department of Education, and cross-checked against National Family Health Survey (NFHS-2), NSSO special purpose surveys, state and central samples\. Most recent estimates, 1999-00, forthcoming\. 10\. Drop-out rates for children aged 5-14years (Boys, Girls, SC/ST, Overall) Source and Periodicity: Administrative data from the UP Education Department, annual\. Most recent estimates, tbd 11\. Completion rates for children, primary, secondary, (Boys, Girls, SC/ST, Overall) Source and Periodicitv: UP DES, baseline set by Poverty Module, state-sample 55 round, follow-up through light/priority survey agreed in project proposal\. To be supplemented by administrative data from the Department of Education, and cross-checked against National Family Health Survey (NFHS-2), NSSO special purpose surveys state and central samples\. Most recent estimates, 1999-00, forthcoming\. Housing Conditions 12\. Percentage of households living in slum areas Source and Periodicit : SUDA administrative data, periodicity not known 13\. Percentage of households having latrine facilities in their house - 50 -  Source and Periodicit : UP DES, baseline set by Poverty Module, state-sample 55" round, follow-up through light/priority survey agreed in project proposal\. Current estimates, 1999-00, forthcoming\. 14\. Distribution of households according to source of drinking water As in 13 15\. Percentage of households living in electrified dwellings As in 13 Participation in Government Proerams 16\. Percentage of persons benefitingfrom employment/welfare schemes (public works, TPDS, Other government anti-poverty programs, IRDP, etc\.) Source and Periodicity: UP DES, baseline set by Poverty Module, state-sample 55" round, follow-up through light/priority survey agreed in project proposal\. Current estimates, 1999-00, forthcoming\. 17\. Health (percentage ofpregnant women registeredfor prenatal care during last one year and Percentage of deliveries attended by Doctor/Trained Nurse/Dai during last one year) As in 16 18\. Education (Percentage of children enrolled in non-formal or alternative schooling programs and Percentage of 0-5 year-olds attending ICDS anganwadis) As in 16 Awareness of Health Proerams and Social Rights 19\. Percentage of households aware of thefollowing: Immunization of children, vaccination ofpregnant women, Iodized salts, Use of ORT, Contraceptives, Minimum wage act, Child Labor Prevention act, Dowry prohibition act, Prevention of Atrocities against SC/ST, Child marriage prevention act\. As in 16 Access to Facilities/Services Distance to nearestfacility/service (within village, upto 2 km, 2-5 km, 5-10 kin, 10+ km) Metalled Road, Other roads, Railway station, Bus stop, Police station, Post office, Telegraph road, PCO, Block headquarter, Bank, Regular market, Rural weekly market, Fair price shop, Junior basic school, Senior basic school, High school /Higher secondary school, Non-formal education center, Total literacy center, Veterinary hospital / stockman center, Hospital /dispensary, Maternity center, Anganwadi center, Cinema, Library, Sales point of agricultural inputs, TRYSEM training center, Perennial source of drinking water, Cooperative society Source and Periodicity: administrative data from the relevant line departments, proposed as a part of the UP Human Development Initiative, data base development\. Periodicity to be determined, likely ever 2-3 years\. - 51 -  Ouality of Services For health: availability of medical staff in government facilities, availability of essential medicines For education, teacher qualifications and training, teacher attendance, hours of classroom instruction, availability of textbooks and other supplies, etc\. For water and sanitation, number and location of tubewells and other drinking water sources, quality of water, number of months water available for specific wells, quantity of water available during dry seasons\. Source and Periodicity: data on perceptions about quality of selected services are to be collected by UP DES through light/priority survey agreed in project proposal\. The baseline has been set by Poverty Module, state-sample 55" round, sampling, periodicity and design of the follow-up surveys is to be discussed and finalized with GOUP after release of baseline report and intemal discussions\. These data is to be augmented by quantitative indicators from administrative data from the relevant line departments\. It is proposed to collect more extensive and disaggregated indicators, including indicators of access, quality, and satisfaction through facility surveys and as a part of district monitoring system\. 3\. Undertake a five-year program of data collection, including (i) baseline poverty monitoring surveys Progress, Immediate Next Steps\. A baseline household survey, gathering information on most of the agreed monitoring indicators, was undertaken in conjunction with the state-sample of the NSS 55" round (Schedule 99, Poverty Module)\. The focus of the module was on outcome measures linked to service delivery and special programs for the poor, as well as a limited amount of information on user views and satisfaction\. These data are now being tabulated and discussed with counterparts in GOUP\. A joint GOUP/WB baseline report is under preparation, which draws on these data, administrative data, and other sources in establishing a project baseline\. (ii) annual special purpose surveys (e\.g\. indicators of service delivery at the local level)\. Progress\. Immediate Next Steps\. It was agreed at the outset of the project that regular, periodic monitoring surveys would be implemented once the baseline was established\. Further, modalities would be agreed based on capacity of DES, agreed sources of information, and agreed periodicity\. Discussions are being initiated with DES/Planning on the coverage, sample design, and periodicity of regular monitoring surveys\. It is unlikely that these will be combined with the ongoing NSS state sample, both for reasons of geographic coverage and desired disaggregation as well as breadth of information needed\. It is desirable that the first of these surveys be launched in January, 2002, two years after the mid-point of the baseline survey and well enough into the reform initiative that there may be evidence of real improvements (e\.g\. in delivery of key services)\. Note that no new survey work should be undertaken until the national and state sample frames are redone based on the 2001 Population Census (hopefully by Jan, 2002)\. (ii) community-based monitoring in high profile districts\. - 52 -  Progress, Immediate Next StePs\. Following on earlier discussions, a draft proposal has been prepared with close links to performance monitoring and the governance component of the program\. This will be discussed and agreements reached shortly (planned June, 2001) on initial actions required for implementing a pilot program\. There are still outstanding questions regarding the role of DES and line departments within GOUP, and the advisability of involving local research organizations or NGOs in providing an audit function on administrative data\. Note that one of the key objectives of the district level work is to improve the quality and accessibility of the vast amount of information collected by various implementing departments at the block and district level\. (iv) monitoring of regionally disaggregated intermediate indicators (e\.g\. prices, wages) Progress\. Immediate Next Steps\. Price and wage data are collected on a monthly basis\. Work is underway to develop a database system to make these data more readily available as well as reporting formats\. ( v) participatory studies, monitoring of qualitative outcome indicators\. Progress\. Immediate Next Steps\. These will be discussed after building stronger analytic and monitoring capacity in the Planning Department, and getting the fundamentals of the statistical system better in place\. 4\. Institute regular reporting process, undertake policy and program analysis to inform decision making, particularly linked to reforms Baseline data and first report under preparation\. Further plans to be discussed and agreed over next 4-6 months\. 5\. Disseminate reports widely to public at large as well as a range of stakeholders, undertake information workshops, other dissemination exercises\. GoUP held informal workshop to discuss draft UP Poverty Assessment and UP PSMS in October\. 2000\. which was attended by a number of non-government individuals, including staff from several well-known research institutes\. Planning follow on meetings when UP Poverty Assessment is released, also to disseminate findings of baseline monitoring report\. Further dissemination efforts to be discussed, including broader dissemination on information at the local level\. Outcome Indicators 1\. Reductions in poverty levels, including measurable improvements in backward districts\. 2\. Improvements in living conditions for vulnerable groups, especially socially excluded or marginalized groups\. - 53 -  Additional Annex 12\.Pove rty and Social Impact Indicators - Table 2 (current baseline estimates) POVER7YAND SOCIAL IMPACT/ND/CATORS- Table 2(cunrentbaseline estfmates} Geographicl Reporting social group Data Sources Periodicity Current baseline estimateslsource disaggregation \. Consum,ofon and lncome Annual growth rate State UP DES, Annual state series Annually Gross State Domnestic product: 1997-98 0\.1%; 1998-99 -6\.9%; 1999-00 5\.7%; Agriculture and Allied Services: 1997-98 -4\.4%; 1998-99 2\.7%; 1999-00 5\.7%; Industry: 1997-98 -0\.2%; 1998-99 14\.3%; 1999-00 5\.4%; Services: 1997-98 4\.8%; 1998-99 6\.5%; 1999-00 5\.9%\. Source: UP DES, at 1993-94,pnces Per-capita monthly expenditure State, Urban/Rural, Quinquennial NSS Consumer Every 5 1999-00: Rs\./person/month (30 day reference period) NSS Regions; Expenditure Survey, central years Total expenditures 466\.7 (100%) Poor - non-poor, and state samples\. Total food 268\.0 (57\.4%) SCIST - majority Cereals 98\.0 (21\.0%) Education 10\.5 (2\.2%) Medical 38\.6 (8\.3%) Soarce: 55 Round NSSO, central sample\. Data from 55th state sample is being processed Poverty: Headcount, Poverty-ap, FGT P2 measure (seventy of poverty) State, Urban/Rural, Quinquennial NSS Consumer Every 5 Current Baseline Estimates not available, pending resolution of intemal NSS regions; Expenditure Survey, central years discussion on comparability of NSS 55t round with previous rounds of SC/ST majority and state samples\. the NSS\. (see UP poverty assessment for fuller details) Forecasting model in intervening years Employment and wages: Wages (agdculture, non-agricultuim) and (proposed) prices State, Urban/Rural, UP DES, monthly monitoring at \. Monthly See below * District block and district level\. - 54 -  Geographic/ Reporting Social group Data Sources Perlodicity Current baseline estimatesfsource disaggregation j Employmerit Status (Note that different defln/mons are used byLO and NSSO) State, Baseline set by UP DES To be Indicator reflecting ILO definition is being processed based on 55t1 Urban/Rural, NSS administered Poverty Module, finalized, state sample\. Regions; state-sample 55t round, follow- anticipate 12- Poor - non-poor; up through light/priority survey 18 months 1999-00: Employment status according to principal usual status SC/ST - majority agreed in project proposal, (primary and subsidiary activities), number of persons per 1000 sampling and design to be pplto SOdfnto discussed and finalized with populaton - NSSO definition GOUP after release of baseline Note that this measure is different from employmentratewhich is report and internal discussions\. calculated as a ratio of working individual over those who work or Quinquennial NSS Consumer 5 years looking for work, among the working-age population- ILO definition Expenditure Survey- Rural Urban Employment/Unemployment Men Women All Men Women All module, central and state 481 201 345 490 94 304 samples\. Source\. 55h Round NSSO, centra/sample\. 10 years Data is forthcoming Populaton Census of India hbealf\. Pementage of children that have been immunized State, Baseline set by UP DES To be Data from 55th state sample is being processed Urban/Rural; administered Poverty Module, finalized, NSS Regions; state-sample 55ih round, follow- anticipate 12- Poor - non-poor; up through light/priority survey 18 months SC/STr- n agreed in project proposal, SC/ST - majority; sampling and design to be Boys - girls discussed and finalized with GOUP after release of baseline report and internal discussions\. Data is forthcoming Administrative data 5 years 1998-99, 12-23 months age group: 29\.5% had no vaccinations Sample survey of households 21\.2% had all vaccinations such as National Family Health Source\. :Wation7aFamndv Hea//h Sun'ey(H'FhS-2) Inhemat/enal Survey (NFHS-2) Institute for Population Stud/es, Measure DHS, ORC Macro - 55 -  GeographicW Reporling social group Data Sources Pe{ dic i Cunent baseline estimatesesource \.disaggregationI Infant Mortality State, Urban/Rural; Sample Registration System, Annual 1998:85 death per 1000 live births NSS Regions; Office of the Registrar General Source: Office of the Registtrar General Poor - non-poor; (ORG) SC/ST - majority; 5 years 1998- 1999: Number of death per 1,000 live birth, 0-4 years preceding Boys - g irls Sample survey of households tesre ovll 1 such as National Family Health the survey -overall 116 Survey (NFHS-2) Source: NationatlFamily Heal/th Survey(NFHS-2) international lnstAtule for Population Studies, Measure DHS ORC Macro Education\. Literacy State, Urban/Rural; UP DES To be Data from 55t round state sample is being processed NSS Regions; finalized, Poor - non-poor; 12-18 mos SC/ST - majority; Boys --girls Sample survey of households such as National Family Health 5 years 1998-99: Men - 71\.8% Women - 62\.7% Survey (NFHS) Source: National Family Health Survey(NFHS-2) Intemational Institute for Population Studies Measure D/HS ORCMacro Population Census of India 10 years Feb, 2001: Men -70\.9% Women -51\.2% AI-61\.1% Source\. Census of India 2001 Enrollment rates for children aged 5-14 years State, Urban/Rural; UP DES To be Data from 55t state sample is being processed NSS Regions; finalized, Districts; 12-18 mos Poor - non-poor; SCIST - majority; Boys - girls Administrative data Annual Data is forthcoming Population Census of India 10 years t________________ I _ Data is forthcoming Drop-out ates for children aged 5-14 years State, Urban/Rural, Department of Education, Annual Data is forthcoming Region, District; Administrative Data Boys - girls Completion rates for children, primary, secondary State, Urban/Rural; UP DES To be Data from 55th state sample is being processed NSS Regions; Finalized, Poor - non-poor; 12-18 mos SC/ST - majority; Boys - girls Administrative data, Department of Education Annual \.________________ __________________________ __________ Data is forthcom ing - 56 -  Geographicl Reporting social group Data Sources Perodicity Current baseline estimatesisource disaggregration Housing Condiffions: Percentage of households living in slum areas State SUDA data base Annual Data is forthcoming Percentage of households having latrine facilities in their house State, Urban/Rural; UP DES, District Monitoring To be Data from 55t state sample is being processed NSS Regions; finalized, 12- Selected distr\. 18 mos Poor - non-poor; SC/ST - majority Distribution of households according to the source of drinking water State, Urban/Rural; UP DES, District Monitoring To be Data from 55th state sample is being processed NSS Regions; finalized, 12- Selected distr\.; 18 mos Poor - non-poor; SC/ST - majority Percentage of households living in electrified dwellings State, Urban/Rural; UP DES, District Monitoring To be Data from 55th state sample is being processed NSS Regions; finalized, 12- Selected distr\. 18 mos Poor - non-poor; SCIST - majority Paticlpation in government program&:Access to Anti-poverty programs and schemes (percentage of persons Benefiting from employment/welfare schemes such as public works, TPDS, IRDP) State, Urban/Rural; UP DES, District Monitoring To be Data from 55th state sample is being processed Selected distr\. finalized, 12- Poor - non-poor; 18 mos SC/ST - majority - 57 -  Geographic Reporting Social group Data Sources Periodicity Current baseline estimates/source disaggregation l Health (percentage of pregnant women registered for prenatal care during last one year and Percentage of deliveries attended by Doctor/Trained Nurse/Dal during last one year) State, Urban/Rural; UP DES To be finalized, 12- Data from 55th state sample is being processed Selected distr\. 18 mos Poor - non-poor; SC/ST - majodty I Education (Percentage of children enrolled in non-formal or altemative schooling programs and Percentage of 0-5 year-olds attending ICOS anganwadis State, Urban/Rural; UP DES To be finalized, 12- Data from 55th state sample is being processed Selected distr\. 18 mos Poor - non-poor; SC/ST - majority; Boys - girls Awareness of heal/fh rograms andsocaa//7ghts: Percentage of households aware of the following: Immunization of children, vaccination of pregnant women, Iodized salts, Use of ORT, Contraceptives, Minimum wage act, etc\. State, Urban/Rural; UP DES To be determined Data from 55th state sample is being processed Selected distr\. Poor - non-poor; SC/ST - majority Access to faclllties/sen',ces\.' Distance to nearest fcility/service, Metalled Road, Other roads, Railway station, Bus stop, Police Station, Post office, Telegraph road, etc\. State, Urban/Rural; Administrative data Annual Data is forthcoming Selected distr\. Poor - non-poor; SC/ST - majority Qualily ofservices: For health: availability of medical staff in govemment facilities, etc\., For education: teacher qualifications and training, etc\. For water and sanitation: number and location of tubewells\. State, Urban/Rural; UP DES To be finalized, 12- Data from 55th state sample is being processed Selected distr\. 18 mos Poor - non-poor; SC/ST - majority = Other Indicators, comments, etc\. Wherever feasible indicators will be collected through integrated household-survey instruments so as to permit disaggregation by important Groups of interest, such as by gender, poor/non-poor, backward regions, socially disadvantaged groups, etc\. Other important performance monitoring indicators such as school learning achievement and behavioral outcomes, process indicators such as whether test-books and other material reach schools in time, teacher attendance and regularity, etc\., supplementing quantitative data with qualitative assessments, etc to also be eventually incorporated into the monitoring system once capacity within GOUP/DES improves\. *Current Baseline Estimates: 1993-94-1998-99, 1999-00 pending Real Agr\. Wage Index (1993=100) 93-94 94-95 95-96 96-97 97-98 98-99 Actual Wages (Rs\. 1993-94) UnskilledAverage 100\.0 96\.9 99\.2 96\.6 108,7 109\.6 31\.0 Himalyan 100\.0 95\.6 99\.8 96\.9 103\.9 104\.7 39\.1 Western 100\.0 95\.1 95\.4 91\.8 105\.5 105\.1 36\.9 Central 100\.0 97\.4 103\.3 100\.0 109\.1 110\.7 25\.8 Eastem 100\.0 98\.0 100\.1 99\.6 113\.2 113\.2 27\.2 Southem 100\.0 100\.2 105\.1 95\.9 101\.5 114\.9 28\.4 - 58 -  Additional Annex 13\.Ba ckground and Task Team This is the Implementation Completion Report (ICR) for the Uttar Pradesh Fiscal Reform and Public Sector Restructuring (UPFRPSR) Credit/Loan, for an amount equivalent to US$251 million\. The operation was approved by the World Bank in April 2000 and disbursed to the Government of India (Gol) in May 2000\. The proceeds of the loan/credit were received by the Government of Uttar Pradesh (GoUP) in June, 2000\. The UP Fiscal Reform and Public Sector Restructuring Credit/Loan supported the launch of multi-year fiscal and governance reforms by the Government of Uttar Pradesh, to turn around a situation of econornic stagnation and slow progress in reducing massive poverty in the state\. The operation was part of an overall program of assistance to the state of Uttar Pradesh\. The one-tranche operation was approved on the basis of up-front actions taken by the GoUP during 1999-00 (April-March), the first year of a medium-term fiscal and governance refonn program\. The ICR was prepared by a team led by Manuela Ferro and V\. J\. Ravishankar (SASPR, Senior Economists and co-Task Leaders), under the guidance of Edgardo Favaro (SASPR, Lead Economist)\. Team members included Sanjay Pradhan, Farah Zahir, Robert Beschel, Valerie Kozel, Vikram Chand, Rajni Khanna, Jillian Tullett, Vinod Ghosh (SASPR), Clive Harris (SASFP), Vinod Sahgal (OEDCM), and T\. K\. Balakrishnan (SASRD)\. Useful comments were received from Manuel Penalver (SARVP), Salvatore Schiavo-Campo, Edward Mountfield, Mark Sundberg, Elena Glinskaya, Lili Liu (SASPR), Mohinder Gulati, Sameer Shukla, and Kari Nyman (SASEG), and Shahrokh Fardoust (DECVP)\. The ICR was reviewed by Roberto Zagha (Sector Director), Edwin Lim (Country Director), Joelle Chassard (Country Coordinator) and Christopher Hoban (Operations Advisor)\. Preparation of the ICR began in November 2000\. An ICR Mission visited New Delhi and Lucknow during January 29-February 16, 2001 and the Aide Memoire of the ICR Mission is attached as part of the supporting documentation\. A matrix of Reform Output/Process/Outcome Indicators is attached as Annexes 9, 10, 11 and 12\. This ICR is based on the Government of UP's audited accounts for 1999-00, which have become recently available\. The ICR also looks forward beyond the specific program supported by the operation, and analyzes the "revised estimates" presented by the GoUP for 2000-01\. In the area of governance, the ICR reviews the follow-up actions and initial outputs/outcomes, based on information available for the first 3 quarters of 2000-01, the second year of the reform program\. The borrower (Government of India) and implementing agency (Government of Uttar Pradesh) contributed to the preparation of the ICR with their own evaluations of the operation\. - 59 -

REVIEW

P034095

 ICRR 10756 Report Number : ICRR10756 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 08/23/2000 PROJ ID : P034095 Appraisal Actual Project Name : Financial Sector Project Costs 45 45 Adjustment Credit US$M ) (US$M) Country : Kyrgyz Republic Loan/ US$M ) 45 Loan /Credit (US$M) 44\.1 Sector (s): Financial Adjustment Cofinancing US$M ) (US$M) L/C Number : C2890; CP973 Board Approval 96 FY ) (FY) Partners involved : Closing Date 06/30/1998 06/30/1998 Prepared by : Reviewed by : Group Manager : Group : 2\. Project Objectives and Components a\. Objectives (i) creation of a policy and regulatory environment conducive to the sound growth of a competitive and efficient banking system; (ii) the liquidation of the two dominant and insolvent state -owned banks, which through their practices stifle the growth of their young private competitors; (iii) the downsizing and financial restructuring through private re-capitalization of two other banks, survival of which has been possible only through preferential treatment and support of the Central Bank; (iv) establishment of a temporary Debt Resolution Agency (DEBRA) to help collect or write off the old non-performing loans, and thus accelerate enterprise restructuring or liquidation in the process; and (v) the creation of a regulatory and supervisory framework for the development and growth of emerging non-bank financial institutions\. b\. Components A credit in two equal tranches of US$ 22\.5 million, the first to be disbursed soon after credit effectiveness and the second after a performance review \. c\. Comments on Project Cost, Financing and Dates The project cost US$45 million financed by IDA\. The loan was approved by the Board on June 25, 1996, made effective on September 3, 1996, and closed on June 30, 1998, as scheduled\. 3\. Achievement of Relevant Objectives: (i) The Law on Banks and Banking Activity enacted in July 1997 strengthened the National Bank of Kygyzstan (NBK) to impose and enforce restrictions on banks' activities \. The Tax Code enacted in 1996 removed a number of policy-induced barriers to bank profitability and security by equalizing the profit tax rate for financial institutions with that of non-financial enterprises at 30 percent\. The Law on Pledge and the revised Insolvency Legislation and the establishment of a Central Pledge Registry provided important tools for the financial system \. Additional to these measures which were required under the Loan, the Government went further and implemented The Law on the National Bank of the Kyrgyz Republic and the Mortgage Law of 1997 which further strengthened the financial system\. Regulatory reforms were implemented to increase minimum capital requirements for banks and to establish a capital adequacy ratio of 8%, later increased to 12%, thus exceeding the Basle guidelines \. (ii) Elbank was liquidated in 1997, with liquidation of Agroprom proceeding, slightly behind schedule which called for liquidation to be complete by December, 1999\. (iii) Diagnostic audits were prepared for Promstroi Bank and AKB Kyrgyzstan, an internal management reform program was implemented under a Management Letter Agreement with NBK, a part of their bad loans portfolio was transferred to DEBRA \. Government recapitalized the banks through placement of bonds, in the absence of any private sector interest (although two other banks were recapitalized with private funds )\. According to NBK's prudential reports, they have since consistently exceeded prudential requirements and are operating well\. (iv) DEBRA was established and is functioning as foreseen as a liquidator of bad debts \. (v) A new Law on the Organization of Insurance Activities was submitted to Parliament and approved \. A new Law on Private Pension Funds was submitted to Parliament but has not yet been approved \. A new Law on Investment Funds was submitted to Parliament and approved \. NBK has prepared a draft of a new Law on Leasing, and processing is continuing\. 4\. Significant Outcomes/Impacts: A legal and regulatory framework was created which provides a favorable environment for the growth of an efficient financial system\. Problems of large state-owned banks have been and are continuing to be addressed, to free up resources for the growth of the private sector and to enable the financial sector to grow \. A new set of laws is promoting the growth of the non-bank financial sector\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): 1\. Inadequate banking supervision 2\. Fraudulent behavior by some individuals in the banking sector and its clients \. 3\. Continued vulnerability of the financial system given weaknesses in the real sector (since the privatization process has not led to a much larger supply of bankable clients )\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev \.: Modest Modest Sustainability : Uncertain * Unlikely The ICR rates sustainability as "uncertain"; this is no longer an option, however, in ICRs or for OED ratings\. To consider the sustainability of benefits as likely, the benefits must be substantially resilient to all relevant risks\. According to the ICR, the financial system remains small and vulnerable to a number of factors: supervision capacity is still weak, exogenous shocks have weakened banks' portfolios, and governance remains a problem for bank management \. Achievement of a stronger, more efficient, more competitive banking system is thus still threatened by a number of problems \. The definition for unlikely sustainability is "\. benefits meet some but not all relevant factors determining overall resilience at the 'substantial' level", which fits the ICR's analysis and is therefore OED's rating \. The Region argues that the reforms are unlikely to be reversed, and that on -going dialogue and other donor involvement in the sector continue to reinforce further reforms and move the financial sector in the right direction\. They think that likely sustainability is a better choice than unlikely\. 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: This project confirms the importance of Government Commitment and ownership for the success of a project \. Detailed monitoring of implementation is especially valuable in an operation such as this which addresses many aspects of a problem and involves a number of institutions, as may be typical of financial sector reform operations \. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: The ICR is clearly written and easy to follow, and does a good job of presenting a wide -ranging financial sector reform program\.

REVIEW

P118145

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) Report Number : ICRR0020377 1\. Project Data Project ID Project Name P118145 GEF:Governance and Knowledge Generation Country Practice Area(Lead) Middle East and North Africa Environment & Natural Resources L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) TF-11513 30-Jun-2015 3,713,300\.00 Bank Approval Date Closing Date (Actual) 29-Nov-2011 30-Oct-2015 IBRD/IDA (USD) Grants (USD) Original Commitment 3,000,000\.00 3,000,000\.00 Revised Commitment 3,000,000\.00 2,568,601\.67 Actual 2,568,601\.67 2,568,601\.67 Prepared by Reviewed by ICR Review Coordinator Group Ranga Rajan Peter Nigel Freeman Christopher David Nelson IEGSD (Unit 4) Krishnamani 2\. Project Objectives and Components a\. Objectives The Global Environment Objective (GEO) as stated in the Project Appraisal Document (PAD, page 5) was: " To foster the integration of environmental issues into sectoral and development policies of the Beneficiaries (Morocco, Lebanon and Tunisia) through the production of innovative knowledge on environmental issues, with specific reference to water related topics (freshwater, coastal, and marine resources), and the organization of trainings during which this knowledge will be used to strengthen the capacity of key stakeholders at a local, national and regional level"\. The GEO was used as the basis of assessment as it was more specific\. Page 1 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) b\. Were the project objectives/key associated outcome targets revised during implementation? No PHEVALUNDERTAKENLBL c\. Will a split evaluation be undertaken? No d\. Components The goal of this project was to enhance the delivery and impacts of the multi-donor Mediterranean Environmental Technical Assistance Program (METCAP) program\. This program which was launched in 1990 and went through four phases of implementation closed in 2010 covered different themes: integrated water resources management, solid and hazardous waste management, chemical pollution, coastal zone management, urban environmental management, institutional development and capacity building and environmental policy tools\. There were three components\. Governance (Appraisal estimate US$1\.50 million\. Actual cost at closure US$1\.31 million)\. This component was aimed at promoting dialogue and coordination among local, national, and regional stakeholders on environmental issues, with specific reference to water-related topics (freshwater, coastal, and marine resources)\. Activities included training the relevant stakeholders and studies on: (i) a review of the environmental management systems of the beneficiaries: (ii) a review of environmental issues at the sectoral and macroeconomic level of the beneficiaries; (iii) promotion of private sector participation in environmental management; (iv) involvement of local stakeholders in the environmental dialogue: and, (v) regional environmental integration\. Knowledge generation (Appraisal estimate US$1\.26 million\. Actual cost at closure US$0\.87 million)\. This component aimed at producing innovative knowledge on environmental issues\. Activities included: (i) training the relevant stakeholders and studies on: (i) preparation of knowledge products on various aspects of environmental vulnerability pertaining to the relevant economic sectors and critical locations at local, national and regional levels: and (ii) dissemination of activities and establishing a project website\. Project Coordination and Management (Appraisal estimate US$0\.24 million\. Actual cost at closure US$0\.27 million)\. This component supported project implementation\. Activities included financing incremental operating costs and costs of project audits\. e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost\. Appraisal estimate US$0\.30 million\. Actual cost at closure was 87% of the appraisal estimate at US$2\.45 million\. Costs of component three activities were slightly higher than estimated due to the addition of two beneficiaries (The West Bank and Gaza, and Egypt) and actual costs of component one and two activities were slightly lower than estimated\. The higher than expected cost of component three activities was met through reallocation of funding between project components\. Project Financing\. The project was financed by a Global Environment Facility (GEF) Trust Fund Grant\. Appraisal estimate US$3\.00 million\. Amount disbursed was about 86% of the grant at US$2\.57 million\. There was parallel financing in kind from: (i) The Plan Bleu pour l'Environnement et le Developpement en Page 2 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) Mediterranee (hereafter referred to as Pan Bileu), Agence pour le Development Francaise (AFD), the European Investment Bank, the Marseille Center for Mediterranean Integration and the French Ministry of Ecology, Sustainable Development, Transport and Housing\. Borrower Contribution\. None was planned by way of contribution from the project countries\. Dates\. There were two Level Two restructurings\. The changes made through the first restructuring on April 29, 2013 were: (i) West Bank and Gaza and Egypt were added as project beneficiaries (addition of these countries did not require modification the Grant Agreement as provisions for their inclusion had already been made in the Grant Agreement): and, (ii) funding was reallocated between project components, with an increase in funding for activities associated with incremental operating costs following the addition of the two countries\. The main changes made through the second restructuring on June 23, 2013 were: (i) The results framework was revised and two new Global Environment Objectives (GEOs) were added: and (ii) The project closing date was extended by four months\. The project closed four months behind schedule on October 31, 2015\. 3\. Relevance of Objectives & Design a\. Relevance of Objectives The Mediterranean Sea region encompasses a wide range of unique and extremely fragile ecosystems\.While some progress had been made in the region with regard to improving environmental quality in the years before appraisal, serious environmental threats remained, such as declining availability of per capita water resources, loss of arable land, pollution-related health problems, overexploitation and degradation of marine resources, and deterioration of coastal zones\. These conditions were exacerbated by climate change effects\. The environmental challenges were mainly due to inadequate environmental institutions, regulatory frameworks and enforcement mechanisms\. Given that the key environmental issues in the Mediterranean sea region were related to the management of common environmental resources and development of a common framework for regional cooperation to tackle the transboundary pollution, the PDOs was highly relevant both for the project countries and in the regional context\. The Project Development Objectives (PDOs) continue to be relevant to the Bank strategies for the participating countries\. The PDO was aligned with the pillar on "sustainable development in a changing climate, supported by the two crosscutting beams of governance and territoriality" in the Country Partnership Strategy (CPS) for the 2014-2017 period\. The Country Partnership Framework (CPF) of Tunisia for the 2016- 2020 period identified governance as a crucial issue and also highlighted the need for addressing governance issues in a holistic and integrated manner\. The Country Assistance Strategy (CAS) for West Bank and Gaza for the 2015-2016 period highlighted the need for "strengthening the institutions of a future state to ensure service delivery to citizens'\. The CAS for Lebanon for the 2017-2022 period identified the water sector as a strategic pillar\. Egypt's CPF for the 2015-2019 period identified environmental sustainability as a long-term issue\. The project was also consistent with the strategic orientations of the Bank's Environment Strategy for the 2012-2022 period, which supported pollution management and highlighted the need for developing partnerships with the private sector to spur cleaner production standards and strategies\. Page 3 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) The PDOs were in line with the new Mediterranean Strategy for Sustainable Development for the 2016-2025 period approved at the 19th Conference of Parties of the Barcelona Convention in February 2016\. This strategy identified the importance of ensuring sustainable development in marine and coastal areas, transitioning towards a green and blue economy and improving governance for sustainable development\. The project was well-aligned with the strategic objectives for the Global Environmental Facility International Waters focal area\. These objectives aimed at "fostering a more comprehensive, ecosystem- based approach to management of transboundary waters" and "to play a catalytic role by assisting countries to utilize the full range of technical assistance, economic, financial, regulatory and institutional reforms that are needed" for addressing priority transboundary water pollution-related issues\. The project was consistent with the first three International Waters Focus Areas Strategic Programs of GEF-4 replenishment\. The outcome 3\.1 identified the need for "improving governance of shared water bodies, including conjunctive management of surface and groundwater through regional institutions and frameworks for cooperation " for increased environmental and socio-economic benefits\. Rating High b\. Relevance of Design The statement of the PDO was clear\. Project activities, their outputs and their outcomes were logical\. Component one activities aimed at providing technical assistance for enhancing governance through promoting dialogue and coordination at the local, national and regional stakeholders on environmental issues with specific reference to water-related topics\. Component two activities aimed at providing technical assistance for producing innovative knowledge products for addressing various aspects of environmental vulnerability to the relevant economic sectors and critical locations at local, national and regional levels\. The combination of these activities in conjunction with support for project coordination and implementation were intended to aid in integrating environmental issues into sectoral and development policies of the beneficiary countries\.The PDOs could be expected to contribute to the GEO objective of fostering a more comprehensive, ecosystem-based approach to management of transboundary waters and addressing issues associated with transboundary pollution\. Given the regional nature of the project and ensuring close participation of the individual countries, the design incorporated providing decision rights to the Project Steering Committee (PSC) which included representatives from the GEF National Focus Points (NFPs- usually Ministers of Environment or relevant agencies)\. The project components were not specifically defined at design in terms of interventions or budget and kept flexible to enable maximum number of beneficiaries\. However, this contributed to implementation delays as specific interventions were only prepared after the project became effective\. Further, the lack of clarity on the scope of activities at design necessitated modification of the results framework to better fit the actual outcomes by adding few specific outcome indicators\. Rating Page 4 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) Substantial 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective To foster the integration of environmental issues into sectoral and development policies of the beneficiaries Rationale Outputs • Ten studies were completed at project closure\. This exceeded the target of eight\. The completed studies included: a set of 22 audit reports for Lebanon as a part of study on "Industrial Pollution Abatement, a set of 20 environmental audits for stone and cutting industry for West Bank and Gaza, set of two environmental studies for Lebanon, a set of two reports "E1 system in Morocco, set of four national reports "Socio-Economic Assessment of Maritime Activities", a guidebook for environment assessment in three languages (Arabic, English and French), strategic environmental assessment for the new National Water Sector Strategy for Lebanon, a set of three reports for "Industrial Pollution Abatement in Palestine", a guidebook and best practice manual for the participatory activity in Morocco and Tunisia, a set of reports for the environmental observatories and indicators for Morocco and Tunisia (ICR, Datasheet, Intermediate Outcome Indicator Number Six)\. All the deliverables from the project were publicly available at the project website (ICR, Datasheet, Intermediate Outcome Indicator Number Eight)\. • Seven government policies and strategies in beneficiary countries were supported by the project as compared to the target of five (ICR, Datasheet, Key Outcome Indicator Number One)\. • Four platforms for exchanging environmental data/information as targeted\. This included: (I) Observatory Platform for Morocco - this was an information exchange platform where the Moroccan Regional Observatories of the Environment and Sustainable Development (OREDD) exchanges information with its partners at local, national and regional levels: (ii) Environmental Map for Tunisia - This was a web-based map which allowed the general public as well as political representatives and administrative staff to have access to all data generated by different institutions active in the environmental field: (iii) Mediterranean network of law enforcement officials (MENELAS) to prevent and respond to illegal marine pollution from ships to the Mediterranean Sea: and, (iv) Project website which provided information about project design, regional strategies and assessments, project outcomes and relevant events (ICR, Datasheet, Intermediate Outcome Indicator Number Seven)\. • An action plan for the review of the Environmental Impact Assessment (EIA) law was completed (ICR, page 20)\. • The Government of Egypt initiated the revision of the National Environment Strategy and Action Plan for the 2017-2022 period (ICR, page 20)\. • Strategic Environmental Assessment (SEA) methods were completed and based on this Lebanon Page 5 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) adopted legislation for a National Water Sector Strategy in 2012 (ICR, page 22)\. • The website for the MENELAS network was developed for enhancing enforcement through regional cooperation (ICR, page 22)\. • Priority pollution abatement measures were identified and considered by donors for financing (ICR, page 21) Outcomes\. • All indicators were output-oriented\. There is very little credible evidence that the project activities contributed to fostering the integration of environmental issues into sectoral and development policies of the beneficiaries\. Rating Modest PHREVDELTBL PHEFFICACYTBL Objective 2 Objective To strengthen the capacity of key stakeholders at a local, national and regional level\. Rationale Outputs\. • 39 stakeholders were trained at project closure\. This exceeded the target of 18\. (The training included, regional and country trainings on Environmental and Social Impact Assessments, participatory workshops in Tunisia and evaluation of maritime activities in Tunisia, Egypt, Morocco, National Training on observatories and evaluation of maritime activities in in Tunisia, Egypt, Morocco, Regional Trainings "cost of environmental degradation, National trainings on Environmental Inspection, Egypt National Environment Strategy Workshop, Green Growth Workshop in Marseille, France and National Consultation sectoral workshops)\. (ICR, Datasheet, Intermediate Outcome Indicator Number One)\. • As part of GEO objective, 36 stakeholders from the Ministry of Environment were trained at project closure (including through workshops, seminars, meetings and conferences)\. This exceeded the target of Seven (ICR, Datasheet, Intermediate Indicator Number Two)\. • 23 stakeholders from two ministries were trained at project closure\. This exceeded the target of four (ICR, Datasheet, Intermediate Indicator Number Three)\. • 23 people from the private sector were trained on local environmental issues (including on local environment issues and knowledge of clean production technologies)\. This exceeded the target of six (ICR, Datasheet, Intermediate Indicator Number five)\. Page 6 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) Outcomes • 835 benefitted from the training activities\. This exceeded the target of 150\. 32\.7% of the people were women as compared to the target of 30%\. (ICR, Datasheet, Key Outcome Indicator Number One and Two)\. • Based on beneficiaries assessment, 82% of the trainings were deemed to be effective as compared to the target of 80% (ICR, Datasheet, Intermediate Indicator Number four)\. The ICR however provides no details on the methodology followed in administering the beneficiary survey\. While it is difficult to assess the extent to which the activities contributed to the PDO, it is reasonable to assume that the activities made a significant contribution to realizing the PDO\. Rating Substantial PHREVDELTBL PHREVISEDTBL 5\. Efficiency A traditional cost-benefit or financial analysis was not conducted at appraisal or at closing, as the project mainly focused on governance and knowledge related activities\. The project was financed by a GEF Grant in the amount of US$3\.00 million (of this US$2\.27 million was disbursed)\. The project was able to leverage funding in the form of in-kind contribution of US$0\.71 million from Plan Bleu, the Agence pour le Developpement Francaise (AFD), the European Investment Bank (EIB), the Marseille Center for Mediterranean Integration (CMI) and the French Ministry of Ecology, Sustainable Development, Transport and Housing\. The project with a limited budget was efficient in the use of project resources in terms of the number of outputs produced and in comparison with other projects on a regional scale\. For instance, under knowledge generation component (US$1\.30 million) the project delivered over 40 reports in five beneficiary countries as compared to other regional projects financed by the Bank such as the Climate Adaptation and Mitigation Program for Aral Sea Basin, with a knowledge management component (US$12\.5 million) for two countries\. 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: Page 7 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) 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 The relevance of PDO for the participating countries and the Bank strategy for the project countries and in the regional context was rated as High\. Relevance of design was rated as Substantial as despite minor shortcomings at design, the causal links between project activities, their outputs and outcomes were clear\. Efficacy of the first objective - to foster the integration of environmental issues into sectoral and development policies of the beneficiaries - was rated as Modest\. All indicators were output-oriented\. Efficacy of the second objective - to strengthen the capacity of key stakeholders at a local, national and regional level - was rated as Substantial\. While it is difficult to assess the extent to which project activities contributed to the PDO, it is reasonable to assume that the project made a significant contribution to realizing the outcome\. Efficiency was rated as Substantial\. The project with a limited budget was efficient in the use of project resources in terms of the number of outputs produced and in comparison with other projects on a regional scale\. a\. Outcome Rating Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating Institutional support\. The plan was implemented by Plan Bleu, one of the active Non-Governmental Organizations (NGOs) in the region\. Its website includes the Regional Governance and Knowledge Generation Project (REGOKO) website and Plan Bleu is expected to provide further support in future; there is only modest Institutional Risk\. Political Commitment: Although there was strong government commitment to mainstreaming environment in the sectoral policies, there is moderate risk associated with the overall political environment in the region\. a\. Risk to Development Outcome Rating Modest Page 8 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) 8\. Assessment of Bank Performance a\. Quality-at-Entry The project was prepared based on lessons from the regional Global Environment Facility (GEF) regional operations (such as, the Aral Sea Program, the Baltic sea Program, the Black Sea/Danube Partnership Investment Fund and the Partnership Investment Fund for Pollution Reduction in the Large Marine Ecosystems of East Asia) and the experience gained from implementing multi-donor Mediterranean Environmental Technical Assistance Program (METCAP) over the last two decades which considered water resources as a global public good in the context of sustainable development\. The lessons from these operations highlighted the need for developing capacity at the local, national and regional levels, consistent procedures for monitoring, building partnerships with the private sector, partnering with existing activities and organizations, tailoring approaches to suit the needs of different riparian countries and translating the regional vision into national level actions for sustainability of results\. The agency chosen for implementing the project had prior experience in activities associated with promoting environmental regional cooperation (discussed in 9b)\. To ensure close participation and involvement of governments in a project with regional dimension, the design provided decision rights to the Project Steering Committee (PSC) which included GEF National Focal Points (NFPs- usually Ministers of Environment or relevant agencies)\. However, there were shortcomings at Quality-at-Entry\. As indicated in section 3b, the project components were not specifically defined at design and kept intentionally flexible to enable the maximum number of beneficiaries\. However, this contributed to implementation delays as specific interventions were only prepared after the project became effective\. The lack of clarity on the scope of activities at design affected M&E design (discussed in section 10a) and necessitated modification of the results framework to better fit the actual outcomes by adding a few specific outcome indicators\. As indicated in section 2a, the project envisioned to enhance the delivery and impacts of the multi-donor Mediterranean Environmental Technical Assistance Program (METCAP) program\. It is not clear if there were linkages with the environmental investments in the region (including non-Bank) and other environment projects under the Sustainable MED program\. Quality-at-Entry Rating Moderately Satisfactory b\. Quality of supervision The Task Team Leader (TTL) was in located in the first year of the project in the region and thereafter in Washington DC\. In addition to regular supervision missions in the region, communications between the team and the Project Management Team (PMT) using online communication tools aided in resolving procurement delays (which affected disbursements), fiduciary, enironmental and technical issues on the ground in a timely fashion\. The project task team was also peer reviewer at Plan Bleu's request\. The team also facilitated coordination with the existing Bank projects in the region, including the Regional Coordination on Improved Water Resources Management and Capacity Building Program\. Page 9 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) Quality of Supervision Rating Moderately Satisfactory Overall Bank Performance Rating Moderately Satisfactory 9\. Assessment of Borrower Performance a\. Government Performance The National governments were highly committed and this was demonstrated by their contribution to project preparation and implementation through participating as the GEF National Focal Points (NFPs) as members of the Project Steering Committee (PSC) and through selecting activities at the national level\. Involvement of the NFPs also aided the project in terms of regional cooperation, as all of the NFPs were active contributors and participants of other regional level initiatives and strategies (such as the Mediterranean Strategy for Sustainable Development)\. During implementation central, county and community governments participated in project activities\. The degree of responsiveness from beneficiaries sometimes wavered due mainly to the political situation in the region\. Government Performance Rating Moderately Satisfactory b\. Implementing Agency Performance The project was implemented by Plan Bleu - a Non-Governmental Organization (NGO) based in France and the Project Management Team (PMT) in charge of day-to-day implementation of the project was located in the premises of Plan Bleu\. The implementing agency had over 30 years of experience in projects promoting environmental regional cooperation and had a track record of implementing environmental projects in the Middle East and North Africa (MENA) Region\. It had the required analytical capacity on environmental issues and had worked with other development agencies conducting similar work (such as the European Investment Bank (EIB) the European Union (EU) and the Agence pour le Developpement Francaise (AFD)\.During implementation the implementing agency worked closely with the beneficiaries by facilitating regular meetings with the Project Steering Committees and communicating with the National Focal Points directly\. The Project Management Unit was well staffed trained when the project became effective and this aided in implementation\. The limitations of the project GEO indicator did not allow for the measurement of actual progress toward the outcome\. These were however rectified during implementation\. Implementing Agency Performance Rating Moderately Satisfactory Overall Borrower Performance Rating Page 10 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization a\. M&E Design Given the demand-driven nature of the project, original indicators and targets were not specific enough (such as number of the non-environmental ministries and agencies)\. Given that the project activities were oriented towards technical assistance and capacity building, only one indicator was aimed at measuring the effectiveness of training\. Even this was inadequate, as it did not capture the number of participants for each training)\. No core indicator was associated with environmental policies and institutions in the original results framework and monitoring at design, as these indicators were being developed at the Bank and expected to be finalized by the end of 2012\. b\. M&E Implementation During restructuring, three outcome level indicators were added, including a core indicator (number of project beneficiaries, of which female) were incorporated and the evaluation sheet proposed by Plan Bleu was used for measuring the usefulness of training and studies for policy making\. c\. M&E Utilization The key results were utilized to monitor project performance and aid the Bank, the Project Management Team (PMT) and the Project Steering Committee in addressing issues relating to project implementation (such as identifying which studies had to be cancelled as a result of delays or training which were ineffective, based on the assessment procedure)\. M&E Quality Rating Modest 11\. Other Issues a\. Safeguards The project was classified as a Category C project for environmental purposes, as the project did not involve any physical works with potential adverse environmental impacts\. No safeguard policies were triggered (PAD, page 15)\. The ICR (page 14) notes that the safeguard category of the project remained unchanged during implementation\. However, the Mid Term Review noted that although the project activities did not involve adverse environmental or social impact, future investments arising out of these studies or section reforms, could have potential environmental impacts (such as environmental studies associated with Page 11 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) industrial enterprises and the National Water Sector Strategy for Lebanon, socio-economic evaluation of maritime activities for Lebanon, Morocco and Tunisia and studies associated with Mapping and Controlling Pollution Sources)\. Based on the MTR results, the Bank recommended to Plan Bleu that safeguard screening be conducted for future activities that may be funded under this project\. b\. Fiduciary Compliance Financial Management\. An assessment was made of the financial arrangements of the implementing agency, Pan Bleu, at appraisal (PAD, page 14)\. The assessment concluded that although the agency had the necessary financial arrangements, Pan Bleu staff had limited knowledge of World Bank financial management standards\. As a mitigation measure, a training plan was envisaged at appraisal (PAD, page 12)\. The ICR (pages 14-15) notes financial management training was provided to the project team in 2011 with a representative from the World Bank financial management department\. The ICR (page 14) notes that financial management of the project was deemed to be satisfactory through the implementation period but provides no details on the quality of audits\. Procurement Management\. An assessment was made of the procurement arrangements of Pan Bleu at appraisal (PAD, page 15)\. Given that Pan Bleu staff had the required capacity to address procurement issues, was expected to allocate its own staff on part-time basis for implementing procurement and expenses associated with salaries of the staff were eligible for disbursement from the Grant proceeds under incremental operating costs (PAD, page 15)\. The ICR (page 14) notes that there were no major procurement issues\. Although there were minor procurement delays during implementation, procurement management of the project was deemed to be satisfactory (ICR, page 14)\. c\. Unintended impacts (Positive or Negative) --- d\. Other --- 12\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Moderately Moderately Outcome --- Satisfactory Satisfactory Risk to Development Modest Modest --- Outcome Page 12 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) Moderately Moderately Bank Performance --- Satisfactory Satisfactory Moderately Moderately 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\. 13\. Lessons The ICR draws the following main lessons from this project, with some adaptation of language\. (1) In order to achieve sustainability of projects with a regional dimension, a strategic approach should be put in place from the beginning that aims at anchoring the work in a regional institution\. This project was conceived to contribute to the overarching objectives of the Mediterranean Environmental Sustainable Development Program - "Sustainable MED"\. The link with the program was however weakened, given that the there was no permanent MED Regional Knowledge center at closure\. (2) Involvement of beneficiaries can facilitate project implementation\. In this project, the outputs and outcomes were fully achieved in countries where beneficiaries were involved\. Establishment of operational country focus groups for each activity in Lebanon helped in adequate follow up of the activities' implementation\. Implementation of the project was also facilitated by mobilization of in-kind financing from the beneficiaries\. (3) Selectivity and prioritizing of specific outcomes is required for effective monitoring\. The experience with this project showed that for projects of relatively small size and implemented in a large geographic area, it is important to focus on specific outcomes and project activities\. (4) It is useful to consider the advantages and disadvantages associated with a flexible project design\. The experience with this project demonstrated that while a flexible design allows for better alignment to the needs of beneficiaries, it also weakened the results framework\. For a project of this size and in the context of a larger program, it is important to identify all interventions ahead of time and defining the results framework before the project becomes effective\. (5) It is necessary to consider the timeline when proceeding with restructuring\. In the case of this project, halfway through project implementation, Egypt and West Bank and Gaza became beneficiaries via a lengthy restructuring\. Although West and Gaza had submitted the endorsement letter in February 2012 and Egypt in October 2012, the restructuring became effective only in April 2013\. While the design of this project allowed for new countries to join the project, the actual process of adding the new participants affected the implementation of existing activities\. (6) Capacity building and Knowledge generation/management intervention tend to yield benefits in the long run\. Given that a six month window of evaluation of results can only capture part of the impact, it may be useful to have an impact evaluation of outcomes in the medium term\. Page 13 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review GEF:Governance and Knowledge Generation (P118145) 14\. Assessment Recommended? No 15\. Comments on Quality of ICR The ICR is concise and provides a detailed overview of the project\. It is for the most part, well written\. It is candid particularly in discussing the issues at Quality-at-Entry\. The report follows the guidelines adequately\. a\. Quality of ICR Rating Substantial Page 14 of 14

REVIEW

P082888

IEG Report Number: ICRR14697 ICR Review Independent Evaluation Group 1\. Project Data: Date Posted: 05/04/2015 Country: Mauritania Project ID: P082888 Appraisal Actual Project Name: Public Sector Project Costs (US$M): 15\.00 14\.44 Capacity Building Project L/C Number: Loan/Credit (US$M): 13\.00 12\.29 Sector Board: Public Sector Cofinancing (US$M): Governance Cofinanciers: Board Approval Date : 07/06/2006 Closing Date: 12/31/2009 03/29/2014 Sector(s): Central government administration (85%); Sub-national government administration (11%); Law and justice (3%); Other social services (1%) Theme(s): Public expenditure; financial management and procurement (29%); Administrative and civil service reform (29%); Environmental policies and institutions (14%); Tax policy and administration (14%); Decentralization (14%) Prepared by: Reviewed by: ICR Review Group: Coordinator: Katharina Ferl Judyth L\. Twigg Lourdes N\. Pagaran IEGPS2 2\. Project Objectives and Components: a\. Objectives: According to the PAD (p\. ii), the objective of the project was "to contribute to the improvement of performance, efficiency, and transparency of public resources management in Mauritania\.” According to the Financing Agreement of July 19, 2006 (p\. 6), the objective of the project was “to assist the Recipient in implementing key reforms to improve performance, efficiency and transparency of public resources management on the territory of the Recipient\.” This Review will use the PDO in the Loan Agreement as the basis for the validation\. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components: The project consisted of five components: Component A: Improvement of public finance management (appraisal estimate US $ 5\.14 million, actual costs US$ 5\.33 million, or 104% of appraisal estimate ): This component was to finance management tools and information systems and build human resources management capacity through the following activities: i) strengthening resource mobilization; ii) improving budget presentation and planning; iii) improving budget execution and accounting; iv) strengthening the efficiency of expenditure; and v) improving public financial management in two regional capitals\.  Component B: Support to local development (appraisal estimate US $ 1\.57 million, actual US$ 856,000, or 54\.7% of appraisal estimate ): This component was to finance the decentralization and de-concentration of authority through technical assistance to the directorate for territorial administration and the general directorate of local governments\. Also, this component was to finance information, education, and communication (IEC) activities, and pilot projects in Dakhlet Nouadhibou and Traza for local development management\. Component C: Mainstreaming environment into development management (appraisal estimate US $ 985,000, actual US$ 950,000; 96\.4% of appraisal estimate ): This component was to finance the enabling of the integration of environmental issues in development through harmonization of different strategies and texts\. Activities to support these efforts were to include technical assistance for the development of a ministry of environment, capacity building, and the implementation of pilot projects\. Component D: Improvement of human resources management in public administration (appraisal estimate US $ 2\.29 million, actual US$ 2\.80 million; 122\.6% of appraisal estimate ): This component was to finance the strengthening of management structures for civil servants and maximization of the state’s human resources\. Activities to support these efforts were to include strengthening of human resources management in public administration and modernization of management and information tools used by public administrators\. Component E: Support to project implementation , monitoring and evaluation (appraisal estimate US $ 970,000; actual US$ 1\.72 million, or 177\.3% of appraisal estimate ): This component was to finance the implementation of the project by the project implementation agency, monitoring and evaluation (M&E) and communication activities, and the provision of technical and financial audits\. The components were revised during a restructuring on March 29, 2012\. Component A: Activities to support increased transparency and efficiency in public financial management were added\. These activities included technical assistance for public procurement reform and to the new coordination unit of the ministry of finance to implement the public financial management master plan, as well as assistance to the national statistics office to conduct a population and habitat census\. Component B: Decentralization activities were removed since they were included in a new project that was under preparation at that time\. Funds were reallocated within the project\. Component C: Funds became available when development around sand dunes in Nouakchott was cancelled\. Instead, strategic work for climate change and green growth and for the rehabilitation of the ministry of environment was conducted\. Component D: This component was revised twice\. First, it was adapted to provide technical assistance for the development of a strategic agenda for the human resource management reform and functional reviews of the ministry of finance and the ministry of civil services\. Then the project steering committee decided to cancel the functional review and instead provide assistance to the operationalization of the human resource management reform\. Component E: This component was adapted to provide additional capacity within the project implementation agency\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost: At appraisal the project was estimated to cost US$ 15 million, with US$ 13 million from the Bank and US$ 2 million from the Government\. The actual cost was US$ 14\.44 million\. The project spent significantly less than planned on the second component (decentralization, as those activities were shifted to another project), and more than planned on the fifth component (project administration)\. Financing: The project was financed by a US$ 13 million IDA credit, of which US$ 993,000 was cancelled due to SDR/USD exchange rate fluctuations and cancellation of two activities\. Borrower Contribution : At appraisal, the estimate for the Recipient's contribution was US$ 2 million\. The actual contribution was US$ 2\.15 million\. Dates: The project was restructured five times:  On December 9, 2009 the original closing date of December 31, 2009 was extended to December 31, 2011\. On December 28, 2011 the closing date was extended by three months to March 29, 2012\.   On March 29, 2012 the closing date was extended by two years to March 29, 2014\. Also, funds were reallocated among components and the results framework was revised\.  On October 21, 2013 additional minor changes were made to the results framework\.  On February 27, 2014 funds in the amount of 645,000 SDR (US$ 993,000) were cancelled\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: Substantial: The objective to contribute to the improvement of performance, efficiency, and transparency of public resources management in Mauritania was relevant given the weaknesses of Mauritania’s public accounting systems, revenue collection, and budget planning and execution\. In 1986, the government implemented a decentralization policy, aiming to move toward autonomous administration by the municipalities\. While some ministries have shifted a few functions to their units in the regions, decentralization has been rather limited\. The project was in line with the government’s priorities, such as strengthening public financial management, moving the decentralization process forward, identifying emerging concerns over sustainable environmental management, and improving human resource management\. The project was in line with the Bank’s Country Assistance Strategy (2006-2009) at the time of appraisal, which focused on improving governance and capacity development for public services\. The project also supports the second pillar of the Bank's current Country Partnership Strategy (2014-2016), which aims to improve economic governance and public sector performance for improving service delivery\. b\. Relevance of Design: Modest: The causal relationship between planned interventions and the development objectives, as well as underlying assumptions about how some program actions would lead to intended outcomes, were not properly laid out\. For example, component C aimed to integrate environmental policy into the state development program, which was not mentioned in the PDO\. Therefore, it is unclear how activities under this component would lead to improving the performance, efficiency, and transparency of public resources management in Mauritania\. The project also supported activities to implement reforms to increase decentralization to the municipalities\. The link between decentralization to municipalities and improving public financial management is not sufficiently laid out in the PAD\. Activities under the other components were more logical for achieving the PDO and aimed at increasing tax revenue by improving tax collection and establishing a customs information system, and increasing transparency and efficiency of public financial management by implementing an automated budget expense system\. Also, a medium-term budget framework was to be developed to improve budget preparation\. 4\. Achievement of Objectives (Efficacy): Assist the Recipient in implementing key reforms to improve performance of public resources management : Substantial Outputs Budget  Seven sectoral and global Mid-Term Budget Frameworks were developed and are being updated on a regular basis\. However, there continues to be a disconnect between the framework and the budget\.  All ministries use an automated network for expenditure processing (RACHAD) to issue orders of payments, achieving the target\.  A network connection between the Treasury and Central Bank is in place, achieving the target\. Environment  A National Environment Action Plan was approved by the Government and the dedicated structure recommended by the National Environment Action Plan is implemented, achieving the target\.  Over 100 staff from the Ministry of Environment benefited from training\. Tax  The tax office was equipped with a computerized revenue management tool, achieving the target\.  Decentralization  160 staff from the Ministry of Interior were trained to provide support for the decentralization process to municipalities, surpassing the target of 150 staff\. Human Resource Management  A new computerized human resource management system was developed and implemented\. Outcomes Budget  Government capacity to make credible budget forecasts has improved\. The difference between initial expenditure forecasts and actual expenditure decreased from 19\.2% in 2011 to 0\.8% in 2013\. The discrepancy between predicted sectoral allocations and effective allocations was reduced from 31\.5% in 2011 to 10\.7% in 2013\. Tax  Tax collection was improved, with revenues increasing to 269\.16 billion ouguiya, surpassing the target of 211\.26 billion ouguiya\. Human Resource Management  Human resource records were cleaned up, with irregularities such as ghost workers or double dippers identified\. This led to a decrease in wage bills from 10\.2% of Gross Domestic Product (GDP) in 2009 to 8\.8% in 2010 and 8\.0% in 2011\. Assist the Recipient in implementing key reforms to improve efficiency of public resources manageme nt: Substantial Outputs Budget  Fiscal and accounting reports are produced in a timely manner and in accordance with legislation, achieving the target\. Outcomes Budget  Budget execution was improved through a more efficient payment process at the Treasury\. Advice of credit is being issued within 36 hours after payment order is approved by the Treasury, achieving the target of 36 hours\. Assist the Recipient in implementing key reforms to improve transparency of public resources manag ement: Substantial Output  12 pieces of legislation on civil service reform were drafted and approved by the Superior Council of Public Service\.  All civil servants were effectively migrated into the new integrated Human Resource Management system, surpassing the revised target of 50%\.  At least nine ministries are executing their published procurement plans, surpassing the target of four ministries\. However, not all sectoral procurement plans cover all public contracts\.  The Public Procurement Regulatory Authority and all sectoral commissions are staffed and operational, achieving the target\. Outcome  Single-source contracting has decreased from 6% contracts in 2012 to 2\.11% in 2014\. 5\. Efficiency: Modest  Neither the PAD nor the ICR include a formal economic efficiency analysis\. The PAD (p\. 69) states that the project would not finance investments with economically quantifiable benefits\. However, the PAD estimates cost-effectiveness as high, given that the project was to finance activities that are essential for improving inefficiencies in critical areas such as public finance and government human resources management\. No alternatives for addressing these inefficiencies were identified\. The ICR (p\. 21) states that the project had high returns, especially due to the increase in tax revenue and decrease in wage bills for civil servants\. Tax revenue increased by US$ 28\.2 million dollars within two years due to the project’s fiscal census, which cost US$ 185,784\. Also, through the civil servants' human resource census and revision of data, the wage bill was reduced from 10\.2% of GDP in 2009 to 8\.0% in 2011\. The investment cost for these activities was US$ 500,000\. However, the project's implementation period and supervision budget were twice as high as initially planned due to the highly unstable and complex political environment\. Initially the project was to be implemented within three years, but the closing date was extended several times and the project period ended up being seven years\. The planned supervision budget was supposed to be 7\.4% of the total project budget; however, the actual was 12\.8%\. Procurement challenges (see Section 11b) demanded significant time and attention\. These factors indicate less than optimally efficient use of project funds\. 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: Relevance of objectives is rated Substantial due to Mauritania’s need to reform its public financial management\. Relevance of design is rated Modest due to the weak causal relationship between planned interventions and the project's development objectives, as well as unclear underlying assumptions about how some program actions would lead to intended outcomes\. The achievement of all three objectives is rated Substantial, as there is strong evidence of increased performance, efficiency, and transparency in the management of public resources\. Efficiency is rated Modest due to the lack of an economic efficiency analysis and significant delays in project implementation\. Taken together, these ratings are indicative of moderate shortcomings in the project's preparation and implementation, and therefore an Outcome rating of Moderately Satisfactory\. a\. Outcome Rating: Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: A new Bank project under preparation (Mauritania Public Sector Governance Project) will aim to build on the achievements of this public sector capacity building project and continue to improve efficiency and performance of public sector institutions\. However, there are significant development outcome risks given the country’s continuing political and institutional instability\. The government’s commitment during implementation was often weak, and this lack of commitment might also persist in the future\. In addition, the country has been experiencing a high turnover in administration and has experienced weak communication between ministries and about various reform steps\. This has led to resistance to reform and lack of ownership\. Therefore, the risk to development outcome is significant\. a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: a\. Quality at entry:  The Bank team prepared the project with the transitional government in a challenging political environment after a military coup in 2005\. The project's objectives were relevant and aligned with government priorities to strengthen public financial management, foster decentralization, improve human resource management for public service delivery, and improve sustainable environmental management\. However, the design of the Results Framework had several significant shortcomings which had a negative impact on project implementation and performance (see Section 10)\. Also, the components were not well linked to one other and to the development objectives\. While the focus was on public financial management and human resource management reform, it is not clear why the project also included a component on sustainable environment management\. The Bank identified several relevant risk factors, including the lack of government support for the reform process, changes of priorities after election of the post-transition Government, and technical and financial partners not being aligned with the Government’s reform program or the project\. However, mitigation efforts were not sufficiently robust, and the Bank did not identify how the project would adapt to changing circumstances despite the unstable political situation\. Also, the planned implementation period was three years, which is too short for such a complex project that anticipated reforms across five ministries\. Even though the PAD emphasizes the importance of coordination with other donors supporting Mauritania in its public sector reform, it does not provide clarity on how the Bank would cooperate with other donors to take advantage of synergies between different interventions\. Quality-at-Entry Rating: Unsatisfactory b\. Quality of supervision: The Bank team experienced a high turnover rate of Task Team Leaders (TTLs)\. During the life of the project there were five different TTLs, which led to delays\. From project appraisal until 2012, supervision of the project had several shortcomings\. Even though several recommendations for restructuring were made in the Implementation Status Reports from 2009 onwards, the restructuring to reallocate funds among components and revise the results framework only took place in March 2012\. Also, ratings for progress towards the achievement of project objectives in the Implementation Supervision Reports were too optimistic\. The ICR (p\. 24) states that the Bank conducted reviews that presented a much more positive outlook on project performance than the ones conducted by the Implementing Agency\. If the Bank’s performance ratings had been more accurate, Bank management and the government could have taken earlier steps to address implementation challenges\. After 2012 until project closing, Bank supervision became more intensive and activities that were inactive were started again\. Also, the Bank team was supported by an expert on information technology for public financial management, an expert on construction to renovate the Ministry of Environment, and an M&E expert to review performance data for the entire project\. Quality of Supervision Rating : Moderately Satisfactory Overall Bank Performance Rating : Moderately Unsatisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: From 2006 to 2011, the political situation was unstable and the country experienced two presidential elections, a military coup, several transitions to new governments, and cabinet reshuffles\. Government co mmitment and ownership were therefore limited\. The project was initially coordinated at the Prime Minister’s Office\. However, the anchoring of the project changed three times and ended up in the Ministry of Public Service from 2010 onwards\. Even though most project funds went to the Ministry of Finance, the project steering committee was led by the Ministry of Public Service, which was also in charge of all project contracts\.  This may have diminished the Ministry of Finance’s stewardship role in the reform process and also led to delays due to complications in project implementation\. The two governmental entities directly responsible for the project, the inter-ministerial committee and the project steering committee, performed their strategic and oversight roles weakly and did not meet as regularly as planned\. Also, focal points in the government lacked technical expertise, which had a negative impact on the work performed by government departments\. The ICR does not comment on the government’s role in consulting and involving beneficiaries and stakeholders, the government’s compliance with covenants, or its role in coordinating with other donors\. Government Performance Rating Moderately Unsatisfactory b\. Implementing Agency Performance: The project was implemented by a Project Coordination Unit (PCU) that had three different coordinators during the life of the project\. The PCU conducted M&E-related activities despite the shortcomings in the Results Framework, and it informed the Bank when implementation of activities was delayed or challenges were identified\. According to the ICR (pp\. 25-26), the PCU was efficient, conversant with Bank practices, and effective throughout the lifetime of the project\. The PCU successfully achieved its disbursement and fiduciary obligations\. The project faced procurement-related challenges (see Section 11b)\. The ICR does not comment on how they were addressed by the implementing agency\. There was little interaction between the PCU and the focal points within the government, largely because the PCU lacked sufficient staff to coordinate with five different ministries\. Implementing Agency Performance Rating : Moderately Satisfactory Overall Borrower Performance Rating : Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: The Results Framework in the PAD (p\. 27) included five PDO-level and 11 intermediate outcome indicators\. The Results Framework had significant shortcomings: i) the causal relationships between some of the planned interventions and the project's development objectives, and underlying assumptions about how program actions would lead to intended outcomes, were not properly laid out; and ii) some of the indicators were not sufficiently specific, measurable, attributable, results-oriented, or time-bound\. For example, PDO indicator 1, “the budget preparation is improved," was very broad and difficult to measure\. The Results Framework did not include indicators to measure results of Component E\. Also, the PAD did not define who would be responsible for the implementation of M&E activities\. Therefore, the M&E design was not well embedded institutionally\. b\. M&E Implementation: A steering committee was responsible for overseeing the M&E process, but its functions were not clearly defined\. The ICR (p\. 12) states that the project lacked appropriate M&E support\. An M&E plan was not developed until 2008\. The M&E expert within the PCU collected M&E data to the greatest extent possible\. During the restructurings in March 2012 and October 2013, several PDO and intermediate outcome indicators were refined to improve the linkages between inputs, outputs, and outcomes\. In 2013, the Bank hired a consultant to evaluate all results produced during project implementation\. c\. M&E Utilization: The PCU produced and submitted quarterly financial and M&E reports\. The ICR does not comment to what  extent M&E results contributed to informed decision making and resource reallocation\. M&E Quality Rating: Modest 11\. Other Issues a\. Safeguards: The project was classified as Environmental Category C\. According to the PAD (p\. 17), no safeguards were triggered under the project\. The ICR does not comment on safeguards\. b\. Fiduciary Compliance: Financial Management According to the ICR (p\. 12), financial status reports were thoroughly prepared and submitted on time\. The accounting system performed satisfactorily, and the auditors found that the internal control procedures were in place and issued an unqualified opinion based on the 2012 financial statements\. Procurement The project faced several procurement-related challenges\. The procurement commissions responsible for the national procurement system lacked capacity\. Processes were unclear, as important documents such as operational manuals and standard bidding guidelines did not exist\. Also, it was unclear which entity was responsible for what\. This led to delays in project implementation and frequent complaints from bidders\. The ICR does not comment on how these challenges were addressed by the Bank or the PCU\. However, in the restructuring of March 2012, procurement for the whole project was put under a single procurement commission (replacing the earlier situation where seven different procurement commissions were involved)\. The project supported implementation of several activities to improve the procurement system, including the development of standard bidding documents and procedural manuals for all procurement agencies, and the provision of training for private and public parties involved in procurement\. c\. Unintended Impacts (positive or negative): None reported\. d\. Other: 12\. Ratings: ICR IEG Review Reason for Disagreement/Comments Outcome: Satisfactory Moderately Relevance of design is rated Modest Satisfactory due to unclear underlying assumptions about how some program actions would lead to intended outcomes\. Efficiency is rated Modest due to the lack of an economic efficiency analysis and significant delays in project implementation\. Risk to Development Significant Significant Outcome: Bank Performance: Moderately Moderately Shortcomings in the design of the Satisfactory Unsatisfactory results framework, insufficient mitigation efforts to address potential risks, and weak supervision until the  March 2012 restructuring\. 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: The ICR (p\. 27) identifies several valuable lessons, including the following:  In a country with an unstable political environment and weak capacity, it is critical that project design is kept simple and objectives are not overly ambitious\. In this project, the design included five components and five ministries\. Also, changes in the architecture of the government led to significant changes in the architecture of beneficiaries\. This led to challenges in project implementation, project management, and coordination with beneficiaries\.  Change management is critical for the successful implementation of a reform project\. Innovation and changes introduced in this project often led to resistance due to lack of communication and coordination between different government stakeholders\. Addressing challenges related to change might lead to a smoother transition process\.  Projects require a strong Results Framework designed during preparation and implemented during the entire project life to ensure accurate progress tracking and identification of bottlenecks\. This project lacked a well designed Results Framework with a clear linkage between activities, outputs and outcomes\. Also, M&E responsibilities were not clearly defined, leading to challenges in measuring progress and overcoming implementation issues\. One lesson added by IEG:  In a politically unstable environment with limited government commitment and ownership, the implementation of a Bank project that aims to reform the public sector is likely to be challenging\. In this project, implementation only really picked up starting in mid-2012, when the political situation became more calm and the Bank increased its engagement and supervision\. Taking potential delays into account during project preparation is prudent\. 14\. Assessment Recommended? Yes No Why? To explore complex issues related to IT procurement, common to this and other public sector capacity building projects\. 15\. Comments on Quality of ICR: The ICR provides a very good overview of the changing political environment and project implementation\. Also, the ICR is in some sections appropriately critical\. However, the ICR is lengthy, does not spell out acronyms when first used, and could have provided more in-depth information on important areas such as financial management, procurement, M&E utilization, and safeguards\. Also, the ICR does not provide any kind of economic efficiency analysis\. The ICR's quality is rated satisfactory, with shortcomings\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P082510

 ICRR 13810 Report Number : ICRR13810 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 09/12/2012 Country : India Project ID : P082510 Appraisal Actual Project Name : Karnataka Urban US$M ): Project Costs (US$M): 51\.53 45\.31 Water Sector Improvement Project L/C Number : L4730 Loan/ US$M): Loan /Credit (US$M): 39\.5 36\.49 Sector Board : Water Cofinancing (US$M): US$M ): 0 0 Cofinanciers : Board Approval Date : 04/18/2004 Closing Date : 12/31/2008 03/31/2011 Sector (s): Water supply (95%); Sub-national government administration (5%) Theme (s): Other urban development (29% - P); Urban services and housing for the poor (29% - P); Pollution management and environmental health (14% - S); Decentralization (14% - S); Administrative and civil service reform (14% - S) Prepared by : Reviewed by : ICR Review Group : Coordinator : Lance Morrell Robert Mark Lacey Soniya Carvalho IEGPS1 2\. Project Objectives and Components: a\. Objectives: The objectives of the project, as stated in the Loan Agreement (Schedule 2, page 18) “are to launch Karnataka’s urban water supply (UWS) reform process based on the state urban water policy, improve UWS services in participating urban local bodies (ULBs) and demonstrate the sustainability of efficient and commercially-oriented UWS service provision\.â€? As stated in the Project Appraisal Document (page 3) “the main objectives are to: (a) launch Government of Karnataka (GOK)’s UWS reform process based on the “Urban Drinking Water and Sanitation Policy Statement of GOKâ€? (approved by the cabinet of GOK in May 2003); and (b) improve UWS services in the participating ULBs (Hubli-Dharwad, Belgaum, and Gulbarga) and demonstrate that sustainable, efficient, and commercially-oriented service provision can be achieved\." There are differences in the wording between the two documents, but the substance is similar\. The statement of objectives in the Project Appraisal Document (PAD) is used in this evaluation since it is more specific and easier to monitor\. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components: A\. Sector Development and Technical Assistance (Planned US$2\.44m Actual US$0\.84m) This component supported: (i) assisting the State Government in finalizing its policy reform agenda and carrying out initial implementation steps of staged sector reforms; and (ii) preparing the business model and Private Sector Participation process for service provision in the three participating urban local bodies and other cities in Karnataka\. The activities to be carried-out were: A1\. Policy Implementation and State Level Institutional Strengthening: a\. Establishment and operationalization of Karnataka Urban Water Supply Company, b\. Strengthening of service delivery in urban local bodies, c\. Development of a Water Sector Management Information System, d\. Water and sanitation sector investment and tariff frameworks, e\. Review and establishment of the legal and regulatory framework, and f\. Preparation of urban water supply legislation\. A2\. Strengthening of service delivery and preparation of follow-on project in the three participating urban local bodies: a\. City-wide engineering feasibility studies, b\. Transition plans, c\. Other studies related to the public private partnerships preparation, and d\. Strategy to scale up this project in other cities in Karnataka\. B\. Physical Investments (Planned: US$41\.18m Actual: US$43\.11m) This component was to finance: (i) improvements to the service provision and attainment of continuous service in selected demonstration zones of the three participating urban local bodies; (ii) generation of credibility in the overall program and learning of lessons on the challenges faced in the demonstration zones for scaling up continuous service provision in each of the entire urban local body; and (iii) simultaneously improving the efficiency of bulk supply operations and distribution networks and attaining initial improvements in water service provision to all the residents of the urban local bodies\. The activities to be carried-out were: a\. Priority investments to increase the bulk water supply to urban local bodies, b\. Works in city distribution networks in the three participating urban local bodies to provide short-term improvements to those parts of the population in each one in most need of water, and c\. Demonstration projects to make clear that 24-hour continuous water supply is possible and to document the benefits\. C\. Project Implementation (Planned: US$1\.27m Actual US$1\.16m) This component financed the project’s incremental operational costs and studies related to project management and implementation including: (i) incremental, short-term consultants for Karnataka Urban Infrastructure Development Finance Corporation (the implementing agency) for the duration of the project, (ii) preparation and establishment of a monitoring and evaluation system, (iii) costs related to the financial management systems within the Corporation, (iv) training for staff of the project management unit of the Corporation, and (v) incremental operating costs of the Corporation, including supervision costs\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Costs Project Costs The project’s final costs were US$ 6\.2 m or about 12% below the appraisal estimate, and at the end of the project there was a reallocation of US$6\.3 m from the “worksâ€? category to “goodsâ€?, “consultants' servicesâ€? and “operating costsâ€? categories\. The reallocation was made because the project had realized cost savings in “worksâ€? due to: (i) the delivery of required services without the need for additional expenditures, and (ii) the operator used cost effective HDPE pipes in the demonstration zones instead of more conventional materials\. Financing The actual disbursements were US$3\.01 million less than expected at appraisal and this amount was cancelled at the closing of the project in March 2011\. There were no co-financiers or parallel financing\. Borrower contribution The Borrower’s actual contribution of US$9\.0 million was less than the US$12\.03 million estimated at appraisal\. No explanation for the reduction in the Borrower’s contribution was provided in the ICR\. According to the project team, the Government's contribution was fully satisfied in Indian rupees, and the difference recorded in US dollar terms was the result of currency conversion rates\. Dates It took 13 months after Board approval for the conditions of effectiveness to be met\. The project's closing date was extended three times for a total of 27 months and the grace period was extended from July 31, 2011 until September 30, 2011\. The reasons were: Extension 1: (6 months from December 31, 2008 until June 30, 2009) to enable the Government to: (i) meet both legal covenants, (ii) compensate for the loss of time due to the delayed effectiveness of 13 months, (iii) compensate for the 17 month delay in implementing the demonstration zone works, (iv) allow the operator to manage the demonstration zones for the full 2-year period of operations, and (v) complete the construction of a pipeline needed to improve the water supply in Gulbarga\. Extension 2: (9 months from June 30, 2009 until March 31, 2010) to enable the Government to: (i) implement legal covenants related to the Water Councils and the tariff framework, (ii) complete the civil works cited in the earlier request for extension, and the procurement and installation of bulk meters, and (iii) scale-up plans in the three towns\. Extension 3: (12 months from March 31, 2010 until March 31, 2011) to: (i) complete scaling up proposals/plans, (ii) implement the Water Sector Management Information System, and the new tariff framework, (iii) complete the Gulbarga pipe line work and bulk meters purchase and installation, and (iv) complete additional two small works in Belgaum\. In addition, there was a 2 month extension in the Grace Period from July 31, 2011 until September 2011 to complete payments for eligible expenses\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: The objectives continue to be relevant and are consistent with the current Country Assistance Strategy for India developed in 2008 for the period FY 2009-FY 2012\. Specifically, the project supports the element of the strategy to “Increase the effectiveness of service deliveryâ€?\. The Country Assistance Strategy (page i) indicated that “the WBG [World Bank Group] will support improvements in the organization and delivery of publicly-financed services that would enhance the development effectiveness of public spending, particularly in … health … urban development and water supply and sanitation\. The emphasis will be on … institutional arrangements that focus on …\. ii) strengthening capacity in publicly-provided services, and iii) enhancing private sector participation\.â€? The project was and remains relevant to the Borrower due to the large portion of the population that continues to experience poor and intermittent water supply, and the need to support institutional clarity, fiscal and financial viability, and improved services to the poor\. The relevance of the project objectives is high\. high b\. Relevance of Design: The results framework presented in Annex 1 of the PAD was well designed and provides a clear linkage between the activities financed and the objectives of: (a) launching Government of Karnataka’s urban water supply reform process based on the “Urban Drinking Water and Sanitation Policy Statementâ€? (approved by the State Government cabinet in May 2003); and (b) improving urban water supply services in the participating urban local bodies (Hubli-Dharwad, Belgaum, and Gulbarga)\. The activities were also appropriate and sufficient to demonstrate that sustainable, efficient, and commercially-oriented service provision can be achieved\. Component A provided technical assistance to develop the legal and regulatory framework for the sector, prepare draft legislation, and establish and operationalize the Urban Water and Sanitation Council\. Component B was designed to provide the physical investments needed to increase the supply of water to the identified zones to demonstrate the feasibility of continuous water supply\. The expected outcomes are supported by well defined and logical outputs\. The relevance of the project design is rated substantial \. 4\. Achievement of Objectives (Efficacy): "(a) to launch Government of Karnataka (GOK) Achievement of the project’s objectives -- "(a GOK )’s UWS reform process based on the “Urban Drinking Water and Sanitation Policy Statement; Hubli-Dharwad, Belgaum, and and (b) to improve UWS services in the participating ULBs (Hubli- Gulbarga ) and demonstrate that sustainable, efficient, and commercially -oriented service provision can be achieved " -- is assessed as substantial \. Outputs Studies and Technical Assistance\. The following studies, designed to assist the Government in launching its urban water supply, were completed, and the recommendations have been, or are expected to be, implemented: • A proposal to set up the Karnataka State Urban Water Supply Council has been elaborated and is pending Government approval\. • A study on strengthening service delivery in urban local bodies has been completed but the recommendations were not deemed feasible by the Government\. The Water and Sanitation Program (a World Bank implemented, donor funded program to support water and sanitation programs throughout the world, largely through technical assistance) has been contracted to revise the recommendations\. • A water and sanitation information system has been developed and is being used\. • A study for the establishment of the legal and regulatory framework has been completed but the recommendations were not deemed feasible by the Government\. The Water and Sanitation Program has been contracted to revise the recommendations\. • A social awareness communication strategy to convince residents in the 5 demonstration zones of the feasibility of continuous water supply and the importance of consumers paying for water provided has been implemented\. • A volumetric tariff policy based on customers’ actual consumption as measured by water meters has been adopted and implemented\. • Initial drafts of city-wide engineering and feasibility studies, transition plans, and other studies related to the use of public-private participation in the operation of the systems have been completed\. Financing of these works after project closure is planned to be assumed by the Government\. • A planned study to prepare for urban water supply legislation was not completed\. It was considered to be unnecessary since the legislation was already included in the broader decentralization agenda\. Physical Outputs\. The following civil works and goods were procured and successfully implemented: • Water distribution network\. The project installed 238 kms of the water distribution network, including house connections, and repaired customers’ water meters in the 5 demonstration zones covering more than 25,640 new house connections; and • Water meters\. As part of the work to address priority bottlenecks and increase bulk water supply, the project implemented 11 bulk water investments resulting in significant improvements in water supply delivery in the 3 participating urban local bodies through the reduction of leaks and the rehabilitation of water production, transmission and storage facilities\. In addition, water meters were procured and installed in all 5 demonstration zones\. Outcomes The Government's Urban Water Supply Policy was launched and the following outcomes were achieved: Improved Water Supply Delivery The possibility of continuous water supply was successfully demonstrated with good water pressure available 24 hours in all five demonstration zones due to the implementation of the physical investments\. Prior to the project, the baseline level of service was about 1-2 hours every 2-3 days in the demonstration zones\. Sustainability Managerial capacity, institutional structure and accountability for water and sanitation operations for the participating urban local bodies have been enhanced as evidenced by the increased quantity of water available to consumers in the 5 demonstration zones, the design and implementation of volumetric tariffs and the associated community awareness\. At appraisal, it was reported that none of the participating urban local bodies were able to recover even half of their operations and maintenance costs from the tariffs\. The project established a cost recovery mechanism to ensure that revenues in the demonstration zones would cover 80% of the operations and maintenance costs and achieve a billing and collection efficiency of at least 70% by the end of the project\. At the conclusion of the project, the billing and collection efficiency was 83% and cost recovery was 119%\. Collection efficiency exceeds national benchmarks based on a sample of 28 cities in 14 States of India, where the average collection efficiency was 60% (versus 83% for the project demonstration zones) and the coverage of operations and maintenance costs was 67\.2% (versus 119% for the project demonstration zones)\. This information comes from a study made in 2010 of the first Service Level Benchmarking Data Book and released by the Ministry of Urban Development\. Increased consumer awareness, commitment and ownership for reform were attained as reflected in consumer willingness to pay\. This was evidenced by the efficiency of revenue collection which was due to the improvements made in increasing the supply of water and the introduction of volumetric billing\. Efficiency Technical water losses were reduced through the physical investments, metering, technical assistance in designing a new tariff structure, and support from the consumers\. Technical losses in the demonstration zones fell from a baseline of about 50% prior to the project, to about 7% after the project\. While no baseline data exist for total non-revenue water in the demonstration zones, the combination of the low (7%) technical losses with the average billing and collection efficiency of about 83% means that the actual level of total non-revenue water is about 23%, which is acceptable by international standards\. It also reflects increased consumer awareness which has reduced the losses due to illegal connections, though this reduction has not been quantified\. Commercial Orientation The use of private operators was tested by the project and determined to be successful\. The use of private operators has become standard practice throughout the state and it has been adopted in other states\. The legal and regulatory structures recommended in a study financed by the project have not been implemented\. As noted above, the Government has contracted with the Water and Sanitation Program to revise the recommendations provided by the consultants to ones that are more acceptable to Government\. 5\. Efficiency: The economic internal rate of return (EIRR) for the project increased from 16% at appraisal to 29% at completion\. The EIRR was calculated for investments ( in sub-components B1 and B3), representing about 84% of the total project costs at closure\. At appraisal, the estimated EIRR for priority investments (component B1) was 18% based on the benefits coming from an increase in the bulk water supply, and power savings as measured by the bulk water meters installed by the project\. The 30% EIRR at completion was due primarily to the larger than expected increases in bulk water supply\. At appraisal, the estimated EIRR for demonstration projects (component B3) of 14% increased to 28% at completion primarily due to the fact that the focus group discussions increased the savings achieved in minimizing coping costs (costs of gathering and carrying water) from Rs 350 (US$7\.16\.)/household/month to a net of Rs771 (US$15\.78)/household/month\. Time savings from fetching and carrying water is a major economic benefit for water supply projects since the time saved can be used for economic activities\. The project was also successful in implementing the agreed upon investment program for a lower cost than had been expected at appraisal, because: (a) the operator used more cost effective piping (high density polyethylene or HDPE) in the demonstration zones instead of the more traditional and expensive piping (a combination of cast iron and polyvinyl chloride or PVC), and (b) the delivery of the required service improvements were achieved without the need for any additional expenditures due in large part to the use of experienced private sector operators who were able to introduce efficiencies which had not been estimated at appraisal\. On the negative side, there was a 27 month implementation delay, much of which was due to administrative inefficiencies\. However, in view of the improved economic return and lower costs, efficiency is assessed on balance 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 16% 80% ICR estimate Yes 29% 84% * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: While the project did not achieve all that it intended regarding the reform of the sector (in particular, the legal and regulatory framework has still to be established), it was successful in demonstrating that water can be delivered on a continuous basis and that private sector involvement and cost recovery from consumers are feasible\. Given these accomplishments, the efficacy rating is substantial\. Efficiency is also substantial with higher economic rates of return at closure than at appraisal, thanks in part to lower than anticipated capital costs\. With the relevance of objectives high, and that of design substantial, the outcome is assessed as satisfactory \. a\. Outcome Rating : Satisfactory 7\. Rationale for Risk to Development Outcome Rating: The following risks may be identified: Institutional and Social: the legal, regulatory and institutional frameworks are not completed which increases the level of uncertainty as regards government’s continued commitment to the reform agenda\. Technical: (i) the scale-up of the project to other parts of the cities may result in unexpected technical issues, (ii) limited technical capacity may result in meters not functioning properly and undermining consumer confidence in volumetric tariffs, and (iii) non-revenue water may increase to higher levels, resulting in reduced sustainability and efficiency of the operation\. Financial: (i) the tariff policy may not continue to be implemented in such a way as to allow for the recovery of operating costs, and (ii) billing and collection procedures may lose some of their effectiveness, especially when applied on a wider scale\. These risks are mitigated by the fact that the Government has requested assistance from the Water and Sanitation Program to finalize the set of recommendations needed to establish the needed institutional reforms\. The risk of the reform agenda not being finalized is further mitigated by the fact that the Government has requested a follow-on project to scale-up the investments in the three cities\. However, experience demonstrates that institutional reform is a long process and one that requires committed political leadership\. Given the difficulty of successfully reforming the water sector, the current reluctance of Government to proceed to implement some of the proposed reforms, and the high turnover of senior government officials, the likelihood of additional problems with the implementation of the reform agenda would appear to be significant\. The impact on the operator being able to deliver sustainable water supply and sanitation services would, therefore, also be significant\. a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: a\. Quality at entry: The project preparation team had a good understanding of the constraints to sustainable service delivery faced by the State Government\. Agreements on the need for institutional reform had been agreed prior to appraisal, and were presented in the Government’s Urban Drinking Water and Sanitation Policy Statement The activities included in component A of the project were consistent with the actions needed to enable Government to complete its reform agenda and implement the needed legal, regulatory and institutional reforms\. In addition, the project design included community consultation and social mediation to obtain critical input from the communities and to strengthen public ownership and acceptance of the tariff requirements\. However, the difficulties associated with implementing institutional reforms were under-estimated; some of the outcome indicators were not realistic for measuring progress toward the first development objective and the imprecise wording of the outcome indicators for that objective made them difficult to utilize\. The project design was complex, both technically and institutionally\. The design team expected the project to be declared effective one month after Board approval, but in fact effectiveness took more than 13 months to be attained\. at -Entry Rating : Quality -at- Moderately Satisfactory b\. Quality of supervision: The Bank supported the project extensively through regular supervision missions involving multi-disciplinary teams\. The core team was largely in place throughout implementation, and the Task Team Leader at the time of the project design was also responsible for implementation until near the to end of the implementation period\. Implementation experienced significant delays, though much of this was due to administrative inefficiencies for which the Bank team should not be held accountable\. Weaknesses in the financial management function of the project unit, which had been at least partially identified at appraisal, would have benefited from more active support and assistance from the team\. The mid-term review occurred very near its originally scheduled date, but it missed an opportunity to address some of the implementation issues and to give more attention to the reform agenda\. Further, the mid-term review could have been used to revise the indicators to make them more measurable\. Quality of Supervision Rating : Moderately Satisfactory Overall Bank Performance Rating : Moderately Satisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: The Government of Karnataka was committed to the project and initially demonstrated strong ownership of the reform agenda\. However, political instability accompanied by frequent changes in key government officials, as well as political economy issues, delayed implementation and may have reduced the Government’s initial resolve to reform the water supply sector\. During the project period, the Chief Minister changed 5 times and there were three different ruling parties\. The Secretaries of the Urban and Finance Ministries also changed\. This lack of political stability was regarded, by the ICR, as the most important factor responsible for the delays in moving the reform process forward\. A number of key reforms were, nonetheless, enacted in areas such as the introduction of water meters, the use of volumetric billings, the setting of tariffs at levels that allow for the full recovery of costs, and the use of private sector operators\. The use of private operators has also been extended to the delivery of rural water supply and other public services\. In addition a state-wide tariff framework for urban water supply was introduced\. Further, many of these reforms, such as the use of private operators, appeared to have strong support at project closure\. However, a key element of the sector reform agenda, the establishment of the Water Supply Council was not completed, though the Government has requested assistance from the Water and Sanitation Program in an attempt to carry the initiative forward\. Government Performance Rating Moderately Satisfactory b\. Implementing Agency Performance: The implementing agency, Karnataka Urban Infrastructure Development and Finance Corporation, demonstrated commitment to achieving the project's development objectives throughout implementation\. It is also committed to replicate the outcomes in several other interested urban local bodies\. The Corporation's central and regional offices were highly focused and assigned the utmost importance to getting timely outputs from the Karnataka Urban Water Supply and Drainage Board and from the operator\. Further, the financial management functions such as issuing financial management reports and draft audit statements were subject to frequent delays\. Implementing Agency Performance Rating : Moderately Satisfactory Overall Borrower Performance Rating : Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: An M&E framework was developed at appraisal, but the indicators were not easily monitorable\. Many indicators lacked baseline values and time-bound targets\. Even though the system had already been developed, it was not launched until after the mid-term review\. b\. M&E Implementation: Gaps in the project's M&E system were filled by monitoring by the operator that managed the demonstration zones as part of its performance contract, and results were also monitored by an independent third party auditor\. c\. M&E Utilization: The project M&E system was used to monitor performance of the construction contracts, and to report on results from the demonstration projects, with the operator being responsible under its performance contract for reporting on the results/performance indicators\. M&E Quality Rating : Modest 11\. Other Issues a\. Safeguards: The project was classified as Category “B,â€? triggering OP 4\.01 (Environmental Assessment)\. It also triggered the Bank’s safeguard policy on Involuntary Resettlement (OP 4\.12) because some minor land acquisition was likely in the project towns\. The ICR reports that the project prepared an Environmental Management Plan (EMP) on the basis of a Limited Environmental Assessment\. The EMP was implemented by the operator hired for component B and supervised by the environmental engineers from the Karnataka Urban Infrastructure Development and Finance Corporation\. In addition, the project prepared an Environmental Code of Practice for all water supply projects in the State\. According to the ICR (para 2\.4\.4\.), the performance rating for the environmental and safeguard management was satisfactory over the entire project\. The project team subsequently informed IEG that the project was in compliance with OP 4\.01\. Regarding Involuntary Resettlement, the ICR reports that the Government prepared a land acquisition and resettlement policy framework satisfactory to the Bank and resettlement action plans (RAPs) were prepared for Hubli-Dharwar and Gulbarga\. Later the Gulbarga RAP was modified because of a decision to re-direct the pipe lines on to unencumbered government lands thus reducing the number of affected families\. The total land acquisition for the project involved 8\.41 hectares affecting 215 families primarily in the Hubli-Dharwar and Gulbarga areas\. According to the ICR (para 2\.4\.5), the RAPs were satisfactorily implemented and there were no complaints\. b\. Fiduciary Compliance: At appraisal the financial management risk was rated as medium with particular concern (high risk) regarding weak accounting systems and weak internal controls in the Karnataka Urban Infrastructure Development and Finance Corporation\. These risks were to be mitigated through the preparation of a Financial Management Manual and the establishment of an internal audit department\. The project accounting system that was developed for the project worked well, according to the ICR (para 2\.4\.2), because it became part of the overall entity's accounting system, and the internal audit practice was set up for the Corporation\. During implementation, the implementing agency suffered from a shortage of qualified accountants\. It did not submit approvals for rejected claims due to missing documents and had overdrawn two loan categories of more than 20%\. Further, the project management unit submitted financial monitoring reports (FMRs) and audit reports after the due dates and in some cases the audit reports needed to be re-certified\. The supervision reports rated financial management as moderately satisfactory\. According to the project team, most audit reports were unqualified and while the last report had some issues (not identified by the project team), they have been resolved\. According to the ICR (page 7), "overall procurement was rated satisfactory throughout the project period\." However, the Borrower's ICR (ICR Annex 7, paragraph 5) refers to an international contract for the procurement of water meters that could not be executed because the Bank had "internal legal issues" with the principal supplier\. The Implementing Agency was apparently unaware of these issues, and the Borrower's ICR requests the Bank to take "appropriate steps to avoid delays in procurement and [keep] the Borrower informed about changes in policy/legal issues etc\. that may affect procurements\." No other major procurement issues are reported\. c\. Unintended Impacts (positive or negative): According to the beneficiary surveys, attendance in schools in the demonstration zones improved in comparison with 2006 levels, and the communities had an increased level of pride because many teams, both national and international, visited them to learn and document the lessons learned\. d\. Other: 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Risk to Development Moderate Significant The political outlook, possible technical Outcome : and financial issues accompanying the up-scaling, and incomplete institutional reforms\. See Section 7\. Bank Performance : Satisfactory Moderately There were moderate shortcomings in Satisfactory Quality at Entry and Quality of Supervision\. The project's M&E system also had weaknesses\. See Section 8\. Borrower Performance : Satisfactory Moderately The delays in effectiveness, Satisfactory implementation and in the grace period to complete disbursements were extensive and due largely to factors internal to the Government and implementing agency\. See Section 9\. 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 three lessons are taken from the ICR with some adaptation\. The fourth is drawn by IEG\. • Individual household water supply connections increase consumer satisfaction, cost recovery, and water conservation\. • Public private partnerships can be highly beneficial for introducing efficiency into water operations\. The private sector is willing to enter the water market and bring technical and managerial skills if the contracts are well designed and accountability is clearly defined, risks evenly allocated, and transparent procurement processes incorporated\. However, the introduction of such partnerships needs to be accompanied by effective consultations with all stakeholders, and the implementation of a public awareness scheme\. • Good governance measures are vital for sustainability\. Introducing new water meter connections and affordable volumetric tariffs that promote water conservation proved essential for ensuring the sustainability of continuous water supplies\. The use of dummy bills based on volumetric tariffs enabled Government to convince consumers that the use of such procedures would not dramatically increase their monthly bills\. An additional, more general lesson that can be drawn from this project is the importance of not underestimating the difficulty of institutional reform in project design\. As seen in this case, unexpected issues/problems often develop and these issues should be addressed as part of the mid-term review\. Further, many of these unexpected issues could be avoided or minimized if the project made active use of communication so that the public can understand the plans and their expected impact\. 14\. Assessment Recommended? Yes No Why? To verify the project ratings and document the lessons learned, especially in the light of weaknesses in the ICR\. 15\. Comments on Quality of ICR: The ICR is satisfactory, but marginally so\. It provides relevant facts and data about the performance of the project\. However, it provides little detailed and critical discussion of the performance of both the Bank and Government\. The ICR appears to hold neither the Bank nor the Government accountable for the extensive delays in implementation\. Further, the ICR lacks the candor which makes it difficult to fully understand the positive and negative aspects of this project, and there are also some internal inconsistencies\. There is no clear statement as to whether there was compliance with the Bank’s environmental safeguard policies, nor any discussion of the third party project audits\. The meeting with the project team provided the clarifications needed to understand the project's impact on government and in the sector\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P094897

 ICRR 13229 Report Number : ICRR13229 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 10/23/2009 PROJ ID : P094897 Appraisal Actual Project Name : Second Broad Based Project Costs (US$M): US$M ): 100 100 Growth Development Policy Loan Country : Guatemala Loan/ US$M): Loan /Credit (US$M): 100 100 Sector Board : EP Cofinancing (US$M ): US$M): 0 0 Sector (s): Central government administration (36%) General industry and trade sector (27%) Sub-national government administration (18%) General finance sector (10%) Aviation (9%) Theme (s): Trade facilitation and market access (29% - P) Public expenditure financial management and procurement (29% - P) Tax policy and administration (14% - S) Regulation and competition policy (14% - S) Municipal governance and institution building (14% - S) L/C Number : L7407 Board Approval Date : 08/29/2006 Partners involved : Closing Date : 12/31/2007 12/31/2007 Evaluator : Panel Reviewer : Group Manager : Group : Jorge Garcia-Garcia Kris Hallberg Ismail Arslan IEGCR 2\. Project Objectives and Components: a\. Objectives: The Second Programmatic Development Policy Loan (DPL2) was part of a programmatic series of three DPLs intended to support the fundamentals and three main pillars of the government’s development plan “Vamos Guatemalaâ€?\. Specific objectives of the loan were: (a) promoting growth and improving the investment climate; (b) enhancing capacity for public spending in priority sectors; and  (c) achieving greater transparency in public sector management \. 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 loan focused on the three main policy areas that encompass the three objectives \. The loan had 14 prior actions\. In addition, the loans had the general condition of maintaining a stable macroeconomic framework\. The loan established triggers for the Bank to continue with the program and grant a subsequent loan\. The loan covered eight sub-topics distributed among the three objectives as follows: I\. Promoting Growth and Strengthening Investment Climate 1\. Macroeconomic stability 2\. Promotion of trade expansion 3\. Promoting investment and business efficiency 4\. Strengthening Infrastructure through private sector participation 5\. Strengthening, modernizing and deepening of the financial sector In a section of the program document this objective was stated as promoting equitable growth and strengthening the investment climate\. II\. Enhancing the capacity for public spending in priority sectors 6\. Improvement in tax collections 7\. Improving budget allocations III\. Transparency and Public Sector Management 8\. Improving transparency and efficiency of public resource use d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The loan was disbursed in its entirety \. It was approved in August 29, 2006, and was closed as planned on December 31, 2007\. 3\. Relevance of Objectives & Design: The loan sought relevant objectives and the prior actions mapped to the objectives were likely to cause the achievement of the objectives\. The loan supported changes in areas where policies and the administration of the state constituted a barrier to grow faster and reduce poverty more effectively \. Main constraints to growth were the incentives for the private sector to develop fully, the low level of human capital, the inefficient use of government resources, and the inadequate volume of government resources supporting the expansion of human capital \. The loan sought to help alleviate such constraints\. The program document fell short in identifying good results indicators for some of the objectives of the program; the review will point the deficiencies when discussing achievement of objectives in section 4\. The relevance of objectives and design was substantial\. 4\. Achievement of Objectives (Efficacy): I\. Promoting Growth and Strengthening the Investment Climate 1\. Macroeconomic stability The program documents for the three loans did not set standards for this objective \. IMF staff reports of Article IV consultation (March 2007, June 2008) conclude that macroeconomic stability has been maintained despite tensions in the financial sector in late 2006 and early 2007\. The reports also note that the rate of growth in 2006-2008 averaged 5\.2 percent, higher than the historical average\. Despite a current account deficit of 5 percent of GDP the central bank accumulated international reserves equivalent to about 4 months of imports and 100 percent of public external debt\. The fiscal position remained solid, with the central government contained and the public debt estimated at about 22 percent of GDP\. Annual inflation, which had averaged 7 percent in 2006-2008, fell to less than 2 percent in 2009 as a result of the fall in commodity prices and weak domestic demand \. This review concludes that efficacy in achieving this objective has been substantial \. 2\. Promotion of trade expansion To achieve this objective the program supported the government’s decision to participate in the DR-CAFTA trade agreement and to simplify and harmonize procedures to conduct trade with El Salvador and Honduras\. The program documents selected as medium-term outcome indicator an increase of 9 percent in the dollar value of nontraditional exports after the DPL program ended \. The ICR notes that nontraditional exports grew 44 percent since 2004, and concludes that the objective was achieved\. This review considers that this indicator is inadequate to measure the results of a trade agreement and that its selection exemplifies the problem of the quality of indicators noted in section 3 above\. This indicator is inappropriate to measure results \. First, it defines impact in nominal terms, when what matters for growth and poverty reduction is the impact on real income \. Second, it neglects the trade creation and trade diversion aspects of a customs union \. Third, it neglects the potential impact on domestic and foreign investment of a change in the rules of the game accompanying the trade agreements\. The ICR suggests that the indicator is not adequate to measure impact but does not bring information to overcome this shortcoming \. Moreover, the ICR does not bring information on the growth of trade with Honduras and El Salvador and the real income gains from such growth \. Lacking an adequate results indicator for this objective, this review concludes that efficacy in achieving the objective has been modest \. 3\. Promoting investment and business efficiency To achieve this objective the program supported actions to reduce processing times and costs in customs, establishing offices to promote investment and to register a business, to carry out a cadastral survey, and to title and register land \. This review discusses the results associated with these actions in two groups, as the ICR does\. The expected outcome for the first group of actions (customs and establishing offices to register businesses ) was met\. Customs administration clears air and seaport cargo in one and 24 hours, while it did so in 12 and 96 hours in 2004\. The government established a one stop shop to register business, and according to Doing Business reports it takes 26 days to register a company, fewer than the 42 days it took in 2004; although the target was 25 days, this review considers that the target was substantially achieved \. Did these actions and results promote investment and business efficiency? There is no information to claim this was the case, although the ICR suggests that FDI tripled since 2005, among other reasons because of the administrative effort\. This review considers the ICR claims more than it should for two reasons \. First, gross domestic investment in 2005-08 remained unchanged at around 20 percent of GDP suggesting that the impact of the actions taken was limited\. Second, FDI may have increased because the Berger administration (January 2004-January 2008) reduced the political and economic instability that the Portillo administration created\. The second group of indicators covered land registration \. The expected outcome for this group was partially met\. The cadastral survey covered 30 percent of the territory, not the 50 percent expected, but land titling and registration had reached 33\.1 percent in 2006, meeting the 33 percent target\. No information exists for the status of titling and registration in 2008\. The review concludes that efficacy in reaching this objective has been modest\. 4\. Strengthening infrastructure through private sector participation To achieve this objective the program supported actions to establish a legal framework for public-private partnerships (PPP) to invest in infrastructure, and to achieve international security certification of all Guatemalan seaports and a Category 1 rating for the Aurora International Airport in Guatemala City\. Congress did not approve the PPP law, so the first result indicator was not met \. According to the ICR the second result indicator, a 7 percent reduction in handling times and costs in ports and airports, was exceeded, and the actual reduction achieved was 15 percent\. A gain seems to have been caused by the security certification of G uatemala's seaports and the upgrading of the Aurora International Airport in line with the standards of the International Civil Aviation Organization, but it is not clear if the 15 percent is part of the gains discussed in 3 above\. The ICR does not explain what caused the gain and whether it differs from the one discussed in 3 above\. The review concludes that efficacy in achieving this objective has been modest\. 5\. Strengthening, modernizing and deepening the financial sector To achieve this objective the program supported actions to strengthen the payments system and the supervision of financial institutions and conglomerates, to facilitate SMEs access to credit, and to resolve the situation of two failed banks\. In addition, DPL1 accepted as prior action the steps the government took in 2004 to ensure that Guatemala was taken off the list of Noncooperative Countries of the Financial Action Task Force\. The program expected to achieve two outcomes: (i) Improve and implement legal and regulatory framework to facilitate access to credit by SMEs \. Guatemala has a better functioning regulatory framework today than in 2004 as witnessed by: (a) application of risk-based supervision on a pilot basis to selected financial institutions; (b) better information on relationship between financial groups, their subsidiaries, and related parties; (c) more and better quality of data on large corporate debtors reported to the Banking Superintendency; and (ii) Payments system implemented and in operation (Banco de Guatemala)\. The ICR reports that the system is in operation but does not explain what is better today than in 2005\. Guatemala has improved some aspects of its financial sector to which the prior actions may have contributed\. First, according to the Doing Business report Guatemala ’s ranking in access to credit went from 61 in 2008 to 28 in 2009 (both dates not covered by the DPLs but, possibly, this is a residual impact of the measures taken earlier )\. Second, credit to the SME sector grew 60 percent between 2005 and 2007, but this does not convey if access improved; a better measure of access would have been the share of total credit going to SMEs or the rate of interest paid by SMEs before and after the program\. Perhaps the best indication that the financial sector has improved comes from the evolution of key indicators between 2004 and 2008\. Coverage over assets at risk increased from 44 percent to 73 percent; profitability over capital increased from 14\.4 percent to 16\.3 percent; and the capital asset ratio increased from 8\.9 percent to 10\.3 percent\. The ICR does not provide information indicating that deepening took place\. Although the DPLs and the ICR do not spell out the logical link between the prior actions and the results discussed, it is clear that the actions taken should have helped improve the overall situation of the sector\. This review concludes that efficacy in achieving this objective has been substantial \. II\. Enhancing the capacity for public spending in priority sectors II\. 6\. Improvement in tax collections To achieve this objective the program supported actions to change tax law and to improve tax administration at the central and municipal levels \. The program expected to achieve two outcomes: (i) strengthened tax administration as assessed by independent agencies; and (ii) tax revenues to equal or exceed 11 percent of GDP (national accounts base year 1958)\. Regarding the first outcome, two indicators not shown in the ICR could support its conclusion that the administration has improved :  first, the number of taxpayers increased from 740 thousand in 2003 to 1\.025 million in 2006; second, the percentage of late filers of VAT and ISR for large and medium taxpayers fell from about 9 percent in December 2004 to about 1\.6 percent in June 2007\. Regarding tax revenues, they increased from 11\.5 percent of GDP in 2005 (IMF data) to 11\.9 and 12\.1 percent of GDP in 2006 and 2007 (Ministry of Finance Third Fiscal Report, February 2009)\. Because of the financial crisis, tax revenues, especially customs revenues, fell to 11\.3 percent of GDP in 2008\. In summary, tax administration has strengthened and tax revenues exceeded 11 percent of GDP\. This review concludes that efficacy in achieving this objective has been substantial\. 7\. Improving budget allocations To achieve this objective the program supported actions to increase budgetary allocations \. As outcomes the program documents indicated a better targeting of resources for social sectors and an increase in social expenditures from 5 percent of GDP in 2004 to at least 6 percent of GDP in 2007\. Social (and other peace related) expenditures increased from 5\.6 percent of GDP in 2004 to above 6 percent of GDP for every year since 2005\. Regarding targeting there is no evidence that the resources are better targeted\. A July 2008 report from the Ministry of Finance about subsidies in the budget concludes, when looking at the budget for education and health in 2007, that there is a “problem of regressiveness in the budgetary allocation and in particular of the presence of the state in the least favored regionsâ€? (p\. 38); the report also notes that there is evidence of problems in budget management (administración presupuestaria , p\. 39), as poorer regions receive lower budget allocations for health and education\. This evidence indicates that the objective of more resources for social programs was achieved, but that a better targeting of them did not occur \. The review concludes that efficacy in achieving this objective has been modest\. III\. III \. Transparency and Public Sector Management 8\. Improving transparency and efficiency of public resource use To achieve this objective the program supported actions to increase the coverage of the integrated financial system (SIAF) and to use a transparent, web-based, procurement system (Guatecompras) in most public sector purchases\. The outcome indicators from these actions would be an enhanced performance of public financial management and more transparency and efficiency in public procurement\. These "outcomes" correspond more to objectives, and lack measurable indicators that the program document mentions but does not define\. The assessment that follows is based on achievement of outputs\. Regarding public financial management, SIAF covers all public entities at the central and local level and the central government has greater control of budget execution and outcomes\. Civil society notes that the transparency in the use of public funds has improved now that the information from SIAF is on-line\. Regarding procurement, Guatecompras has expanded coverage, and it is mandatory for all public agencies, while in 2004 they barely used it\. Guatecompras serves to inform potential bidders but does not allow yet for procurement on-line\. Although it is not yet known if as a result of SIAF and Guatecompras public expenditure is more efficient the review concludes that the expansion of the two programs constitutes a step to improving transparency and, eventually, as the public acquires more information, to increasing efficiency \. The review concludes that efficacy in achieving the objective has been substantial \. 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 review concludes that relevance of objectives and design was substantial, efficacy in achieving the objectives was modest, and rates the outcome as moderately satisfactory \. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: The review considers that risk to development outcome is moderate\. Macroeconomic risks are low, as the authorities have shown a prudent management of macroeconomic policies, with low fiscal deficits, low external debt and heir decisiveness in solving problems in the financial sector to prevent their spillover to the rest of the economy\. Microeconomic risks are also low, as the likelihood is small that the government will reverse the changes carried out in customs, tax administration, procurement and public financial management, and on the allocation of resources for social expenditures \. This is so because after the signature of the Peace Accords in 1996 a consensus has been growing that the reforms the agreements supported (and which the prior actions of the DPLs largely reflect ) are essential steps to promote growth and improve the standard of living of the poor \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: T he Bank identified relevant objectives to support, and the objectives were consistent with the Berger’s administration program and the Bank’s country assistance strategy\. The prior actions were appropriate to help deal with the problems identified, although in one instance, the investment promotion office, it is not clear why a prior action was required when no particular result was associated with it\. The Bank carried out two supervision missions for DPL 2 (although the information in the ISR and in accounting for staff time and costs does not reflect it )\. Bank staff in conjunction with personnel from the Executive office explained the nature and parameters of the loan to relevant congressional committees\. at -Entry :Satisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Satisfactory c\. Overall Bank Performance :Satisfactory 9\. Assessment of Borrower Performance: The government sought support from civil society and members of Congress for the different elements of the DPL program and carried out the actions that it had agreed to in the loan agreements\. Despite temporary setbacks caused by delays in congressional approval of actions the DPLs supported, the government maintained its focus on the program and met most of the triggers agreed\. The Ministry of Finance was the principal implementing agency and kept the DPL agenda on track \.  Progress in land administration has been uneven; land titling met the targets in the program but the cadastral survey fell short of them as a result, among others, of weak execution capacity in the Registro de Información Catastral (RIC)\. a\. Government Performance :Satisfactory b\. Implementing Agency Performance :Moderately Satisfactory c\. Overall Borrower Performance :Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: The prior actions and triggers for loans constituted the main tools to monitor the development of the program\. In general, the triggers and prior actions were well thought out and most triggers were met \. The medium-term indicators and the outcome indicators could have been designed better; some did not have a relationship with the actions taken (e\.g\., growth of nontraditional exports and FTAs), and others could have been defined with more precision to inform or measure better the expected benefits (e\.g\., land, reductions in processing time in customs, efficiency gains from better public financial management)\. a\. M&E Quality Rating : Substantial 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately See section 4 above Satisfactory Risk to Development Moderate Moderate Outcome : Bank Performance : Satisfactory Satisfactory Borrower Performance : Satisfactory Moderately See section 9 above 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: DPLs are more likely to achieve their objectives when they support the government ’s reform program and the time frame for the actions they support takes into account the political barriers to reform and the capacity of the government to carry out the reforms\. Trying to push for reforms beyond what is politically feasible may endanger the potential success of the program \. Broadly designed DPLs are more likely to be more effective when complemented with technical support from Bank-financed projects, projects financed by other International Financial Institutions,  government programs, or local institutions \. This technical support for the DPLs reviewed made it easier to achieve their development objectives in a timely manner and on a yearly schedule coordinated with the national budget\. When the government owns the reform agenda and its process, the Bank can design the program to accommodate risky environments as that ownership permits targeting other areas for reform wh en some part of the program proves intractable\. As reforms in PPP became difficult, the DPL program gave more weight to reforms in the financial sector, which needed the reforms and the government supported it\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR presents well the general development and the potential results of the program \. This review found particularly useful the section on achievement of results, with its attention to results rather than to processes\. With its analytical approach to results, though, the ICR could have explored alternative ways to elucidate impact when the results indicators of the program were inadequate to measure it (e\.g\., on FTAs or land)\. The sections on M&E and on risk to development outcomes do not match the quality of other sections of the document, and the lessons section could have been sharpened by separating findings from lessons\. The section on Bank supervision could have explained what the supervision missions did and why there is no supervision cost for DPL 2 when two supervision missions were carried out\. The overall quality of the ICR is good\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P050938

Document of The World Bank Report No: ICR00001202 IMPLEMENTATION COMPLETION AND RESULTS REPORT (Credit No\. 3698) ON A CREDIT IN THE AMOUNT OF SDR 20\.7 MILLION (US$26\.2 MILLION EQUIVALENT) TO THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA FOR THE CAPACITY BUILDING FOR DECENTRALIZED SERVICE DELIVERY PROJECT June 30, 2009 Urban/Water 1 Africa Region Sustainable Development Ethiopia and Sudan Country Department 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 = Ethiopian birr Ethiopian birr 1\.00 = US$0\.089 US$1\.00 = 11\.375 Ethiopian birr (Exchange Rate Effective June 30, 2009) ETHIOPIA FISCAL YEAR July 1­June 30 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CBDSD Capacity Building for Decentralized Service Delivery CIP Capital investment plan CSRP Civil Service Reform Program DFID U\.K\. Department for International Development EPRDF Ethiopian People's Revolutionary Democratic Front FI Financial Intermediary GTZ Gesellschaft für Technische Zusammenarbeit (German Technical Cooperation) MCB Ministry of Capacity Building M&E Monitoring and evaluation PSCAP Public Sector Capacity Building Program PSIP Performance and Service Delivery Improvement Program QAG Quality Assurance Group UDCBO Urban Development Capacity Building Office Vice President: Obiageli Katryn Ezekwesili Country Director: Kenichi Ohashi Sector Manager: Jaime Biderman Task Team Leader: Abebaw Alemayehu ICR Team Leader: Abebaw Alemayehu ii  ETHIOPIA CAPACITY BUILDING FOR DECENTRALIZED SERVICE DELIVERY PROJECT CONTENTS Data Sheet A\. Basic Information\.v B\. Key Dates \.v C\. Ratings Summary\.v D\. Sector and Theme Codes \. vi E\. Bank Staff \. vi F\. Results Framework Analysis \. vi G\. Ratings of Project Performance in ISRs \. xi H\. Restructuring (if any) \. xii I\. Disbursement Profile \. xii 1\. Project Context, Development Objectives, and Design \.1 1\.1 Context at Appraisal (brief summary of country and sector background, rationale for Bank assistance) \.1 1\.2 Original Project Development Objectives and Key Indicators \.2 1\.3 Revised Project Development Objectives and Key Indicators, and Reasons/Justification \.3 1\.4 Main Beneficiaries \.3 1\.5 Original Components (as approved) \.3 1\.6 Revised Components \.5 1\.7 Other Significant Changes \.5 2\. Key Factors Affecting Implementation and Outcomes \.6 2\.1 Project Preparation, Design, and Quality at Entry \.6 2\.2 Implementation \.8 2\.3 Monitoring and Evaluation (M&E) Design, Implementation, and Utilization \.9 2\.4 Safeguard and Fiduciary Compliance \.10 2\.5 Post-completion Operation/Next Phase \.10 3\. Assessment of Outcomes\.11 3\.1 Relevance of Objectives, Design, and Implementation \.11 3\.2 Achievement of Project Development Objectives \.12 3\.3 Efficiency \.14 3\.4 Justification of Overall Outcome Rating \.14 3\.5 Overarching Themes, Other Outcomes and Impacts \.14 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops \.16 4\. Assessment of Risk to Development Outcome\.16 5\. Assessment of Bank and Borrower Performance \.17 5\.1 Bank Performance \.17 iii  5\.2 Borrower Performance \.19 6\. Lessons Learned \.21 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \.22 Annexes Annex 1: Results Framework Analysis \.23 Annex 2: Project Costs and Financing\.28 Annex 3: Outputs by Component \.29 Annex 4: Bank Lending and Implementation Support/Supervision Processes \.35 Annex 5: List of Supporting Documents \.37 Annex 6: Summary of Borrower's ICR and/or Comments on Draft ICR \.38 iv A\. Basic Information Capacity Building for Country: Ethiopia Project Name: Decentralized Service Delivery Project ID: P050938 L/C/TF Number(s): IDA-36980,IDA-3698A ICR Date: 06/30/2009 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: TAL Borrower: ETHIOPIA Original Total XDR 20\.7M Disbursed Amount: XDR 18\.7M Commitment: Environmental Category: F Implementing Agencies: Ministry of Capacity Building Ministry of Work and Urban Development Cofinanciers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 10/03/2001 Effectiveness: 09/01/2002 01/23/2003 Appraisal: 04/19/2002 Restructuring(s): Approval: 07/23/2002 Mid-term Review: 01/31/2004 05/02/2006 Closing: 12/31/2005 12/31/2008 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: 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 Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Rating Performance any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any time Quality of Supervision Yes Satisfactory (Yes/No): (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 48 48 Other industry 2 2 Sub-national government administration 50 50 Theme Code (as % of total Bank financing) Access to urban services and housing 20 20 Administrative and civil service reform 20 20 Decentralization 20 20 Municipal governance and institution building 20 20 Public expenditure, financial management and procurement 20 20 E\. Bank Staff Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Callisto E\. Madavo Country Director: Kenichi Ohashi Ishac Diwan Sector Manager: Jaime M\. Biderman Alain R\. Locussol Project Team Leader: Abebaw Alemayehu Sumila Gulyani ICR Team Leader: Abebaw Alemayehu ICR Primary Author: Wendy Schreiber Ayres F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of the project was to enhance decentralized service delivery performance by initiating long-term public sector capacity building through institutional reforms, systems development and training at the federal, regional and local levels\. vi Revised Project Development Objectives (as approved by original approving authority) The project development objectives were not revised\. (a) PDO Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Prioritization of public expenditures at the federal level and in participating local Indicator 1 : governments Regional governments and MCB prioritized their public expenditures Value No process or methods in for capacity building quantitative or use to systematically None specified None activities; 18 cities Qualitative) prioritize expenditures prepared prioritized 5 year CIPs & then 3 year CIPs for funding under new project Date achieved 06/30/2002 11/24/2004 05/02/2006 12/13/2008 Comments (incl\. % achievement) Cost-efficiency and financial sustainability in participating federal and regional Indicator 2 : ministries, agencies, and bureaus, and local governments improved\. Federal and regional governments now use the standard bidding documents for public No process of procurement\. Value systematically assessing 18 cities have quantitative or None specified None cost-efficiency and prepared revenue Qualitative) sustainability in place\. enhancement plans & property mgt manuals to better manage public property\. Date achieved 06/30/2002 11/24/2004 05/02/2006 12/31/2008 Comments Services are being delivered more cost-efficiently\. For example, each staff member of (incl\. % the Addis Ababa Transport Authority is serving an average of 7 customers a day, achievement) compared with an average of 2\.5 customers in 2005\. Client satisfaction with services delivered by federal and regional ministries, agencies, Indicator 3 : and bureaus, and local governments improved Service delivery in Value participating quantitative or None specified None specified None government entities Qualitative) shows quantitative vii  improvement (time required to receive a service falls) or improvements in client satisfaction or both Date achieved 06/30/2002 11/24/2004 05/02/2006 12/31/2008 Comments (incl\. % achievement) Percentage of subprograms in the Borrower's national capacity building program fully Indicator 4 : financed and under implementation 11 out of 14 subprograms fully financed and under implementation (six Value under PSCAP, four quantitative or None At least 50 percent None under other Bank- Qualitative) financed projects, and one under a GTZ-supported project) Date achieved 06/30/2002 08/23/2002 05/02/2006 12/31/2008 Comments (incl\. % achievement) (b) 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 Strategic plan for CSRP implementation developed; CSRP-Coordinating Office Indicator 1 : restructured and adequately staffed; # staff in CSRP offices trained in public sector reform; media programs implemented Strategic plan for CSRP Strategic plan for implementation CSRP developed and No strategic plan in place; developed; in use; CSRP- Value Coordination office not coordination office coordination office (quantitative functioning effectively; 0 restructured and None restructured and or Qualitative) staff trained; 0 media adequately staffed; staffed; 2,000 staff programs media programs trained; media broadcast programs implemented Date achieved 06/30/2002 11/24/2004 05/02/2006 12/31/2008 Comments viii (incl\. % achievement) # regions undertaking budget information system and/or completing budget Indicator 2 : disbursement accounting; results-oriented performance management system adopted in fed institutions; # regions closing backlog accounts; # trained in public procurement 9 regions implemented budget reform; 5 ministries (and the agencies under their direct 9 regions implement supervision) and 4 budget reforms; 6 regional Value federal institutions governments are (quantitative 0 adopt performance None starting or Qualitative) mgt system; 9 implementation of regions close performance backlog accounts management system; 9 regions closing backlog accounts; 760 trained in procurement Date achieved 06/30/2002 11/24/2004 05/02/2006 12/31/2008 Comments (incl\. % achievement) # fed and regional ministries, agencies, and bureaus in Performance and Service Indicator 3 : Improvement program Value (quantitative 0 10 None 10 or Qualitative) Date achieved 06/30/2002 11/24/2004 05/02/2006 12/31/2008 Comments (incl\. % achievement) Hotline/complaint resolution system established; policy and training modules for Anti- Indicator 4 : Corruption Commission; # staff trained in audit; CSRP performance tracking facility established Hotline in place; internal reporting system for the anti- Value corruption (quantitative None None None commission in place; or Qualitative) 7 staff trained in audit; performance tracking facility framework developed Date achieved 06/30/2002 11/24/2004 05/02/2006 12/31/2008 Comments (incl\. % ix achievement) Indicator 5 : Urban development policies and strategies developed National urban development policy adopted; urban Value planning law (quantitative None None None adopted; Federal or Qualitative) Urban Good Governance Program designed and implemented; others Date achieved 06/30/2002 11/24/2004 05/02/2006 12/31/2008 Comments (incl\. % achievement) Regions issue legislation empowering municipalities; urban policies issued in 2-4 Indicator 6 : regions; financial management and human resources guidelines issued Municipal proclamations issued in all regions; 120 urban local 2 emerging regions governments to issue city Value established; 4 regions proclamations and 4 (quantitative None None adopted financial major regions to or Qualitative) management manual; issue revised city 8 regions adopted proclamations human resources guidelines; urban polices issued in 4 major regions Date achieved 06/30/2002 11/24/2004 05/02/2006 12/31/2008 Comments (incl\. % achievement) Number of federal and regional and local government staff trained in urban issues; Indicator 7 : master#s program in urban management established 10,000 staff and councilors trained in urban development; Value master's program in (quantitative None None None urban management or Qualitative) established at Ethiopian Civil Service College Date achieved 06/30/2002 11/24/2004 05/02/2006 12/31/2008 Comments (incl\. % achievement) Indicator 8 : # of infrastructure projects completed x Value 10 projects (quantitative None 17 None completed, and 4 or Qualitative) underway Date achieved 06/30/2002 11/24/2004 05/02/2006 12/31/2008 Comments (incl\. % achievement) Indicator 9 : Restructuring completed in 16 municipalities (4 regions) Restructuring underway in 70 Restructuring reform towns with a Value completed in 16 more concentrated (quantitative None None municipalities (4 effort in 18 towns\. or Qualitative) regions) Four major regions are restructuring their cities Date achieved 06/30/2002 11/24/2004 05/02/2006 12/31/2008 Comments (incl\. % achievement) Ministry of Capacity Building: # staff trained in program management, procurement, Indicator 10 : planning and accounting; equipment and systems for implementation of National Capacity Building Program 29 staff trained, of whom 23 are still Value working at the (quantitative None None None ministry; office or Qualitative) equipment procured and put into use Date achieved 06/30/2002 11/24/2004 05/02/2006 12/31/2008 Comments (incl\. % achievement) G\. Ratings of Project Performance in ISRs Date ISR Actual Disbursements No\. DO IP Archived (USD millions) 1 10/11/2002 Satisfactory Satisfactory 0\.00 2 04/14/2003 Satisfactory Satisfactory 1\.25 3 10/14/2003 Satisfactory Unsatisfactory 1\.54 4 04/13/2004 Satisfactory Unsatisfactory 2\.05 5 05/27/2004 Satisfactory Unsatisfactory 2\.05 6 11/24/2004 Satisfactory Unsatisfactory 2\.49 7 04/28/2005 Satisfactory Satisfactory 3\.12 8 12/20/2005 Satisfactory Satisfactory 6\.44 9 06/30/2006 Satisfactory Satisfactory 7\.86 10 12/12/2006 Satisfactory Satisfactory 12\.91 11 06/13/2007 Satisfactory Satisfactory 16\.20 xi  12 11/21/2007 Satisfactory Satisfactory 19\.31 13 03/01/2008 Satisfactory Satisfactory 21\.99 14 07/15/2008 Satisfactory Moderately Satisfactory 24\.20 15 12/30/2008 Satisfactory Satisfactory 25\.18 H\. Restructuring (if any) Not applicable\. I\. Disbursement Profile xii 1\. Project Context, Development Objectives, and Design 1\.1 Context at Appraisal (brief summary of country and sector background, rationale for Bank assistance) Country and sector background\. At the time when the project was being prepared in the early- 2000s, Ethiopia was in the process of a major political transformation\. The Ethiopian People's Revolutionary Democratic Front (EPRDF) in 1991 had defeated the previous government after a protracted civil war and formed a transitional government\. The country adopted a new constitution in 1994 that established Ethiopia as federal republic and granted considerable powers to nine semi-autonomous ethnically-based regional authorities\. Ethiopia held its first multi-party elections the following year, leading to large victories for the EPRDF\. The EPRDF in 2000 again achieved a broad electoral victory\. This gave it the mandate to move forward with comprehensive reforms aimed at rapidly improving the delivery of public services, enhancing capacity of regional and local authorities to execute their new responsibilities, and unleashing the potential of the private sector to drive economic growth essential to reduce poverty\. Recognizing that such a radical departure from the central planning model of the previous regime would require considerable institutional change and capacity building, the authorities in 2001 launched a comprehensive National Capacity Building Program--a wide-ranging and ambitious program backed by the highest levels of government--and established the Ministry of Capacity Building in 2003 to lead implementation of the program\. They also sought advice and financial assistance from development partners, including the World Bank, to design and support implementation of the program\. The government originally envisaged the Bank-financed Capacity Building for Decentralized Service Delivery (CBDSD) project as laying the foundation for the much larger Public Sector Capacity Building Program (PSCAP), which would rapidly follow\. Specifically, the CBDSD project would develop prototypes for policies and institutions (which regional administrations and urban local governments could adapt for their own circumstances) and pilot various approaches to building capacity of local administrations for delivering services\. The lessons learned from the CBDSD project would then inform the design of the PSCAP, which would follow within a few years\. Rationale for World Bank involvement\. The World Bank's involvement in the project was valuable for several reasons\. First, the Bank's global experience with public sector capacity building and decentralized service delivery helped to inform the overall design of the project\. Second, the Bank's knowledge of country-specific issues gained through the preparation of several important pieces of analytical work--the 1999 regionalization study, the 2000 review of the Civil Service Reform Program, the 2000 public expenditure review, the 2001 rapid assessment of municipal decentralization, and the 2001 woreda study--assisted in ensuring that the project suited Ethiopian circumstances\. Third, the Bank's experience in Ethiopia with demand-driven models for providing assistance, particularly at the local level (for example, through the Ethiopia Social Rehabilitation and Development Fund and the Emergency Recovery Program), helped in persuading the authorities to include funds to be made available to municipalities upon presentation of an acceptable proposal\. Fourth, the Bank's involvement helped to leverage assistance for government's program from other development partners, including the U\.K\. Department for International Development (DFID), the European Commission, United Nations Development Program, United States Agency for International Development, Canadian International Development Agency, German Technical Cooperation, the Government of Italy, and Swedish International Development Agency\. Indeed, DFID contributed to the preparation of the CBDSD project\. Contribution to higher-level objectives\. The project was a key element of the Country Assistance Strategy (CAS), discussed by the World Bank's Board of Directors on April 17, 2003, which was built around four pillars: pro-poor growth, human development, governance, and vulnerability\. In particular, it supported the CAS pillar to improve governance, which was to be achieved by, among other things, supporting the reform of the public sector systems (including financial management and justice system reforms) and capacity building, and deepening and strengthening decentralization to shift decision making closer to the citizens\. The Bank's CAS was itself aligned with the government's development program, known as the Sustainable Development and Poverty Reduction Program\. This was built around four pillars: (a) agricultural development-led industrialization and food security; (b) governance, decentralization, and empowerment; (c) reform of the justice system and the civil service; and (d) capacity building\. The project was again a major element of the Interim Strategy Note, discussed by the Bank's Board of Directors on May 25, 2006\. This specified deepening of Ethiopia's core governance program as a major objective of the Bank's engagement in the country\. 1\.2 Original Project Development Objectives and Key Indicators The development objective of the project was to enhance decentralized service delivery performance by initiating long-term public sector capacity building at the federal, regional, and local levels\. The project was envisaged as a first phase of long-term support from the International Development Association to enhance service delivery performance through a coordinated program of: (a) implementing civil service reforms, (b) restructuring and empowering local governments, and (c) strengthening of the Ministry of Capacity Building\. The Project Appraisal Document and the Development Credit Agreement specified four key performance indicators\. These were: Improved prioritization of public expenditures at the federal level and in participating local governments\. Increased cost-efficiency and financial sustainability in participating federal and regional ministries, agencies and bureaus, and local governments\. Improved client satisfaction with services delivered by participating federal and regional ministries, agencies and bureaus, and local governments\. Fifty percent of the subprograms in the National Capacity Building Program are fully financed and under implementation\. 2 A table in annex 1 further elaborates the project's logical framework\. The table however does not contain quantitative baseline or target values for the first three of the key indicators\. This was not unusual for projects prepared before 2004, when the detailed results framework replaced the logframe in Project Appraisal Documents\. 1\.3 Revised Project Development Objectives and Key Indicators, and Reasons/Justification Neither the project's development objectives nor key performance indicators were formally revised during implementation\. However, the intermediate outcome/output indicators were revised following the QAG quality of supervision review in September 2004 to include more detailed and measurable indicators\. The revised intermediate outcome indicators are presented in annex 1, table b\. 1\.4 Main Beneficiaries (original and revised; briefly describe the "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 primary target beneficiaries were the civil servants and their respective agencies at the federal, regional, and local levels; civil society groups interested in enhancing good governance; public and private training institutions; and providers of local public services\. Over the longer term, the people receiving services from the entities participating in the project were expected to benefit from more efficient and effective service delivery\. 1\.5 Original Components (as approved) The project comprised three components: (a) implementing civil service reforms, (b) restructuring and empowering local governments, and (c) strengthening the Ministry of Capacity Building\. Component 1: Implementing civil service reforms (US$13\.1 million)\. This component was to finance the implementation of the government's Civil Service Reform Program at the federal, regional, and local levels\. Subcomponents included: Civil Service Reform Program coordination and change management\. This subcomponent was to provide technical assistance and capacity building support for the newly-established coordinating office in the Ministry of Capacity Building\. It also supported local and international training events and study tours for key civil servants on issues related to public sector reform and decentralization, and dissemination of information related to the Civil Service Reform Program\. Resource management and control\. This subcomponent was to finance the roll-out of the budget information system and the interim budget, disbursement, and accounts system in federal institutions and regional finance bureaus to serve as a transitional step in the development of an integrated financial management information system\. It also was to finance procurement training at the regional and federal levels, strengthening of existing treasury operations, advisory 3 support to strengthen management of human resources, and the development of a federal-level human resource information management system\. Performance and service delivery improvement\. This subcomponent was to finance the development of a basic framework for a performance and service delivery improvement program\. In addition, it was intended to support the implementation of the program in ten pilot government entities (five federal and five regional entities) and the preparation of an operational manual for scale-up that was based on the experiences of the entities participating in the pilot program\. Accountability and transparency\. This subcomponent was to finance the development and testing of models for accountability and transparency (such as parliamentary oversight, and the development of the accounting and auditing profession)\. Eligible activities included training in techniques of monitoring and evaluation, such as expenditure tracking surveys, cost efficiency studies, service delivery report cards, and governance surveys\. This subcomponent also was to support the development of an operational manual to assist in the running of a performance tracking facility\. Finally, the subcomponent was to finance piloting of innovative mechanisms of community and civil society participation in public sector performance\. Component 2: Restructuring and empowering local government (US$14\.9 million)\. This component was to finance activities to build the capacity of local governments to improve delivery of services\. Assistance was targeted to local governments that were already financially sound and that had some capacity to deliver services\. Strengthened municipalities could then serve as models for others\. Subcomponents included: Federal and regional policy and analysis\. This subcomponent was to support technical assistance for formulation of policies and strategies to strengthen local governments\. It also was to provide financial support and technical assistance for implementation of the policies and strategies\. Regional technical assistance for deepening decentralization\. This subcomponent was to finance activities to enable two to four regions to fulfill their responsibilities in a decentralized system\. Specifically, it was to cover the design and establishment of regional-level legislative, administrative, fiscal, and institutional frameworks, with an emphasis on clarifying intergovernmental fiscal relations\. This subcomponent also was to finance training in basic skills for staff of regional and local government entities\. Local government restructuring and capacity building\. This subcomponent financed activities aimed at building capacity of pilot local governments (municipalities and woredas) in the target regions to deliver services in an efficient, accountable, and financially sustainable manner\. Pilot investments for infrastructure rehabilitation\. This subcomponent was to finance rehabilitation of existing infrastructure at the local level to facilitate capacity building through learning-by-doing\. Lessons learned from the experiences would also inform the design of a follow-on operation\. 4 Component 3\. Strengthening the Ministry of Capacity Building (US$1\.2 million)\. This component was to finance technical assistance to help the Ministry of Capacity Building--a ministry created in 2001 to coordinate the development and implementation of the government's National Capacity Building Program--fulfill its responsibilities\. Aspects included expertise to help design capacity building programs and strategies; expertise to design and help implement ministry human resource, financial management, and other systems; study tours and training for ministry staff in all aspects of program management; and equipment to operate the ministry\. 1\.6 Revised Components The components were not revised\. 1\.7 Other Significant Changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) The project's design, implementation arrangements, schedule, and funding allocations were adjusted during the course of implementation to reflect changing country priorities and lessons learned from the early years of project execution\. Of great importance was the government's decision announced in May 2003 to rapidly scale up the implementation of its core reform and capacity building interventions under the PSCAP\. This program was a much larger initiative than the CBDSD intervention (US$400 million, of which the World Bank provided US$100 million) and absorbed many of the activities originally included in component 1 of the CBDSD project\. These included the rollout of budgetary and personnel management systems, consultancies for job classification and grading and the development of a medium-term pay and employment policy, the dissemination of materials on the civil service reform program, and others\. New activities were added for financing under the CBDSD project, including the preparation of a government property asset management manual and related training, production of satellite images and base maps for 15 towns, training of front-line providers of services to micro and small enterprises, additional infrastructure, and others\. All new activities were part of the government's National Capacity Development Program and support for them was conceived of as part of an overall sectorwide approach\. The project closing date was extended twice\. The first extension of two years from December 31, 2005 to December 31, 2007 was granted to allow completion of major technical assistance contracts (specifically, deepening decentralization), for infrastructure rehabilitation activities to be designed and constructed, and for performance and service delivery improvement program (PSIP) proposals to be implemented\. The second extension to December 31, 2008 was given to enable towns to complete civil works and benefit from the experience of participating in all phases of infrastructure project implementation (execution of civil works was delayed due to a limited number of interested bidders, the lack of competitive bids, and the need to renegotiate the scope of works with the cities, given rising costs of fuel, cement, and other critical inputs)\. The Development Credit Agreement was amended twice\. The first amendment of April 2006 reallocated credit proceeds from component 1 (implementing civil service reforms) and component 3 (strengthening the ministry of capacity building) to component 2 (restructuring and 5 empowering local governments), in recognition that many of the activities under component 1 and 3 were being financed under PSCAP and related projects, while activities for urban development could effectively absorb additional resources for municipal infrastructure to enhance opportunities for learning by doing\.1 Reflecting the increasing share of funding being managed by the Urban Development Capacity Building Office (UDCBO) (US$24 million of some US$30 million by May 2006), the 2006 amendments gave full responsibility to this office for execution of component 2 activities and established a second special account to allow it to manage component 2 funds\. The second amendment of December 2007 reallocated more funds to component 2 (by this time, most component 1 and 3 activities had been completed and any funds not already committed were made available to component 2)\. This amendment also granted responsibility to the UDCBO for overall coordination of project activities, including submission of consolidated audit reports and financial monitoring reports\. The Ministry of Capacity Building retained responsibility for components 1 and 3, which by the end of 2007 were largely complete\. The changes were widely discussed with the stakeholders and were approved by Bank management, because they strengthened the ability of the project to meet its objectives\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design, and Quality at Entry (including whether lessons of earlier operations were taken into account, risks and their mitigation identified, and adequacy of participatory processes, as applicable) QAG­No QAG at entry\. Several factors of the preparation and design positively affected implementation\. The background analysis was sound\. The project was based on several pieces of analytical work focusing on Ethiopia (such as the rapid assessment of municipal decentralization and the woreda decentralization study) in addition to studies by global experts in decentralization and public sector capacity building\. These studies led to the decision to concentrate support on a relatively few well-performing local governments, which could then receive the critical support they needed to rapidly improve services and serve as models for others\. They also supported an approach of strengthening local governments in relation to regional and federal government entities to bring service delivery closer to the citizens\. The design recognized that empowering local governments to effectively deliver services would require a sequenced set of reforms: first policy reform, second institutional strengthening, and third training, capacity support, and opportunities for learning by doing\. The Project Appraisal Document noted alternative approaches, the trade-offs between them, and the rationale for the final decisions\. The document generally foresaw the risks the project would face and identified adequate mitigation measures, although it underestimated the risks associated with the project's complex design and its short implementation period\. A thorough appraisal of procurement and financial management arrangements helped to ensure that resources were used 1 The amendment also explicitly named infrastructure rehabilitation works as eligible subprojects (in addition to training and capacity building activities), since the development credit agreement had inadvertently omitted them as eligible subprojects, although it explicitly included them in the project description\. 6 as intended\. The project was classified appropriately as environmental category Financial Intermediary (FI), because of the potential environment risks associated with the as-yet to be identified municipal infrastructure\. Procedures were put into place to ensure that such risks were properly identified and that measures to mitigate them were put into place\. By the time of Board presentation the project implementation plan had been appraised and found to be realistic and of satisfactory quality\. Conditions of effectiveness were appropriate\.2 The Development Credit Agreement included only the standard financial covenants, which was suitable\. In summary, the design was generally appropriate to address the profound changes in government structure brought about with the adoption of the 1995 Ethiopian constitution\. The urban policies developed and implemented under this project--the national urban development policy, the new urban planning law, and the preparation and issuance of city proclamations establishing 120 municipal governments--are seminal reforms that have laid the foundation for restructured and empowered local governments to respond effectively to the challenges and opportunities of urbanization\. However, the project design suffered from several weaknesses at entry\. The first was the project's unrealistically short implementation period, which was just three years\. Although the project was originally designed with a five-year implementation period, the government proposed keeping the implementation period extremely short in recognition that PSCAP, once approved, would be the government's primary vehicle for building public sector capacity\. However, implementing such a complex project as the CBDSD project in just three years proved optimistic, leading to two extensions of the closing date and a total implementation period of six years\. A second major weakness was a design that was too complex given the implementation capacity in Ethiopia\. The project included two implementing agencies (the Ministry of Capacity Building and the UDCBO of the Ministry of Federal Affairs) and hundreds of relatively small consultancies and activities, which overwhelmed capacity of the implementing agencies to procure goods and services, to manage contracts, to disseminate and make use of the findings of studies and technical assistance, to coordinate activities across ministries, and to monitor and evaluate implementation and results\. A third weakness was the lack of specificity of a large proportion of project activities\. Over 75 percent of project funds were targeted for subprojects that would be implemented by government entities on a demand-driven basis\. Yet, three years is much too short a time to develop and disseminate information about eligibility criteria, invite and evaluate proposals, and ensure that projects are implemented in compliance with World Bank safeguard policies and Ethiopian rules 2 Conditions of effectiveness were: (a) the Borrower has established an accounting and financial management system for the project opened the Project Account and has deposited the required initial amount; (c) the Borrower has adopted the project implementation plan in form and substance satisfactory to the Association; (d) the Borrower has prepared the procurement plan for the first year of Project implementation, satisfactory in form and substance to the Association; (e) the Borrower has appointed to the staff of Ministry of Capacity Building at least one procurement specialist and one financial management officer with experience and qualifications satisfactory to the Association; and (f) the letter of undertaking for the implementation of component 2 of the Project has been entered into between Ministry of Capacity Building and the Ministry Federal Affairs in the form and substance satisfactory to the Association\. 7 and procedures\. Other activities were not well defined\. For example, the options for training of regional and local government staff were still being appraised at the time of Board presentation\. A fourth deficiency relates to weaknesses in the monitoring and evaluation (M&E) framework\. Although the project incorporated an M&E framework to track project implementation progress and outcomes, the project logframe contained poorly-specified indicators and lacked baseline and target values\. The 2004 QAG assessment of quality of supervision noted the weaknesses in the project's M&E framework, and proposed that the Bank team identify more specific and practical indicators that would provide a more robust basis for discussions about improvements in implementation progress\. 2\.2 Implementation (including any project changes/restructuring, midterm review, project at risk status, and actions taken, as applicable) The Bank responded to start-up challenges with intensive supervision, and downgraded the project's rating for implementation progress to unsatisfactory in October 2003\. This led to the government accepting the need for external assistance for project management and for help with technical issues\. Once the specialists had been hired, performance improved\. However, implementation arrangements, despite improvements following the midterm review, were never optimal\. The division of responsibilities between the Ministry of Capacity Building and the UDCBO made coordination of overall project management cumbersome\. Moreover, the Ministry of Capacity Building did not prioritize the CBDSD project, focusing instead on the preparation and implementation of PSCAP\. During the first three and a half years of its life the project was moved between three directorates at the ministry and had five coordinators\. The changeovers were not accompanied by proper briefings and new coordinators typically had to ask the Bank team for the key project documents\. The ministry also failed in the early years to fulfill its agreements to hire financial management, procurement, monitoring and evaluation, and other project specialists\. Although these issues were discussed at length during the midterm review, and the Bank advised the government to give full management and coordination responsibility to the UDCBO (which by then was managing 80 percent of the project funds), the government instead offered to (finally) fully staff the project implementation team at the Ministry of Capacity Building and to give UDCBO control of all aspects of component 2\. However, despite the personal assurances of the minister, the Ministry of Capacity Building was never able to effectively carry out its responsibilities as overall project coordinator and manager\. The project's success is due to a large extent to the consistently good performance of the UDCBO\. The midterm review provided a comprehensive analysis of implementation challenges and presented a detailed action plan to address them\. It also appropriately recommended that overall project management responsibility be shifted to the UDCBO, a recommendation that the Ministry of Capacity Building rejected\. However, it did not recommend a formal restructuring, although the project may have benefited from dropping components 1 and 3, whose activities could be funded by PSCAP, and shifting resources to component 2\. The team decided to continue with all three components because several activities were underway at the time of the midterm review (particularly the performance and service delivery improvement program) that would have been 8 disrupted if components 1 and 3 were cut\. Revisions to project design following the midterm review were made through amendments to the Development Credit Agreement, because the project's development objectives and components did not change\. Several positive aspects of implementation are worth noting\. The government and Bank teams proactively tackled issues as they emerged\. For example, once PSCAP became effective and absorbed many of the activities identified for funding under component 1 of the CBDSD project, the teams identified new activities for funding consistent with a sectorwide approach\. In addition, the Bank appropriately responded to the government's request to reallocate credit proceeds to measures to strengthen local government and to give full responsibility for implementation of component 2 to the UDCBO\. Supervision from the Bank's country office in Addis Ababa was critical in providing the government with timely advice on procurement, financial management, monitoring and evaluation, and other project management issues\. The procurement, financial management, and reporting performance of the UDCBO was consistently highly satisfactory\. The Bank's collaborative relationship with GTZ's urban specialists ensured that the resources of both organizations were directed at achieving common objectives\. Thus, GTZ advisors based in the four regional capitals helped to provide day-to-day support for development of cities' capacity to deliver services\. This close partnership is continuing under the new Urban Local Government Development Project\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation, and Utilization Design\. The Project Appraisal Document included a logframe in annex 1 with both outcome and intermediate output indicators\. However, the logframe reflects several weaknesses\. For example, it does not contain baseline or target values for three of four outcome indicators\. Nor does it adequately specify the sources of information for tracking the indicators, instead offering the types of documents that might contain useful information (such as public expenditure tracking reviews, client and household surveys, and cost-efficiency surveys)\. Moreover, the logframe does not indicate the agencies that would be responsible for collecting and analyzing data\. The Project Appraisal Document does not discuss monitoring and evaluation arrangements, nor does it include the administration of surveys or other data collection instruments as activities to be covered under project finance\. It does however include funding for the preparation of an operations manual for a performance tracking facility and the hiring of a performance tracking specialist as part of the project team in the Ministry of Capacity Building\. Outputs were not initially well-specified, because so many of the activities were not known prior to Board approval\. Implementation\. Recognizing the lack of specificity in the outcome indicators and sources of information, and based on the recommendations of the QAG review of the quality of supervision, the project team identified and reported on reasonable proxies during the course of implementation\. Although not financed under the CBDSD project, the teams were able to draw on information from client satisfaction surveys conducted under PSCAP and other initiatives to assess improvements in delivery of services by entities benefiting from the project\. The team also tracked a set of output indicators that is more comprehensive than that presented in the logframe of the Project Appraisal Document, presenting the values in quarterly and annual 9 progress reports\. The Bank team reported the findings in the aide memoires and implementation supervision reports\. Utilization\. The government and Bank teams used the monitoring information to identify areas of particular challenge and to develop measures to address them\. Specifically, the teams noted the challenges in implementing many of the activities under components 1 and 3\. As a result, they intensified their dialogue with the Minister of Capacity Building and, ultimately, reallocated project funds away from the management of the ministry\. They also improved their coordination with the PSCAP team to ensure that activities complemented each other\. In addition, they observed the lags in initiating and completing many of the small infrastructure projects, and stepped up supervision in this area\. The government agencies that carried out client satisfaction surveys or other methods to assess performance consistently used the information to enhance service delivery\. For example, St\. Stephen's Tuberculosis Hospital used the results to improve its procedures for registering patients upon arrival and directing them to appropriate offices\. 2\.4 Safeguard and Fiduciary Compliance The project complied with all safeguard and fiduciary policies\. Project accounting and auditing have consistently been conducted in accordance with the Development Credit Agreement, although with some delays\. The most recent audit report was submitted on time and was unqualified\. The team satisfactorily managed the environmental and social aspects of the project\. The local governments included in their project application forms an assessment of the potential adverse environmental and social impacts of the proposed interventions and measures to be taken to mitigate the impacts\. The regional governments and the UDCBO reviewed this information before approving the projects, seeking more information and stronger mitigation measures where necessary\. Contracts included mitigation measures\. The local governments monitored their implementation, reporting on compliance in their periodic progress reports\. The project complied with all social safeguards\. One challenging issue arose as a result of a project- financed survey of settlements in Makelle that revealed the presence of about 13,600 families living informally on public land\. In response to the information, the municipal government initially agreed to formally recognize the right to occupy the plots of only those households that could prove they had been living there prior to 2004\. This left the status of 600 in doubt\. Following extensive discussions with the Bank team regarding their status, the government decided to formally grant all the families the right to occupy the plots\. 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) As intended, the CBDSD project has served as the basis for two Bank-financed follow-on projects: the PSCAP approved in fiscal 2004 (US$400 million) and the Urban Local Government Development Project (US$150 million) approved in fiscal 2008\. The PSCAP, which is being managed by the Ministry of Capacity Building, is a nationwide program that supports civil service reform, decentralization, urban management and development, tax system reform, justice sector reform, and information and communications technology\. It is leveraging significant 10 development partner assistance, which is being harmonized under a sectorwide approach\. The Urban Local Government Development Project, managed by the UDCBO, is further strengthening the 18 urban local governments that were the focus of the CBDSD project through the provision of grants based on achieving specific performance criteria\. Both projects are aimed at ensuring the gains achieved so far in public sector capacity building are sustained and scaled up\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design, and Implementation (to current country and global priorities, and Bank assistance strategy) Objectives\. The project's overall objectives were, and remain, relevant\. They reflect the importance of strong public sector capacity at all levels of government to effectively deliver services and to achieve development results\. As mentioned in section 1\.1, the project's objectives are consistent with the objectives of Ethiopia's 2001 National Capacity Building Program, itself a central element of Ethiopia's Sustainable Development and Poverty Reduction Program\. They are also in conformity with the objectives of the Bank's 2003 CAS and its 2006 Interim Strategy Note, both of which explicitly identify capacity building as a critical goal\. Design\. The design was and remains relevant\. Despite the design weaknesses noted in section 2\.1, the overall design was appropriate to support the substantial institutional reform and capacity building required to enable local governments to successfully deliver the services for which they were newly responsible and to support the initial phase of a long-term public sector capacity building at the federal, regional, and local levels\. The design was based on analytical work carried out in Ethiopia (the 1999 regionalization study, the 2001 woreda decentralization study, and others) and in other countries\. These studies show that strengthening decentralized service delivery requires civil service reforms at all levels of government (supported under component 1), and strengthening of capacity at the municipal level through learning by doing (supported under component 2)\. Thus, activities supported under component 1--the overarching strategic plan for civil service reform, the development of the PSIP manual, the development of a results oriented performance management system for the different tiers of government, and the design and adoption of standard bidding documents to be used at all tiers of government as part of the implementation of the new national procurement law--created the foundation for decentralized service delivery\. In addition, studies indicate that providing some resources on a demand-driven basis is an effective approach to building capacity of local governments operating in a decentralized system\. Finally, analytical work demonstrates that focusing limited resources on a few relatively strong municipalities is more likely to achieve results than spreading the resources thinly over many cities and towns\. Implementation\. Implementation arrangements were relevant at the time the project was prepared and were appropriately adjusted during implementation in response to changing circumstances\. The new Ministry of Capacity Building established to lead the implementation of the government's National Capacity Building Program was the obvious choice to manage the CBDSD project in its early years\. Including the UDCBO as the agency to implement activities aimed at urban development also made sense, because this agency had considerable experience 11 in working with local governments, even though UDCBO was housed in a different ministry (the Ministry of Federal Affairs, and subsequently in late 2005, in the newly created Ministry of Works and Urban Development)\. Implementation arrangements were changed several years after the start of the project to give a greater role for the UDCBO in executing the project\. This reflected both the strong performance of the UDCBO and the project's increasing focus on component 2 activities\. Adapting the project's implementation arrangements, extending its closing date, and shifting resources to component 2 ensured that the design remained relevant throughout the project's implementation period in supporting decentralized service delivery\. 3\.2 Achievement of Project Development Objectives (including brief discussion of causal linkages between outputs and outcomes, with details on outputs in annex 4) The project broadly achieved its development objectives of enhancing decentralized service delivery performance by initiating long-term public sector capacity building at the federal, regional, and local levels\. Activities aimed at reforming institutions; developing operational, financial management, and procurement systems; and building staff skills have been completed, and most targets met\. The national urban development policy and urban planning law are under implementation nationwide\. Some 120 urban local governments have been created in a context where autonomous local urban authorities were virtually nonexistent\. Through participation in all aspects of the project cycle, the 17 participating cities have gained experience through learning-by -doing in planning, prioritizing options with public participation, and appraisal of proposed projects\. They have also benefited from close collaboration with the UDCBO in all stages of project implementation (issuing requests for proposals, selecting consultants, procuring contractors, managing contracts, and the like)\. The outcome indicators have been substantially achieved\. Specifically: Prioritization of expenditures\. Participating federal ministries and bureaus and local government entities are now prioritizing their expenditures, something they had not done prior to the project\. For example, the Ministry of Capacity Building and all regional governments prioritized their public expenditures for capacity building activities through extensive consultations with local governments and with sectors\. The 17 cities undertaking small infrastructure investments have prioritized their choices through a participatory process that included consultations with stakeholder groups (women, youth, elders, teachers' associations, and others) of each kebele in the cities\. In addition, 18 cities prepared prioritized 5-year and then 3-year capital investment plans, which they are implementing under the Urban Local Government Development Project\. Financial sustainability and cost-efficiency\. The federal government and all regional governments now use the standard bidding documents and procurement procedures for all public procurement\. It is generally accepted that use of standard bidding documents results in greater transparency and value for money in procurement\. Some 18 cities have prepared revenue enhancement plans, undertaken public asset inventories, developed property management manuals, and established a unified financial management system to increase revenues and ensure financial sustainability\. In addition, the 18 cities have prepared municipal restructuring and performance improvement plans under the project, 12  which are being implemented under the government-financed Urban Good Governance Program\. Revenues in the participating cities have already risen substantially\. For example, revenues mobilized by the city of Hawassa have risen from 12 million birr in 2005 to 25 million birr in 2007\. Revenues of Arba Minch have risen from 16\.1 million birr in fiscal 2008 to 20\.1 million birr in 2009\. This picture is similar for each of the 18 cities\. Services are also being delivered more cost efficiently\. For example, each staff member of the Addis Ababa Transport Authority is serving an average of 7 customers a day, compared with an average of 2\.5 customers in 2005\. Moreover, monthly revenue of the authority has increased from 14 million birr in 2005 to 16 million birr in 2008\. Improved service delivery\. Service delivery performance in all the agencies for which data are available has improved, in some cases dramatically so\. For example the Federal Revenue and Customs Authority, which registers new businesses, reports that the average time taken to register a new business has fallen substantially\. This improvement is corroborated by the World Bank/IFC Doing Business reports, which show that the time required to start a business dropped from 32 days in 2005 to 16 days in 2008\.3 Doing Business also shows that the time taken to register a property has decreased from 56 days in 2005 to 43 days in 2008\. In addition, the customs authority has reduced the time needed for customs clearance from eight hours to one hour by establishing satellite offices at key import points\. Improvements in service delivery are equally impressive in the Addis Ababa Transport Authority\. The time required to obtain a license has declined from four hours in 2005 to 20 minutes in 2008 and the time needed to register a new vehicle has fallen from one day to one hour over the same period\. In addition, the number of customers that the authority serves has risen to 3,000 per day in 2008 compared with 1,000 per day in 2005 (staff have risen from 400 to 440 over the same period)\. The National Archives and Library also demonstrates improved services, according to interviews of staff and clients carried out during the final supervision mission of the project\. As one example, the time required to check out a book has declined over time\. Although causality is not possible to prove, the improved services have likely contributed to an increase in users from 80,000 in 2006/07 to 120,000 users in 2008\. Client satisfaction surveys for agencies that have carried them out show rising customer contentment\. For example, surveys of patients of St\. Peter's tuberculosis hospital demonstrate that the average time required to see a medical professional has dropped and that patients are generally more satisfied with services than in the past\. The Drug Administration and Control Authority has reduced the time required to issue and renew a license from eight days to one day by decentralizing its operations to five regional offices\. Although not necessarily representative of all users, comments left in suggestion boxes of agencies that have received support under the project show a marked increase in satisfaction\. For example, 90 percent of the comments provided to a one-stop-shop for micro small and medium size enterprises in Hawassa expressed great pleasure with the quality of services offered\. The owner of a medical clinic came to the one-stop-shop to renew his license, and wrote that he had received "exceptional treatment;" another client 3 Doing Business\. Various years\. International Bank for Reconstruction and Development\. Washington, D\.C\. Available at www\.doingbusiness\.org\. 13  noted the "modern and effective" services; another stated "with your support, you have directed me to lead my own life and that of my family\." City benchmarking surveys, undertaken under PSCAP also show improvements in service delivery at the local level\. Financing and implementation of subprograms of the National Capacity Building Program\. This is an indicator intended to demonstrate that support to the Ministry of Capacity to enable it to coordinate the National Capacity Building Program has been effective\. Capacity of the ministry has indeed been created, and by end of December 11 of 14 subprograms in the Borrower's National Capacity Building Program are fully financed and under implementation--six under PSCAP, four under other the Bank- financed projects (Financial Sector Capacity Building, Rural Capacity Building, Private Sector Development Capacity Building, and Post Secondary Education)\. GTZ is supporting capacity building of the construction industry\. The project's substantial intermediate outcomes and outputs are described in detail in annex 3\. 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) Not applicable\. The Project Appraisal Document did not present economic or financial analyses for the project\. This is appropriate since the project focused on capacity building and technical assistance\. 3\.4 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs, and efficiency) Rating S Achievement of the objectives of the project is rated satisfactory\. The project objectives, design, and implementation arrangements were and remain relevant\. This is demonstrated through the scaling up of efforts to strengthen decentralized service delivery through two Bank-financed follow-on projects, PSCAP and Urban Local Government Development\. The project largely achieved its development objective, although with delays\. High relevance and satisfactory achievement of objectives justifies an overall outcome rating of satisfactory for the project\. 3\.5 Overarching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above) In the process of planning and implementing small infrastructure projects, 17 urban local governments have gained experience through learning-by-doing in investment planning, in prioritizing of expenditures through public consultation, in procurement, and in contract administration\. This experience has enabled the cities to undertake larger infrastructure projects using the funds under their responsibility (including contributions of the Urban Local Government Development Project)\. For example, Wolayita Sodo and Dilla are currently upgrading over ten kilometers of local roads each\. Shire, Axum, Arba Minch, and Dessie are constructing improved drainage systems\. Arba Minch and Bishoftu are upgrading their markets\. 14 Most cities are constructing cobblestone roads through labor-intensive techniques\. The managers of cities visited by the Bank team emphasized that the capacity built under the CBDSD is the main reason why cities are now able to undertake these projects\. They also noted that a wide range of city staff--including the cities' managers, planners, engineers, economists, procurement specialists, accountants, and auditors--developed new skills through their participation in the various aspects of project management, which they are now using in the service of their cities' development\. Prior to undertaking these investments, none of the 17 cities had had experience implementing large infrastructure projects\. (a) Poverty impacts, gender aspects, and social development The Project Appraisal Document noted the importance of improving services for the poor and for women, two disadvantaged groups in Ethiopia\. However, the project did not target these groups in selecting beneficiary entities or project activities\. None-the-less, improved public services will certainly benefit low-income people and women, as these groups are least able to afford private substitutes\. The project's measures to promote broad citizen participation in selecting projects and in overseeing their implementation is likely increasing the transparency and accountability of resource use, and social development more broadly\. (b) Institutional change/strengthening (particularly with reference to impacts on longer-term capacity and institutional development) The project helped to bring about key policy and institutional reforms aimed at increasing the effectiveness and efficiency of public sector service delivery\. It supported the formulation and adoption of several important laws and implementing regulations\. These included the national urban development policy approved by the Council of Ministers and now under implementation in all nine regions and the two chartered cities\. It also comprised the urban planning law, which was gazetted in May 2008, and the federal framework for a land information system, which in April 2009 was being reviewed by the Office of the Prime Minister\. It is expected to be submitted to parliament for approval in September 2009\. The project supported the preparation of the integrated infrastructure policy and the federal housing policy, which are in the final stages of approval\. In addition, it assisted the preparation and issuance of city proclamations that lay out the roles and responsibilities of 120 municipal governments\. The project also brought about important institutional changes\. It supported the restructuring of the current Federal Urban Planning Coordination Bureau to clarify its responsibilities in relation to those of the regional urban planning institutes and increase its effectiveness\. It played a key role in establishing the accredited master's program in urban management at the Ethiopian Civil Service College, which by end 2008 had conferred graduate degrees to some 400 students, nearly all of whom are serving as specialists in the city, regional, or federal government\. Another 1,000 students are currently enrolled in the program\. This is one of the project's notable achievements\. Students are required to serve in a local government's administration for five years following successful completion of the program, and the vast majority of graduates are doing so\. The State Minister of Works and Urban Development in May 2009 stated that he would like to see further expansion of the graduate program because of its clear effectiveness in developing skills essential for management of decentralized local governments\. 15 Other important institutional reforms prompted by the project include the development and testing of the PSIP, which is now being implemented nationwide under PSCAP to improve organization work flow and effectiveness\. This initiative, known as business process reengineering, has resulted in rapid improvements in service delivery in participating entities by eliminating unnecessary procedures and introducing time-saving technology in offices serving the public\. Interestingly, more efficient delivery of services has not resulted in job redundancies in the affected entities that generate revenues, because the unmet demand for services is so high in Ethiopia\. This has made resistance to the changes much lower than would otherwise have been expected\. (c) Other Unintended Outcomes and Impacts (positive and negative) The project financed a large technical assistance package, Deepening Decentralization (US$4\.6 million) under component 2, which became the basis for the Urban Good Governance Program\. The government's establishment of the program to implement the recommendations of the technical assistance package was not foreseen at the time the CBDSD project was prepared\. The Bank is now supporting the implementation of the government's Urban Good Governance Program through the Urban Local Government Development Project\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for core ICR, details in annexes) 4\. Assessment of Risk to Development Outcome Rating L The risk to development outcomes is rated low\. The government has demonstrated its commitment to public sector capacity building and decentralization for nearly 15 years, starting with the launch in 1996 of the Civil Service Reform Program, followed in 2001 by the start of the National Capacity Building Program, continuing in 2004 with the initiation of PSCAP and in 2008 with the commencement of the Urban Local Government Development Program\. PSCAP, as a national program, has institutionalized a grant transfer mechanism to support capacity building, in which the government has committed to put US$137 million of treasury resources\. The Urban Local Government Program is scaling up demand-driven approaches by providing resources to municipalities to improve performance in service delivery\. Support for the capacity building agenda in Ethiopia is broad; the cabinet of ministers and the parliament have played key roles in approving legislation designed to strengthen public sector performance and decentralization\. These include the urban planning law and the federal framework for a land information system\. Entities at all levels of government and in all regions have embraced the reform agenda\. Sustainability of the infrastructure investments is assured\. The 17 cities that benefited from the infrastructure subprojects are contributing at least 10 percent (in practice, many are contributing up to 40 percent) of the cost of their infrastructure projects, which strengthens ownership\. All 16 cities benefiting from the project have prepared asset management plans, which lay out a schedule for operations and maintenance and identify the sources of finance and institutional arrangements for doing so (preparation of the plans is a performance criteria under the Urban Local Government Development Project)\. All have also prepared and are implementing revenue enhancement plans to ensure resources are available to operate and maintain their investments\. 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 MS The Bank's overall performance in ensuring quality at entry was moderately satisfactory\. The Bank's performance in identification was satisfactory\. Strengthening public sector capacity for decentralized service delivery was a priority for the government and citizens of Ethiopia who were striving to fundamentally transform the state from one of centralized control to one in which power is much more broadly shared\. The government prepared its civil service reform and national capacity building programs and established in 2001 the Ministry of Capacity Building to lead the effort\. It requested the participation of the World Bank in financing a first phase of the program that would prepare and test prototypes and approaches in preparation for the nationwide roll-out of the program\. The Bank responded appropriately, preparing a technical assistance loan, and providing extensive advice with design and safeguard issues\. The project's design reflected lessons learned from experience in Ethiopia and in other countries undertaking major institutional change, decentralization, and capacity building\. The Bank's performance in preparation and appraisal was satisfactory in most respects\. The project implementation plan had been appraised and found to be realistic and of satisfactory quality\. Procedures for environmental screening of small infrastructure projects had been agreed\. Processes for procurement and fiduciary management had been assessed and steps agreed to ensure that funds were used as intended\. Appraisal of implementation arrangements was satisfactory and agreements reached on the division of responsibility between the overall executing agency, the Ministry of Capacity Building, and the agency in charge of urban and local government strengthening, the Ministry of Federal Affairs\. However, greater realism with respect to implementation capacity would have led the team to design a smaller, less complex project with a smaller number of activities and fewer implementers\. Persuading the government to accept a longer implementation timeframe, for example, by explaining that if the funds are exhausted early, the government can seek additional financing, would have allowed the team to avoid extending the project closing date\. More effort should have been to identify the activities that would be financed under the project, and certainly to specify eligibility criteria for municipal subprojects, rather than leaving this for implementation\. More care should also have been taken to specify key performance indicators 17 and to name baseline and target values for them\. These deficiencies result in a moderately satisfactory rating for Bank performance in ensuring quality at entry\. The project did not benefit from a quality effective review prior to appraisal\. Such a review may have helped bring about a better match between the scope of activities and the time allowed for implementation\. It may also have helped in developing the project's logframe to ensure that it served as a useful tool for monitoring implementation and results\. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating S Bank performance in supervision was satisfactory\. Supervision was intense throughout the project implementation period, even though three Bank staff served in the role of task team leader\. It helped that the two most recent task team leaders managed the project from the Bank's Addis office, and could address issues as soon as they arose\. The two country directors, the sector manager, and the sector leader have actively overseen project implementation to help ensure that the project remained on track to meet its objectives\. The Bank fielded 15 supervision missions during the project's six years of implementation\. Missions generally took place two times a year\. Missions lasted about two weeks each and typically comprised nine or more members, including foreign and local consultants investigating a wide range of technical and operational issues\. Aide memoires consistently highlighted key issues and presented detailed action plans to help the implementing agencies address obstacles\. During the early years, supervision missions focused primarily on progress with implementation of the civil service reform program, performance of the Ministry of Capacity Building to manage the project and measures to enhance capacity, and elaboration of eligibility criteria for the funds being provided on a demand-driven basis\. In the later years, supervision focused increasingly on outputs and progress towards outcomes rather than processes\. Supervision also concentrated on coordinating with the PSCAP team to ensure that the two projects worked collaboratively to achieve shared goals\. Members of the CBDSD and PSCAP project teams consistently participated in each other's missions\. Supervision also involved consulting with development partners involved in supporting enhancing decentralized service delivery, especially GTZ\. This helped ensure a harmonized approach of development partners\. In addition, supervision involved consideration of proposals of activities for funding in lieu of those absorbed by PSCAP\. Supervision consistently paid attention to fiduciary and safeguard aspects of the project\. A comprehensive and detailed midterm review highlighted the poor performance of the Ministry of Capacity Building in managing the activities under its responsibility and proposed measures to overcome them\. This led to an increase in staffing at the Ministry of Capacity Building to manage the project\. However, the Bank team missed an opportunity to restructure the project following the midterm review, which may have resulted in a narrower project focus and more effective implementation arrangements\. Restructuring of the project, however, would not likely have resulted in speedier implementation\. Despite the good performance of the UDCBO, many of the physical works added to the urban component to utilize funds freed from the other two components had not been completed by the close of the project\. 18 The project performance indicators were consistently rated realistically\. Implementation performance was rated unsatisfactory six months after effectiveness\. The rating was upgraded to satisfactory only in April 2005 when the project demonstrated clear improvement in performance\. Implementation performance was downgraded to moderately satisfactory in July 2008, due to some of the infrastructure contracts still not having been awarded six months prior to the project's closing date\. The rating was raised in December 2008 because adequate progress had been made in executing the projects and because ratings for financial management and in project management had been upgraded (from moderately satisfactory to satisfactory)\. QAG in September 2004 assessed the quality of supervision to be satisfactory, giving a rating of 2 on a 6-point scale\. (c) Justification of Rating for Overall Bank Performance Rating MS The Bank's overall performance was moderately satisfactory\. In lending, the Bank responded to the government's request to support its national program to build public sector capacity at all levels of government\. Drawing on lessons learned from Ethiopian and global experience, it assisted in designing a project that would serve as the foundation for a future nationwide program\. However, quality at entry suffered from a project design to did not fit government implementation capacity, which resulted in a doubling of the implementation period, significant reallocation of resources, and changes in implementation arrangements, and ultimately the cancellation of 6\.1 percent of credit proceeds\. (Another US$2 million of the credit proceeds were redeployed in late 2008 to finance the food crisis response program, which was the case for most projects in the portfolio with surplus funds\.) The project also suffered from weaknesses in the design of the monitoring and evaluation framework\. Supervision was thorough\. In supervision, the Bank played an important role in keeping the project on track\. Bank supervision missions also regularly reviewed compliance with fiduciary, environmental, and other safeguards\. The Bank maintained a close dialogue with policy makers, technical staff, and development partners throughout implementation\. The Bank responded flexibly and effectively to requests to fund important areas of capacity building that were not envisioned at the time the project was prepared, such as training of front-line providers of services to micro and small enterprises\. 5\.2 Borrower Performance (a) Government Performance Rating MS The government's performance in implementation was moderately satisfactory\. Government ownership and commitment to the National Capacity Building Program was high\. In a clear sign of commitment, it established a the Ministry of Capacity Building with the mandate to coordinate the initiative\. It also prepared the follow-on projects, PSCAP and the Urban Local Government Project, to scale-up the work started under the CBDSD project\. The government 19 provided its agreed counterpart funds, but with occasional delays\. However, it appeared to be more committed to the overall goals of the capacity building program than to addressing the daily implementation challenges of procurement, contract management, financial management, and monitoring and evaluation\. Thus, it did not provide the newly created Ministry of Capacity Building with the resources or authority it needed to operate effectively\. It also chose to retain this ministry as the overall project manager, despite the Bank's advice following the midterm review to put the well-performing UDCBO in charge\. The government also appeared to lack commitment to a specific approach to capacity building, introducing major new initiatives (such as business process reengineering) every few years\. Staff of the entities expected to implement the new initiatives expressed frustration and weariness with the rapid shifts in direction\. All these factors contributed to implementation delays\. As the entity responsible for the policy, planning, programming, and funding of services, the government is ultimately accountable for performance\. (b) Implementing Agency Performance Rating MS The performance of the Ministry of Capacity Building was moderately unsatisfactory\. The commitment of the ministry to the objectives of the National Capacity Building Program was never in doubt\. However, it lacked experience with project implementation, and was not able to adhere to schedules for procurement, financial reporting, auditing, or preparation of quarterly progress reports\. In addition, the ministry's limited resources proved insufficient for it to manage both the CBDSD and PSCAP projects, and it gave priority to the much-larger PSCAP\. The ministry did not maintain adequate channels of communication with the CBDSD project's other implementing agency, the UDCBO, which led to delays in implementation of component 2\. To address this obstacle, the government and the Bank agreed to open a special account under the management of the UDCBO to allow it to take full responsibility for implementation of the urban component\. The performance of the Ministry of Capacity Building improved marginally following the midterm review, when it accepted the need for externally-contracted specialist staff to handle procurement, financial management, and monitoring and evaluation\. However, it never effectively fulfilled its role as overall project coordinator\. The UDCBO took over the role of overall project coordinator in November 2007, as specified in an amendment to the credit agreement extending the project closing date to December 2008\. The performance of the UDCBO (under the Ministry of Federal Affairs) was satisfactory\. The UDCBO performed capably throughout the period of implementation\. It complied with all environmental, social, and fiduciary safeguards\. It prepared quarterly project progress reports on time, and used the monitoring information to tackle implementation challenges\. It also complied with the Bank's procurement, financial management, and reporting requirements\. Although five of 15 the urban infrastructure projects were still not complete when the project closed, due to factors largely outside its control, the UDCBO is continuing to supervise their implementation to ensure that they are executed and operated as expected\. The good performance of the UDCBO justifies the moderately satisfactory rating for implementing agency performance\. 20 (c) Justification of Rating for Overall Borrower Performance Rating MS The overall performance of the borrower was moderately satisfactory\. The government demonstrated its commitment to the project, from identification to completion, and met its counterpart funding obligations\. However, the Ministry of Capacity Building did not perform adequately even after the midterm review, despite the assurances of the minister that he would take personal responsibility to improve its performance\. In the final three years of the project, most of the funds and responsibilities had been transferred to the UDCBO, so the inadequate performance of the Ministry of Capacity Building did not have significant impact on its overall execution\. The UDCBO performed capably throughout implementation\. It handled procurement and financial management in accordance with Bank guidelines, and ensured compliance with the Bank's environmental and social safeguard policies\. However, overall Borrower performance was marred by the long delays in implementation and a lack of coordination between implementing agencies\. 6\. Lessons Learned (both project-specific and of wide general application) Designing a project that fits government implementation capacity will help ensure its effectiveness and timely implementation\. In its drive for state transformation, the government of Ethiopia overestimated its capability to implement a complex project aimed at rapidly creating public sector capacity at all levels of government\. It also underestimated the time that would be required to implement the project\. The Bank with its global experience of institutional could have suggested a more focused approach and a longer implementation period\. Drawing on this lesson, the Bank team was able to convince the government to accept a six-year timeframe for the follow-on Urban Local Government Development Project by offering an understanding that if the funds are exhausted early, the government can seek additional financing\. Intensively supervising projects with innovative designs and a dynamic context (in this case the whole decentralization process being new and an evolving situation) is critical to address issues that are not foreseen at the time of preparation\. Intensive supervision by the Bank, drawing on field-based staff to the extent possible, helped to address weaknesses in project design and changes in the country context\. Thus, when PSCAP became effective and took over many of the project's component 1 activities, frequent interaction with the client helped in identifying new activities to enhance decentralized service delivery\. Setting procurement thresholds too low can delay implementation of infrastructure projects\. Procurement thresholds for international competitive bidding were set at just US$500,000\. Yet, very few international firms are interested in bidding on projects below US$1 million\. While the original project design envisaged that cities' infrastructure projects would be below US$500,000, and therefore be executed by local contractors chosen under national competitive bidding, the reallocation of funds made it possible for cities to undertake larger projects\. However, cities received few or no responses to their requests for proposals\. Moreover, the project's credit agreement did not allow project funds to be used for work done under force account\. Some cities had to advertise several times or divide the work into smaller 21 contracts before finding contractors willing to do the work\. The lack of ability to find qualified contractors is a major reason for delayed implementation of cities' infrastructure projects\. This lesson has been reflected in the design of the Urban Local Governments Development Project, which has a procurement threshold for international competitive bidding of US$1 million\. Credit proceeds of the new urban project may also be used for work done under force account\. Intensive supervision of the design and implementation of urban government's infrastructure projects is essential in the early years to ensure that works are of adequate quality and that funds are used effectively\. Experience under the CBDSD project indicates that urban administrations do not always have the expertise they need to ensure that design and implementation of infrastructure projects at a minimum meets national standards\. The federal and regional agencies will have to supervise the projects carefully, and either contract themselves or advise cities to contract expertise when necessary\. Conducting periodic client satisfaction surveys at facilities can both focus staff on enhancing quality of service delivery and help them to understand and overcome obstacles in doing so\. Nearly all of the entities benefiting from capacity development interventions in Ethiopia are requested to conduct periodic surveys on client satisfaction\. These have proven useful in orienting staff to deliver high quality services and in identifying areas that require improvement\. Thoroughly preparing a project monitoring and evaluation system prior to the start of a project will ensure that stakeholders can track progress towards the project objectives as soon as implementation starts\. Ensuring that baseline and target values and sources of information are specified at the beginning of a project can help the project team assess whether proposed indicators can be used at reasonable cost, or whether others should be considered instead\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies See annex 6\. (b) Cofinanciers (b) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) 22 Annex 1: Results Framework Analysis Project Development Objective\. The development objective of the project was to enhance decentralized service delivery performance by initiating long-term public sector capacity building at the federal, regional, and local levels\. The project was envisaged as a first phase of long-term support from the International Development Association to enhance service delivery performance through a coordinated program of: (a) implementing civil service reforms, (b) restructuring and empowering local governments, and (c) strengthening of the Ministry of Capacity Building\. Table (a) presents the project's key performance indicators and outcomes\. Table (b) presents the project's intermediate outcome indicators\. (a) Project Development Objective Indicators Actual Value Achieved at Baseline Original Revised Indicator Completion 2002 Target Values Target Values Dec\. 2008 1\. Prioritization of public No process or None specified None All regional governments and expenditures improved at the methods in use to the Ministry of Capacity federal level and in systematically Building prioritized their participating local prioritize public expenditures for governments (qualitative expenditures\. capacity building activities indicator)\. through a participatory process\. The 17 cities undertaking small infrastructure investments have prioritized their choices through a participatory process\. They have built on the experience to institutionalize a participatory process in preparing their annual capital investment plans\. 18 cities drafted prioritized 5- year capital investment plans (CIPs), followed by 3-year CIPs\. They are implementing the CIPs under the Urban Local Government Development Project (approved in fiscal 2008)\. 2\. Cost-efficiency and No process of None specified None The federal government and financial sustainability of systematically all regional governments now operations of participating assessing cost- use the standard bidding federal and regional efficiency and documents that were drafted ministries, agencies, and sustainability in under the project for all public bureaus, and local place\. procurement\. It is broadly governments improved\. accepted that using standard bidding documents results in greater transparency and value for money in 23  procurement\. 18 cities have prepared revenue enhancement plans and are in the process of establishing financial management systems to increase revenues and ensure financial sustainability of their operations\. They have also prepared property management manuals that are enabling them to keep track of and better manage public property\. Revenues in the cities that are implementing revenue enhancement plans have risen\. For example, revenues mobilized by the city of Hawassa have risen from 12 million birr in 2005 to 25 million birr in 2007 (in real terms)\. Services are being delivered more cost-efficiently\. For example, each staff member of the Addis Ababa Transport Authority is serving an average of 7 customers a day, compared with an average of 2\.5 customers in 2005\. In addition, monthly revenue has increased from 14 million ETB in 2005 to 16 million ETB in 2008 (in real terms)\. 3\. Client satisfaction with None None specified None Service delivery in services delivered by federal participating government and regional ministries, entities shows quantitative agencies, and bureaus, and improvement (time required local governments improved\. to receive a service falls) or improvements in client satisfaction or both\. 4\. Percentage of None At least 50 None 11 out of 14 subprograms subprograms in the percent\. fully financed and under Borrower's national capacity implementation (six under building program fully PSCAP, four under other financed and under Bank-financed projects, and implementation\. one under a GTZ-supported project)\. 24 (b) Intermediate Outcome Indicators Baseline Original Target Actual Value Achieved at Completion 2002 Values Dec\. 2008 Project outputs from each component Component 1: Civil Service Reform Program 1a\. Restructuring and performance improvements undertaken in select agencies at federal and regional levels Strategic plan for CSRP No strategic plan in Strategic plan for Strategic plan for CSRP implementation implementation developed place CSRP developed and in use\. implementation developed\. CSRP coordination office Coordination office Coordination office Coordination office restructured and restructured and adequately not functioning restructured and adequately staffed\. staffed effectively\. adequately staffed Staff trained in areas of 0 None Over 2,000 staff from federal and public sector reform use regional institutions benefited from their skills training\. The great majority are still in the public service and are using their skills\. Public awareness of targets None\. Radio and television Programs broadcast Ethiopian radio and for service delivery and shows broadcast television\. actual achievements raised\. Several programs designed and implemented to promote activities of PSIP beneficiary agencies through distribution of brochures, radio and television broadcasts, newspapers, and workshops\. 1b\. Budgeting, planning, accounting, and personnel management systems established at federal level and in selected regions Number of regions Nine Nine Nine have implemented budget reform\. undertaking budget All regions except the Somali Region information system and/or have implemented accounts reform\. completing budget disbursement accounting rollout Results oriented 0 Six federal Five ministries (and the agencies under performance management institutions their direct supervision) and four regional system adopted\. governments are starting implementation\. Regions close backlog 0 9 9 accounts Staff trained in public 0 1,000 754 staff from federal and regional procurement use their skills institutions received training on the new procurement law and the use of new standard bidding document\. In addition, 8 staff from CSRP were trained abroad on international procurement standards\. Number of federal and 0 10 (5 federal and 5 10 (8 federal and 2 regional) regional government regional) entities in Performance and Service Improvement Program Number of staff trained in 0 None 7 audit Framework for CSRP None in existence 1 1 25 performance tracking facility prepared Component 2: Restructuring and empowering local governments 2a\. Restructuring of select governments Urban development None specified None specified National urban development policy policies developed and adopted\. implemented Urban planning law adopted\. Urban Planning Coordination Bureau established\. Federal Urban Good Governance Program designed and implemented\. Draft integrated infrastructure policy prepared and being reviewed by the Ministry of Works and Urban Development\. Draft federal housing policy prepared and under review by the Council of Ministers\. Federal framework for land information system developed and under review by the Office of the Prime Minister\. Prototype regional regulation of lease holding and urban land prepared and under implementation in all regions\. Compensation law promulgated in 2005 and under implementation\. Restructuring completed in None\. Restructuring Restructuring underway in 70 reform 16 municipalities (4 completed in 16 towns with a more concentrated effort in regions) municipalities (4 18 towns\. Four major regions are regions) restructuring their cities\. Infrastructure rehabilitated None\. 17 projects 10 infrastructure projects completed, and another four underway\. Legislation issued None specified Two emerging The four major regions have issued empowering municipalities regions will have revised city proclamations establishing issued city approximately 120 autonomous city proclamations and administrations\. The four emerging four major regions regions and Harari Regional State have will have issued issued city proclamations\. Dire Dawa revised city and Addis Ababa issued their chartered proclamations\. proclamations\. Urban policies issued in 2­ None 2­4 regions Regional urban development strategies 4 regions and implementation plans issued in the 4 major regions and the two city administrations\. Financial management and None Guidelines issued 4 major regions have adopted financial human resources guidelines management manual, accounting system issued procedures manual, and chart of accounts\. 8 regions have developed and adopted the human resources guidelines/procedures\. 2b\. Regional and local staff trained in critical skill areas Federal and regional staff 0 None specified 10,000 staff and councilors benefited trained in urban from training\. development use their Councilors: 3,135 skills Micro and small enterprise front-line service providers: 3,715 26  Regional and city staff: 3,150\. Master's program in urban None in existence Program established Degrees granted to 382 students by management established at August 2008\. Another 1,000 enrolled in Ethiopian Civil Service 2008/09\. College Component 3: Strengthening the Ministry of Capacity Building 3\. Coordination and management capacity of the Ministry of Capacity Building increased Staff trained use their skills None Training plans 29 staff trained abroad in various aspects provided annual of organizational and project targets management, of whom 23 are still working at the ministry\. Equipment and systems for None specified None specified Office equipment procured and put into implementation of National use\. Capacity Building Program 27 Annex 2: Project Costs and Financing (a) Project Cost by Component (in US$ million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (US$ (US$ millions) Appraisal millions) 1\. Implementing civil service reforms 11\.7 3\.2 27% 2\. Empowering and restructuring 13\.0 27\.7 213% local government 3\. Strengthening the Ministry of 1\.1 0\.6 55% Capacity Building Total Baseline Cost 25\.8 31\.5 122% Physical Contingencies 2\.2 Price Contingencies 1\.2 Total Project Costs 29\.2 31\.5 108% Total Financing Required 29\.2 31\.5 108% (b) Project Financing (in US$ million equivalent) Appraisal Actual/Latest Type of Co- Percentage of Source of Funds Estimate Estimate financing Appraisal (US$ millions) (US$ millions) Government of Ethiopia 3\.0 4\.6 153% International Development Association 26\.2 28\.1 107% 28 Annex 3: Outputs by Component Component 1: Implementing civil service reforms The outputs of this component are satisfactory\. Component 1: Implementing civil service reforms\. The outputs of this component are satisfactory\. Specific outputs include: Civil Service Reform Program coordination and change management\. The Ministry of Capacity Building developed a strategic plan that clarified its mandate and specific responsibilities and that provided a blueprint of how to fulfill them\. The Civil Service Reform Program coordinating office was restructured and is now staffed with 11 permanent staff\. In addition, 20 quality assurance team and 42 outreach support team members are seconded from the Ethiopian Management Institute and Ethiopian Civil Service College to support the full implementation of the civil service reform activities\. Over 2,000 staff from federal and regional institutions participated in training on project management and monitoring and evaluation, human resources management, public service reform, accounting and auditing, procurement, information technology, records and warehouse management, and issues related to HIV/AIDS and tuberculosis\. The ministry in collaboration with Radio Fana hosts live radio broadcasts to discuss issues related to public sector reform and delivery of public services to raise public awareness of the goals and achievements of the PSIP\. These include news from the Ministry of Revenue and the Federal Inland Revenue Authority about the newly developed tax system and from the National Archives and Library Ethiopia about its improved services, broadcast on radio and television and disseminated through brochures and newspapers\. Additional programs on business process reengineering have also been broadcast on Ethiopian radio and television\. Resource management and control\. All regions, except Somali, have rolled budget information systems and budget disbursement accounting\. Some 300 staff of five ministries (Ministry of Agriculture and Rural Development, Ministry of Transport and Communication, Ministry of Federal Affairs, Ministry of Information, and Ministry of Capacity Building) and 70 staff from regional governments (Oromia, Amahara, Tigray and Southern Nations, Nationalities, and Peoples regions) on the improved results oriented performance management system\. The Ministry of Agriculture and Rural Development, Ministry of Transport and Communication, and the Ministry of Federal Affairs--including the agencies under their direct supervision--have implemented the system\. The others have either started or will soon start implementing the system\. All regions have closed their backlog accounts\. Over 750 staff from federal and regional institutions have participated in training on the new procurement law and the new standard bidding documents\. In addition eight staff from the Ministry of Capacity Building have benefited from training in Tanzania on international procurement standards\. All are using their new skills as members of the ministry's procurement staff\. 29  Performance and service delivery improvement\. Ten government entities have participated in the PSIP, including the Ministry of Trade and Industry, Ministry of Revenue, Federal Inland Revenue Authority, Customs Authority, Drug Administration and Control Authority, Ministry of Agriculture and Rural Development, St\. Peter's hospital, National Archives and Library, Amhara Investment Office, and Amhara Educational Bureau\. Those visited during the Bank's final supervision mission explained how they brought about improved services and how they are collecting information through client satisfaction surveys or through suggestion boxes to track progress and identify lagging areas\. The PSIP has now been scaled up nationwide under the PSCAP\. Accountability and transparency\. Seven staff from the Ministry of Capacity Building received training in financial and performance audit at the United States Auditor General's office\. Upon return the experts provided in-house training to other staff of the Office of the Federal Auditor General\. All seven are continuing to provide services to the office\. In addition, the internal reporting system for the anti-corruption commission was developed and put into place\. Following a testing phase, it is now being refined under PSCAP to better meet the needs of the commission\. A performance tracking framework was developed\. The facility is now being established under PSCAP\. Component 2: Restructuring and empowering local government\. The outputs of this component are satisfactory\. Specific outputs by component included: Federal and regional policy and analysis o National urban development policy approved by the Council of Ministers and now under implementation in all nine regions and the two chartered cities\. o Urban planning law approved by the House of Peoples representatives and gazetted in May 2008 (proclamation 574/2008) and now under implementation in all regions\. o Draft integrated infrastructure policy and the draft federal housing policy are in the final stages of approval\. o Federal framework for a land information system was developed\. In April 2009, it was under review by the Office of the Prime Minister\. It is expected to be submitted to parliament in September 2009\. Once approved, three regulations--real property registration organization, establishment of Ethiopia cadastral surveyor's regulatory board, and Ethiopian cadastral surveying regulation--will be sent to the regional governments for implementation\. o Federal land lease proclamation reviewed and found adequate\. o Prototype regional regulation of lease holding and urban land prepared and sent to regions and two city administrations for adaptation and implementation\. The Urban Good Governance Program (financed under PSCAP and GTZ) is supporting the adaptation and implementation\. 30  o Compensation law promulgated in 2005\. Regulations issued in May 2007 and sent to regions\. Regions have adapted the regulations to meet their needs and are implementing them\. o Federal Urban Planning Coordination Bureau established in March 2008 as a result of restructuring the National Urban Planning Institute\. The restructured bureau is now serving in the role as advisors to the regional urban planning institutes, rather than as planners\. The new arrangements are working well\. o Federal Urban Good Governance Program designed and under implementation in all regions and 432 cities including Addis and Dire Dawa\. The program focuses on institutional and organizational aspects of good governance aimed at promoting efficiency, effectiveness, accountability, transparency, participation, sustainability, the rule o f law, equity, democratic government and security\. The Urban Development Program--focused on delivery of urban based infrastructure, municipal services, housing, and the like--benefiting 120 cities\. o Operational manual and training manual for development of urban infrastructure asset management plans finalized and distributed to all cities for implementation\. Training provided to the four major regions and 18 cities\. These 18 cities are now preparing their asset management plans (which is also a performance criterion under the Urban Local Government Development Program)\. o Training provided to: (a) 3,135 councilors in basic urban management, (b) 3,175 micro and small enterprise front-line service providers, and (c) 2,400 staff of regional and municipal governments on technical aspects of urban management\. Another 600 people benefited from workshops to share experiences\. This training is providing tangible benefits\. For example, several business one-stop shops visited during the final supervision mission were staffed with specialists in business plan development, financing options, IT solutions, and the like\. They also offered training in a variety of topics aimed at helping micro and small entrepreneurs establish and operate businesses\. Written feedback from clients was universally positive\. In addition, according to senior managerial and technical staff of the municipal government met during the mission, the training had helped them in many areas, such as public participation in infrastructure projects and the use of asset management plans for planning operations and maintenance and enhancing revenues\. o Master's program in urban management established at the Ethiopian Civil Service College\. Some 400 students have already graduated\. Another 1,000 are currently enrolled in the program\. To qualify for the training, students must agree to serve in regional or municipal governments for a minimum of five years\. The graduates met during the mission expressed enthusiasm about receiving the opportunity to enhance their knowledge and their hopes for their future career development\. Regional technical assistance for deepening decentralization\. 31  o Four major regions revised city proclamations establishing approximately 120 autonomous city administrations\. Four emerging regions and Harari regional state issued city proclamations\. Addis issued its chartered proclamations in 2003 and Dire Dawa issued its in 2004\. o Draft regional housing strategies developed by the four major regions\. o Prototype land lease regulations at regional level are approved and being implemented in four major regions\. Some 65 cities in the four major regions (9 in Amhara, 20 in South, 12 in Tigray and 24 in Oromia) now under lease system, up from 28 in 2002\. o Regional urban development strategies and implementation plans completed and under implementation in the four major regions and in Addis and Dire Dawa\. o Financial management manual, accounting system procedures manual, and chart of accounts developed for four major regions\. System now operational in 18 towns\. Urban local governments and regions have received training\. Use of the modern accounting system is a performance measure under the Urban Local Government Development Project\. o Human resources management guidelines and procedures developed and adopted in the four major regions\. Prototype guidelines adopted by the four emerging regions\. Support for implementation is being provided under the Urban Good Governance Program\. o Equipment and accessories provided to Addis Ababa Transport Authority to allow it to complete the automation of its licensing and vehicle registration system\. This has led to greatly improved services\. For example, citizens now receive a license an average of 15 minutes following a successful driving test, down from the previous 1­ 2 weeks\. o Digital maps for Addis Ababa completed\. These are being used to improve planning and service delivery\. o First stage of preparation of Mekelle cadastre completed\. The city is currently installing a local area network under support of PSCAP to link the cadastre to the land information system\. o Performance improvement plans and operational manuals for 18 cities completed\. Some 18 cities have used the manuals to prepared 3-year capital investment plans, which they have submitted to the Urban Local Government Development Project for financing\. Local government restructuring and capacity building 32  o Restructuring and performance improvement plans prepared for all 18 cities, and under implementation under the Urban Good Governance Program and the Urban Local Government Development Project\. o Some 18 cities have prepared and are implementing revenue enhancement plans, aimed at enabling them to improve local services\. o Prototype financial regulations prepared and sent to regions for adaptation\. Three major regions (Amhara, Tigray, Southern Nations, Nationalities, and Peoples) have approved financial regulations\. o Guidelines for preparation of revenue enhancement plans developed and sent to the four major regions and 18 towns\. A number of cities are preparing their revenue enhancement plans with support of the Urban Good Government Program\. This is also a performance measure under the Urban Local Government Development Project\. Pilot investments for infrastructure rehabilitation o Ten infrastructure project completed\. They include project to rehabilitate drainage systems, local roads and bridges, and markets\. Three contracts were cancelled\. Four projects were ongoing as of May 2009\. Cities are using their own funds to complete the projects, under the supervision of the federal and regional bureaus of work\. The 17 participating cities have gained experience through learning-by-doing in planning, prioritizing options with public participation, and appraisal of proposed projects\. They have also benefited from close collaboration with the UDCBO in all stages of project implementation (issuing requests for proposals, selecting consultants, procuring contractors, managing contracts, and the like)\. o All cities are addressing sustainability through the preparation of the asset management plans and budgets that provide for operations and maintenance (this is an access criterion and performance measure under the Urban Local Government Development Project)\. Component 3\. Strengthening the Ministry of Capacity Building\. The outputs of this component are moderately satisfactory\. Specific outputs included: Some 29 staff trained abroad (in Tanzania for procurement and in Italy for public sector management)\. Another 50 staff were trained locally on strategic planning, 170 staff on basic computer skills, and 8 staff on procurement\. The great majority of these staff are still working at the ministry\. Ministry of Capacity Building provided with equipment and expertise to assist with the preparation of the capacity building program, implementation plan, and operational 33 manual\. Support was also provided to help government entities implement the capacity enhancement activities\. 34 Annex 4: Bank Lending and Implementation Support/Supervision Processes (a) Task Team Members Responsibility/ Names Title Unit Specialty Lending Sumila Gulyani Sector Leader AFTU1 Task team leader David DeGroot Senior Urban Specialist WBISD Urban management Yitbarek Tessema Senior Water and Sanitation AFTU1 Infrastructure quality Specialist Navin Girishankar Operations Advisor CFPVP Operations quality Rowena Martinez Operations Officer AFTU1 Eshetu Yimer Senior Financial Management AFTFM Financial Management Specialist Samuel Haile Selassie Senior Procurement Specialist EAPCO Procurement Steve Gaginis Disbursement Officer LOAG2 Disbursements Solange Alliali Senior Counsel LEGAF Legal James Hicks Consultant Local government AFTU1 management Perla San Juan Program Assistant AFTU1 Team assistance Yeshi Gizaw Team Assistant AFC06 Peer Reviewers Christine Kessides Economic Advisor TUDUR Project design Michael Stevens Lead Public Sector Management AFTPR Project design Specialist Supervision/ICR Sumila Gulyani Lead Urban Specialist AFTU1 Task team leader Rumana Huque Senior Urban Specialist AFTU1 Task team leader Abebaw Alemayehu Senior Urban Development AFTU1 Task team leader Specialist Navin Girishankar Operations Advisor CFPVP Operations quality Edeltraut Gilgan-Hunt Environment Specialist AFTEN Environmental safeguard compliance Eyerusalem Fasika Research Analyst AFTP2 M&E Yitbarek Tessema Senior Water and Sanitation AFTU1 Infrastructure quality Specialist Elsa Araya Public Sector Management AFTPR Public sector management Specialist Samuel Haile Selassie Senior Procurement Specialist EAPCO Procurement Wuleta Giday Program Assistant AFTU1 Program assistance Belinda Asaam Program Assistant AFTU1 Program assistance Barjor Mehta Senior Urban Specialist AFTU1 Urban management David DeGroot Senior Urban Specialist WBISD Urban management Wendy S\. Ayres Consultant AFTU1 M&E and Implementation and Results Report 35 Abiy Admassu Temechew Procurement Analyst AFTPC Procurement Jean Charles Amon Kra Country Officer AFCRI Portfolio quality Mulat Negash Tegegn Consultant AFTFM Financial management Berhanu Legasse Ayane Senior Public Sector Management AFTPR Public sector management Specialist Tafesse Freminatos Abrham Financial Management Specialist AFTFM Financial Management Rajat Narula Senior Financial Management EAPCO Financial Management Specialist Eshetu Yimer Senior Financial Management AFTFM Financial Management Specialist (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle US$ thousands (including No\. of staff weeks travel and consultant costs) Lending FY99 32\.48 FY00 10 67\.26 FY01 0\.00 FY02 64 241\.41 FY03 5 14\.07 Total: 79 355\.22 Supervision/ICR FY03 50 168\.70 FY04 70 161\.02 FY05 81 206\.85 FY06 51 88\.14 FY07 48 61\.12 FY08 50 71\.49 FY09 35 0\.00 Total: 385 758\.72 36 Annex 5: List of Supporting Documents Ethiopia Country Assistance Strategy, March 24, 2003\. Ethiopia Strategy Note, May 1, 2006\. Ethiopia Country Assistance Strategy, April 2, 2008\. Development Credit Agreement, September 12, 2002\. Project Appraisal Document, June 27, 2002\. Midterm review, May 2006\. Quarterly progress reports prepared by the Ministry of Capacity Building and UDCBO \. Regionalization study, 1999\. Review of the Civil Service Reform Program, the 2000\. Rapid assessment of municipal decentralization, 2001\. Woreda decentralization study, 2001\. Borrower's Implementation and Completion and Results Report, May 2009\. Other project files, project supervision reports, aide memoires, back-to-office reports, financial audits\. 37 Annex 6: Summary of Borrower's ICR and/or Comments on Draft ICR Executive Summary of the Borrower's ICR The project's development objective (PDO) is to enhance decentralized service delivery performance by initiating long term public sector capacity at the federal, regional and local levels through a coordinated program of: (a) implementing civil service reforms (Component 1); (b) restructuring and empowering local governments (Component 2); and (c) strengthening of the Ministry of Capacity Building, MCB (Component 3)\. The PDO has been achieved through institutional reforms, systems development, and training activities supported under the three components\. Activities aimed at reforming institutions, developing operational, financial management, and procurement systems, and building staff skills have been completed, and most targets met\. Some 120 urban local governments have been created in a context where autonomous local urban authorities were virtually nonexistent\. The PDO outcome indicators on prioritization of expenditures, financial sustainability and cost-efficiency and improved service delivery have been substantially achieved \. Participating federal ministries and bureaus and local government entities are now prioritizing their expenditures, something they had not done well prior to the project\. The federal government and all regional governments now use the Standard Bidding Documents and procurement procedures for all public procurement\. This has resulted in greater transparency and value for money in procurement\. Some 18 cities have prepared revenue enhancement plans, undertaken public asset inventories, developed property management manuals, and established a unified financial management system to increase revenues and ensure financial sustainability\. Revenues in the participating cities have already risen substantially\. Service delivery performance in all the agencies for which data are available has improved, in some cases dramatically so\. Client satisfaction surveys, for agencies that have carried them out, show rising customer contentment\. City benchmarking surveys, undertaken under PSCAP, also show improvements in service delivery at local level\. In regard to component objectives, the independent evaluators have concluded, for Component 1, that in spite of substantive budget reductions - the component's objectives have to a very large extent been achieved\. Most importantly, the component has introduced systems for performance-oriented management in the Ethiopian public service\. It has supported the development of innovative concepts and systems such as the PSIP, BPR and BSC that presently are being launched at wider scale through PSCAP\. Component 2 has achieved its objectives through various activities that have been carried out by the project which have enabled the establishment of urban local governments, including setting up systems, guidelines, manuals, technical assistance and training to enable cities to function as viable entities\. The strategies, recommendations, operational systems and procedures provided by the project under the Deepening Decentralization Technical Assistance - DDTA (Window 2) have proved to be timely as they have informed in a significant way national strategies and programs for urban reform, governance and development, particularly the Ministry's Urban Good Governance Program (UGGP) which is currently under implementation at federal, regional and local levels\. These have laid the foundation and built the capacity at federal, regional and local level that have been 38 instrumental in the successful launching of the follow on project, the Urban Local Government Development Project (ULGDP)\. Under Component 3, the Ministry of Capacity Building was strengthened to enable it to coordinate the National Capacity Building Program and PSCAP\. The independent consultants for evaluation of CBDSD have concluded that since the project had to be extended twice and substantive budget reallocations made it can retrospectively be argued that the design had significant problems\. However, given the requirements of the reform processes at the start of the Project and the information available, the basic design was sound although project period was overambitious and the agreed management structure was weak\. The Bank team that participated in the project preparation of CBDSD provided Government with critical information on lessons learnt and experiences from Ethiopia and other countries on public sector reform and efforts to strengthen local governments\. The Bank team performed well in that they advised the Government on the proper sequencing of public sector reforms and capacity building activities and in coming up with the strategy to start with the CBDSD project, followed by the scaled up PSCAP project and the larger scale infrastructure project which is performance based, the ULGDP\. However, the Bank team should have taken into account more the views of Government, especially for Component 1, to have greater flexibility and less IDA control especially on approval by IDA of procurement plans and on the requirement to use IDA procurement procedures instead of Government procurement procedures for some of the activities\. The project benefitted a lot from the decision by the Bank in 2004 to have the CBDSD Task Team Leader based in Addis Ababa as this brought a more focused and strategic support by the Bank team\. This was one of the contributory factors in the project being upgraded from unsatisfactory to satisfactory in 2005\. Most of the problems on the Bank side resulted from delays in obtaining "no objections" for procurement decisions and this was partly caused by the fact that the staff at the resident mission were clearly overwhelmed by the number of requests they had to deal with not only from the CBDSD but other World Bank projects as well\. The large number of requests going to the Bank were due to the low prior review threshold that had been set by the Bank, although the Government had recommended higher thresholds\. The Bank justified the low thresholds on the basis that the procurement capacity in the country was limited and was in the process of being built up and that there was also limited experience with World Bank procurement procedures\. The other reason for delays was that some of the request submitted to the Bank were incomplete, which meant the Bank had to take more time on the requests or they had to be referred back to Government for further information /clarifications\. Other significant problems from the Bank were caused by the Bank's delay in processing withdrawal applications and replenishments to the special account\. Delays of up to 20 days were experienced\. Other payment delays were caused by the fact that the World Bank Resident Mission staff were either not updating or properly updating the Bank system with some signed contracts submitted to them by UDCBO\. The Bank's ongoing support and advice (technical, procurement, safeguards, monitoring and evaluation) during implementation, especially advice and recommendations given during the frequent and timely IDA supervision missions contributed immensely to successful project implementation and the achievement of project objectives\. 39 In terms of overall management, the Government in many ways displayed significant flexibility in dealing with the challenges that faced the CBDSD project, in that it twice agreed to reallocate funds across main components and corresponding implementing agencies\. Later in the project, the Government agreed to transfer overall management responsibilities from MCB to MWUD\. The independent evaluators noted that such decisions are, in other countries, almost impossible to effectuate, but in the case of CBDSD, Government has shown the necessary flexibility to optimize implementation performance and management arrangements\. The preparations for, and implementation of PSCAP, which was happening at the same time as CBDSD implementation, affected performance, especially for Component 1 and 3 since the same senior officers in MCB responsible for these Components were also responsible for and heavily involved in PSCAP (especially dealing with the many PSCAP management issues)\. At the same time, the same officers were for a long time (2003-2007) also responsible for overall project management of CBDSD\. Delays were experienced in bid and proposal evaluations especially were these involved evaluators coming from different organizations\. The evaluations took time partly due to inexperience of the evaluators and partly due to the time taken to obtain their release from their normal duties to carry out the evaluations\. There was a high turnover of staff especially at the city level and to a lesser extent at regional and federal levels which eroded the benefits from the various capacity building and training programs (including formal training and on the job training)\. Staff turnover resulted from either people leaving due to poor salaries and conditions of service or staff being moved due to continuous restructuring\. There was some stability in UDCBO and the top positions in MCB which was augmented by the selective and targeted use of international and local consultants which contributed to the project being upgraded from unsatisfactory to satisfactory in 2005\. This was also an important factor in the completion of some of the major activities and accomplishment of the project objectives\. On infrastructure, problems were experienced due to limited contractor capacity in the country for the type and size of projects that the towns prioritized and implemented under CBDSD\. There were poor responses to invitation for bids, where either there were no responsive bidders and the contracts had to be retendered or only one to three bids were evaluated which limited the choices and quality available\. Problems were also experienced due to the countrywide shortage of cement, foreign exchange availability and the dramatic increase in prices of cement and other material also affected the administration and implementation of the fixed price contracts\. 40

REVIEW

P122478

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) Report Number : ICRR0021398 1\. Project Data Project ID Project Name ACBF Regional Capacity Building P122478 Project Country Practice Area(Lead) Additional Financing Africa Governance P127549 L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IDA-H6470,IDA-H8760,TF-99645 31-Dec-2015 117,076,876\.41 Bank Approval Date Closing Date (Actual) 17-Mar-2011 31-Dec-2017 IBRD/IDA (USD) Grants (USD) Original Commitment 25,000,000\.00 29,000,000\.00 Revised Commitment 118,956,692\.83 28,999,992\.38 Actual 117,076,876\.41 28,999,992\.38 Prepared by Reviewed by ICR Review Coordinator Group Paul Holden Robert Mark Lacey Malathi S\. Jayawickrama IEGEC (Unit 1) 2\. Project Objectives and Components a\. Objectives The project development objectives (PDOs) were to contribute to: (a) enhanced capacity for effective policy formation and management in the countries of the Sub-grantees; and (b) improved and sustained management of the Recipient’s (the African Capacity Building Foundation, ACBF) operations\. (Financing Agreement, p\. 6)\. 　 The project followed two decades of IDA support to ACBF that commenced operations in 1991\. 　 Page 1 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) There was a level 1 restructuring, which became effective on December 5, 2013, involving Additional Financing and an expansion of the project’s scope\. The revised PDOs were: (a) to improve the capacity of the ACBF’s clients to deliver and measure their development results; and (b) to enhance the ACBF’s organizational effectiveness and efficiency (Amending and Restating Original Financing Agreement p\. 6)\. As these modifications involve no substantive changes, a split evaluation will not be undertaken\. 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 05-Dec-2013 PHEVALUNDERTAKENLBL c\. Will a split evaluation be undertaken? No d\. Components There were two components\. Component 1: To provide capacity building sub-grants in selected Sub-Saharan African countries and regional organizations that assisted those countries to finance technical assistance (TA)\. Appraised amount US$30 million ;Restructured amount US$74 million; Actual amount US$67\.6 million\. 　 This component aimed to improve institutional capacity in 4 areas: (i) the analysis of economic policy and development management; (ii) improved financial management, transparency and accountability; (iii) improved national statistical systems and the production of national statistics; and (iv) promotion of regional economic cooperation and integration, and the provision of regional public goods\.　 Component 2: Institutional Development: This component financed the strengthening of the operations and institutional capacity of the ACBF\. Appraised amount US$24 million; Restructured amount US$45 million; Actual amount US$49\.5 million\. This component consisted of activities in four areas: (i) continued implementation of ACBF’s 2009 Management Action Plan; (ii) the development of a medium-term strategy, including the upgrading of a monitoring and evaluation system (M&E) for the ACBF; (iii) the appraisal, supervision and evaluation of sub-projects; and (iv) the enhancement of skills and peer learning in economic and public sector management\. Page 2 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost: The original project cost was US$49 million The actual cost was US$117\.08 million\. Financing: The project at appraisal was to be financed by a US$25 million Regional International Development Association (RIDA1) grant and a US$29 million Recipient-Executed Multi Donor Trust Fund (RE-MDTF) grant\. As noted, Additional Financing of US$65 million (RIDA2) was approved in December 2013 bringing the total funding to US$119 million\. Borrower/Recipient Contribution: The ACBF did not contribute to the project cost\.　 Dates: The project was approved on March 17, 2011 and became effective on August 1, 2011\. The first restructuring was approved on December 5, 2013 and involved an expansion of the mandate of the ACBF as mentioned in Section 2a above\. A level 2 restructuring occurred on February 6, 2017, which extended the closing date by 11 months to December 31, 2017 and reallocated some expenditure items\. 3\. Relevance of Objectives Rationale The project’s original and modified objectives were relevant to a key aim of the World Bank Group’s Africa Region’s strategy -- strengthening institutional capacity of African countries, regional economic communities and public sector entities\. Bank support under the project aimed to enable the ACBF to implement this strategy effectively, monitoring the impact of its support, while enhancing its managerial and operational efficiency\. The objectives remained relevant at closure, reflected in the Bank’s continued support for capacity building for the African Union Commission and the preparation of a regional capacity building project to strengthen civil service and public administration through regional and international networks\. The original objectives were less relevant to the situation in which the ACBF found itself at the time of project preparation, but this was corrected in their revision during the restructuring in December 2013\. At appraisal, the Project Appraisal Document (PAD) noted the need for careful management of expenses (p\. 20) but few actions were contemplated to reduce them\. The 2013 restructuring specified enhancement of the Foundation’s organizational effectiveness and efficiency, and the project began to support actions to reduce costs directly and significantly through drastic cuts in staff\. Rating Page 3 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) Substantial 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective To improve the capacity of the ACBF’s clients to deliver and measure their development results Rationale The theory of change underlying the first objective was that grants to ACBF-supported programs and sub- projects would strengthen ACBF clients’ ability to deliver, and measure results\. The grants funded economic policy research in ministries, departments and agencies supported by policy institutes, think tanks and university programs, and students studying for post graduate degrees or undertaking training in economic policy and related fields\. 　 Outputs 　Under RD1: • The number of research projects completed by closure was 119 (target 30); • 446 ministries, were provided with technical assistance or training by the policy institutes that had received funding, (target 220); • 326 students (target 180) received post graduate degrees, and 842 (target 450) received training certificates, in the targeted disciplines; • 6,684 requests for ACBF products and services were received (target 1,200); • 100% of clients’ products were peer reviewed (target 80%); • 83% of ACBF clients were judged to have functional M&E systems (target 80%); • There were 2,111 engagements and interactions between ACBF clients and policymakers (target 360); • 310,171 documents were downloaded from the ACBF website (target 55,000); • There were 1,719 requests for knowledge and learning products (target 300); and • ACBF knowledge and learning products were cited 27,469 times (target 12,500)\. Outcomes Under RD1, the number of recommendations submitted by ACBF grantees that were used in policy formation by governments as measured by the ACBF increased from a baseline of zero in 2010 to 39 in 2013--more than double the target of 15\. The zero baseline casts doubt on the usefulness of the indicator as do the self-measured data\. Furthermore, this outcome was measured only for RIDA1, so that results at project closure were not available\. Page 4 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) For RIDA2, assessment of outcomes relied on satisfaction surveys conducted during the 2014-2017 period involving 14 sub-projects and 1,400 respondents\. User satisfaction with ACBF clients’ products was reported to be 92% (target 90%) in December 2017, and with client services 91% (target 80%)\. The percentage of sub-projects in the ACBF portfolio rated satisfactory or above was reported to be 90% (target 77%) in December 2017\. Again, no data had been collected previously on which to base comparative changes\. Moreover, survey techniques and biases were not analyzed\. The percentage of the total universe represented by the sample is unknown\. The absence of reliable baseline data weakens evidence of enhanced capacity for effective policy formation and management in the recipient countries, although the client satisfaction was reportedly high\. Furthermore, in some cases, output targets were exceeded by wide margins, suggesting that they may have been set too low\. An additional question is the extent to which self-reported data can be relied upon in the light of the ACBF’s governance problems\. Rating Modest PHREVDELTBL PHEFFICACYTBL Objective 2 Objective To enhance the ACBF’s organizational effectiveness and efficiency Rationale The theory of change rested on administrative restructuring under RIDA1 to improve M&E and accountability and under RIDA2 on measures to reduce costs\. Outputs According to the ICR (page 16), the intended outputs related to this objective comprised: (a) continued implementation of the activities under the MAP; (b) development of a forward‐looking medium‐term strategy by and for ACBF, including enhancement of the M&E system; (c) systematic appraisal, supervision and evaluation of subprojects, and (d) implementation of knowledge and learning activities designed to enhance skills and peer learning in economic and public sector management in Africa\. There is little information concerning those project-financed activities that were expected to contribute to these outputs\. The reforms were internally driven and did not appear to benefit from the infusion of project- financed consulting expertise, equipment, training or other assistance\. Implementation was largely to be the responsibility of the Foundation, and it is noteworthy that operating expenses, including ACBF staff salaries, were eligible for financing under the component related to this objective\. Page 5 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) Outcomes Under RIDA1, there were three targets related to ACBF’s internal efficiency\. Results fell short of expectations: • The ratio of the total budget to the value of the total active portfolio value fell from 8% in 2010 to 6\.5% at the end of 2013\. The target was an increase to 12\.4%, since enhanced control and audit functions, foreseen under the MAP, were expected to expand the budget\. • The ratio of non-staff administrative costs to the total budget fell from 16% in 2010 to 14\.7% at the end of 2013\. Here, also, the ratio was expected to increase as a result of MAP implementation\. • The ratio of total staff costs to the budget rose from 60% in 2010 to 70\.2% at the end of 2013, whereas the target was a reduction to 57\.7%\. New staff positions were introduced; salaries were benchmarked at international levels (in accordance with the recommendations of a consulting firm retained by the Foundation); and "Bank-like processes and controls were introduced where they may not have been appropriate" (ICR, p\. 8)\. Under RIDA2, there was a stronger emphasis on cost reduction, especially of staff costs\. This was because the level of financing available to the Foundation was considerably less than had been anticipated\. According to the Restructuring Paper, 2013, US$35 million of non-IDA donor financing was expected\. This turned out to be only US$22\.9 million\. The financing that had been suspended in 2009 was not subsequently reinstated to the extent foreseen\. Sweden withdrew its support, and the African Development Bank and other donors contributed significantly less than they had originally indicated\. The ICR (p\. 46) suggests that an unintended impact of the decision to utilize IDA funds for the project may have been to drive away potential bilateral donors, who saw contributing to the ACBF as double dipping in the sense that they were already contributing to IDA\. In addition, the impression had been given by World Bank staff that Additional Financing from IDA for RIDA2 would be US$100 million, rather than the US$65 million actually approved by the Board\. Fund shortages were exacerbated by delays in presenting RIDA2 to the Board because of concerns on the part of some shareholders regarding the speed of governance improvements, and delays in approving new IDA contributions\. The following results had been achieved by project closure in December 2017: • The ratio of total disbursements to cash outflows for activities (including knowledge and learning products) and sub-projects was 80%, in accordance with the target\. This signals that a significant proportion of resources was spent on programmed activities rather than on internal administration\. Page 6 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) • The ratio of total staff costs to cash outflows fell from a baseline of 22\.3% to 14\.6%, bettering the target of 17%\. The manner in which staff cost reductions were carried out was, however, controversial and led to disagreements between the IDA and ACBF teams\. The Foundation’s ICR states that "the requirement to reduce staff costs to 17 percent of cash outflows within one month, which resulted in an immediate reduction of ACBF staff by almost half and a significant reduction in the salaries of remaining staff, led to plummeting staff morale, high turnover, and anonymous letters from disgruntled former staff" (p\. 30)\. A subsidiary aim was to ensure that, by January 2017, "core" staff costs would be fully covered by contributions from African member states\. It is not known whether this was achieved\. Rating Modest PHREVDELTBL PHOVRLEFFRATTBL Rationale The efficacy for both objectives is rated modest\. Overall Efficacy Rating Primary reason Modest Insufficient evidence PHREVISEDTBL 5\. Efficiency Neither an ex ante nor an ex post economic rate of return (ERR) was calculated\. ACBF’s role as an intermediary between donors and ultimate recipients essentially rules such a calculation out, although a financial analysis of the Foundation’s operations would have been possible\. The ICR (pp\. 23-25) assesses efficiency on the basis of total project costs, which were within appraisal and restructuring estimates, and project performance with respect to the second objective\. However, neither of these is an adequate gauge of efficiency, which should be a measure of the extent to which the project’s benefits exceeded its costs\. The second criterion (project performance) is already assessed as part of efficacy\. In this case, it would have been necessary to rely on qualitative assessments of project benefits\. Operational inefficiencies were largely reflected in the delays associated with the Additional Financing, which led to a 24-month extension of the closing date\. There were also some delays caused by the Ebola epidemic in a number of recipient countries, though their extent is not recorded\. Page 7 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) Given the lack of any quantitative analysis and of identified qualitative benefits, combined with evidence of operational and administrative inefficiencies, efficiency is assessed as negligible\. Efficiency Rating Negligible 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 The relevance of objectives was substantial\. According to the ACBF’s self-assessments, and surveys of client satisfaction, the objective of enhanced capacity for effective policy formation and management in the countries of the Sub-grantees appears to have been substantially achieved\. However, there were serious deficiencies in the indicators, many of which were of doubtful reliability because of the absence of baseline data, the extent to which poorly defined targets were achieved, and the near universal reliance on self-collected information and\. self-assessment\. Under the second objective - improved and sustained management of ACBF’s operations and enhanced effectiveness and efficiency of its organization – results under RIDA1 were mixed, but significant cost reductions were achieved under RIDA2, consonant with the reduced external financing available to the Foundation\. However, while the outcome targets were met, the reach and quality of the evidence is limited\. There is no way to objectively determine the value of the advice provided to ultimate beneficiaries, or its impact on policy-making and implementation\. Client survey techniques and biases were not analyzed\. The consequences of drastic staff reductions and curtailment of external financing on ACBF’s operational effectiveness was reported by the Executive Secretary of the ACBF to have undermined staff morale and efficiency\. There is no independent external assessment of the internal structural reforms undertaken\. Efficiency is rated modest, since no evidence is presented as to whether the project provided value for money\. On balance, shortcomings are considered to be significant, and outcome is assessed as unsatisfactory\. Page 8 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) a\. Outcome Rating Unsatisfactory 7\. Risk to Development Outcome The extensive cost cutting measures, restructuring and changes in governance practices achieved with the support of the project has reduced ACBF costs significantly\. \. However, there is a high risk to development outcome stemming from the sharp curtailment of external donor financing, and the consequent reliance on income from client governments\. Donor contributions remain markedly short of their pre-suspension levels, and the decision (ICR, p\. 36) not to provide further IDA funding beyond the project may reduce such contributions further\. Should the Foundation’s financial position remain precarious, it is likely that this will undermine the standard of its services\. Higher quality staff, with better alternative employment opportunities, would probably be the first to leave, thereby contributing to declining standards\. The extent to which the viability of the sub-projects would be compromised without continued high quality ACBF assistance is unclear\. The ICR (p\. 46) states that many ACBF-supported think tanks are now financially sustainable, but this statement is not backed by evidence\. 8\. Assessment of Bank Performance a\. Quality-at-Entry The project was consistent with IDA’s strategic priorities in the Africa Region (see Section 3 above)\. Initial project financing in 2011 was relatively modest\. It aimed to assist the Foundation in initiating the implementation of its MAP following the 2-year suspension of IDA funding in 2009-2010\. However, further, more substantial additional financing was foreseen in the PAD\. This would be contingent on approval of the IDA replenishment, the process for which coincided with project preparation\. Implementation was to rely heavily on the ACBF itself, and there were few if any technical assistance, external training activities or provision of equipment foreseen that would be financed by the project\. By design, evaluation was to be based largely on self-assessment, with the project supporting the implementation of the ACBF’s own Management Action Plan\. Although IDA had provided decade-long financial support to the Foundation, there was no close working relationship that might have assisted preparation of the project\. ACBF staff had little familiarity with Bank procedures, and this contributed to RIDA1’s slow start\. The principal risks were identified as fiduciary, Page 9 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) and project design incorporated changes to ACBF’s fiduciary systems\. The most important involved modifying the previous pass-through arrangements for sub-grants, and the adoption of World Bank procurement procedures (see Section 10 below)\. The ICR does not discuss any preparatory studies or other analytical underpinnings that might have assisted project conceptualization and preparation\. M&E design and management arrangements relied on the strengthening of ACBF’s own M&E, which was a project activity (see Section 9 below)\. Quality-at-Entry Rating Unsatisfactory b\. Quality of supervision The supervision team established a good working relationship with the ACBF, especially following the 2013 restructuring, although disagreements did arise on the cost-cutting methods adopted under RIDA2\. Regular supervision assisted the ACBF with adjustment to the new fiduciary systems and the Foundation adopted and applied the modified arrangements that were conditions for the project\. Several shortcomings identified in RIDA1 were addressed in the RIDA2\. This was especially the case with some of the initial indicators, which were not closely related to ACBF sub-projects\. RIDA2 focused more on cost reductions, which were necessary given the curtailments in external financing\. A Bank team visited sub-projects in 4 four of the recipient countries to assess performance under ACBF grants\. It concluded (ICR p\. 40) that there had been significant improvement in ACBF sub-grantee M&E capabilities, which, inter alia, had resulted in the sub-grantees being able to access funding from other sources\. The Bank team followed progress on cost cutting measures and internal processes, but technical assistance to monitor and assist in the enhancement of internal governance does not appear to have been financed by the project\. If technical assistance had been provided at an early stage, some of the internal issues would have been identified and outside expertise could have contributed to dealing with them\. The Bank project team carried out their supervision diligently given the design shortcomings, but as the following paragraph indicates, management involvement was limited\. According to the ICR (p\. 43), "[Bank] management attention to this sensitive, high‐risk and potentially high reward project appears to have been episodic\." The ICR (p\. 47) quotes the ACBF Executive Secretary as saying, "The feeling at the ACBF is that the Bank’s leadership, especially at the Africa Region, showed little interest in ACBF’s work and its achievements\." The Foundation also complained that it had received assurances from senior Bank staff that the additional financing for RIDA2 would be US$100, not US$65 million as approved by the Board, and that no official notification was given that Page 10 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) there would be no further financial support from IDA following project closure\. Quality of Supervision Rating Moderately Satisfactory Overall Bank Performance Rating Moderately Unsatisfactory 9\. M&E Design, Implementation, & Utilization a\. M&E Design The Financing Agreement (p\. 9) required that the ACBF formalize its M&E system (it had established an Operations and Evaluation Department for the first time in 2008), submit M&E reports yearly (adjusted to twice yearly under the 2013 restructuring), and that grant recipients’ M&E systems be assessed prior to any financing approval\. Sub-projects were required to submit quarterly M&E reports (PAD p\. 5)\.　 The results framework encompassed 2 sets of variables\. The first related to the effectiveness of the ACBF sub-grants\. These were measured by a set of output indicators that recorded such items as the number of pieces of policy research, the number of ministries and departments in recipient countries supported through ACBF TA, and students on ACBF scholarships receiving masters degrees and training\. The outcome indicators for RIDA1 were the recommendations submitted to governments that were used in policy formation\. For RIDA2, the intermediate results indicators consisted of the number of requests for products and services, of peer reviewed clients’ products, of engagements between ACBF clients and policy makers, of ACBF knowledge and learning products cited, and the percentage of ACBF clients with functional M&E systems\. Outcome indicators for the first objective were self- assessed sub-project ratings, and client satisfaction survey results (survey techniques and biases were not analyzed)\. The severe shortcomings in the design of the indicators, particularly the lack of any baseline data, casts doubt on the veracity of the results that were achieved\. The indicators for the second objective focused appropriately on financial ratios such as the ration of staff costs to budget\. 　 Page 11 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) b\. M&E Implementation The ACBF improved its reporting during implementation and complied with enhanced submission requirements under RIDA2\. All progress reports were submitted in a timely fashion\. A "retrofitting" was carried out of sub-projects initiated before 2011, and which did not conform to the M&E arrangements in the project covenants\. The ICR (p\. 39) reports that nearly 70 sub-projects in 2011 and nearly 40 in 2013 were retrofitted\. Furthermore, the documentation of evaluation of sub-projects increased with the regular production of project completion reports, mid-term reviews and special evaluations for selected sub- projects although as the M&E Design section points out, the information may at times have been of questionable value\. c\. M&E Utilization By closure, the ACBF was using the M&E system at both the corporate and the sub-project level\. The system in place produced "accurate, validated data on all project indicators" (ICR p\. 40)\. The effectiveness of the ACBF M&E system was noted at regional conferences, and as a result, the ACBF was invited to join a task force to develop an M&E training curriculum for the whole of Africa\. M&E Quality Rating Modest 10\. Other Issues a\. Safeguards The project was classified as category C for environmental assessment purposes, and no safeguard policies were triggered\. The ICR reports that there were no environmental or social compliance issues\. b\. Fiduciary Compliance Design incorporated important changes in ACBF internal practices to reduce fiduciary risk\. The Foundation was required to comply with Bank fiduciary policies for the first time\. The previous pass-through arrangements for donor and DGF grants to the ACBF, which limited the Bank’s contractual fiduciary oversight both as donor and trustee were deemed inadequate\. Instead, the Bank and ACBF agreed that Page 12 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) RIDA financing required the application of standard Bank fiduciary policies and technical supervision to provide better assurance that Bank and donor funds were spent for intended purposes\. The use of Bank procurement guidelines would be mandatory for all contracts financed under the project\. At sub‐grant level, these requirements, and the particular procurement methods to be used and institutional arrangements to be maintained by the sub‐grantees, were elaborated in ACBF‘s Procurement Guidelines, which were updated and finalized as part of the updated Operations Manual, as a condition of project effectiveness\. During implementation, contract management was systematized\. Improved procedures at both the ACBF and sub- grantee levels enabled the Bank to reduce the fiduciary risk rating from moderate to low\. There were several instances of 'questionable expenditures' during 2015-2016\. The Bank claimed reimbursement of 'ineligible expenditures' following a February 2015 Travel Audit Report\. Following an independent and verification by the Bank's Financial Management Specialist, US$182,854 remained a subject of non-agreement between the Bank and ACBF; however, the Bank withdrew its demand for a refund in September 2017 (ICR, p\. 42)\. c\. Unintended impacts (Positive or Negative) \. d\. Other The project had a positive impact on gender related issues\. The ICR (p\. 25) points out that its support for the Women's University in Africa epitomizes this impact\. The Women's University in Africa has graduated more than 4800 women students\. The ACBF also conducted numerous regional workshops that provide training for African women\. 11\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Although outcome targets were met, there were deficiencies in the quality of Outcome Satisfactory Unsatisfactory some supporting evidence\. Survey techniques are not analyzed and sample is unknown\. Both objectives are Page 13 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) rated modest for efficacy\. Efficiency is rated negligible\. There were major shortcomings in quality at entry: no preparatory studies Moderately Moderately are mentioned, there was little Bank Performance Satisfactory Unsatisfactory or no technical assistance planned, and evaluation was to rely largely on self- assessment\. Many indicators lacked baselines, much data were Quality of M&E Substantial Modest unverifiable, and there was a lack of discussion of survey methodology\. The ICR is far too long\. It does Quality of ICR Modest not discuss several critical issues related to the project 12\. Lessons Among the lessons presented in the ICR (pp\. 45-46) two are of particular importance (presented here with some adaptation of language): • Timely notification and the formulation of an agreed exit strategy can be expected to increase an institution’s chances for sustainability after longstanding support is curtailed\. In this case, discontinuing IDA support to the ACBF in the absence of clear communication and a road map towards independence has placed the institution’s viability at risk\. • Avoiding perverse incentives can increase a project’s impact\. In this case, the requirement that ACBF sub-projects be limited to 15 countries provided an incentive to select projects where the likelihood of success was high, rather focusing on countries with the greatest need\. IEG adds two additional lessons: • Linking the sub-projects of a Bank-supported capacity-building institution to other Bank operations in the countries concerned can produce important synergies\. In this case, forging such linkages does not appear to have been considered\. • Bank initiatives at regional and sub-regional levels frequently encounter difficulties in attracting necessary resources for supervision and adequate managerial attention\. This, in turn, reflects the country-oriented structure of Bank operations and incentives\. In this case, the ACBF complained of Bank Page 14 of 15  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ACBF Regional Capacity Building Project (P122478) managerial neglect\. Moreover, Bank financial support to the Foundation prior to the project was not accompanied by adequate supervision\. 13\. Assessment Recommended? No 14\. Comments on Quality of ICR The ICR is comprehensive and informative over the complex issues surrounding the genesis of the project and the issues that arose as it evolved\. It is frank in its discussion of Bank support, both prior to and during the project\. It is internally consistent, with a logical structure, and the lessons are evidence-based\.　 There were shortcomings\. With 43 main text pages (in smaller-than-normal font) and over 200 pages in total, the ICR is far too long and dwells at too great a length on minutiae\. At the same time, the decision to cease financial support from IDA after project closure could have been discussed in more detail\. Greater clarity on project-financed activities would have been useful, especially with regard to the second objective\. a\. Quality of ICR Rating Modest Page 15 of 15

REVIEW

P050881

 ICRR 13526 Report Number : ICRR13526 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 04/29/2013 PROJ ID : P050881 Appraisal Actual Project Name : Rural Poverty US$M ): Project Costs (US$M): 30\.0 61\.3 Reduction Project - Piaui Country : Brazil Loan/ US$M): Loan /Credit (US$M): 22\.5 45\.0 Sector Board : ARD US$M): Cofinancing (US$M ): Sector (s): Roads and highways (45%) Water supply (20%) Irrigation and drainage (15%) Other social services (12%) Sub-national government administration (8%) Theme (s): Participation and civic engagement (33% - P) Rural services and infrastructure (33% - P) Rural policies and institutions (17% - S) Rural non-farm income generation (17% - S) L/C Number : L4624; L7399 Board Approval Date : 06/26/2001 Partners involved : Closing Date : 06/30/2005 01/31/2010 Evaluator : Panel Reviewer : Group Manager : Group : John R\. Heath Ridley Nelson IEG ICR Review 1 IEGPS1 2\. Project Objectives and Components: a\. Objectives: (I) ORIGINAL PROJECT The statement of project development objectives in the Project Appraisal Document (PAD) is similar but not identical to that in Loan Agreement (LA)\. According to the PAD, "The project aims to assist the State of Piaui to reduce currently high levels of rural poverty by: (a) improving well-being and incomes of the rural poor through better access to basic social and economic infrastructure and services and support for productive activities, using proven community-driven development (CDD) techniques; (b) increasing the social capital of rural communities to organize collectively to meet own needs; (c) enhancing local governance by greater citizen participation and transparency in decision-making, through creation and strengthening of community associations and Municipal Councils; and (d) fostering closer integration of development policies, programs and projects at the local level, by assisting Municipal Councils to extend their role in seeking funding, priority-setting and decision-making over resource allocation" (pp\. 2-3)\. According to the LA, "The objectives of the Project are: (a) to increase social and economic opportunities for the Municipalities' rural poor by improving access to basic, social and economic infrastructure through Community Subprojects; (b) to increase the social capital of rural communities to organize collectively and meet their own needs; and (c) to foster local governance and citizenship through strengthening of Municipal Councils, at the same time forging links with governmental and nongovernmental agencies, civil society, financial institutions and the private sector" (Schedule 2, page unnumbered)\. (II) ADDITIONAL FINANCING The additional financing that was approved in July 2007 had the same objectives as the original project\. The statements of development objectives in the Project Paper and the Loan Agreement were identical\. According to the Additional Financing LA, the aim was to "scale up the impact of the Original Project by using the social capital created by the Original Project to further increase incomes of the rural poor and by fostering closer integration of development policies, programs and projects in rural areas at the local level, by assisting Municipal Councils to extend their role in seeking funding from, setting priorities for and making decisions concerning the allocation of resources from other programs beyond the Project" (Schedule 1, p\. 5)\. IEG evaluates the project against the statement of objectives contained in the PAD, because this makes clear that the project's overarching objective is to reduce rural poverty: sub-objectives (a)-(d) in the PAD are treated as intermediate outcomes\. All five outcomes will be assessed\. 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\. Community Subprojects (Expected cost at appraisal, US$26\.5 million; Additional financing, US$24\.1 million; Actual cost at completion, US$56\.0 million\.) This component provided matching grants to rural community associations to identify infrastructure, social and productive investments (subprojects) that would improve community well-being, each subproject costing a maximum of US$50,000\. There were three separate channels for financing subprojects: State Community Schemes (PAC)\. Rural communities submitted their investment proposals directly to the State Technical Unit (the project implementing agency), which screened and approved them and released funds to the beneficiary associations\. Municipal Community Schemes (FUMAC)\. Decision-making on investment proposals was delegated by the State Technical Unit to project Municipal Councils, composed of community members and representatives of civil society and municipal authorities\. At least 80 percent of Council voting members were potential project beneficiaries and civil society representatives\. The Municipal Councils discussed, and sought to build consensus on priorities and approve community proposals, in the context of an indicative annual budget amount determined by the state\. Pilot Municipal Community Funds (FUMAC-P)\. The State Technical Unit established an annual budget envelope, according to a distribution formula based on clear and measurable criteria (rural population, poverty levels and previous year's performance)\. Based on this budget, Municipal Councils submitted an Annual Operating Plan (Plano Operativo Anual) for review by the State Technical Unit\. Upon approval, funds were transferred to the Municipal Council, which was then responsible for managing their distribution to community associations and assisting them with implementation of subprojects\. 2\. Institutional Development (Expected cost at appraisal, US$1\.5 million; Additional financing, US$3\.2 million; Actual cost at completion, US$2\.5 million\.) This component financed technical assistance and training to build the capacity of the Community Associations, the Municipal Councils and the implementing agency\. It also included modest funding to support state institutional modernization and reform related to poverty reduction programs and policies\. 3\. Project Administration and Monitoring and Evaluation (Expected cost at appraisal, US$1\.5 million; Additional financing, US$1\.4 million; Actual cost at completion, US$2\.5 million\.) This component financed the costs (excluding salaries) of project administration and coordination including supervision, monitoring and subsequent impact evaluation\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Costs Under the original project, the total cost was estimated as US$30 million at appraisal, rising to US$31 million by closing\. Under the additional financing, the total cost was estimated as a further US$30 million at appraisal, and was US$30\.3 million at closing\. Financing The loan agreement was amended three times, each case involving a Level 2 restructuring (not Board approved)\. The first amendment extended the closing date (see below)\. Second, in January 2010, project funds were reallocated to Area 1 subprojects and to incremental operating costs\. ["Area 1" is defined in the Loan Agreement as the subset of eligible municipalities with the lowest Human Development Index scores\.] Third, in April 2010, the restructuring enabled US$1 million to be reallocated to Area 1 subprojects (ICR, p, viii)\. Borrower Contribution Adding funding from the original project to the additional financing, the expected Borrower contribution was US$9\.6 million and the actual contribution was US$9\.2 million\. The expected contribution from the Community Associations was US$5\.4 million and the actual contribution was US$5\.6 million\. Dates At the time of the first amendment (June 2009) the closing date was extended to January 2010 to allow the state continued access to loan funds, some of which would be used to respond to a flood emergency (the ICR does not say how much was spent on flood relief)\. 3\. Relevance of Objectives & Design: Relevance of Objectives (Rating: Substantial) Throughout the implementation period the relevance of this project’s objectives was consistently endorsed in the Borrower and Bank's strategy\. The overarching objective of rural poverty reduction was relevant because, when the project was appraised in 2001, 77 percent of rural families in the state of Piaui lived in poverty\. Government data showed that 80 percent of rural households in Piaui lacked piped water supply, 77 percent were without sanitation, and 53 percent had no electricity\. The Borrower attached particular importance to the aim of using the subproject process to leverage financing from sources outside the project (sub-objective (d) in the Project Appraisal Document)—a new departure for this series of community-driven development projects, one that was relevant because it increased prospects for sustaining the drive to reduce poverty\. The Bank’s FY2001-03 Country Assistance Strategy (dated May 24, 2001) identified poverty and inequality reduction as the core of Bank assistance efforts and stressed well-targeted, decentralized programs, social capital formation and local integration of programs\. The Additional Financing accorded with the FY2004-07 CAS (dated November 10, 2003), which called for successive projects under the Northeast community-driven development program to finance basic infrastructure for the rural poor, support income generation, and promote closer integration of state and federal rural initiatives in participating municipalities\. The Country Assistance Strategy that was current when the loan closed (covering the period 2008 to 2011) acknowledges the validity and the success of the series of Northeast community development operations of which this project is a part, "both in building social capital and in enabling poor communities to get access to water and electricity" (p\. 10)\. However, the FY08-11 CAS did signal a change of emphasis, indicating that in response to demands from state governments in the Northeast, the Bank would henceforth address the development needs of rural municipalities by prioritizing the promotion of productive subprojects connected to high-value supply chains (e\.g\. contracts with supermarkets)\. This signaled a shift of emphasis away from the rural community infrastructure investments, promotion of which was central to the project\. Relevance of Design (Rating: Substantial) Design relevance was enhanced by the incorporation of lessons learned from the two earlier community-driven development projects in this series of operations for Piaui\. The project components were sufficiently few in number, clear in conception, and flexible in implementation to make it more likely that the objective and intermediate outcomes would be achieved\. Attainment of project objectives was facilitated by a process that promoted community commitment to the investments by involving would-be beneficiaries in identifying subprojects, choosing between investment alternatives, and cofinancing of the subprojects that were selected\. The components included the training and technical assistance to Community Associations and Municipal Councils that was needed to make them more effective and more sustainable agencies for local planning\. Equally important was the “leaning by doingâ€? that implementation entailed\. The availability of a pre-existing menu of tried and tested subproject options helped to make these small-scale investments more feasible\. The existence of three distinct windows for sub-project financing made it possible to tailor the project process to the institutional capacity of the various communities, with greater delegation of decision-making to communities with greater capacity (using the FUMAC and FUMAC-P windows, explained in Section 2c above)\. The transparent and participatory process of subproject selection helped to ensure that decisions reflected the will of the majority of would-be beneficiaries, reducing the scope for elite capture (although possibly limiting the opportunity for targeting investments to the poorest members of each community)\.Project design ensured that around 90 percent of project funds flowed directly to beneficiaries, increasing the scope for attaining the overall objective of poverty reduction\. On the other hand, a single community could win approval of multiple infrastructure and social subprojects (but not productive subprojects) in successive rounds of financing, so that potentially the best-organized communities could obtain several investments while poorer, less-organized communities could be marginalized\. As one of the poorest states in Northeast Brazil, Piaui posed particular challenges in this respect\. The original design envisaged that the project would concentrate resources on the 122 municipalities with the lowest score on the Human Development Index\. In practice, because of the weak implementing capacity in the poorest municipalities, there was pressure to make funds available to 221 municipalities, in order to ensure smooth disbursement\. The project design could have anticipated this capacity constraint, allowing for extra training and supervision resources to be devoted to the poorest municipalities\. This shortcoming was not addressed when Additional Financing was approved\. 4\. Achievement of Objectives (Efficacy): (a): Improve well-being and incomes of the rural poor through better access to basic social and economic infrastructure and services and support for productive activities, using proven community-driven development (CDD) techniques\. (Rating: Substantial) Outputs Adding the results under the original project to those achieved under additional financing, 144,655 families were served (123 percent of the combined target) and 1,902 subprojects were delivered (79 percent of the combined target)\. (Under the additional financing, the subproject target was cut from 1,200 to 500 when the project was restructured in January 2010, because the average cost per subproject exceeded the initial estimate; 517 subprojects were delivered\.) Subprojects were distributed among the following categories: infrastructure (67 percent), productive (21 percent), and social (12 percent)\. Rural electrification accounted for the largest number of subprojects (33 percent), followed by communal water supply (23 percent) and tractors (7 percent)\. Subprojects were selected from a menu of tried and tested options, helping to ensure they were technically sound\. (The ICR does not report what proportion of subproject proposals were turned down for financing following appraisal\.) Physical performance studies in 2004, 2009 and 2010 confirmed that, in most cases, subprojects were being soundly operated although provisions for maintenance were more variable (ICR, p\. 21)\. Outcomes The ICR notes that targeting of subproject investments to the poorest areas was difficult to implement, because, between as well as within, municipalities, the poorest localities lacked the organization to present viable subproject proposals: the pre-established targeting criteria (based on municipality scores on the Human Development Index) did not much influence the distribution of approved subprojects\. The ICR presents limited evidence to suggest that the project significantly increased incomes and employment\. Although productive subprojects accounted for one-fifth of subprojects, the direct employment generated (across all three subproject categories) was estimated at only 2,550 jobs (0\.02 jobs per beneficiary family)\. A study by Binswanger and others compared beneficiary and control households for three states including Piaui, comparing circumstances in 2005 (when the survey was conducted) with interviewees’ recall of circumstances in 2002\. (The loan for the Piaui project was made effective in April 2002)\. This study found that, with respect to income and household assets, there was no statistically significant difference between the treatment and the control group (ICR, p\. 15 and p\. 57)\. The project team reported, based on data published in 2012 by IPEA, that real rural household per capita income rose between 2001 and 2009 from R$118 to R$198\. These findings include project areas and other rural areas in Piaui\. It is unclear how much of this improvement was due to the project as opposed to general improvements in the economy or expansion of other social protection programs\. The same study found that access to clean water increased by 12 percent between 2002 and 2005, citing this as a key reason why, for the treatment group, there was a 38 percent fall in infant mortality and a 70 percent drop in the incidence of diarrhea relative to the control group (ICR, p\. 58)\. However these results are aggregated across the three states in the survey; attribution of the health benefits to the project was speculative and did not take into account other determinants of diarrhea and infant mortality\. A footnote on page 58 of the ICR notes that, when the survey was conducted, the number of water supply subprojects in Piaui was small relative to the other two states, suggesting that the health gains were smaller in Piaui\. The project team provided the additional information that between 2001 and 2009 access to potable water in rural Piaui rose from 9% to 40% and rural electrification rose from 52% to 80%\. These results include but are not limited to the project areas and would have been affected by other contemporaneous government water and electrification programs, but the project’s outputs likely contributed to the trends\. (b): Increase the social capital of rural communities to organize collectively to meet own needs\. (Rating: Substantial) Outputs The number of Community Associations and Municipal Councils formed under the project, and the training they received, may be construed as evidence of increased collective organization\. Combining results under the original project and additional financing, 1,553 Community Associations were created (there was no target)\. 89 Municipal Councils were formed; the target was 77\. The number of training courses delivered was more than double the target\. Outcomes The study by Binswanger and others referred to above found that, relative to the control group, the treatment group experienced, between 2002 and 2005, a bigger increase in community participation in associations, collective decision-making and collective activities, and that beneficiaries viewed Community Associations as inclusive, participatory and democratic institutions where decisions were made by the majority\. A Social Capital Index was part of the project design but the necessary data were not collected to assess change between the start and finish of project implementation\. Also, a study conducted for the mid-term review in 2004 found that “deficient technical assistance and training, uneven access to project information and the ever-present influence of political/other interests undermined to varying degrees, the institutional growth of many Community Associationsâ€? (ICR, p\. 16)\. (c): Enhance local governance by greater citizen participation and transparency in decision-making, through creation and strengthening of community associations and Municipal Councils\. (Rating: Modest) Outputs Women were adequately represented in the Municipal Councils\. Only 3 of the Municipal Councils created were of the FUMAC-P type (see Section 2c above for explanation), which was, according to the project design, the most advanced model of decentralized decision-making and administration; the target was to create 7 of these councils\. Outcomes The study by Binswanger and others found that, relative to the control group, the treatment group reported, between 2002 and 2005, only a modest increase in the extent that Municipal Councils provided information on the actions of the municipal administration, and in over 70 percent of cases the Municipal Councils did not deliberate on federal, state and municipal programs (that is, initiatives outside the project)\. The accountability of Municipal Councils was strengthened: it became a requirement that all officeholders be elected to their posts, abolishing the tradition of assigning these posts to the mayor and members of his administration\. However, the ICR (p\. 17) says that, in rural Piaui, party politics and vested interests reduce the effectiveness and the sustainability of Community Associations and Municipal Councils as decision-making fora\. (d): Foster closer integration of development policies, programs and projects at the local level, by assisting Municipal Councils to extend their role in seeking funding, priority-setting and decision-making over resource allocation\. (Rating: Modest) Outputs By closing, 221 councils, new and old were, in principle, involved in setting priorities and making decisions for the use of project funds\. But only 11 percent of all councils had allocated funds obtained from sources outside the project\. A total of US$5\.7 million of non-project resources was mobilized, less than envisioned at appraisal (but representing 20 percent of the IBRD loan)\. The ICR says (in a footnote to p\. 17) that the aim was to generate US$5 of non-project resources for every US$1 of project funds and if that was indeed the case there was a large shortfall\. (IEG could not find any reference to this target in documents for original project and additional financing\.) The ICR (p\. 19) reports that "accelerated implementation in the final stages left insufficient time for institutional consolidation of the newer Councils and associations\." There is no indication of the extent to which productive subprojects were able to secure credit on commercial terms\. Outcomes Overall, the Community Associations and Municipal Councils made limited progress in achieving the "integration" that was sought, making it possible that planning capacity nurtured by the project would not be sustained once the project ended\. (e) Assist the State of Piaui to reduce currently high levels of rural poverty (Rating: Substantial) The project team provided additional evidence that the incidence of extreme rural poverty in Piaui declined over the period 2001-2009: it actually rose from 43 to 46% between 2001-2003, then began a steady decline to 18% in 2009\. There are no doubt many factors affecting this reduction, including the expansion of social safety net and rural development programs and a general economic improvement in Brazil\. However, the extent of targeting and the evidence of improved access and incomes suggest that the project activities likely contributed to poverty reduction in the project areas\. 5\. Efficiency (not applicable to DPLs): Given the demand-driven nature of this project the distribution of funds between the various categories of subproject could not be known in advance, explaining why a project-wide economic rate of return was not estimated at appraisal\. The PAD (p\. 15) makes it clear that efficiency should be assessed on the basis of: (a) cost effectiveness (logically, of infrastructure and social subprojects) ; (b) the financial rate of return to productive subprojects; and (c) the fiscal savings reaped from not providing infrastructure through other, less cost-effective, public programs\. Benefit-cost analysis\. The financial economic/analysis was based on 20 subproject "case studies" (equal to 1 percent of all subprojects financed), drawn from the four most common subproject types financed: water supply, rural electrification, tractors, and honey production\. However, these were not randomly selected; the project team noted that the cases represented subprojects considered by knowledgeable people to be moderately successful\. Although the sampled units were not limited exclusively to very successful subprojects, they seem to have excluded unsuccessful projects\. The overall share of successful relative to unsuccessful projects is not known\. For the casse studied that were at least moderately successful, the economic rates of return were as follows: water supply (3 percent); rural electrification (22-40 percent); tractors (17-35 percent) and honey production (43-63 percent)\. There is no discussion of why the rate of return to water supply (which accounted for 23 percent of subprojects, across the two phases) had such a low rate of return when other states in this project series had returns ranging from 18 to 53 percent\. The project team confirmed that operation and maintenance costs were included in the calculations\. Cost-effectiveness\. The region provided some comparative cost figures suggesting that public investments of a similar type were more costly than the investments made by the communities\. Project costs were reported to be between 47% and 77% of the non-project cases\. However, it has been difficult to assess the comparability of these estimates to this particular project\. Combining original and additional financing, actual spending on subprojects (US$56\.0 million) was 111 percent of the expected amount, while the number of families benefited from the project was 123 percent more than expected\. The actual cost of project management (Component 3) was 4 percent of total project cost, consistent with claims in the PAD about the limited overheads involved in this approach to community driven development\. The ICR (p\. vii) says that studies have shown that the average cost of the infrastructure and social subprojects was 30 percent lower than for similar works under other public programs\. Table 2\.2\.1 (ICR, p\. 34) confirms that, for a range of comparable subprojects, unit costs for the project were lower than those quoted by other agencies\. However, some costs seem to be elevated\. In the original Project, the cost of rehabilitating houses was US$3,791 per family (the mean cost per family was US$381); housing rehabilitation accounted for 9 percent of all subprojects in this phase\. Fiscal savings\. There is some evidence of the project’s fiscal impact\. Foregone expenditure for water distribution via tanker trucks are significant in those communities where water supply subprojects were executed\. Some 25,600 families benefited from water supply subprojects at a combined investment cost of US$10\.7 million\. For virtually all of these families, the only viable alternative for water supply would have been tanker trucks at an overall monthly recurrent cost of US$1\.25 million\. Efficiency is rated 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 overall objective of reducing rural poverty was substantially relevant in terms of conditions in Piaui, and in relation to Bank and Borrower strategy\. The relevance of design was also substantial, because the project components were tried and tested, and they were appropriate for reducing poverty\. On balance, the objectives of improving the well-being and incomes of beneficiaries and the building of social capital were substantially achieved\. Subprojects do not appear to have been well targeted, reducing the scope for poverty reduction\. The objective of increasing the social capital of rural communities to organize collectively was substantially achieved, but the objectives of enhancing local governance and fostering closer integration of development policies, programs, and projects at the local level were modestly achieved\. Although there are no specific data on poverty reduction in the project areas, the overall share of rural households in extreme poverty declined significantly during the life of the project, and it is likely that increased access to services and increased incomes of beneficiaries in the project areas contributed\. There are some gaps in the efficiency analysis: the subproject sample used for the economic and financial analysis was not randomly selected, and the evidence on other measures of efficiency is patchy\. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: Provisions for operation and maintenance were included in the contract between the Community Association and the State Technical Unit\. But there is a mixed picture concerning the likelihood that subprojects will be adequately maintained\. In the case of electrification (35 percent of all subprojects), maintenance was generally satisfactory because the cost was factored into the fee levied by the state concession\. Also single-household subprojects were generally well maintained because there was no scope for free-riding\. But there is limited advance funding of subproject maintenance by community associations: "The practice in other Northeast states of building reserve funds for more costly replacement costs\.remains uncommon in Piaui and communities mostly resort to the mayors\. Water supply charges surveyed averaged a symbolic R$2\.00 per household/month for the electricity to run pumps and O&M effectiveness is questionable at these rates" (ICR, p\. 14)\. However, the lack of sound technical assistance that was detected at mid-term review (ICR, p\. 16) raises concerns about the long-term viability of some project investments, particularly for productive subprojects\. There are particular doubts about the sustainability of the productive subprojects, given the drought-prone nature of this region, and the limited availability of credit\. (Productive subprojects accounted for 21 percent of all subprojects\.) The ICR notes that elite capture of benefits and control of decision-making is particularly marked in Piaui\. The project did not concentrate resources on the poorest communities where capacity building needs were greatest, suggesting that any benefits in these areas may hard to sustain\. The modest extent of outreach to other programs, the limited leverage of non-project resources, and the weak capacity of Municipal Councils further increase the risk to the project’s development outcome\.  a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: Quality at Entry The project's objectives were relevant to Borrower and Bank strategy at the time of appraisal and afterwards; and its design was relevant to the attainment of those objectives\. However, there were several shortfalls in design which should have been anticipated given the long trajectory of the project series to which this operation belonged\. First, not enough consideration was given to targeting resources to the poorest municipalities\. Second, the monitoring and evaluation framework was compromised by incomplete specification of targets and indicators; and inadequate provision was made for measuring the project’s contribution to poverty reduction\. Third, the project was highly centralized—at appraisal, there was no provision for establishing field offices, which would have allowed for closer supervision of community associations and subprojects\. (Four offices were ultimately opened but their responsibilities were not well defined and they played a marginal role in project implementation)\. Quality of Supervision The ICR notes that, despite a “strong mid-term reviewâ€?, overall, supervision intensity was light, with limited use of specialized expertise and incomplete fiduciary oversight (p\. 23)\. The Bank did little to ensure that the State Technical Unit complied with the Operation Manual—in particular, the provision that Municipal Councils be advised each year of their indicative budget (ICR, p\. 8)\. Also, with respect to safeguard compliance, the ICR (p\. 12) says that "community leaders and beneficiaries appeared largely unaware of environmental issues," possibly because supervision did not highlight them\. The Bank urged the implementation agency to strengthen monitoring and evaluation (pushing for inclusion of Piaui in the Binswanger multi-state study), although largely to no avail\. Supervision was not able to address the tendency in Piaui for the poorest municipalities to be marginalized\. "At the time of the mid-term review (2004) Municipal Councils in the poorest municipalities were virtually moribund for lack of sufficiently organized communities to present proposals, most commonly the poorest communities" (ICR, p\. 34)\. The demand-driven nature of the project pulled resources toward better-organized, better-off municipalities and some of the community associations in these municipalities became highly adept at obtaining project funds: "20 municipalities presented over 26 proposals each, representing 9 percent of total municipalities at the time and 27 percent of total demand" (ICR, p\. 32)\. at -Entry :Moderately Unsatisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Unsatisfactory c\. Overall Bank Performance :Unsatisfactory 9\. Assessment of Borrower Performance: Government The state government was strongly committed to the project's objectives and approach, a commitment that survived changes of administration\. The federal government was arguably less supportive, given concerns about state-level indebtedness that transcended this particular project: there was a disbursement lag between the original project and the additional financing that was traceable to strict enforcement of the central government's Fiscal Responsibility Law--which affected the whole of the Bank's portfolio\. The state government could have done more to ensure that municipal counterpart funding obligations were in line with their capacity to pay: too much was expected of poor municipalities (p\. 24) Implementing Agency The State Technical Unit's approach to capacity building showed little regard for sustainability: for technical assistance and training, it "contracted a large number of private and public entities without an underlying strategy and with uneven quality control" (ICR, p\. 10)\. A politically-driven change in the Project Coordinator and the State Technical Unit management team led to a falling off in performance under the additional financing phase, a decline that was not reversed until the final year of project implementation\. The ICR notes (p\. 9) that "the experienced technical team had lost influence over the project during the additional financing and it drifted with minimal activity for some time" (ICR, p\. 9)\. Operational support to the Municipal Councils and Community Associations is characterized by the ICR as "inadequate" (p\. 25)\. Also, the implementing agency did not support the impact evaluation proposed by the Bank and there were unresolved fiduciary issues\. The four regional offices that were established were "only marginally involved in project coordination" and their responsibilities "were not well defined" (ICR, p\. 10)\. a\. Government Performance :Moderately Satisfactory b\. Implementing Agency Performance :Unsatisfactory c\. Overall Borrower Performance :Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: Design Insufficient attention was paid to the results framework: performance indicators were poorly designed and not enough provision was made for impact evaluation\. The project had a good Management Information System (MIS), which produced the data needed for sound monitoring; but evaluation was weak\. No baseline survey was carried out\. Measurement of progress towards the second objective (social capital formation) was predicated on a Social Capital Index for which no baseline was available when the project was approved\. Implementation "Performance of the Management Information System was mixed\.due to limitations on what was actually monitored, and inconsistencies in the data collected" (ICR, p\. 11)\. Limited attempts were made during implementation to strengthen the monitoring and evaluation framework\. "There was a hiatus of about five years with little evaluation activity, the result of proactive but frustrated efforts by the Bank to agree with the State on terms and conditions for a baseline study\. There was no progress on the broader (Northeast-wide) issue of implementing a formal impact evaluation\. Utilization The ICR provides no evidence that monitoring and evaluation led to improved management of the project or built a framework likely to endure beyond loan closing\. Longer-term assessment of the project's legacy was impeded by failure to complete the anticipated formal impact evaluation\. Given the size of the overall program of which this project is a part and the length of time it has been running, this failure pushes the M&E rating to modest\. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): Safeguards The project was Category B, with an Environmental Management Plan, which remained the same under additional financing\. All subprojects were vetted for compliance with the Operational Manual, which included the Bank's Environment and Social Safeguards\. Subprojects were also assessed against state and federal environmental laws\. The staff of the implementing agency included an environmental specialist\. No safeguard violations were reported\. The ICR says (p\. 12) that there were no particular issues to resolve, with the caveat that "community leaders and beneficiaries appeared largely unaware of environmental issues", probably reflecting the "uneven design, quality and coverage of technical assistance and training"\. Fiduciary In 2009, financial management was downgraded from satisfactory to unsatisfactory, because the Operational Manual was outdated and the internal controls practiced by the State Technical Unit were inadequate\. The rating was subsequently raised to moderately satisfactory, but fiduciary problems had not been fully resolved by closing\. Unintended Impacts No unintended impacts are reported in the ICR\. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately Satisfactory Satisfactory Risk to Development Moderate Significant There are questions about Outcome : maintenance capacity at community level, about MC capacity and about MC outreach to other programs\. There is limited evidence that institutional capacity has been substantially strengthened\. Bank Performance : Moderately Unsatisfactory There were significant problems with Satisfactory project design and insufficient supervision follow-up in response to implementation shortfalls\. 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: Lessons suggested by the ICR include the following: Subproject preparation may be hampered by the lack of good-quality technical assistance services in rural areas, irrespective of whether or not part of the subproject budget is earmarked for funding technical assistance; Local capacity building is more likely to be sustainable if projects provide for continuous training of the people in participating agencies; and Planning exercises will be more rigorous and transparent if participating institutions, like Municipal Councils, are given annual indicative budgets, within which trade-offs must be made\. IEG adds: A complete assessment of the efficiency of CDD projects involves reviewing the evidence for cost-effectiveness, showing how this varies between subproject categories, and the extent of variation between the average for the project and the average obtained under other public programs (the ICR, pp\. 33-34, provides relevant data); Intermediate outcomes, such as social capital, need to be properly quantified with well-designed indicators, baselines, and targets\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The report is well written and comprehensive, distinguishing clearly between what was achieved under the original project and under additional financing\. There is a thorough assessment of project design\. A number of specific and informative lessons are proposed\. There is a useful presentation on subproject unit costs relative to other programs and agencies (ICR, pp\. 33-34)\. However, given the project objective of reducing high levels of rural poverty in the state, there is limited evidence presented on poverty outcome (perhaps reflecting the weak M&E)\. The efficiency analysis should have been based on a larger number of subprojects, randomly selected; unsuccessful subprojects should not have been excluded\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P133446

Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00005088 IMPLEMENTATION COMPLETION AND RESULTS REPORT Credit Number 5515-KG Grant Number H972-KG ON A GRANT IN THE AMOUNT OF SDR 7\.3 MILLION (US$9\.96 MILLION EQUIVALENT) AND A CREDIT IN THE AMOUNT OF SDR 7\.59 MILLION (US$10\.35 MILLION EQUIVALENT) TO THE KYRGYZ REPUBLIC FOR THE ELECTRICITY SUPPLY ACCOUNTABILITY AND RELIABILITY IMPROVEMENT PROJECT June 22, 2020 Energy and Extractives Global Practice Europe and Central Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Exchange Rate Effective December 7 2019 Currency Unit = Kyrgyzstan Som (KGS) KGS 70\.89= US$1 US$1\.368450 = SDR 1 FISCAL YEAR July 1 – June 30 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank AMS Assets Management System CHP Combined Heat and Power Plant CIS Commonwealth of Independent State CMS Commercial Management System CRMS Corporate Resource Management System CPS Country Partnership Strategy CPF Country Partnership Framework DPO Development Policy Operation ECA Europe and Central Asia EIRR Economic Internal Rate of Return ERP Enterprise Resource Planning ESARIP Electricity Supply Accountability and Reliability Improvement Project ESMP Environmental and Social Management Plan FESTI Fuel and Energy Sector Transparency Initiative FIRR Financial Internal Rate of Return FM Financial Management GDP Gross Domestic Product GIS Geographic Information System ICR Implementation Completion and Results Report IFC International Finance Corporation IFRS International Financial Reporting Standards IRMS Incidents Recording and Management System ISA International Standards on Auditing JSC Joint Stock Company KfW Kreditanstalt für Wiederaufbau LRAIC Long-run Average Incremental Cost M&E Monitoring and Evaluation MIS Management Information System NPV Net Present Value NSDS National Sustainable Development Strategy OHS Occupational Health and Safety OJSC Open Joint Stock Company OMS Outage Management System PAD Project Appraisal Document PDO Project Development Objective PIU Project Implementation Unit SE Severelectro Regional Vice President: Anna Bjerde Country Director: Lilia Burunciuc Regional Director: Lucio Monari Practice Manager: Sameer Shukla Task Team Leader(s): Maksudjon Safarov ICR Contributor: Rong Cui  TABLE OF CONTENTS DATA SHEET \. ERROR! BOOKMARK NOT DEFINED\. I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES \. 5 A\. CONTEXT AT APPRAISAL \.5 B\. SECTORAL AND INSTITUTIONAL CONTEXT \.5 C\. RATIONALE FOR BANK INVOLVEMENT\.7 D\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) \. 11 II\. OUTCOME \. 16 A\. RELEVANCE OF PDOs \. 16 B\. ACHIEVEMENT OF PDOs (EFFICACY) \. 17 C\. EFFICIENCY \. 25 D\. JUSTIFICATION OF OVERALL OUTCOME RATING \. 27 F\. OTHER OUTCOMES AND IMPACTS (IF ANY) \. 28 III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME \. 30 A\. KEY FACTORS DURING PREPARATION \. 30 B\. KEY FACTORS DURING IMPLEMENTATION \. 31 IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME \. 33 A\. QUALITY OF MONITORING AND EVALUATION (M&E) \. 33 B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE \. 34 C\. BANK PERFORMANCE \. 36 D\. RISK TO DEVELOPMENT OUTCOME \. 37 V\. LESSONS AND RECOMMENDATIONS \. 38 ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS \. 40 ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION \. 49 ANNEX 3\. PROJECT COST BY COMPONENT \. 51 ANNEX 4\. EFFICIENCY ANALYSIS \. 52 ANNEX 5\. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS \. 55  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name Electricity Supply Accountability and Reliability P133446 Improvement Project Country Financing Instrument Kyrgyz Republic Investment Project Financing Original EA Category Revised EA Category Partial Assessment (B) Partial Assessment (B) Organizations Borrower Implementing Agency Kyrgyz Republic Severelectro OJSC Project Development Objective (PDO) Original PDO The proposed development objective is to improve the reliability of electricity supply in the project area and strengthen the governance of Severelectro’s operations\. Page 1 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 11,250,000 11,250,000 10,166,566 IDA-H9720 13,750,000 11,951,815 10,146,933 IDA-55150 Total 25,000,000 23,201,815 20,313,499 Non-World Bank Financing 0 0 0 Borrower/Recipient 0 0 0 Total 0 0 0 Total Project Cost 25,000,000 23,201,815 20,313,499 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 15-Jul-2014 29-Dec-2015 27-Nov-2017 31-Dec-2019 31-Dec-2019 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 18-May-2018 14\.77 Change in Results Framework Change in Components and Cost Other Change(s) 23-Dec-2019 20\.06 Change in Results Framework Change in Components and Cost Cancellation of Financing Reallocation between Disbursement Categories KEY RATINGS Outcome Bank Performance M&E Quality Satisfactory Moderately Satisfactory Substantial Page 2 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No\. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 29-Nov-2014 Satisfactory Satisfactory \.08 02 18-May-2015 Satisfactory Satisfactory \.12 03 25-Nov-2015 Moderately Satisfactory Moderately Unsatisfactory \.24 04 24-Jun-2016 Moderately Satisfactory Moderately Unsatisfactory \.72 05 28-Dec-2016 Moderately Satisfactory Moderately Unsatisfactory 3\.97 06 29-Jun-2017 Moderately Satisfactory Moderately Unsatisfactory 4\.80 07 26-Dec-2017 Moderately Satisfactory Moderately Unsatisfactory 15\.09 08 25-Jun-2018 Moderately Satisfactory Moderately Satisfactory 17\.39 09 27-Dec-2018 Moderately Satisfactory Moderately Satisfactory 19\.51 10 27-Jun-2019 Moderately Satisfactory Moderately Satisfactory 19\.51 11 31-Dec-2019 Moderately Satisfactory Moderately Satisfactory 20\.38 SECTORS AND THEMES Sectors Major Sector/Sector (%) Energy and Extractives 100 Public Administration - Energy and Extractives 8 Energy Transmission and Distribution 60 Other Energy and Extractives 32 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Private Sector Development 33 Jobs 33 Job Creation 33 Page 3 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Urban and Rural Development 66 Urban Development 33 Urban Infrastructure and Service Delivery 33 Rural Development 33 Rural Infrastructure and service delivery 33 ADM STAFF Role At Approval At ICR Regional Vice President: Laura Tuck Anna M\. Bjerde Country Director: Saroj Kumar Jha Lilia Burunciuc Director: Laszlo Lovei Lucio Monari Practice Manager: Ranjit J\. Lamech Sameer Shukla Task Team Leader(s): Ani Balabanyan Maksudjon Safarov ICR Contributing Author: Rong Cui Page 4 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A\. CONTEXT AT APPRAISAL Country Context 1\. Landlocked and largely mountainous, the Kyrgyz Republic has experienced modest and volatile economic expansion since the economy bottomed out from the transition recession in 1995, when gross domestic product (GDP) amounted to about half of its pre-independence levels\. The country’s growth performance is in stark contrast with the country’s potential and with the promises of the structural reforms and the opening to the rest of the world in the 1990s\. As a result of structural reforms at the start of the transition, the emergence of remittances and commodity exports—largely gold—as powerful new drivers of growth, and improvements in the macroeconomic management in the recent decade, per capita real GDP grew by 3\.1 percent a year on average since 1995\. However, it was still not able to catch up with pre-independence levels\. 2\. Moreover, improving the country’s governance is critical for growth, inclusion, and stability\. Governance and institutional weaknesses, coupled with an inefficient bureaucracy, are one of the major reasons for the Kyrgyz Republic’s growth and jobs underperformance\. Since 2011, there have been 10 changes of government; the average tenure of the Cabinet of Ministers is less than one year\. Meanwhile, the Kyrgyz Republic’s nascent democracy and vibrant political discourse have been important assets of the country\. B\. SECTORAL AND INSTITUTIONAL CONTEXT 3\. The power sector in the Kyrgyz Republic was largely state owned and operated by six joint stock companies (JSCs) that are responsible for power generation, transmission, and distribution\. The companies consisted of one generation company, the Electric Power Plants, one transmission company, the National Electricity System of Kyrgyzstan, and four regionally divided distribution companies: Severelectro, Vostokelectro, Oshelectro, and Jalalabatelectro, delivering electricity to 52 percent, 22 percent, 20 percent, and 5 percent of customers, respectively\. A National Energy Holding Company was established in 2016, unifying the country’s six power companies under one management umbrella, to improve the industry’s management and performance\. In addition, a settlement center was set up in 2015 to implement a transparent revenue allocation mechanism across sector entities\. The Ministry of Energy and Industry was abolished in 2015, with a transfer of policy-making responsibilities to a new State Committee on Industry, Energy and Subsoil Use in 2016\. 4\. At the time of appraisal, the power sector in the Kyrgyz Republic was relatively large and had significant growth potential\. It accounted for about 4 percent of the country’s GDP and 16 percent of industrial production, and its performance was critical for the growth of the economy\. The sector had a significant unrealized potential for export\. Other advantages of the power sector were relatively low cost of power generation, reliance on clean sources of energy, and the near universal access to power supply\. Page 5 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) 5\. However, the sector, especially distribution segment, faced a number of key challenges that needed to be addressed to sustain growth and macroeconomic stability\. Those challenges included (i) power supply reliability and service quality; (ii) financial viability; and (iii) governance in the sector\. • Poor supply reliability and service quality\. Assets in the power sector were dated and in poor condition due to insufficient investments and severe under-spending on maintenance and rehabilitation\. The four distribution companies reported that 28 percent of their 0\.4-10 kV power lines were in poor condition and SE reported that 85 percent of its low voltage distribution lines and electrical equipment was in urgent need of repair\. In addition, the significant increase in power consumption in 2009-2012, especially during winter season by 62 percent, causing frequent emergency shutdowns of distribution facilities because of equipment congestion and overloading, especially in Bishkek\. The four distribution companies combined reported an average of 43 outages per day between 2009 and 2012\. Severelectro alone reported an average of 20 outages per day during the winters of 2010 to 2012, and 15 outages per day on an annual basis\. • Lack of sector financial viability\. In 2012, the quasi-fiscal deficit of the sector accounted for 2\.1 percent of GDP\. Tariff levels were exceptionally below the prevailing cost of supply\. The collection efficiency was poor which also contributed to the sector’s financial distress\. From 2007 to 2012, the sector’s actual costs incurred per kWh were on average 35 percent higher than the average cash collected from domestic end-users\. The gap between costs and cash collections was predominantly the result of exceptionally low tariffs, which failed to reflect recurrent expenses\. The revenue-expenditure gap also had significant fiscal and economic consequences for the country\. Some portion of the gap between tariffs and cost was attributable to high levels of technical and non-technical losses\. Reported total losses were 22 percent of net generation in 2012, while the actual losses were likely higher due to lack of metering and poor management information systems\. In the distribution network, total reported technical and nontechnical losses accounted for 18 and 4 percent of power injected to the distribution network in 2012, respectively\. Severelectro total losses amounted 1,300 GWh (or 22 percent) of net injected power in 2012\. • Weak governance and lack of transparency and accountability\. At the sectoral level, some of the key governance issues included: (i) overlapping roles and responsibilities in sector policy-making, ownership and regulation; (ii) sub-optimal contractual and settlement arrangements, which impeded transparency and accountability of flow of funds and electricity, and undermine incentives for sector companies to improve operational and financial performance; (iii) unpredictable expenditure planning, which was done on a year-to-year basis, and largely in a reactive manner rather than by prioritizing investments based on transparent criteria and forward-looking sector planning; and (iv) an ambiguous regulatory environment, including absence of clearly defined and transparent mechanisms for setting tariffs\. At the company level, manifestations of poor governance included deficient internal control systems, inadequate corporate resource management and customer information systems, which were mainly based on manual entry and were not integrated, aggravating issues related to lack of accountability, transparency and data reliability\. 6\. The Electricity Supply Accountability and Reliability Improvement Project (ESARIP) directly responded to a request from the Government of the Kyrgyz Republic for a pilot project at OJSC Page 6 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Severelectro to address these challenges in the power sector and support the implementation of its Power Sector Development Strategy for 2012-2015 (NSDS)\. Key measures of the strategy included: (i) improvements in efficiency and transparency of sector operations; (ii) development and adoption of a medium-term tariff policy that would need to be accompanied by properly designed social protection schemes; and (iii) design and implementation of priority investments in the sector\. In order to operationalize the implementation of the strategy and coordinate donors’ support in the sector, the Government also developed a more detailed Action Plan for Reforming the Energy Sector in 2013-2014\. In addition, the Government has started implementing some modest governance improvement measures, such as the opening of an escrow account for power export proceeds in 2011, and the establishment of a Fuel and Energy Sector Transparency Initiative (FESTI) in 2011 in an attempt to improve management and governance within the sector by ensuring greater public participation and transparency\. Given that Severelectro is the largest distribution company serving more than 40 percent of all residential customers in the country and delivering more than 50 percent of total electricity consumption, focusing on improving the service of Severelectro would ensure that benefits accrue to the largest share of customers\. C\. RATIONALE FOR BANK INVOLVEMENT 7\. The project built on the World Bank Group’s engagement in the energy sector of the Kyrgyz Republic, which has been focusing on helping the Kyrgyz authorities to strengthen governance and accountability in the sector, improve the service delivery and reliability, and enhance the sector’s financial viability\. The project was aligned with the World Bank’s engagement in the sector through investment financing operations, policy dialogue under Development Policy Operations (DPOs), and analytical and advisory activities, aimed at addressing power sector principal challenges, which included: (a) Energy Chapter of the Public Expenditure Review (PER) and Power Sector Note (P146333), which analyzed the key challenges in the power sector of the Kyrgyz Republic and identified a comprehensive package of measures to overcome them; (b) an Energy Sector Development Policy Operation (P152440)1 and a subsequent Kyrgyz Republic Economic Governance DPO (P163983),2 which identified some of the measures that were implemented through this project, including strengthening of Severelectro’s procurement system, financial reporting and accountability mechanism, carrying out audits according to the International Financial Reporting Standards (IFRS), and enabling reliability and timeliness of performance indicators for the power sector; and (c) the World Bank’s Technical Assistance on tariff setting that supported the adoption of the Medium-Term Tariff Policy for 2014–2017 and related end- user tariff adjustments in 2014 and 2015 (P146333)\. 8\. At the time of the appraisal, the project was aligned with and supported the Country Partnership Strategy (CPS) for 2013–2017 (Report No\. 78500-KG), which recognized governance as the key development challenge in the country\. Specifically, the CPS identified maintenance of scarce natural resources and physical infrastructure, including energy, as one of the three areas of focus in FY2014–2017\. The project remained aligned with the priorities of the CPS and the Country Partnership Framework (CPF) for FY2019–2022 (Report No\. 130399-KG), which emphasized the challenges and opportunities in the energy sector as a continued focus area going forward, in Objective 4: ‘Enhance growth of natural resource 1 ICR for Kyrgyz Republic - Energy Sector Development Policy Operation, March 31, 2018, http://documents\.worldbank\.org/curated/en/731181523025372363/pdf/ICR-KYR-Energy-DPO-revised-April-2-CLEAN- 04032018\.pdf 2 ICR for Kyrgyz Republic - Programmatic Governance and Competitiveness Development Policy Operation, November 4, 2018, http://documents\.worldbank\.org/curated/en/652701542056413066/pdf/icr00004547-11042018-636774840340760882\.pdf Page 7 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) sectors, especially hydro-power’ under Area 2: ‘Raise productivity and build connectivity’ and Objective 9: ‘Enhance resilience to climate change and disaster risks’ under ‘Area 3: Enhance economic opportunities and resilience’\. Theory of Change 9\. The Project activities were designed to achieve the practical outcomes to improve the reliability of electricity supply in the project area and strengthen the governance of Severelectro’s operations\. The project objectives and outcomes were achieved through the following measures: (i) reducing losses and power outages through investments in strengthening the distribution infrastructure and installing smart meters, and thereby improving power supply reliability in the service area of Severelectro; (ii) enhancing the quality of services to customers through providing Severelectro with better information management tools for faster and more effective response to service interruptions and customer complaints; (iii) improving the financial viability of Severelectro through reduction of technical and non-technical losses, providing series of capacity building activities, supporting the preparation, auditing and publication of the company’s first-ever financial statements compliant with IFRS for the years 2018 and 2019; (iv) strengthening governance and internal control of Severelectro through provision of access to real time and reliable corporate and commercial information and tools, as well as strengthening the company’s institutional and human capacities, including through trainings and study tours to deepen the knowledge of best utility management practices, distribution system planning, corporate governance and financial management and reporting; and (v) job creation and improving the living standards of the poor through enhanced reliability of electricity supply\. Therefore, the aforementioned outcomes would contribute to the long-term goal of achieving a financially viable, efficient, and sustainable energy sector and service delivery, improving living standards of people, and reducing significant economic costs of unmet demand\. Figure 1 represents the Theory of Change of the project\. Page 8 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Figure 1\. Theory of Change Project Development Objectives (PDOs) 10\. The PDO is to improve the reliability of electricity supply in the project area and strengthen the governance of Severelectro’s operations\. Key Outcomes and Outcome Indicators 11\. The project’s key outcome indicators include the following: (a) Total electricity losses per year in Severelectro's distribution network\. This core sector indicator measured enhanced operational and financial performance of the company and reflected improved metering, billing, and governance (for example, reduced errors in accounting and record keeping and improved billing rates)\. (b) Average Duration of outages in Severelectro’s network per 1,000 customers\. This indicator measured the duration of outages at medium voltage level to assess improvements in service quality (that is, faster restoration of power supply after outages)\. Page 9 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) (c) Reliable operational and financial data available to the management of Severelectro and key external stakeholders\. This indicator measured progress toward enhanced internal (company management) and external (Government, regulator, and customers) accountability and good governance, enabled through the availability of reliable up-to-date operational and financial data\. The timeliness and reliability of data were ensured through the incorporation of well-proven MISs covering all core business areas of Severelectro that would automate collection of data under an integrated platform\. (d) Increase in the share of customers satisfied with Severelectro’s services\. This indicator measured the evolution of customer satisfaction levels during project implementation reflected by perceived improvements in supply reliability and service quality, which were the two critical areas for customer satisfaction\. The surveys were designed to provide disaggregated results by gender and by income levels\. Project Components 12\. The project has achieved the Development Objective through a holistic approach that integrates the following three components: (a) Distribution Infrastructure Strengthening, (b) Customer Service and Corporate Management System Improvement, and (c) Institutional Strengthening and Project Implementation Support\. 13\. Component 1: Distribution Infrastructure Strengthening (estimated cost of US$16\.0 million at appraisal)\. This component has helped improve power supply reliability and reduce losses in the distribution network by supporting priority investments to strengthen the distribution infrastructure of Severelectro\. The targeted assets were part of a priority investment program of the Government and Severelectro and were selected based on their potential for reducing losses and improving power supply reliability\. The selected investments included construction of three new medium-voltage substations and replacement of meters for high-consumption customers in Chui region\. 14\. Component 2: Customer Service and Corporate Management System Improvement (estimated cost of US$7\.0 million at appraisal)\. This component has provided Severelectro with information tools to improve quality of services provided to its customers and to enhance overall efficiency of its performance in all business areas\. 15\. To that end, the component has financed supply, installation, and commissioning of selected MISs; training for Severelectro’s employees on how to use them; and some investments into hardware to support the MISs\. The MISs were set up companywide and capture all three key areas of Severelectro’s operations: commercial management, corporate resources management, and power network planning and operations\. The specific MISs and their technical and functional specifications included the incorporation of a Commercial Management System (CMS), an Incidents Recording and Management System (IRMS), and a Corporate Resource Management System (CRMS)\. 16\. Component 3: Institutional Strengthening and Project Implementation Support (estimated cost of US$2\.47 million at appraisal, including US$0\.47 million from the Europe and Central Asia [ECA] Capacity Development Trust Fund)\. This component would support two key activities for the smooth implementation of the project and sustainability of project outcomes: (a) implementation support for project management, including monitoring and evaluation (M&E) and incremental operating expenses of Page 10 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) the Project Implementation Unit (PIU) under Severelectro; and (b) technical assistance to Severelectro to improve its business processes, strengthen its governance, and make the company more customer focused\. The technical assistance would include strengthening of Severelectro’s procurement system and financial reporting and accountability mechanism and improving Severelectro’s business processes\. D\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) Revised PDOs and Outcome Targets 17\. The project was approved by the World Bank’s Board of Executive Directors on July 15, 2014, and became effective on December 29, 20153\. 18\. The first restructuring of the project took place on May 18, 2018\. The restructuring updated the cost and financing estimates, as well as the baselines and annual targets for some of the results indicators to align them better with the project’s outcomes\. It also clarified the description of Component 1 and updated the economic and financial analyses (see paragraph 29 for details)\. 19\. In the second restructuring of the project, approved on December 23, 2019, an amount of SDR 1,310,000 (US$1\.80 million equivalent) was canceled due to project savings, and the unit of measurement, baseline, and target values of the results indicator ‘Average duration of outages in Severelectro’s network (minutes/1,000 customers)’ were revised to correct values included in the first project restructuring which were based on unreliable data\. Detailed rationale of restructuring and revision of PDO indicators is discussed in paragraphs 21–23\. 20\. The PDO remained unchanged during the project implementation\. 21\. The project’s end targets of the outcome indicators were revised twice during project implementation\. The purpose of revising the end targets was primarily to make them consistent with the objectives of the restructuring and to make corrections\. Each restructuring attempted to better align the outcome indicators with the project’s outcomes and to incorporate better data that became available from Severelectro as a result of project activities\. 22\. The end targets of the PDO indicators were revised, as provided in Table 1\. 3There was a delay in declaring project effectiveness due to institutional and personal changes in the government and sector in 2015 – the Ministry of Energy and Industry ceased to exist and the Director General of Severelectro also changed\. Therefore, there was a delay in ratifying the project’s Financing Agreement by the Parliament, the signing of the Subsidiary Agreement between the Ministry of Finance and Severelectro, and the execution of the Project Agreement and Subsidiary Agreement\. Page 11 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Table 1\. Changes to PDO Indicators and the End Targets during Implementation Revised End Revised End Unit of Original End Target - at Target - at Target - at Indicator Baseline Measure Appraisal First Second Restructuring Restructuring Year 2013 2018 2019 Electricity losses per Percentage 22 18 13 No change year in the Project revised to 15 area in 2018 Renamed to ‘Electricity losses per year in Severelectro's distribution network’ in 2018 Electricity losses per Percentage 18 16 Dropped — year in the project subtype area - Technical supplemental Electricity losses per Percentage 4 2 Dropped — year in the Project subtype area- Non-Technical supplemental Total net injected Megawatt 5,817,000 6,099,000 Dropped — generation hour (MWh) subtype supplemental Duration of outages Hours 21 18 15 18 per 1,000 customers revised to Revised to 16 reduced ‘minutes’ in in 2018 and 2018 and back back to 21 in to ‘hours’ in 2019 2019 Reliable operational Text n\.a\. Data generated through No change No change and financial data MISs available to available to the Severelectro management, management of SE regulatory authority and and key external government; selected data stakeholders available to customers Share of customers Percentage 0 10 No change No change satisfied with SE's services increased Share of female Percentage 0 10 No change No change customers satisfied (Supplemental) with SE’s services increased Share of customers Percentage 0 10 No change No change from low income (Supplemental) groups satisfied with SE’s services increased Page 12 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Revised PDO Indicators 23\. PDO indicators that were revised are noted in the following paragraphs along with a brief explanation of the key reasons for revision\. 24\. Electricity losses per year in the project area\. During the first project restructuring approved in 2018, this indicator was renamed as ‘Electricity losses per year in Severelectro's distribution network’ because it made better sense to measure network losses for Severelectro’s entire network\. The boundary for ‘the project area’ was difficult to define because the substations were constructed in Bishkek City and the smart meters were installed in the larger Chui District, and Severelectro indicated that it would only be feasible to measure the electricity losses for the whole network\. The restructuring also dropped the sub-indicators for technical and nontechnical losses\. These two indicators were originally chosen to track the achievement of distribution infrastructure strengthening, because these activities would directly help Severelectro reduce technical losses, while implementing smart meters was expected to reduce nontechnical (commercial) losses\. Later on, Severelectro informed the World Bank that it could not reliably break down the data into technical and nontechnical (detection of frauds and other irregularities in consumption and accuracy of billing and metering)\. The restructuring also restated the baseline for 2016 (2014 originally) and adjusted the annual target as new data became available due to the installation of smart meters financed by the World Bank, Kreditanstalt für Wiederaufbau (KfW), and the company’s own investments\. The indicator ‘Total net injected generation’ was dropped as the data was redundant and used as an intermediate parameter to calculate network losses\. 25\. Duration of outages per 1,000 customers reduced (hours)\. This indicator measured the total duration of outages in the network and was computed as the sum of duration of all outages recorded over a calendar year, divided by the total number of customers, and multiplied by 1,000\. The baseline and target values originally included in the Project Appraisal Document (PAD) were expressed in ‘hours’ (the baseline was 21 hours and the target was 18 hours)\. During the first project restructuring approved in 2018, the unit of measure of this indicator was revised to ‘minutes’ (the baseline was 16 minutes and the target was 15 minutes) based on the limited data reported by Severelectro at the time\. However, this unit of measure was revised back to the original (in hours) during the second restructuring in 2019 as the Outage Management System (OMS) was installed and started reporting data that was believed to be more reliable\. The updated data reported by Severelectro based on the OMS confirmed that the baseline and target values and the unit of measure of the original indicator were correct in the PAD and should not have been changed during the 2018 restructuring\. Therefore, the indicator was revised back to the original definition ‘Duration of outages per 1,000 customers reduced, hours/1,000’ and the baseline and target values were switched back to the original values in the second restructuring\. Revised Components 26\. The total project cost and budgetary allocation to project components were revised during the restructurings\. 27\. In the first restructuring, the total project cost estimate was largely unchanged (US$25\.9 million versus US$25\.5 million at appraisal) but the component costs had changed slightly based on actual contract costs, exchange rate fluctuations, and re-prioritization of the activities by the recipient\. The restructuring clarified that, in addition to substations, Component 1 would also finance the connection of Page 13 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) the Bishkek substation to the national grid, including an underground transmission cable for the substation without which the substation would not be operational\. The restructuring excluded the Enterprise Resource Planning (ERP) System under Component 2 from IDA financing, as explained in paragraph 29 under “Other Changes”\. The funding of around US$2 million that was originally allocated to Component 2 was reallocated to finance other activities meeting the project goals\. Severelectro decided to allocate about US$3\.26 million equivalent of its own resources to finance the ERP-related activities, spare parts for the substations, equipment for substation maintenance, equipment for cable line maintenance, calibration equipment for the smart meters, and customs duties and value added tax during the project period\.4 Despite a change in the financing source, all these MISs were kept in the scope of the Project to ensure an integrated approach of the implementation of MISs, which would enhance overall efficiency, transparency, and accountability of the company’s performance in all business areas\. Therefore, these changes did not trigger an amendment of the Financing Agreement\. 28\. The second restructuring entailed a cancellation of SDR 1,310,000 (US$1\.80 million equivalent) from Component 2 (Customer Service and Corporate Management System Improvement)\. Thus, the funding allocated to Component 2 was reduced from US$5\.50 million to US$3\.70 million equivalent to cancel the project savings (details explained in “Rationale for Changes and Their Implication on the Original Theory of Change” paragraph 31)\. Table 2 shows the changes in project costs (US$, millions) due to the cancellation\. 29\. At project closing, the project disbursed US$20\.3 million equivalent, which is 100 percent of the total IDA financing taking into account the amount that was cancelled\. Table 2\. Key Changes to Project Cost during Implementation (US$, millions) Original Cost at Revised Cost Revised Cost Appraisal (After First Restructuring) (After Second Restructuring) Year 2013 2018 2019 Trust Trust Trust Component IDA IDA Severelectro IDA Severelectro Fundc Fund Fund 1\. Distribution Infrastructure 16\.0 0\.00 18\.80 0\.00 0\.46 18\.80 0\.00 0\.46 Strengthening 2\. Customer Service and Corporate 7\.0 0\.00 3\.00 0\.00 2\.50 1\.20 0\.00 2\.50 Management System Improvement 3\. Institutional Strengthening and Project 2\.00 0\.47 0\.33 0\.47 0\.30 0\.33 0\.47 0\.30 Implementation Support 20\.33 Total 25\.00 0\.47 23\.00a 3\.26 b 3\.26 25\.47 25\.87 24\.07 4The final amount Severelectro invested was US$5\.3 million\. This includes the financing Severelectro has received from KfW for the CMS\. Page 14 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Note: a\. This amount is based on SDR/US$ exchange rate of November 27, 2017\. Includes US$400,000 for contingencies\. b\. This amount is based on SDR/US$ exchange rate of December 23, 2019\. c\. Grant from ECA Capacity Development Trust Fund\. Other Changes 30\. The economic and financial analyses of the project were updated during the first restructuring in 2018 to evaluate the flow of economic and financial benefits and costs associated with the restructuring of the project, including the increased number of installed smart meters from 20,000 to 40,000 under Component 1 and the connection of the Bishkek substation to the national grid (in addition to the project’s original scope)\. The approach to estimate economic and financial benefits and costs was similar to the one used at the appraisal stage\. Major changes that have been made in the economic and financial analyses at the restructuring include, first, the long-run average incremental cost (LRAIC), used to evaluate technical loss reduction versus the use of short-run marginal cost of power supply at appraisal\. LRAIC was the estimated cost of meeting the electricity demand forecasting with required investments in new generation, transmission, and distribution, considering all inputs as variables, thus it was considered a better estimate of the avoided long-term cost of power supply\. Second, the electricity loss reduction estimates were revised downward as Severelectro reported significant reduction in commercial losses in those years deriving from the 38,000 smart meters installed through the project, and additional 130,000 smart meters installed by Severelectro under a separate KfW-financed project\.5 This yielded an economic net present value (NPV) of US$17\.6 million and an economical internal rate of return (EIRR) of 30\.9 percent, which was higher than the appraisal estimate but a negative financial NPV and a financial internal rate of return (FIRR)\. This was because of the significantly lowered estimates of electricity loss reduction which led to the revision of the unit of measure from “hours” to “minutes” during the first restructuring\. Rationale for Changes and Their Implication on the Original Theory of Change 31\. The first restructuring of the project took place on May 18, 2018, to change the financier of the ERP from IDA to Severelectro and fine-tune the Results Framework to incorporate the updated data that became available from Severelectro during implementation\. The restructuring updated the cost and financing estimates, updated the baseline and annual targets for some of the results indicators to align them better with the project’s outcomes, clarified the description of Component 1, and updated the economic and financial analyses\. This was in response to the request from Severelectro that was received on September 22, 2017\. Due to the Government’s re-prioritization of the sector, including the decision to install a single ERP for all the energy sector entities in an integrated way, the World Bank team reviewed the project status and agreed with the Government on excluding the ERP from IDA financing and reallocating the released funds of around US$2 million to finance other activities meeting the project goals (that is, the cable line to connect the Bishkek substation to the Bishkek combined heat and power plant [CHP])\. 5At the first restructuring in 2018, the contract for the supply of 20,000 smart meters for high-consumption consumers was awarded in March 2016 and installation by Severelectro was completed by early 2017\. Due to the lower-than-estimated price of the first batch of the meters yielding to considerable savings, an additional 20,000 meters were procured, of which 19,000 were satisfactorily installed by January 2018\. Page 15 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) 32\. The second restructuring took place on December 23, 2019, when the project reached completion after six years of implementation\. Because of the SDR/US dollar exchange rate fluctuations during the project’s life, the total IDA financing amount in US dollars reduced from the original US$25 million equivalent at appraisal to about US$22\.6 million at closing\. The project also generated considerable savings due to: (a) competitive bidding resulting in reduced contract prices compared to the initial plans/budgets; and (b) the first restructuring of the project, requested by the recipient, which shifted the financing source of the ERP from IDA to counterpart financing\.6 Following these developments, the World Bank team agreed with Severelectro and the Ministry of Finance to cancel the respective funds\. 33\. There was no impact on the original Theory of Change\. The PDO remained unchanged\. The restructurings changed the budgetary allocation to the project components but did not have an impact over the results chain although the PDO indicators and targets were slightly revised during implementation\. Their revisions adjusted the indicator targets due to more reliable data which became available during implementation but were not material in the measurement of PDO outcomes\. II\. OUTCOME A\. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating 34\. The PDO, ‘to improve the reliability of electricity supply in the project area and strengthen the governance of Severelectro’s operations’, was highly relevant at the time of project approval and remained highly relevant at the project closure\. The World Bank’s CPF for the Kyrgyz Republic (FY2019– 2022) sets in its Objective 4 (Focus Area 2: ‘Raise productivity and build connectivity’) to ‘Enhance growth of natural resource sectors, especially hydro-power’\. Objective 9 (Focus Area 3: ‘Enhance economic opportunities and resilience’) states ‘Enhance resilience to climate change and disaster risk’\. These objectives are aligned to the PDO\. 35\. Furthermore, the project was aligned with the Government’s sector strategy and action plan by improving efficiency and transparency of the sector and supporting identified key investments in the distribution network\. The overall objectives of the ‘National Sustainable Development Strategy (NSDS) for the Kyrgyz Republic (2013–2017)’7 called for, among others, ‘increase in energy efficiency and reduction of losses especially heat and electrical energy and promotion of renewable energy sources’, ‘ensure reliability and uninterrupted nature of supply of electricity, primarily to domestic consumers’, and ‘improve the financial and corporate governance in the energy sector, enhance the commercial and financial discipline’\. The activities in the project directly contributed to all these objectives\. In addition, the project was in line with the World Bank Group’s engagement in the energy sector of the Kyrgyz Republic, which is focused on helping the Kyrgyz authorities improve the service delivery and supply 6 The last two procurement packages for more advanced meters (estimated cost US$580,000) and switchgears (US$1,400,000) were prepared at project closing to utilize savings from the project but were cancelled after the additional 20,000 meters and the substation connections were installed), because they could not be delivered to Severelectro’s sites by the project’s closing date of December 31, 2019\. 7 The NSDS for the Kyrgyz Republic was issued in January 2013\. Page 16 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) reliability, strengthen governance and accountability in the sector, and enhance its financial viability, through the ongoing technical assistance for tariff reforms and overall sector development\. 36\. Thus, relevance of PDOs for the project is rated as High\. B\. ACHIEVEMENT OF PDOs (EFFICACY) Assessment of Achievement of Each Objective/Outcome 37\. The PDO has two objectives: (a) to improve the reliability of electricity supply in the project area and (b) to strengthen the governance of Severelectro’s operations\. 38\. The project achieved most relevant and attributable indicators for the outcomes associated with the PDO\. Outcomes were assessed for the entirety of the implementation period, rather than with split ratings for any restructuring\. Because restructurings made adjustments mainly to the Results Framework, a split rating by each restructuring period was not adopted for the following reasons: (a) there were no changes to the PDO outcomes; (b) the restructurings did not introduce substantial and/or material change to key outcome indicators, project scope, and the associated level of ambition; and (c) the revised indicators reflected a better measure for achievement of the PDO and the end targets were revised as new reliable data became available due to the installation of smart meters and MISs supported through the project\. Table 3 lists relevant outcome targets where there was a change, with justification showing why the level of ambition did not change materially; thereby, outcomes are assessed for the entirety of the implementation period\. Table 3\. Change in PDO Indicator Targets because of the Restructurings Change in End Indicator Change in Baseline Comments Target Electricity losses Revised from 22 Revised from 18 The breakdown of the indicator by technical per year in percent to 15 percent to 13 and nontechnical losses, was removed and Severelectro's percent in 2018\. percent in 2018 assessed as a combination of losses because distribution The breakdown by of the difficulties to reliably split the data network technical and into technical and nontechnical\. The nontechnical baseline and target were adjusted to be losses was more appropriate as new reliable data removed\. became available once the smart meters and MIS were installed\. Duration of outages Revised from 21 Revised from 18 Indicator and end target were adjusted to per 1,000 hours to 16 hours to 15 minutes correct the unit of measure caused by customers reduced minutes in 2018, in 2018, and back to unreliable data, as explained in “Revised and back to 21 18 hours in 2019 PDO Indicators” paragraph 23\. hours in 2019 Page 17 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) 39\. Assessment of achievement of each objective is provided in the following paragraphs\. Objective (i): To improve the reliability of electricity supply in the project area 40\. A number of activities took place under the project-financed infrastructure investments to improve power supply reliability in the service area of Severelectro through investments in strengthening the distribution infrastructure, resulting in more reliable supply and reduction of losses and power outages8\. These activities included (a) construction of three medium-voltage substations in Bishkek (a 110/35/6 kV substation Bishkek, a 35/6–10 kV substation Orto-Say, and a 35/6–10 kV substation Sport); (b) installation of smart meters for high-consumption consumers in the larger Chui region; and (c) 110 kV underground cable line connecting the Bishkek substation to the Bishkek CHP\. Table 4 provides a summary of targets achieved at the PDO-level and intermediate indicators\. The construction of the substations and cables reduced the technical loss of electricity supply, while the commercial losses were reduced through the introduction of smart meters\. Loss reduction would enhance the sector operational efficiency and ultimately increase the resource delivery contributing to meeting the growing demand\. Table 4\. Achievement of Objective (i): To Improve the Reliability of Electricity Supply in the Project Area End Target Actual End Indicator Baseline End Target Achieved as a Target Percentage Electricity losses per year in Severelectro's distribution network 15 13 11\.66 16\.7 (Percentage) Duration of outages per 1,000 customers 21 18 17\.21 126\.3 reduced (Hours) Share of customers satisfied with SE's 0 10 28\.00 280\.0 services increased (Percentage) Share of female customers satisfied with 0 10 29\.00 290\.0 SE’s services increased (Percentage) Share of customers from low income groups satisfied with SE’s services 0 10 19\.00 190\.0 increased (Percentage) 41\. At the end of project implementation, all five indicators related with this outcome had exceeded their targets\. • ‘Electricity losses per year in Severelectro's distribution network’ were 11\.66 percent at project closing compared to 15 percent at the start of the project, exceeding the end-project target of 13 percent\. This improvement in operational efficiency was mainly supported by ESARIP as well as by the company’s annual network maintenance work\. Although the project supported the integration of advanced meters, OMS, GIS, 1C, CMS in Pervomayskaya district (see next sections for details), more efforts and investments are needed to further improve the data reliability and availability, including through expanding the coverage of advanced metering infrastructure (current coverage is 35 percent), full-fledged implementation of CMS, integration of GIS with OMS, 8Severelectro is the owner and operator of the 35-10-6-0\.4kV distribution network for the city of Bishkek, Talas and Chui regions\. At appraisal, the city of Bishkek and Chui region accounted for 92\.2 percent of Severelectro total billed consumption of 4,489 GWh, with 45\.5 percent and 46\.7 percent separately\. Page 18 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) among others\. These actions are being considered and/or implemented by Holding and SE with the support from development partners, which would yield better results in coming years\. • ‘Duration of outages per 1,000 customers reduced’ were 17\.21 hours at the project closing from 21 hours at the start of the project, exceeding the end-target of 18 hours\. This indicator is regularly measured and reported by Severelectro using the System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI) according to the “Regulation on key performance indicators (KPIs) in the electricity sector” approved by the Kyrgyz Republic State Regulatory Agency for Fuel and Energy Sector in 2016\. Integration of OMS significantly improved the data reliability with regard to this indicator, which was not available during the first years of the project\. • ‘Customers’ satisfied with Severelectro's services’ improved 28 percent comparing with customer satisfaction at approval, while the disaggregated results by gender and by income levels were 29 percent and 19 percent, respectively, all exceeding the targets of 10 percent\. Customer surveys were conducted through ESARIP to track the level of satisfaction with electricity supply and overall Severelectro service\. This was the first step for Severelectro, and for the entire sector in general, on promoting citizen engagement in their business process\. Customers acknowledged the overall improvement in electricity supply, raised awareness on measures implemented in the sector, metering practices, payment period and methods, improved communication practice of Severelectro, among others\. Meanwhile, some areas were also identified for further improving the reliability of supply, especially in Chiu region which has a higher load during the winter season\. Following the survey results, Severelectro prepared a detailed action plan to address those issues with the aim to improve the service across the company’s operation area in coming years\. 42\. All targets of intermediate indicators were also met or exceeded\. The construction of three substations and connecting cable lines added 112,600 kVA transmission capacity to the electricity network, which has substantially improved the reliability of electricity supply in Bishkek City by reducing emergency shutdowns of distribution facilities due to equipment congestion and overloading\. A total of 40,000 smart meters were procured and 39,500 were installed to the most energy-intensive customers, which contributed to achieving significant loss reduction and improving the accountability in electricity supply\. The interventions of the project directly benefited 530,000 customers of Severelectro, of which 51 percent are female beneficiaries\. Over the period of the project implementation, Severelectro also installed additional 130,000 smart meters for lower consumption consumers under a separate KfW-financed project\. The installation of smart meters financed by the World Bank and KfW helped Severelectro reduce nontechnical losses (detection of frauds and other irregularities in consumption) and improve the accuracy of metering and billing\. 43\. Overall, objective (i) was successfully achieved thus efficacy could be rated High\. Meanwhile, given the need and ongoing work on improving the data reliability and availability, the efficacy for the objective (i) is rated Substantial\. This objective has a dominant share in the project as it makes up 92 percent of the total project cost\. Page 19 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Objective (ii): To strengthen the governance of Severelectro’s operations 44\. The project helped Severelectro strengthen the governance of its operations by implementing measures to improve the efficiency of all business areas, including network operations for provision of electricity services; commercial functions (for example, metering, billing collection, disconnection/reconnection, and better attention to/addressing of customer requests); and planning and management of corporate resources\. The activities enabled real-time access to reliable commercial and corporate information, and thereby strengthened supervision, monitoring, and internal control functions of the company\. Thus, the activities enhanced accountability of Severelectro in all operations and contributed to the improved governance of Severelectro\. 45\. The objective of strengthening the governance of Severelectro’s operations was measured by ‘Reliable operational and financial data available to the management of Severelectro and key external stakeholders’\. Table 5\. Achievement of objective (ii): To Strengthen the Governance of Severelectro’s Operations Indicator Baseline End Target Actual End Target Reliable operational and n\.a\. Data generated through MISs Real-time data are available financial data available to the available to Severelectro through OMS companywide; management of Severelectro management, regulatory CMS real-time data are and key external stakeholders authority, and Government; available through the new selected data available to billing system for residential customers customers of Pervomayskaya District, financial operations data are available through the upgraded 1C 8\.3 system of Severelectro’s existing accounting, and ERP system, and Geographic Information System (GIS) integration has been successfully completed\. Severelectro’s financial statements are now aligned with the IFRS and its first-ever audited annual financial statements compliant with the IFRS for 2018 and 2019 are prepared and disclosed on the company’s website\. 46\. The objective was achieved through two parts: (a) implementation of companywide MISs, which helped improve the company’s customer service and corporate management system in all business areas, and (b) institutional strengthening of corporate procurement and financial management (FM), which helped improve transparency, efficiency, and accountability within the company in these areas\. 47\. Customer service and corporate management system improvement\. The project financed the implementation of MISs by Severelectro, to improve quality of services provided to its customers and to enhance overall efficiency, transparency, and accountability of its performance in all business areas: Page 20 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) commercial management, corporate resources management, and power network planning and operations\. 48\. The GIS was the only MIS financed by IDA, while the other MISs remained in the scope of the project but were financed by Severelectro, KfW, and Asian Development Bank (ADB)\. At appraisal, the specific MISs and their technical and functional specifications included incorporation of a CMS, an OMS,9 an ERP, and an Assets Management System (AMS)\. Over the period of implementation, Severelectro decided to develop the OMS in-house and the CMS was financed by KfW\. Severelectro decided to move faster by upgrading its existing system to align with the ERP, as explained in “Revised Component” paragraph 26\. The GIS and AMS were identified during implementation as important MISs to improve Severelectro’s commercial operations and complement the ERP\. Subsequently, ADB initiated a project with the State Property Commission to introduce and integrate the AMS for all energy sector utilities, including Severelectro, rather than a separate introduction in Severelectro\. 49\. Nevertheless, all these MISs were kept in the scope of the project to ensure an integrated approach of the implementation of MISs, which would enhance overall efficiency, transparency, and accountability of the company’s performance in all business areas\. During implementation, the team has been actively keeping track of the implementation status\. The MISs included in the scope of the project are provided in Table 6\. Table 6\. Scope of the MISs MIS Description Financing Source(s) CMS The CMS provides (a) integrated management of the commercial KfW cycle (metering, reading, billing, collection, and receivables accounting) and (b) online management of a customer database\. OMS The OMS supports customer services by improving network Severelectro operations, aimed at ensuring good quality in power supply to customers\. The OMS allows Severelectro’s existing service quality centers to better respond to client claims and complaints related to outages and other anomalies in electricity supply and ensure better quality of supply by automating the detection of distribution faults\. ERP The ERP is a nonutility-specific information tool that supports Severelectro efficient and transparent execution of processes and activities related to the following corporate functions: accounting, asset management, FM, human resources, procurement and logistics, project management, business planning and intelligence, and information management\. GIS The GIS helps create and maintain a reliable database of IDA customers and network assets\. AMS The AMS supports efficient maintenance of Severelectro’s ADB network infrastructure and other assets\. 50\. The MISs have been implemented, while the status of each MIS varies\. 9 Referred to as Incidents Recording and Management System (IRMS) in the PAD\. Page 21 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) 51\. The fully completed components, the OMS financed by Severelectro and the GIS financed by the World Bank, when used together, have become central tools for Severelectro to efficiently resolve customer claims and complaints related to outages and other anomalies in electricity supply, and to ensure better quality of power supply by automating the detection of distribution faults\. 52\. Within the framework of the project, Severelectro has developed and integrated companywide the full set of functionalities of an advanced OMS financed by Severelectro’s own sources and gradually deployed the system in all the regions served by the company to attend to and resolve complaints from customers and incidents in high- and medium-voltage networks on a fast-track basis\. A call center was integrated as part of the OMS, which allowed the reception of customers’ complaints, identification and resolution of related incidents in electricity networks, and service restoration\. From the OMS, Severelectro can create dispatching teams in each district to perform the whole set of measures for outage management\. The steps for attending and resolving customer complaints with the support of the OMS can be described as follows (as demonstrated on the job to the World Bank team): (a) reception of customers’ complaints by the call center, (b) geographical mapping of the incident, (c) creation of separate application for each incident, (d) recording of the incident in the OMS, (e) signaling of the dispatchers and respective maintenance team about the incident by the OMS, (f) assignment of a team to promptly analyze the incident, and (g) service restoration\. Severelectro has mapped all low-voltage customers by the distribution transformers\. This makes it possible to maximize effectiveness in detecting and resolving outages by reducing the number of physical trips to those transformers, as well as to record frequency and duration of interruptions at the level of each distribution transformer\. 53\. Development of the GIS financed by the World Bank has been successfully completed in December 2019\. Once Severelectro incorporates the GIS, the customers will be mapped to low-voltage feeders, which will further improve effectiveness in detection and resolution of incidents in low-voltage networks\. The activities contributed to the improvement of customer feedback mechanisms and availability of timely and reliable information, which helped Severelectro improve its accountability toward external stakeholders, including the regulatory authorities, Government, and customers\. The project also provided adequate trainings to properly operate, maintain, and use the new information management tools provided under the project\. 54\. With its own financing, Severelectro has completed installation of upgrades of its existing 1-C 8\.3 version accounting system (developed by a Russian company 1S), which brings the company’s FM and accounting systems closer aligned to ERP\. The upgraded system has part of the functionalities of the full- scope ERP which was to be financed by the World Bank at project design, and it includes the following modules: (a) accounting (general ledger, assets, financial consolidation, and cash management); (b) human resources (payroll, benefits, and management); and (c) warehouse control\.10 The full-fledged ERP was cancelled from World Bank financing during the restructuring of May 2018 to reflect the Government’s decision to procure a standardized/integrated ERP for all energy companies so that they could all use a uniform technology platform and be synchronized accordingly\. Therefore, the Government decided to finance the system from its own sources and requested the cancellation of the procurement 10The full scope ERP is a nonutility-specific information tool that supports efficient and transparent execution of processes and activities related to key corporate functions\. Besides accounting, human resources, and warehouse control, it includes features related to asset management, project management, business planning and intelligence, and information management\. Page 22 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) of the ERP under the World Bank financing\. At the time of the ICR, Severelectro was awaiting the Energy Holding Company’s instructions on the full-fledged integration of ERP in all electricity utilities\. 55\. The CMS financed by KfW has been integrated in Bishkek City, while the ‘go live’ was implemented for residential customers of Pervomayskaya District of Bishkek City\. The contract with Fluentgrid financed by KfW was extended till they complete the full-fledged CMS implementation of at least 8 modules (out of total 12) for all customers (residential and nonresidential) in Pervomayskaya District\. The implementation of modules related to revenue cycle (meter reading, billing, collection, and disconnection/reconnection) for 55,000 customers was integrated for residential customers in the district in December 2018\. As Severelectro has already purchased licenses to roll out the CMS for up to 600,000 customers, CMS will be implemented in all districts of Bishkek City, following the completion of the contract with Fluentgrid\. The rollout of all modules of CMS was initially planned for the end of March 2020 but is now postponed till December 2020, given the restrictions caused by the COVID-19 crisis\. Once the CMS is implemented in those districts, it is expected to maximize the accuracy and efficiency of billing and customer management systems\. 56\. Full implementation of the AMS financed by the ADB has not been completed by the project’s closing date due to the lack of coordination between ADB and counterparts\. Upon the request from the Government, ADB initiated a project with the State Property Commission to introduce and integrate the AMS for all energy sector utilities rather than a separate introduction in Severelectro\. The consultant— Grant Thornton—drafted the technical specifications and requirements for functionalities\. At the time of the ICR, the AMS component was pending approval of the State Property Fund and sector stakeholders\. The completion of the AMS is delayed till March 2021, given the restrictions caused by the COVID-19 crisis\. 57\. At appraisal, the World Bank team had foreseen the risk that other development partners in the country may initiate projects with Severelectro that overlap or are not complementary with the project and hence has been closely following up with all the stakeholders and development partners during every mission\. The Severelectro-financed OMS has already been successfully completed\. In the meantime, implementation of the CMS and AMS, financed respectively by KfW and ADB, was not fully completed at the time of the ICR due to the restrictions caused by the COVID-19 crisis as well as the lack of coordinated actions and implementation capacity of both the vendor and government agencies\. The World Bank team noted that better coordination of all processes between the parties (State Property Fund, Holding Company, ADB, and consultants) could have advanced the implementation of those activities\. Meanwhile, the inclusion of international donors has enhanced the results of the project, especially the implementation of the CMS by KfW\. 58\. Institutional strengthening\. The project financed several activities aimed at strengthening the capacity of Severelectro’s staff, especially accounting and FM departments: (a) corporate FM strengthening, (b) corporate procurement strengthening, and (c) support for project management\. 59\. Corporate FM capacity has been strengthened\. The company’s accounting policy and the quality of its financial statements and reports were enhanced\. Supported by the project, Severelectro’s financial statements are now aligned with the IFRS and its first-ever audited annual financial statements compliant with the IFRS for 2018 and 2019 are disclosed at the company’s website, which increased the company’s transparency and contributed to better understanding of the company’s financial position by the public, the government, and other stakeholders\. Page 23 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) 60\. Severelectro was supported by a consulting firm that helped prepare the company for an audit of consolidated financial statements compliant with the International Standards on Auditing (ISA), which further streamline the preparation process of financial statements\. Severelectro entity audits for FY2018 and FY2019 have been completed\. Severelectro contracted an international audit firm, Ernst & Young, for auditing the company’s 2018 and 2019 IFRS-based financial statements according to the ISA\. The respective selection was validated by Severelectro’s Board of Directors and approved in its Shareholders Meeting in August 2019\. The final audit report covering FY2018 and FY2019 and respective management letters were submitted to the World Bank on November 25, 2019, and May 19, 2020, respectively\. Both financial statements and audit reports were found acceptable to the World Bank\. 61\. With the support from the project, Severelectro received comprehensive capacity building for its accounting and FM personnel with a practical and standardized approach\. Under the project, most of Severelectro’s accounting personnel have completed their accounting training for Certified Accounting Practitioner (CAP), which is widely recognized in the Commonwealth of Independent State (CIS) countries\. The project also provided Severelectro financial personnel an opportunity to learn from a peer company’s experiences in establishing highly informative and functional accounting practices\. For example, a group of experts from Severelectro visited one of the leading power distribution companies in Georgia, JSC Telasi in 2019, which has established a strong financial reporting process in line with the legislative requirement to report and disclose financial statements in accordance with the IFRS and ISA\. The study tour achieved its objective of raising awareness and strengthening the capacity of Severelectro management and accounting personnel on good reporting practices\. Severelectro specialists learned about business processes design, operating practices, accounting and reporting under the IFRS, integration of systems, and practical experience of the energy companies\. Another example is that Severelectro’s personnel visited the National Administration of Power Plants and Electrical Transmissions of Uruguay to learn about its institutional arrangement\. This study tour also strengthened the capacity of Severelectro management and staff and further informed their decision in introduction of modern practices and tools in the company’s operation\. 62\. These activities helped Severelectro achieve the following outcomes: (a) improved quality of Severelectro’s financial reports; (b) better alignment of the underlying accounting policies with the IFRS; and (c) improved capacity of Severelectro staff, especially financial and accounting personnel\. Strengthening the financial reporting function in Severelectro through training of staff, aligning of Severelectro’s accounting policies with the IFRS, and implementation of the IFRS helped streamline and improve governance within Severelectro, which contributed to the overall objective of the Government and the project to improve transparency, accountability, and efficiency of utilities\. These achievements will allow Severelectro to produce quality financial reports and be more transparent toward its shareholders and general public going forward, beyond the life of the project\. Severelectro’s experience in this area can be learned and replicated in other distribution companies\. 63\. The implementation of companywide MISs under the project helped improve the company’s customer service and corporate management system in all business areas\. The activities related to institutional strengthening of governance, corporate procurement and FM have substantially improved the transparency, efficiency, and accountability within the company\. Real-time data are available through the OMS companywide\. As mentioned above, the rollout of all modules of CMS was initially planned for the end of March 2020 but is now postponed till later in the year, given the uncertainties cause by the current Covid-19 crisis\. Once the CMS is fully implemented, it is expected to maximize the accuracy and Page 24 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) efficiency of billing and customer management systems\. Nevertheless, considering the delays in the implementation of CMS and OMS, and the missing functions of ERP, the efficacy for objective (ii) is rated “Substantial”\. Justification of Overall Efficacy Rating 64\. The overall efficacy rating is Substantial based on the Substantial rating in improving the reliability of electricity supply in the project area and the Substantial rating in strengthening the governance of Severelectro’s operations\. As discussed, at the end of project implementation, all five indicators had exceeded their targets for objective (i) but considering the need and ongoing work on further improving the reliability of data, is rated Substantial\. The indicator for objective (ii), ‘Reliable operational and financial data available to the management of Severelectro and key external stakeholders’ has almost fully achieved its objective, thus it is rated Substantial\. C\. EFFICIENCY Assessment of Efficiency and Rating 65\. Economic analysis\. The project’s economic impact at completion was conducted at the project level11 considering that major economic benefits are the joint result of implementing Components 1 and 2\.12 Similar cost-benefit analysis approach was applied at appraisal with updated data available at the end of the project’s lifetime: the main quantifiable economic benefit of the project is systemwide savings due to the reduction of losses\.13 There are several other benefits resulted by the project (improved outage response system, faster mapping of the company’s assets and identification of outages, and strengthened institutional and human capacity, among others), but they are not included in the analysis, as it is hard to quantify those benefits\. The economic costs of the project include investment costs and incremental operation and maintenance costs associated with the investments\. Key assumptions underlying the economic and financial analysis are summarized in ANNEX 4\. 66\. As indicated earlier, the economic benefits of the project are limited to significant quantifiable benefits and therefore the results regarding the economic NPV and the EIRR should be seen as lower bounds relative to the actual economic benefits\. The economic analysis of the project yielded economic NPV equivalent to US$24\.22 million and EIRR of 17\.1 percent\. Considering environmental benefits, the NPV increased to US$32 million in a low-case scenario and US$39\.74 million in a high-case scenario, and the EIRR improved to 21\.4 percent in a low-case scenario and 25\.4 percent in a high-case scenario14\. Table 8 reflects the post-completion analysis based on actual results of the project\. 11 The efficiency assessment was conducted at project level and did not separate the results by financiers contributed to the project\. During project implementation, there was no major other investment projects\. Therefore, the project contributed to most of the reduction of losses at Severelectro\. 12 Component 3 also yielded several benefits (outlined in paragraphs 52 –55), though those benefits are not included in the cost- benefit analysis, as they are difficult to quantify\. 13 The reduction of energy not served due to improved reliability of power supply is relatively small and is difficult to quantify, and thereby it is not included\. 14 The discount rate values in line with the 2016 guidance note entitled “Discounting Costs and Benefits in Economic Analysis of World Bank Projects” and the shadow carbon prices (benefits) are based on 2017 “Shadow Price for Carbon Guidance Note” \. Page 25 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Table 7\. Summary of Results for Economic Analysis of the Project Base Case without Base Case Considering Base Case Considering Considering Carbon Low Carbon Benefit High Carbon Benefit Benefit NPV (US$, millions) 24\.22 32\.00 39\.74 EIRR (%) 17\.10 21\.40 25\.40 67\. Financial analysis\. An ex post financial analysis of the project (not of Severelectro as a state- owned enterprise or of the sector) was also carried out using a cost-benefit analysis with the same discount rate of 4\.87 percent\. The financial analysis of the project yielded financial NPV equivalent to US$36\.93 million and FIRR of 23\.4 percent\. A summary of the results for the financial analysis of the project base case is indicated in table 9\. 68\. The project’s financial benefits are savings because of reduced power purchases valued at average purchase cost of electricity for Severelectro due to the reduction of losses\. The US dollar /Kyrgyzstani som foreign exchange rate is forecasted using the purchasing power parity approach\. 69\. The main financial costs of the project are the investment costs and incremental operation and maintenance costs, both estimated inclusive of applicable taxes and duties\. Table 8\. Summary of Results for Financial Analysis of the Project Base Case Without Considering Carbon Benefit NPV (US$, millions) 36\.93 FIRR (%) 23\.4 70\. The project has achieved the key outcomes with high efficiency based on the economic and financial analysis as described herein, which is conservative and robust to sensitivity analysis\.15 71\. Project Implementation Efficiency\. Overall, the project achieved a substantial level of implementation efficiency through joint efforts to resolve the arising issues and significant cost savings\. The implementation of the first two substations and smart metering was smooth, though there were some delays with the commissioning the underground cable lines due to the local licensing issues, and the financial statement audit\. However, the implementation was substantially accelerated in the last years, and the project implementation was closed on time, as initially planned\. Completion of subprojects financed by other donors, including the CMS and AMS were delayed, which were beyond the control of the World Bank\. On the other hand, the Project has achieved considerable savings of USD $1\.8 million equivalent due to: (a) competitive bidding resulting in reduced contract prices compared to the initial plans; and (b) Severelectro’s decision to shift the funding source of the ERP from IDA to their own resources\. This contributes to the overall project implementation efficiency\. 72\. The overall efficiency rating of the project is Substantial\. The realized EIRR and payback period is better than the estimated results at appraisal, and the FIRR is higher than the 4\.87 percent discount rate\. 15The results for economic and financial analysis are different than under the first restructuring because of the different methodology to calculate ‘Undersupply of electricity due to outages without project’ and the revision of the unit of the indicator ‘Average duration of outages in SE network without project’ from ‘minutes per 1,000 customers’ to ‘(hours per 1,000 customers)’\. Page 26 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Therefore, the investment was substantially efficient\. Overall Outcome Rating: Satisfactory D\. JUSTIFICATION OF OVERALL OUTCOME RATING 73\. Based on the High rating for relevance of objectives, Substantial rating for efficacy, and Substantial rating for efficiency, the overall outcome rating of the project is assessed to be Satisfactory\. While the project’s last ISRs had Moderately Satisfactory ratings, a deeper disaggregated assessment of each rating components (relevance, efficacy, efficiency) and project (sub)-components, following the Bank guidelines on Deriving the Overall Outcome Rating for a project, suggests Satisfactory rating for the overall outcome\. Most of the project objectives were met and exceeded targets, and the efficiency of the project is also higher than estimated at design\. However, the project had minor shortcomings in achieving objective (ii), which were beyond the World Bank team’s control (such as the delay in the rollout of all modules of CMS, including due to the COVID-19 pandemic)\. E\. SUSTAINABILITY OF THE PROJECT RESULTS\. 74\. As stated above, ESARIP has demonstrated and yielded good benefits for Severelectro, broader energy sector and Government through reforming a distribution company in a comprehensive way\. The project results are expected to sustain even beyond the project life, if further pursued and committed by the government, as described below: • Sector regulation and performance monitoring\. World Bank has been supporting energy sector institutional, regulatory, financial viability and tariff reforms over the past years through “Capacity-building support to the new Energy regulator of the Kyrgyz Republic (P154684), “Energy Tariff reform including poverty and social impact assessment and communication and outreach strategy” (P163340) ASAs and “Energy Sector Development Policy Operation” (P152440)\. A Regulatory Agency was established in 2014 consolidating the sector regulatory functions in a transparent way\. The Regulatory Agency adopted “Regulation on Key Performance Indicators in the Electricity Sector” in 2016 to track the quality of power supply and efficient operations of the sector companies\. Distribution KPIs include: (i) electricity losses in power network; (ii) SAIFI; (iii) SAIDI; (iv) Customer Average Interruption Duration Index [CAIDI]; (v) unplanned power outages; and (vi) planned power outages\. The Regulatory Agency established a framework for systematic performance evaluation and motoring of companies, including through the above-referenced KPIs, to ensure the efficiency and sustainability of distribution segment\. • Replicating the project results\. The Government has started replicating and implementing similar to ESARIP initiatives across the country\. “Oshelectro distribution rehabilitation” and “Vostokelectro distribution rehabilitation” projects financed by EBRD and EU aim to improve the reliability of electricity supply in the south of the country and in Issyk-Kul and Naryn regions through introduction of smart meters and upgrade of outdated assets\. A donor coordination platform was also established to discuss the sector’s key challenges, priority reform and investment needs, and coordinate development partners’ efforts\. • Severelectro further initiatives\. Through ESARIP Severelectro has gained significant outcomes both Page 27 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) in terms of operational efficiency and governance as well as institutional and human capacity building\. Particularly, the introduction and management of new for Kyrgyz Republic technologies and tools such as GIS substations, advanced meters, CMS, OMS, GIS, preparation of financial statements compliant with IFRS, corporate governance and procurement significantly strengthened the company’s in-house capacity\. Severelectro is committed to further leverage those lessons and expertise to roll out the project results across its operation area beyond Bishkek city\. • WB continued support\. Despite the progress made towards reforming the sector, the implementation of those reforms has been very challenging mainly due to political context in the sector and country\. Accordingly, continued support to support to the design and implementation of reforms would be needed, and accordingly this frames the key objectives of the proposed “Supporting Energy Sector Reform to Achieve Financial Viability” (P174466) programmatic Advisory Services and Analytics (PASA)\. PASA will provide support through 4 pillars: (i) understanding political economy of energy tariff reform and supporting development of communication and outreach strategies; (ii) improving electricity sector financial viability by supporting the Regulatory Agency in enhancing the regulatory framework to strengthen revenue generation, develop sustainable tariff policy and reduce subsidies; (iii) facilitating energy efficiency in public and residential buildings; and (iv) supporting the Government in its long-term strategy for the development of additional generation capacity with a focus on hydro and solar\. F\. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender 75\. The project did not include gender-specific activities but was considered gender-informed as it contributed to the gender inclusion aspects of development\. According to the beneficiary survey, conducted through the project in 2019, the project was equally beneficial for women and men, and Severelectro indicated that women were more responsive to the survey\. The strengthened complaints handling system for the service quality centers benefitted women as the majority of customers using the Severelectro’s hotline are elderly women\. The training aspects equally benefited male and female employees of Severelectro\. Institutional Strengthening 76\. The project strengthened governance and internal management of Severelectro in several areas\. The project has had an important role in moving the largest electricity distribution company in the country toward a customer-driven business\. The incorporation of several elements of MISs and business process reengineering facilitated a better customers’ communication with Severelectro through a single 24/7 customer call center and ensured that the customer inquiries and complaints are executed in a timely, accountable, and transparent manner while minimizing the risk of mistakes and intentional wrongdoings\. In addition, the customer satisfaction surveys, conducted throughout the implementation period, provided feedback on customers’ perception of service quality and helped to continuously improve customer orientation in business operations\. Page 28 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) 77\. The project improved the financial viability of Severelectro through the reduction of technical and nontechnical losses in its service area\. The project improved power supply reliability in the service area of Severelectro through investments in strengthening of the distribution infrastructure and scaling up the advanced metering infrastructure, resulting in reduction of losses and power outages, thereby generating savings from the reduced losses\. 78\. The project has also strengthened the corporate FM capacity of Severelectro\. The project financed several staff positions of the PIU (including the finance manager, procurement specialist, and translator); local and international consultants; and study tours to transfer knowledge and ‘know-how’ into Severelectro’s operations\. The project also helped many local staff deepen the knowledge of best practices of modern utilities to improve Severelectro’s operations\. Project components also included trainings in technical and financial topics to increase staff capacity to the maximum\. Mobilizing Private Sector Financing 79\. At the end of the project, Severelectro invested a total of US$5\.3 million of counterpart funding to implement the project\. These investments were made to install the two MISs - OMS and upgrading the 1C system to the version 8\.3 better aligning with the ERP system and supporting the installation of smart meters and operation during project implementation\. 80\. The project has not attracted reasonable private financing because the beneficiaries are a state- owned enterprise - Severelectro and the Kyrgyz Government\. The power sector has sizable investment needs (rehabilitation needs only estimated to be in excess of US$850 million) and private sector participation is not only important to satisfy investment needs, but also for improving operational performance\. 16 By improving the financial and operational performance of Severelectro, the project supported the improvement of the enabling environment for further private sector participation\. However, private sector participation would only be possible when the overall regulatory and institutional environment is adequate, and when there are right incentives, which takes years and broader reforms\. The World Bank is closely supporting the Government on the sector reform initiatives, including on creation of an enabling environment for leveraging private sector and commercial financing through ongoing and planned technical assistance activities and projects\. 81\. Meanwhile, the project leveraged financing from other donors to finance the sector needs such as from KfW and ADB\. Moreover, during the implementation of the Project, building on the success of the project, the European Bank for Reconstruction and Development approved a EUR 5\.0 million project for Oshelectro, and later another EUR 6\.0 million project for Vostokelectro, two smaller distribution companies in the Kyrgyz Republic to rehabilitate and modernize their distribution network\. Building on the success of the project, the Energy Holding Company also expressed its interest to expand/replicate the project to other distribution companies\. Poverty Reduction and Shared Prosperity 82\. The project did not explicitly measure its direct impact on low-income rural and urban populations and other vulnerable groups or the impacts on poverty reduction\. The survey that measured disaggregated satisfaction rates by income levels of customers (aiming to depict the satisfaction levels of 16 This estimate is from the PAD\. Page 29 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) the bottom 40 percent of population in service areas of Severelectro) indicated that the project was beneficial for customers of all income levels\. However, the project particularly contributed to improving the living standards of the poor who cannot afford to resort to backup options for electricity and are therefore forced to receive low-quality/insufficient power supply or switch to lower quality solutions, such as firewood and manure, with resulting negative environmental and health consequences\. By improving the reliability of power supply and strengthening the governance of Severelectro, the project also helped improve the business environment in the project area by enhancing the monitoring of outages and modernizing its infrastructure to reduce power outages\. 83\. In addition, the PIU estimated that the project generated a total of 219 jobs, including 96 permanent jobs and 123 temporary construction and consultancy jobs during project implementation\. The creation of employment would have contributed toward poverty reduction\. Other Unintended Outcomes and Impacts Not applicable\. III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A\. KEY FACTORS DURING PREPARATION 84\. The project objectives were focused on both infrastructure investment and governance of the company\. The project was designed to solve key sectoral issues in alignment with the Government strategies and objectives, which contributed to effective implementation and results\. The project was implemented within the context of the recipient’s ownership and interest\. The project supported the implementation of several key reform measures outlined in the Energy Sector Reform Action Plan of the Government and was aligned with the priorities defined in the NSDS and the Power Sector Development Strategy\. By focusing on the service area of Severelectro, the project ensures that benefits accrue to the largest share of customers, given that Severelectro is the largest distribution company serving more than 40 percent of all residential customers in the country and delivering more than 50 percent of total electricity consumption\. 85\. The project components were designed based on simple technical and low-risk solutions with clearly specified outputs\. During the project preparation, the ECA Capacity Development Trust Fund Grant supported Severelectro to hire qualified international consultants in preparing an investment program, including priority investments based on transparent and justified criteria, and in specifying sound technical and functional specifications of the MISs that aimed to improve the efficiency of all core functions, including their integration with existing systems and preparation of the procurement packages\. 17 The equipment and technologies for implementation and operation of the project were commercially proven, have been widely used by utilities in developed and developing countries worldwide, and were implemented according to internationally accepted technical standards and practices\. The scope of activities financed by IDA complemented, and coordinated with, similar activities supported by other international financial institutions\. 17 The total amount of the grant is US$399,540\. Page 30 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) 86\. The absence of adequate MISs made it a challenge to ensure the reliability of baseline and related target values at the time of project design\. The objectives of the project were clearly defined, easy to understand, and targeted toward addressing specific needs\. The intermediate indicators were directly linked to the project objectives\. The baseline values and target values were manually calculated a year before the project approval and were revised during the project implementation as more reliable data from the integrated OMS and smart meters became available\. B\. KEY FACTORS DURING IMPLEMENTATION 87\. The project implementation arrangements were designed to balance the need for proper oversight and accountability to avoid complex and heavy arrangements\. Severelectro is the implementing entity, which ensured commitment to the proposed business process reengineering, and enhanced sustainability of investments supported\. The PIU, housed in Severelectro, was responsible for day-to-day project management, and was staffed with experts who had experience in implementing various donor-funded projects (World Bank, ADB, KfW, and so on)\. The Project Steering Committee set up for the project included the deputy director, chairman of Energy Holding, general director of Severelectro, a representative from the FESTI advisory council, provided overall oversight for the implementation of the project\. 88\. However, the project in some instances suffered some delays owing to approval processes taking longer than anticipated\. For example, the national regulation required a special local license for the construction of high- and medium-voltage electricity lines, while the contractor did not have the local license, but this was not noticed at the beginning\. This caused a 10-month delay in commissioning of the 3\.1 km 110 kV underground cable line from the Bishkek substation to Bishkek CHP after the construction of the two facilities was completed in December 2018\. Severelectro and the contractor solved the issue by applying the licensing requirement to the local subcontractor that physically performed the civil works and had all the required licenses\. 89\. Implementation of activities under Components 2 and 3 also experienced some delays due to the constant changes in the counterpart’s institutional arrangements and personnel composition and therefore change of their priorities for the sector\. An example is the Government’s decision to install a standardized/integrated ERP for all the energy sector entities, could have adversely affected the overall progress of the project\. Before the change of priorities, an ERP assessment was conducted under the project, bidding documents were prepared, and a tender was processed\. While the Energy Holding Company was preparing a call for bids to incorporate an ERP for all the energy sector companies, Severelectro decided to move faster by upgrading its existing system better aligning with ERP with its own financing\. The flexible design of the project, in parallel with quick intervention by Severelectro’s and the World Bank supervision team during implementation, ensured that these delays did not materially affect the project outcomes\. 90\. Frequent changes in counterparts also resulted in a lack of buy-in and commitment to push through serious efforts to strengthen MISs during the early implementation years which further picked up\. While there was clear interest and commitment in implementing the investments under Component 1, the substantial amount of IDA credit earmarked for implementation of adequate MISs was delayed because of frequent personnel and institutional changes on the counterpart’s side\. The fact that the implementation of several activities under Component 2 was delayed during the first few years after the Page 31 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) project became effective was caused mainly by the changing views and priorities in the sector\. The political instability in the sector during the project implementation, including changes of several high-level officials in the sector and in the Government as well as institutional restructuring, including the formation of the National Energy Holding Company with the aim to improve the management and effective performance of the sector, caused further delays in the project’s Component 2 implementation\. Eventually, the counterpart opted to use its own budgetary resources for several activities under Component 2\. While the project initial design aimed to incorporate well-proven MISs covering all core business areas of Severelectro, only GIS, OMS, and upgrade system of Severelectro aligned with the ERP have been implemented under the project\. More broadly, frequent institutional and personal changes in the sector and recent COVID-19 impacts are collectively preventing the realization of the sector’s huge potential\. Accordingly, further commitments in terms of the sector regulatory, operational and tariff reforms could strengthen the security and reliability of energy supply as well as the operational performance and financial sustainability of the sector utilities\. 91\. Workshops and study tours for key personnel of Severelectro to learn from peer energy distribution companies about international experience were effective ways to inform the counterparts of the importance of strengthening governance of the company\. Workshops and study tours on how to enhance service quality, governance, and established financial reporting frameworks have been organized\. The workshops and study tours allowed the counterparts to dialogue and interact with their colleagues who might be facing related challenges, and that usually helps to convince decision-makers of the right type of reforms required\. Additionally, the project investments supported the reforms by investing in some of the systemwide technologies and practices\. After that, Severelectro started to realize the importance of shifting toward a customer and business-oriented operation, and it speeded up the project implementation\. 92\. The World Bank was working closely with Severelectro and development partners to ensure that the design and implementation of the project benefited from efforts of various donors\. A KfW- financed project with a focus to support the introduction of smart meters for low consumption customers and the World Bank-financed smart meters for high consumption customers were implemented by the same PIU\. The KfW project also provided financing for incorporation of a CMS, including installing a companywide billing system\. ADB initiated a project with the State Property Commission to introduce an AMS for all energy sector utilities\. The programs were complimentary to the World Bank’s work in the sector\. The World Bank has been leveraging financing from those development partners and maximizing synergies\. The savings under CMS and AMS were reallocated, as IDA financing was no longer needed for the aforementioned activities\. While there were some delays with CMS and AMS and the funding and implementation were beyond the control of the World Bank, they remained in the scope of the project to ensure an integrated approach of activities under Component 2\. The World Bank noted better coordination with all stakeholders and development partners and implementation capacity of both the vendor and government agencies were critical to smooth implementation\. Page 32 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A\. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 93\. The indicators for most PDO and intermediate level results were found to be appropriate for an operation focused on improving the reliability of electricity supply and strengthening the governance of Severelectro’s operations\. 94\. For example, the PDO indicator “Electricity losses per year in the project area” to assess progress towards “…to improve the reliability of electricity supply in the project area,” was a key part of the PDO\. The construction of the substations and cables reduced the technical loss of electricity supply, while the commercial losses were reduced through the introduction of smart meters\. Loss reduction would enhance the sector operational efficiency and ultimately increase the resource delivery contributing to meeting the growing demand\. For most of the indicators, the PIU used its existing company system for measuring, evaluating, and reporting technical and commercial indicators\. In the absence of adequate MISs, the reliability of baseline data and associated target values was a key challenge at the project preparation and appraisal (for example, technical and commercial electricity losses and duration of outages)\. During the preparation of the project, Severelectro was recording and managing outages and related parameters (duration and so on) relying on the manual entry of incomplete data based on the reports of 17 regional offices\. The indicator and its baseline data and target values were revised and improved during the project restructuring after installation of the MISs to reflect the reliable data becoming available near the end of project implementation\. M&E Implementation 95\. M&E of the project involved (a) performance indicators; (b) semiannual implementation progress reports on inputs, outputs, and results; (c) a midterm review of implementation and outcome progress; and (d) an Implementation Completion and Results Report (ICR)\. The PIU was responsible for day-to-day M&E activities including collecting data and monitoring and reporting progress against the agreed performance indicators to the World Bank\. In addition to M&E conducted to inform its operations and report to its board, the project also gathered information from customers through a customer survey which allowed it to measure changes before, during, and after the project implementation\. 96\. The results indicator, ‘Average duration of outages in Severelectro's network’ was corrected at restructuring as reliable data from project-supported OMS and smart meters became available\. It is evident that only following completion of the deployment of the OMS companywide in 2017 was Severelectro able to record any parameter on quality and duration of electricity supply in accurately and reliably\. Therefore, based on more reliable data, this results indicator was updated to reflect the project outcomes more accurately\. M&E Utilization Page 33 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) 97\. M&E was utilized to (a) monitor and manage project progress particularly through the intermediate results indicators and achievements toward the PDO, (b) identify areas where emerging issues might require attention and adjust their respective implementation plans to achieve the project’s objectives, and (c) provide a basis for important decision making, such as the restructurings\. The experience accumulated under the project would be valuable in the M&E of Severelectro’s future operation\. Justification of Overall Rating of Quality of M&E 98\. The overall quality of M&E is rated as Substantial\. 99\. The project was successful in being able to monitor progress and providing evidence that most of the development objectives as planned for at project start had been met\. The design of the M&E was adequate, and its operationalization and utilization were used to regularly inform all relevant parties on project progress\. However, opportunities during implementation to reexamine the Results Framework were only used at the end of the project\. Thus, the overall quality of M&E is rated as Substantial\. B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Environmental 100\. Overall project environmental management and compliance during the whole period of project implementation was Satisfactory\. All civil works for (a) construction of the Bishkek substation; (b) installing of the 3\.1 km 110 kV underground cable from Bishkek substation to Bishkek CHP; and (c) installing of two transformers were done in compliance with the project Environmental and Social Management Plan (ESMP) requirements and there were no outstanding environmental issues\. Furthermore, during the project implementation there were no accidents or injuries, and no serious noncompliance of occupational health and safety (OHS) cases have been registered\. This was ensured by providing necessary protective clothing, uniforms, glasses, gloves, aid kits, and so on to all personnel, as well as by organizing training on OHS at the initial stage of civil works and then periodically\. Furthermore, labor safety issues were at the forefront of the PIU’s attention while supervising ESMP implementation—this was stated in the submitted PIU environmental safeguards progress reports\. Similarly, all electrical substations’ workers undergo monthly training session on safety issues such as emergency response, fire safety and response, and first aid, compiled into a specific OHS procedure manual, accessible to all staff\. Social 101\. Project activities followed World Bank Social Safeguards policies and standards in a satisfactory manner\. The project civil works included (a) substation works at Sport, Orto-Say, and Bishkek and (b) installation of underground cable from Bishkek substation\. No households were physically resettled; however, two households, one in Orto-Say and one in Bishkek substations, experienced impacts on their assets which were compensated according to the decision of each household\. Installation of the underground cable caused temporary land disturbance and impacts\. Resettlement Action Plans were prepared, reviewed by the World Bank, and publicly disclosed\. Consultations were conducted with impacted households, community members, and interested stakeholders\. Affected households reported satisfaction with the compensation process and packages\. Severelectro established an effective feedback Page 34 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) mechanism call center which also serves as a grievance mechanism, if needed\. The project did not experience an influx of labor as workers were locally hired\. Financial Management 102\. FM arrangements were overall acceptable during project implementation in terms of staffing, budgeting, flow of funds, accounting, internal controls, reporting, and external audit\. FM performance was consistently Satisfactory, except from January to April 2017, when the FM rating was downgraded to Moderately Satisfactory due to deterioration in the FM staffing at the PIU as well as deficiencies revealed in internal controls that resulted in overpayments under the contract with Garcia Carlos and delays in payments under several contracts\. The deficiencies were resolved by April 2017 and no significant issues were noted since then during regular risk-based FM implementation support and supervision missions\. The project followed a comprehensive set of accounting policies and internal control procedures, as described in the FM section of the Project Operational Manual\. Quarterly interim unaudited financial reports were sent to the World Bank on time, in the formats agreed, and were of adequate quality\. The yearly project financial audits were also submitted on time and had an unmodified (clean) opinion throughout implementation\. The project audited financial statements were disclosed on the website of the JSC Severelectro\. Procurement 103\. The procurement performance under the project was generally Moderately Satisfactory, and delays in contract awarding were mostly due to factors beyond the control of the implementing agency\. The implementing agency had sufficient procurement capacity with a procurement specialist having experience in international procurement employed full time depending on the workload\. The filing system was generally adequate; some issues were noted related to the storage of copies and timely filing of signatures, which were resolved\. Ex post reviews of procurement were conducted regularly\. Page 35 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) C\. BANK PERFORMANCE Quality at Entry Rating: Satisfactory 104\. At entry, the project components, including allocation of funds, were agreed with Severelectro’s management, the State Committee on Industry, Energy and Subsoil Use\.18 The project contributed to or is aligned with the Government’s energy sector priorities as defined in the Power Sector Development Strategy for 2012–2015, and a more detailed Action Plan for Reforming the Energy Sector in 2013 –2014\. The project was also relevant to the Government’s opening of an escrow account for power export proceeds in 2011 and the establishment of FESTI in 2011\. From technical, financial, and economic perspectives, the components were sound, aligned to the PDO, and targeting the most urgent issues in the largest power distribution company\. Strong World Bank preparation and implementation and a detailed Operational Manual helped ensure project readiness and mitigate the risk of delays during implementation\. 105\. In the absence of adequate MISs, issues relating to the reliability of baseline data and associated target values remained a key challenge (for example, technical and commercial electricity losses and duration of outages)\. However, they were addressed during project implementation\. Quality of Supervision Rating: Moderately Satisfactory 106\. The World Bank’s performance during supervision was Moderately Satisfactory\. The World Bank worked closely with Severelectro to ensure successful implementation of the project\. During the implementation of the project, the World Bank conducted regular supervision missions about twice a year and ramped up to four times a year in the last years when the project entered advanced stage of implementation\. The Aide Memoires and Implementation Status and Results Reports were prepared in a candid manner and on time\. When issues materialized, the World Bank appropriately advised the client, and restructuring was done to improve identified shortcomings\. The project was in compliance with fiduciary and safeguard policies\. In the last year of implementation, the World Bank took every step possible to resolve the long-standing outstanding licensing issues of commissioning the cable line and speeded up the implementation of Components 2 and 3, as described in paragraphs 85 and 86\. The team diligently followed up with the counterpart and other development partners and raised the issues to the highest level within the Government\. As a result, the project gained strong commitment from the counterparts to advance implementation diligently following the milestones and deadlines agreed\. Soon after, the cables and the Bishkek substation were commissioned, and five people were hired to speed up implementation of the CMS\. However, there were still minor shortcomings during supervision, for instance, more expedient decision making on the first restructuring could have sped up project performance during the period 2015-2017\. 18 Since the Ministry of Energy and Industry was abolished in 2015\. Page 36 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Justification of Overall Rating of Bank Performance 107\. The Overall Rating of the World Bank’s performance is Moderately Satisfactory\. The World Bank task team was diligent in preparation of the project, ensuring that the project’s outcomes were relevant to the Kyrgyz Republic’s energy sector needs and strategies at the time of project preparation and incorporated lessons from previous projects to ensure smooth implementation\. The task team covered all the required project aspects during preparation, including fiduciary, risk assessment, M&E, social and environmental safeguards\. During project implementation, the task team proactively supported Severelectro, providing them guidance and advice, resulting in successful project completion\. However, the World Bank team could have taken more proactive measures during implementation and restructuring to ensure the measures implemented by other donors were completed or remove nonperforming activities from the scope of the project\. D\. RISK TO DEVELOPMENT OUTCOME 108\. There is a Modest risk to the achievement of the development outcomes\. In the short term, the risk to achieve the objective, ‘improve the reliability of electricity supply in the Project area’, is Low if the company maintains an operation and maintenance program adequately\. The infrastructure investments are likely to last through the lifetime of the technology\. In addition, extensive training has been provided to ensure that Severelectro’s staff is able to properly operate and use the systems\. 109\. The risk to achieve the objective ‘strengthen the governance of Severelectro’s operations’ is Modest\. The OMS and GIS will continue to serve as useful tools to efficiently resolve client claims and complaints related to outages and other anomalies in electricity supply and ensure better quality of power supply by automating the detection of distribution faults\. Severelectro has gained the necessary training and experience to operate the systems\. While some of the MISs such as ERP, CMS, and AMS were not fully integrated, Severelectro was aware of the importance of these tools\. The systems have been put in operation for further scale-up and integration\. Severelectro improved the quality of its financial reports and aligned the underlying accounting policies with the IFRS\. The capacity of Severelectro’s financial and accounting personnel was improved\. The commitment of the company to continue these practices is strong, but there is a risk if the counterpart’s commitment would further change\. 110\. In the long term, the risks that the development outcomes achieved by the project may not be achieved include the following: (a) the country still faces issues related to frequent changes/reshuffling of the Government, including in the energy sector, and the accident at the Bishkek CHP plant in early 2018 increased public mistrust where sector management is concerned; (b) while cost recovery tariffs are very important for the financial and operational sustainability of the power sector in general, the Government’s commitment to bring end user tariffs for electricity and thermal energy closer to cost recovery levels is low in the wake of the CHP accident and public discontent with the sector; and (c) there are insufficient funds to maintain the assets and future investment in the power system to meet growing demand\. The World Bank is providing technical assistance for tariff reforms and sector development to help enhance the financial viability and improve transparency and accountability in the broader power sector\. Page 37 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) V\. LESSONS AND RECOMMENDATIONS 111\. Advanced project preparation, including bidding documents for procurement of goods and works, are important to speed up the project implementation\. The ECA Capacity Development Trust Fund Grant helped Severelectro in preparing the investment program, including priority investments based on transparent and justified criteria\. It also supported Severelectro in preparing sound technical and functional specifications of the MISs, including their integration with existing systems and preparation of the procurement packages for both the MISs and construction works, and strengthening of the PIU capacity by financing trainings for PIU staff and development of an Operational Manual (including Procurement and FM Manuals) that clearly specified the implementation procedures for the project\. An important lesson learned is that the World Bank preparation and implementation support should address a variety of technical and administrative issues and processes that could impede implementation of investments as early as possible\. These issues include local licensing and other requirements, lack of expertise, and approval of investment plan by the Government\. 112\. Government commitment is crucial for the project implementation\. The project included a combination of comprehensive measures that contribute to/are aligned with the priorities defined in the NSDS and the Power Sector Development Strategy, which involves not only infrastructure investments to replace obsolete technologies and equipment but also incorporation of companywide MISs and institutional strengthening, which experienced some delays at the project beginning due to some changes in priorities in the sector\. Moreover, in some cases inconsistency of local requirements with international procedures delayed the commissioning some facilities (cable line, Bishkek substation) for some time\. Future operations should be designed based on the medium and long-term priorities with ensuring both the Government and sector stakeholders’ ownership and commitment as well as with maintaining regular multi-stakeholder consultations\. Furthermore, future operations could scrutinize the internal government procedures to make sure they are compatible with international standards, and consider necessary procedural changes to be adopted, as needed\. 113\. Dissemination of international best practices on utilities operation is critical\. The project benefited from the phased approach to start with the distribution infrastructure strengthening component, which had the flexibility to be implemented earlier\. At the same time, the project continuously provided proactive capacity building to Severelectro’s personnel through workshops and study tours in Uruguay, Georgia, India, Italy, and Kenya to learn about international experience on how to strengthen governance, procurement, and FM\. As Severelectro realized the benefits of these measures, implementation speeded up in the last two years of project implementation\. At project closing, the successfully completed OMS and GIS became effective tools for detection and resolution of incidents in low-voltage and medium-voltage networks\. 114\. The Project has demonstrated the benefits and outcomes of this project design and implementation and paved the road both for the Government and World Bank to further improve the sector efficiency through replicating the project design and results in other companies in the sector, especially in the distribution segment\. The implementation of the Project planted seeds for further sectoral engagement and showed that a follow-up project on improving supply reliability and introducing advanced digital technologies could benefit the sector\. The Government, Energy Holding, and Severelectro expressed strong interest in continuing the close partnership with the World Bank and proposed a list of priority investments, including replicating the Project for other distribution companies, Page 38 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) digitalization of the Severelectro network, replication of the advanced metering infrastructure in other regions of the country, and rehabilitation of the obsolete distribution network\. Building on the success of the Project, new investment operations could continue to improve the reliability of electricity supply and strengthen the governance of energy companies\. Continued investments in network upgrades and sector digitization are needed to replace the obsolete assets and improve the sector operational efficiency\. Potential investments would support the rehabilitation and modernization of the distribution networks outside of the urban area of Bishkek and integration of advanced metering infrastructure and advanced digital technologies (for example, supervisory control and data acquisition [SCADA]) in the sector and further strengthen corporate governance in the sector through the introduction of smart metering and data management systems\. 115\. Strengthened coordination and partnerships of various agencies and partners is essential for future engagement\. Other international financial institutions working in the power sector in the Kyrgyz Republic, particularly KfW and ADB (KfW financed the implementation of OMS, CMS, and smart metering, and ADB financed the implementation of AMS), had similar strategic objectives of the sector\. Successful implementation of other World Bank operations will enhance project outcomes and sustainability\. During the implementation, the team coordinated very closely with all the relevant donors\. The PIU was responsible for implementation of all donor programs with Severelectro\. However, there was lack of traction on the other donors’ side, and implementation of the project was delayed because of the different focus of each of the programs\. The recommendation is to ensure strong alignment and buy-in from counterparts for sectoral development\. It is also important to ensure that there are no critical path dependencies between World Bank projects and other donors’ programs\. 116\. To ensure sustainable development of the sector in the medium to long term, development and adoption of policy and institutional reforms will be necessary\. Severelectro has already started putting in place some governance improvement measures during the implementation of the project, along with the infrastructure investments as an attempt to improve management and governance within the sector by ensuring greater public participation and transparency\. However, Severelectro and other utilities will be able to better plan and recover its capital and maintenance expenses and eventually improve its overall financial standing only when there is a medium-term tariff policy that enables gradual full cost recovery and encourages energy conservation\. Development and adoption of an adequate tariff setting policy framework should be accompanied by properly designed social protection schemes\. Continuous support to policy-level topics such as sector planning, institutional arrangement, and sector regulations and policies will be needed\. \. Page 39 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS A\. RESULTS INDICATORS A\.1 PDO Indicators Objective/Outcome: Electricity losses per year in Severeletro's distribution network Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Electricity losses per year in Percentage 15\.00 18\.00 13\.00 11\.66 Severeletro's distribution network 30-Jun-2016 15-Jul-2015 18-May-2018 31-Dec-2019 Comments (achievements against targets): The target was achieved 167 percent\. This indicator measures enhanced operational and financial performance of the company, and reflects improved metering\. The electricity loss per year in Severeletro's distribution network was reduced to 11\.66%\. Objective/Outcome: Average duration of outages in Severelectro's network Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Average duration of outages Hours 21\.00 18\.00 18\.00 17\.21 Page 40 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) in Secerelectro's network 30-Jun-2016 15-Jul-2015 25-Dec-2019 25-Dec-2019 (minutes/1000 customers) Comments (achievements against targets): This target was achieved 126\.3 percent\. The Average duration of outages per 1000 customers in Secerelectro's network was reduced to 17\.21 hours\. Objective/Outcome: Share of customers satisfied with SE's services Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Share of customers satisfied Percentage 0\.00 10\.00 28\.00 with SE's services increased 30-Oct-2015 05-Apr-2019 31-Dec-2019 Share of female customers Percentage 0\.00 10\.00 29\.00 satisfied with SE’s services increased 31-May-2018 Share of customers from Percentage 0\.00 10\.00 19\.00 low income groups satisfied with SE’s services increased 31-May-2018 Comments (achievements against targets): The overall customers satisfaction with Severelectro's services increased by 28%\. The share of customers satisfied with SE's service by gender and by income levels was improved 29% and 19% respectively\. These two indicators exceeded the target of 10%\. Page 41 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Objective/Outcome: Reliable operational and financial data available to the management of SE and key external stakehold Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Reliable operational and Text n/a Data generated Real-time data are financial data available to the through MISs available available through management of SE and key to Severelectro OMS companywide; external stakeholders management, CMS real-time data regulatory authority, are available through and Government; the new billing system selected data available for residential to customers customers of Pervomayskaya District, financial operations data are available through the upgraded 1C 8\.3 system of Severelectro’s existing accounting, and ERP system, and Geographic Information System (GIS) integration has been successfully completed\. Severelectro’s financial statements are now aligned with the IFRS and its first- ever audited annual Page 42 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) financial statements compliant with the IFRS for 2018 and 2019 are prepared and disclosed on the company’s website\. 28-Feb-2014 31-Dec-2019 31-Dec-2019 Comments (achievements against targets): This target was partially achieved\. This indicator measures progress towards enhanced internal and external accountability of SE and improved governance as a result of incorporation of the MISs\. Real-time data are available through OMS companywide; CMS real-time data are available through the new billing system for residential customers of Pervomayskaya District, financial operations data are available through the upgraded 1C 8 \.3 system of Severelectro’s existing accounting, and ERP system, and Geographic Information System (GIS) integration has been successfully completed\. Severelectro’s financial statements are now aligned with the IFRS and its first-ever audited annual financial statements compliant with the IFRS for 2018 and 2019 are prepared and disclosed on the company’s website\. A\.2 Intermediate Results Indicators Component: Distribution Infrastructure Strengthening Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Capacity added Kilovolt- 0\.00 54000\.00 112600\.00 Amphere(KVA) 28-Feb-2014 31-Dec-2019 31-Dec-2019 Page 43 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Comments (achievements against targets): This target was achieved 209%\. The activities under the distribution Infrastructure Strengthening component added 112,600 KVA capacity to the distribution network\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Meters installed Number 0\.00 38000\.00 39500\.00 28-Feb-2014 31-Dec-2019 31-Dec-2019 Comments (achievements against targets): This target was achieved 104%\. Under the project, 40,000 smart meters were procured and 39,500 were installed, which contributed to achieving significant loss reduction and improving the accountability in electricity supply\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Direct project beneficiaries Number 0\.00 527000\.00 530000\.00 28-Feb-2014 31-Dec-2019 31-Dec-2019 Female beneficiaries Percentage 0\.00 52\.00 51\.00 31-May-2018 Page 44 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Comments (achievements against targets): This target was achieved 100\.6%\. The number of direct beneficiaries are people or groups who directly derive benefits from an intervention is 530,000\. Component: Customer Service and Corporate Management System Improvement Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion MISs incorporated and Text None MISs in use as Outage Management operational evidenced by 95% of: System (OMS) is fully (i) customers metered operational, and in and billed using CMS; use through four (ii) commercial distribution Operation complaints attended Centers, which is using CMS; and (iii) helping to speed-up complaints for the restoration of outages using IRMS\. service due to equipment failures\. ERP has been upgraded by SE own resources, and the implementation of GIS was completed in November 2019\. 28-Feb-2014 31-Dec-2019 31-Dec-2019 Comments (achievements against targets): Page 45 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) The MISs have been implemented, while the deployment status of each MIS varies, due to government's priority change and lack of coordination with development partners\. Component: Institutional Strengthening and Project Implementation Support Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IFRS applied Text None Financial Statements Financial Statements are in accordance with are in accordance with IFRS and audited by IFRS and audited by independent private independent private auditor acceptable to auditor acceptable to the Bank\. the Bank\. 28-Feb-2014 31-Dec-2019 31-Dec-2019 Comments (achievements against targets): Severelectro’s financial statements are now aligned with the IFRS and its audited annual financial statements are regularly disclosed at the company’s website, which increases the Company’s transparency and benefits the public and the Government in better understanding the Company’s financial position\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Transparency and fairness in Text None All national All national Page 46 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) procurement improved procurement is procurement is conducted through e- conducted through e- Government platform, Government platform, as well as all tenders as well as all tenders and contract awards and contract awards are published on SE's are published on SE's website\. website\. 28-Feb-2014 05-Apr-2019 05-Apr-2019 Comments (achievements against targets): Severelectro entity audit for financial year 2018 has been completed\. The project helped the company to strengthen the transparency and fairness in procurement by providing training and capacity building to its key staff\. Page 47 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) B\. KEY OUTPUTS BY COMPONENT Objective/Outcome 1 Improve the reliability of electricity supply in the Project area 1\. Electricity losses per year in Severeletro's distribution network Outcome Indicators 2\. Average duration of outages in Secerelectro's network 1\. Capacity added 2\. Meters installed Intermediate Results Indicators 3\. Direct project beneficiaries 4\. Female beneficiaries Objective/Outcome 2 Strengthen the governance of Severelectro’s operations 1\. Reliable operational and financial data available to the Outcome Indicators management of SE and key external stakehold 1\. MISs incorporated and operational Intermediate Results Indicators 2\. IFRS applied 3\. Transparency and fairness in procurement improved Page 48 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A\. TASK TEAM MEMBERS Name Role Preparation Ani Balabanyan Task Team Leader(s) Irina Goncharova Procurement Specialist(s) Aliya Kim Financial Management Specialist Arcadii Capcelea Social Specialist Asli Gurkan Social Specialist Supervision/ICR Maksudjon Safarov Task Team Leader(s) Irina Goncharova Procurement Specialist(s) Aliya Kim Financial Management Specialist Kunduz Ermekbaeva Procurement Team Emil Zalinyan Team Member Zamir Chargynov Team Member Alisher Khamidov Team Member Rustam Arstanov Team Member Kathrin Hofer Team Member Dung Kim Le Team Member Hung Tan Tran Team Member Natalia Manuilova Team Member Regina Oritshetemeyin Nesiama Team Member Garik Sergeyan Team Member Nagaraju Duthaluri Team Member Page 49 of 62  The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Pedro Antmann Team Member Husam Mohamed Beides Team Member Mohamed Ghani Razaak Social Specialist Jasna Mestnik Team Member Ruxandra Costache Counsel Ani Balabanyan Team Member Arcadii Capcelea Environmental Specialist Adam Shayne Counsel Kristine Schwebach Team Member Mohammad Ilyas Butt Procurement Team Paivi Koljonen 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 FY13 6\.400 51,242\.49 FY14 27\.043 230,248\.66 FY15 7\.419 19,224\.54 Total 40\.86 300,715\.69 Supervision/ICR FY15 25\.595 132,654\.36 FY16 15\.350 99,958\.07 FY17 36\.666 296,546\.93 FY18 22\.253 215,452\.73 FY19 19\.380 160,089\.39 FY20 14\.313 94,939\.50 Total 133\.56 999,640\.98 Page 50 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) ANNEX 3\. PROJECT COST BY COMPONENT Actual at Project Amount at Approval Percentage of Components Closing (US$, (US$, millions) Approval millions) Distribution Infrastructure 16\.00 19\.19 120\.0% Strengthening Customer Service and Corporate 7\.00 0\.49 7% Management System Improvement Institutional Strengthening and 2\.47 0\.63 25\.5% Project Implementation Support Total 25\.47 20\.31 79\.7% Page 51 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) ANNEX 4\. EFFICIENCY ANALYSIS This section sets out the economic and financial analysis of the project\. The ex post economic analysis is based on the incremental benefits and costs of the project from the perspective of the Kyrgyz economy using the same approach at appraisal\. The financial analysis is conducted based on the cash flows of Severelectro to assess the project financial sustainability\. Table 9 summarizes the key assumptions underlying the economic and financial analysis\. Table 9 Key assumptions of economic and financial analysis at project closing Average annual exchange rate 70\.89 KGS/US$ Electricity loss in distribution w/o project in 2015 14\.5% Electricity loss in distribution w/ project in 2019 11\.66% Estimated generation tariffs (VAT inclusive) 21 tiyin/kWh Estimated transmission tariff (VAT inclusive) 52 tiyin/kWh Marginal cost of power generation 0\.019 US$/kWh Marginal cost of power transmission 0\.002 US$/kWh Incremental O&M cost 1\.5% (a) Component 1 – Distribution infrastructure strengthening supported priority investments in rehabilitation and upgrading of Severelectro’s infrastructure with two key economic benefits: (i) reduction of losses in Severelectro’s distribution network and (ii) improvement of power supply reliability for customers by reducing the frequency and duration of power interruptions\. These economic benefits translate into financial benefits to Severelectro through savings in power purchased to meet the demand and through increased billing\. Other economic benefits of this component include reduced damage of electrical appliances of customers due to the reduction of outages and voltage fluctuations, resource savings due to the reduction of customers’ claims and related field interventions as a consequence of rehabilitation and reinforcement of Severelectro’s distribution network\. (b) Component 2 – Customer Service and Corporate Management System Improvement provided Severelectro with information tools to address losses and revenue leakages in its operations and improve efficiency and quality of services to its customers\. (c) Component 3 – Institutional Strengthening and Project Implementation Support provided technical assistance to Severelectro to enhance its institutional capacity and support project implementation\. This component had economic benefit of strengthening governance, raising the accountability and ensuring project sustainability\. However, since the benefits were varied and difficult to measure, their quantification was not attempted as part of the economic and financial analysis\. Page 52 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Economic analysis\. The project’s economic impact at completion was conducted at the project level considering that major economic benefits are the joint result of implementing Components 1 and 2\.19 Similar cost-benefit analysis approach was applied at appraisal: the main quantifiable economic benefit of the project is systemwide savings due to the reduction of losses\.20 There are several other benefits resulted by the project (improved outage response system, faster mapping of the company’s assets and identification of outages, and strengthened institutional and human capacity, among others), but they are not included in the analysis, as it is hard to quantify those benefits\. The economic costs of the project include investment costs and incremental operation and maintenance costs associated with the investments\. The quantified economic benefits associated with Component 1 and Component 2 are illustrated in the preceding section\. The main economic costs of the project were associated with tax exclusive investment costs, incremental operating and maintenance expenses associated As indicated earlier, the economic benefits of the project are limited to significant quantifiable benefits and therefore the results regarding the economic NPV and the EIRR should be seen as lower bounds relative to the actual economic benefits\. The economic analysis of the project yielded economic NPV equivalent to US$24\.22 million and EIRR of 17\.1 percent\. Considering environmental benefits, the NPV increased to US$32 million in a low-case scenario and US$39\.74 million in a high-case scenario, and the EIRR improved to 21\.4 percent in a low-case scenario and 25\.4 percent in a high-case scenario\. Table 8 reflects the post-completion analysis based on actual results of the project\. Table 10\. Summary of Results for Economic Analysis of the Project Base Case without Base Case Considering Base Case Considering Considering Carbon Low Carbon Benefit High Carbon Benefit Benefit NPV (US$, millions) 24\.22 32\.00 39\.74 EIRR (%) 17\.10 21\.40 25\.40 Financial analysis\. An ex post financial analysis of the project (not of Severelectro as a state-owned enterprise or of the sector) was also carried out using a cost-benefit analysis with the same discount rate of 4\.87 percent\. The financial analysis of the project yielded financial NPV equivalent to US$43\.47 million and FIRR of 25\.5 percent\. A summary of the results for the financial analysis of the project base case is indicated in table 11\. The project had two main financial benefits for Severelectro: (i) savings as a result of lower power purchases and lower power transmitted by the transmission company to meet the power demand valued at generation and transmission tariffs; and (ii) additional cash collected due to increased sales from the 19 Component 3 also yielded several benefits (outlined in paragraphs 52–55), though those benefits are not included in the cost- benefit analysis, as they are difficult to quantify\. 20 The reduction of energy not served due to improved reliability of power supply is relatively small and is difficult to quantify, and thereby it is not included\. Page 53 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) portion of losses that were converted to additional billing valued at the weighted average end user power tariff and from improved collections\. The main financial costs of the project are the capital investment costs and incremental O&M costs, both estimated inclusive of applicable direct taxes\. The project’s financial benefits are savings because of reduced power purchases valued at average purchase cost of electricity for Severelectro due to the reduction of losses\. The US dollar /Kyrgyzstani som foreign exchange rate is forecasted using the purchasing power parity approach\. The main financial costs of the project are the investment costs and incremental operation and maintenance costs, both estimated inclusive of applicable taxes and duties\. Table 11\. Summary of Results for Financial Analysis of the Project Base Case Without Considering Carbon Benefit NPV (US$, millions) 36\.93 FIRR (%) 23\.4 The project has achieved the key outcomes with high efficiency based on the economic and financial analysis as described herein, which is conservative and robust to sensitivity analysis\.21 21The results for economic and financial analysis are different than under the first restructuring because of the different methodology to calculate ‘Undersupply of electricity due to outages without project’ and the revision of the unit of the indicator ‘Average duration of outages in SE network without project’ from ‘minutes per 1,000 customers’ to ‘(hours per 1,000 customers)’\. Page 54 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) ANNEX 5\. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS BORROWER ’S IMPLEMENTATION COMPLETION AND RESULTS REPORT (ICR) Electricity Supply Accountability and Reliability Improvement Project (ESARIP) A\. CONTEXT AT APPRAISAL Context 1\. At the end of the 20th century, the energy in the Kyrgyz Republic was represented by JSC Kyrgyzenergo, a company that included all assets of the energy sector, including generating capacities, high-voltage lines, and distribution networks to subscribers\. At the beginning of the 21st century, in 2001, at the initiative of the World Bank, to establish market relations, improve transparency and diversify management, JSC Kyrgyzenergo was divided into three levels of activity: energy generation (OJSC 22 Electric Power Plants); electricity transmission (OJSC National Electric System of Kyrgyzstan); and distribution companies (OJSC Severelectro, OJSC Vostokelectro, OJSC Jalalabatelectro, and OJSC Oshelectro)\. 2\. Despite the low tariffs, the population could not afford necessary electricity due to poverty, unemployment, and the inefficiency of technical solutions (high-consumption appliances, uninsulated houses, and inefficient lighting)\. At the same time, low tariffs did not allow the newly created companies to invest in updating the obsolete infrastructure\. Financing of the sector was mainly limited to the purchase of equipment and staff training\. 3\. In 2013, the World Bank and the Kyrgyz Republic agreed to go further and implement a project under which a pilot company (OJSC Severelectro) would be provided with financing to implement tools for transparent management of the company’s business activities\. These tools are software and technical solutions in accounting, financial planning, and procurement management (all this was assumed within the framework of one ERP ), as well as purely company specific: emergency outages registration system and CMS (billing)\. 4\. The main objective of the project is to increase the accountability of the company\. This should be expressed in clear, understandable, and correctly prepared financial statements\. This can only be achieved by putting all accounting and financial documents in order and switching to IFRS\. It is also important to streamline and standardize the procurement of goods, works, and services so that it is as transparent and honest as possible\. This will instantly improve the financial performance of the company and attractiveness for investors\. 5\. Another equally important goal is to improve the quality of services provided by the company\. The goal is to provide not only a constant supply of electricity to customers but also a high-quality response to their calls, as well as instant correction of all interruptions and unjustified outages\. 22 OJSC = Open Joint Stock Company\. Page 55 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) 6\. To solve these problems, the basis of the project is two systems - ERP and billing\. The first is to establish internal management of the company and the second is the effective management of its direct business activities\. Subsequently, all MISs were included in Component 2 of the project\. 7\. In addition, structural changes were needed in the company so that the above systems could work properly, and employees could effectively fulfill their responsibilities in a completely updated environment\. For this, it was decided to hire consultants who will conduct an assessment of the company and offer recommendations for changes\. It subsequently became Component 3 of the project\. 8\. To get the maximum effect, the parties agreed to fill in some of the gaps in the distribution infrastructure of JSC Severelectro: to build three substations and purchase 40,000 smart metering devices\. It became Component 1 of the project\. 9\. To assess the success of the project, the parties identified indicators that were reflected in the PAD, based on data from 2012\. In addition to the main indicators, such as the level of application of MISs, compliance with IFRS, transparency of procurement, improved perception of the population, the percentage of electricity losses in the network, and the duration of outages, additional indicators included the number of increased capacities installed by meters and improved perception of the company in gender and income level\. 10\. The main results of the project should be the following: (a) Compliance of the company with all the requirements of IFRS and the issuance of financial statements of an international level for the confident passage of the audit of the class of ‘Big Four’ (b) Transparent and effective management of all economic activities, including procurement, network maintenance, replacement, and repair of equipment (c) Maximizing of the efficiency of electricity sales: getting rid of human error factors by collecting meter readings and billing through the billing system, which automates this activity together with the implementation of smart meters (d) Improvement in customer service through the automation of accident registration and the efficient operation of a call center (e) Effective human resources management\. B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) 11\. In general, the PDO did not change throughout the duration of the project\. Revised PDO Indicators 12\. During the implementation of the project, it turned out that according to some indicators, JSC Severelectro was ahead of schedule and in the middle of the project, it reached the final targets\. This Page 56 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) could be attributed to a not entirely accurate assessment at the beginning of the project, but the conclusion is not so simple\. 13\. In terms of the percentage of electricity losses, there was a strong decline even before the first purchases of equipment were made\. This took place owing to the implementation of the German Development Bank (KfW) project, in the framework of which many kilometers of ABC-insulated wires and about 170,000 smart meters were purchased\. These together provided an instantaneous positive effect: ABC prevented illegal attempts to connect ‘from the air’, and smart meters tremendously complicated the theft of electricity\. 14\. Another indicator also caused discussion: the methodology for calculating the duration of outages for 1,000 subscribers raised questions and, unfortunately, in the middle of the project it was not possible to determine how the calculation was made, so it was decided to change the units of measurement and calculate the values for this indicator again\. 15\. Because the only the numbers were modified in the indicators, such changes did not require a new ratification from the Government of the Kyrgyz Republic and were introduced by letter from the World Bank only\. The indicators changed as follows: instead of 18 percent of electricity losses per year, the final goal was set at 13 percent for 2019; instead of 16 hours of outages per 1,000 subscribers per year, the final goal was set at 15 minutes\. 16\. Toward the end of the project, OJSC Severelectro and the World Bank realized that the calculation of the second indicator should have a more detailed descriptive part and, as a result, it was decided to return to the unit of measurement ‘hours’\. Revised Components 17\. The tender for the purchase of 20,000 smart meters resulted in substantial savings\. This is because smart meters are getting cheaper every year, due to the development of technologies, and even a Procurement Plan calculated just a year earlier may contain an irrelevant price\. There were additional savings also because of a tender for the construction of three substations\. As a result, the Severelectro decided to purchase another 20,000 smart meters\. 18\. The main change in the project was that the implementation of the billing system began as part of the KfW project and, to avoid duplication, it was decided to consider that billing remained part of the project, but it was funded by another organization\. 19\. After the inspection, the World Bank recognized the self-developed emergency shutdown registration system developed by OJSC Severelectro as fully compliant with the requirements of the project\. It was also decided to consider this subcomponent as remaining within the framework of the project but in the form of cofinancing from OJSC Severelectro\. 20\. The fact that the companies were again assembled as subsidiaries under the wing of OJSC National Energy Holding Company also made adjustments to the design of the project\. According to the results of the tender for the implementation of the ERP system, it was found that the prices submitted by the bidders were significantly higher than the estimated budget\. The holding considered this unacceptable Page 57 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) and recommended that OJSC Severelectro, its subsidiary, refuse to purchase this subcomponent and announced its plans to introduce a unified accounting system for all subsidiaries\. The World Bank agreed to this and the parties agreed that the ERP would also remain part of the project with Severelectro’s financing\. 21\. The World Bank has initiated the inclusion of new systems in Component 2: Customer Service and Corporate Management System Improvement\. Relevant changes have been made\. The GIS has been successfully implemented\. AMS, as it turned out, is being introduced by the main holder of the Holding’s shares—the State Property Fund\. 22\. The GIS has become the only system directly funded by the World Bank\. Initially it was assumed that the company, which would be awarded a contract, would independently collect data on the coordinates of all the equipment of Severelectro\. However, after negotiations with the World Bank, it was decided that the company would develop and implement the system, and Severelectro will own the data on its assets\. Rationale for Changes and Their Implication on the Original Theory of Change 23\. The tasks set within the framework of Component 1 were fully implemented, while under Component 2, barriers constantly arose during the implementation of the original plan\. This is primarily due to the transformation of JSC Severelectro into a subsidiary of OJSC National Energy Holding Company, whose shares are mainly owned by the State Property Fund\. The Holding expressed its ambitions to introduce a unified accounting system in all subsidiaries, because of which it was necessary to cancel the tender for the implementation of ERP, and the State Property Fund decided to conduct an inventory and revaluation of assets on its own, followed by the introduction of the AMS\. If there are certain shifts in the first task (SE updated the 1C system to version 8\.3, which largely corresponds to the ERP level ), then the issue of implementing an AMS also remains relevant\. Project Outcomes 24\. The order of the Government of the Kyrgyz Republic dated December 11, 2015, №606-p, to implement the Financing Agreement between the Kyrgyz Republic and IDA (ESARIP), signed on April 7, 2015, in Bishkek, was ratified by the Law of the Kyrgyz Republic dated July 14, 2015, № 158\. Based on this, the Ministry of Finance of the Kyrgyz Republic signed a Subsidiary Agreement with JSC Severelectro for implementation of the project on a loan basis provided by IDA in an amount of SDR 16,200,000, equivalent to US$25,000,000 as loan funds\. The project started on December 29, 2015\. 25\. The project aims to improve the reliability of electricity supply in the project area and strengthen the governance of Severelectro’s operations\. The project involves the following three components: (a) investments in target segments of the distribution infrastructure, (b) incorporation of MISs, and (c) institutional strengthening\. The three components of the project are described in the following paragraphs\. Page 58 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Component 1: Distribution Infrastructure Strengthening (estimated cost of US$16 million) 26\. This component helps reduce technical losses and improve power supply reliability by supporting investments that strengthen the distribution infrastructure of Severelectro\. The scope of this component was defined based on Severelectro’s five-year investment plan, which identified a comprehensive set of investments in high-, medium-, and low-voltage cables, overhead lines, substations, power transformers, circuit breakers, meters, and other assets of the power distribution infrastructure operated by Severelectro\. The plan included investments in new assets to eliminate overloads, as well as rehabilitation and upgrading of existing assets with a total estimated cost of around US$40 million\. Component 1 supported priority investments included in the investment plan and identified based on the following criteria: (a) potential for reducing losses and/or power outages and (b) absence of alternative sources of financing (KfW funding and own funding of Severelectro)\. 27\. Table 5\.1 summarizes investments under Component 1\. Table 5\.1\. Description of Investments Financed Under Component 1 Investment Description of Works Cost (US$, Rationale millions) 1\. Construction of a new 8\.46 The construction provided 2 x 40 MW additional 110/35/6–10 kV substation Contract with capacity which helped reduce the overload of the Bishkek PESTECH and following substations: 35/6 kV Penko-Jute SPECO JOINT (approximately 10 MW), 35/6 kV Central-4 and 35/6 kV VENTURE Central-6 (approximately 8 MW), and 35/6 kV Central-1 and 35/6 kV Central 2 (approximately 8 MW)\. The construction of a substation is calculated to result in 62 GWh additional power supply per year\. 2\. Construction of a new 35/6- In the past years, maximum defect of 6 kV cable line 10 kV substation Orto-Say was located in the area of distribution substations in Microdistrict 3, Bishkek\. Transformer overload on these substations was up to 110%\. Technical losses, overloads, and transformer damages because of 6 kV cable line overload were eliminated by the construction of a new substation with two transformers (10 and 6\.3 MVA)\. Through cable line 35 kV, Vostochnaya- Abdykalykova new substation reduced the overload of the existing substations 110/35/6 kV Vostochnaya and 110/35/6 kV Abdykalykova by 9 MW\. The new substation added 7–9 kVA of capacity and allows an additional power supply of 35 GWh per year\. 3\. Construction of a new 35/6- The construction of a new substation with two 10 kV substation Sport transformers (10 and 6\.3 MVA) near ‘Kojomkul Sport Palace’ was necessary to meet the existing and projected demand, and reduce the overload at the existing substations 110/35/6 kV ‘Yujnaya’, 35/6 kV ‘Central-1’ and 35/6 kV ‘Central-2’\. The added capacity allows provision of an additional power supply estimated at 27 GWh per year\. Page 59 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Investment Description of Works Cost (US$, Rationale millions) 4\. Construction of 110 kV cable 4\.0 This cable line connects CHP 1 with new ‘Bishkek’ line Contract with substation\. Length is approximately 3\.1 km\. Estralin PS 5\. Replacement of meters for Main contracts: To reduce losses, meters for residential and customers with high Hexing Electrical nonresidential customers with an estimated annual consumption in the largest Co\., 1\.58 consumption above 12,000 kWh were replaced in the cities in Chui Sanxing Medical largest cities in Chui\. About 20,000 meters were Electrical Co\., installed and reduction of losses is nearly 1,200 kWh 1\.6 annually\. The investments focusing on Chui Oblast complements the KfW-financed project, which supported replacement of meters for high consumption customers in Bishkek\. Component 2: Customer Service and Corporate Management System Improvement (estimated cost of US$7 million) 28\. This component provides Severelectro with management information tools to improve quality of services provided to its customers (electricity supply and commercial matters), and to enhance overall efficiency, transparency, and accountability of its performance in all business areas\. The component was supposed to finance supply, installation, and commissioning of the MISs and training of Severelectro staff to apply them\. The MISs are to be set up companywide and will cover all three key areas of Severelectro’s operations: commercial function, corporate management, and power network planning and operations\. The incorporation of the MISs, accompanied by reengineering of relevant business processes of Severelectro in all key areas, aimed to maximize the use of functionalities provided by the new management tools and make the company operations more customer oriented and efficient and their execution transparent and accountable, both internally and to external stakeholders\. The Company is implementing CMS billing within the KfW project\. The IRMS was internally developed by Severelectro’s own IT staff and this in-house implemented solution was accepted by World Bank as satisfactory\. 1C accounting system was updated to version 8\.3, making it acceptable to be considered as an entry-level ERP solution\. The AMS is developing within an ADB-funded project\. Based on these findings and on recommendations of the ongoing assessments, the scope and technical and functional specifications of the MISs implemented within the project were determined\. 29\. GIS\. Within the framework of ESARIP financed by the World Bank, Severelectro incorporated an information system for efficient topological management of its assets, hereinafter referred to as GIS\. The GIS allows collecting, storing, and updating documentation about the power network and various types of equipment in one place, integrating GIS data with existing data, and providing access to the data for authorized enterprise users\. The system allows company users to access power supply network data geographically with a possibility to view and search power supply network geographic elements by coordinates, addresses, and type of element; to mark and describe trouble places (redlining); and to manipulate map layers\. The GIS includes standard functionalities such as attribute editing; zooming out/in; identifying geographic elements; measuring distances, areas, and geographic coordinates; and changing scale\. The GIS is also designed for optimization of network inspection routes\. The GIS is integrated with an advanced CMS, 1C system, and other in-house implemented systems in SE\. Page 60 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) Component 3: Institutional Strengthening and Project Implementation Support (estimated cost of US$2\.47 million, including US$0\.47 million from the ECA Capacity Development Trust Fund) 30\. This component supported two key activities for the smooth implementation of the project and sustainability of project outcomes: (a) implementation support for project management, including M&E of project results and incremental operating expenses of the PIU under Severelectro and (b) technical assistance to Severelectro to strengthen companywide procurement and FM capacity, improve the business processes of Severelectro, and make it more customer focused\. The technical assistance complemented the incorporation of the relevant MISs, helping improve governance within Severelectro and included the following: (a) Strengthening the institutional framework and performance related to corporate procurement functions, including (i) a detailed review of the current institutional structure and procurement skills of the Procurement and Logistics Department of Severelectro to develop a targeted plan for strengthening the procurement capacity within Severelectro; (ii) preparation of design, supply, and installation standard bidding document (single stage and two stage) in line with the Public Procurement Law; and (iii) capacity-building support to Severelectro to get ready for implementing the e-government procurement developed by the Ministry of Finance and expected to be applied by all budgetary units by the end of 2014\. (b) Strengthening Severelectro’s capacity in accounting and FM functions\. The subcomponent improved the company’s financial accountability and reporting transparency through implementation and compliance with the IFRS, equipping Severelectro’s staff with knowledge and expertise in financial reporting, enhancing institutional functions and reporting lines, assisting the company in addressing qualifications in the previous years’ audit reports, and assisting Severelectro in preparations for the audit based on ISA for the second year of the project implementation (financial year ending December 31, 2016)\. This subcomponent would feature three main focus areas: (i) improving Severelectro’s internal policies and procedures, aligning its accounting policies with IFRS, introducing internal control system, and building segregation of duties in line with good international practices; (ii) raising Severelectro’s accountability through external audit and financial statements publication, as well as working with the company to prepare it for full ISA based audit for the financial year 2016; and (iii) establishing sustainable financial reporting functions through strengthening of accounting and FM staff capacity through training in IFRS and promoting good international practices through study tours to countries with strong governance and established financial reporting frameworks\. (c) Business process improvements related to the commercial management function of Severelectro to ensure ‘customer-oriented’ execution of all the commercial activities\. The extent of business process reengineering will be finalized based on the ongoing assessment that reviews the commercial processes currently adopted by Severelectro and will identify areas for improvement that would need to accompany the incorporation of the CMS\. Overall, the commercial process reengineering will be driven by the concept that each kilowatt-hour supplied by Severelectro should be metered, billed, and collected\. 31\. Several consultants were hired under the project: Page 61 of 62 The World Bank Electricity Supply Accountability and Reliability Improvement Project (P133446) • IFRS consultant, Murod Sattarov, studied the financial statements of JSC ‘Severelectro’, took measures to comply with IFRS requirements, and helped in developing a financial reporting control system\. The contract of the consultant was until December 2017\. • ERP consultant, Carlos Garcia Sposto, previously conducted a business process study of ‘Severelectro’, providing an extensive report with detailed analysis of all aspects of the business enterprise\. He prepared bidding documents for the ERP\. At the moment, the management of JSC ‘Severelectro’ is thinking about extending his contract for supervision of ERP integration\. • The consultant for developing Standard Bidding Documents for the design under the law on public procurement is expected to sign a contract with Vyacheslav Shokin, who previously developed the draft of the amended provisions of the Procurement and Logistics Department and job descriptions and proposed the modified communication schemes of department in the organigram of the company\. Page 62 of 62

REVIEW

P100568

 ICRR 13281 Report Number : ICRR13281 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 04/14/2010 PROJ ID : P100568 Appraisal Actual Project Name : NCO - Avian And US$M ): Project Costs (US$M): 10\.0 0\.34 Human Influenza Prevention And Control Project Country : West Bank & Gaza Loan/ US$M ): Loan /Credit (US$M): 10\.0 0\.34 Sector Board : ARD US$M): Cofinancing (US$M ): Sector (s): General public administration sector (60%) Health (31%) General agriculture fishing and forestry sector (5%) Solid waste management (3%) Other social services (1%) Theme (s): Natural disaster management (25% - P) Other communicable diseases (25% - P) Rural services and infrastructure (24% - P) Social risk mitigation (13% - S) Pollution management and environmental health (13% - S) L/C Number : Board Approval Date : 09/07/2006 Partners involved : Closing Date : 01/31/2009 03/31/2009 Evaluator : Panel Reviewer : Group Manager : Group : John C\. English Kris Hallberg IEGSE ICR Reviews IEGSE 2\. Project Objectives and Components: a\. Objectives: Note : This report is a Note on a Cancelled Operation (NCO), not a full Implementation Completion Report \. Note: Background \. The West Bank and Gaza (WBG) is considered a high risk for Avian Influenza (AI) because of the large volume of bird migrations through the area \. In early 2006 (at a time of worldwide concern about spread of AI ) an outbreak was reported in Gaza, expanding to eight locations and 400, 000 birds were culled to contain it\. Because of the intermingling of poultry and the population in WBG there was concern over possible health consequences, and there was pressure from neighboring countries to increase public awareness of the risks to human health and strengthen the local capacity to deal with disease outbreaks \. The objectives of the grant were to assist the Palestinian Authority (PA) in: (a) minimizing the threat posed to humans by the Highly Pathogenic Avian Influenza (HPAI) infection and other zoonoses in domestic poultry; and (b) preparing for controlling, and responding to, an avian influenza pandemic and other infectious disease emergencies among humans\. 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\. Animal Health and Veterinary Services (Estimated cost US$5\.86 million: 62\.7 percent of total project cost) This had three elements\. Strengthening of the surveillance and diagnostic capacity of the veterinary services in WBG; culling and disposal of condemned birds; and compensation for income loss, including technical support for the compensation committee and a proportion of the compensation funding \. The latter was the largest element, amounting to US$4\.8 million\. 2\. Human Health (Estimated cost US$2\.97 million: 31\.8 percent of total project cost)\. This comprised: prevention and human safety, including the protection of medical and field staff and other highly exposed groups; strengthening public health surveillance systems; and health system response including vaccinations, drug therapy and medical services\. The latter was to amount to US$2\.35 million or almost 80% of the total component cost\. 3\. Public Awareness and Environmental Management \. (Estimated cost US$ 519,000: 5\.5 percent of total project cost)\. This was to include a public awareness and information campaign targeting the general public, especially in rural areas and areas with concentrations of backyard poultry production \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The grant was cancelled after a two month extension of the Closing Date (see Section 4)\. At Closing a total of US$340,000 had been spent on staff salaries and seasonal influenza vaccines \. The balance of US$9\.66 million was cancelled\. The project was complemented by a grant of US$ 3 million from the Avian and Human Influenza Facility implemented by UNDP and the World Health organization and Food and Agricultural Organization provided technical assistance and guidance \. 3\. Relevance of Objectives & Design: Objectives \. Given: (a) the concerns in 2006 about the potential impacts of a spread of HPAI in poultry and of potential human AI pandemics; (b) the difficult social, economic and operational conditions in WBG; and (c) the confirmation of the presence of HPAI in the territories, the project objectives were substantially relevant \. Design \. However, the project's design was of modest relevance \. The operation was too complex, given the potential emergency nature of the required interventions \. Also, placing the leadership with the Ministry of Health (MOH), when substantial efforts were also required from the Ministry of Agriculture (MOA), including first responses to an HPAI outbreak, created unnecessary roadblocks \. Leadership might have been better placed in the Prime Minister's Office, to facilitate inter-ministerial coordination\. Since the project, in addition to its support of possible emergency actions, was to support longer -term institutional measures, the proposed implementation period of two years was unreasonably short, especially in light of the implementation difficulties inherent in the unique situation in WBG\. 4\. Achievement of Objectives (Efficacy): The objectives were not achieved \.  Project effectiveness was delayed by one month \. Coordination between the agencies involved was not helped by the fact the MOH headquarters were in Gaza, while MOA is headquartered in the West Bank \. Furthermore, in early 2006 Palestinian elections had been won by Hamas and the Government of Israel and many donors had responded by adopting a policy of noncooperation \. By early 2008 a Project Implementation Unit (PIU) had not been established and implementation had barely progressed so the Mid -Term Review was postponed to October 2008\. Delays were primarily due to: (a) relocation of the MOH from Gaza to WB after Hamas took control of Gaza in June 2007; (b) Ministerial changes after the formation of an interim government; (c) the complexity of the institutional structure of the project requiring coordination among a number of agencies; and (d) diminishing interest in, and ownership of, the project on the part of the PA \. One consequence of these problems was a long delay in establishing the PIU and nominating the Coordinating Committees (CCs)\. At the time of the MTR global concern over potential AI pandemic had abated and it was clear that the large sums set aside in the project for compensation of owners of slaughtered poultry would not be necessary \. Given this, and in the face of the lack of progress, the Bank proposed a series of measures to restructure the project towards strengthening the capacity for controlling animal diseases (including a permanent compensation facility ) and for responding to related human disease issues \. The closing date would also have been extended by two years \. The two ministries were supportive of these proposals but, over the following two months, and (in the context of the Israeli invasion of Gaza in December 2008) administrative delays and financial problems resulted in difficulties in paying the staff of the PIU from the Special Account \. After two months of working without pay the staff, including the project coordinator, resigned \. The Bank extended the Closing Date by two months in order to allow for agreement with the PA on restructuring and for the PIU to be re-established\. In the absence of communication from the PA (who at the time were giving priority to the immediate recovery and reconstruction needs of Gaza ) the Bank closed the project on March 31, 2009\. 5\. Efficiency (not applicable to DPLs): Not Applicable 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: See Section 4\. a\. Outcome Rating : Not Rated 7\. Rationale for Risk to Development Outcome Rating: Not Applicable a\. Risk to Development Outcome Rating : Non-evaluable  8\. Assessment of Bank Performance: The UNDP and the Bank responded expeditiously to an urgent situation and tried, where possible, to design the project and procedures to be flexible in order to facilitate implementation in what were known to be difficult conditions\. Based on Regional comments, it is noted that the unpredictability of the disease and its recurrence in neighboring countries led the two agencies to intervene\. However, especially given that the project included some longer term investment activities, the implementation period of two years was not realistic \. The complexity of the institutional structures, especially the arrangement for joint management of the project by the Ministries of Health and Agriculture and the number of agencies involved (under conditions where coordination was difficult ), together with the inexperience of the PA in handling AI containment and in building capacity in this area, predisposed the operation to implementation problems and delays (See also Section 3) During supervision the Bank team expended considerable resources in very difficult circumstances, trying to achieve progress\. Based on Regional comments, it is noted that the higher than usual supervision cost resulted from simultaneously supervising the two operations (this project and the UNDP Grant) drawing on the same budget resource and the need to include health experts who were in high demand globally and hence expensive\. Given the weak Borrower ownership, the Bank should have cancelled the project in a timely manner\. The Region argues that it was inappropriate to close the project until the UNDP grant was sufficiently advanced in order to mitigate the Bank's reputational risk in case of an outbreak\. a\. Ensuring Quality -at-at -Entry :Moderately Unsatisfactory b\. Quality of Supervision :Moderately Unsatisfactory c\. Overall Bank Performance :Moderately Unsatisfactory 9\. Assessment of Borrower Performance: There was a lack of ownership throughout on the part of the PA, perhaps because of the project's genesis in the concerns of neighboring countries, rather than in the PA's own priorities \. After the enforced move of the Ministry of Health from Gaza, the PA was unable to reach an acceptable consensus on where the PIU should be located\. Then, towards the end of the implementation period, it allowed the staff to go unpaid for two months, leading to their resignation\. a\. Government Performance :Unsatisfactory b\. Implementing Agency Performance :Unsatisfactory c\. Overall Borrower Performance :Unsatisfactory 10\. M&E Design, Implementation, & Utilization: Not Applicable a\. M&E Quality Rating : Non-evaluable 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): There were no safeguard or fiduciary issues \. But the report raises two other issues \. Bank Costs \. The Bank used a total of 114 staff weeks on this project (48 weeks for appraisal and approval, and 66 during the two year implementation period ), costing nearly US$400,000\. During implementation the expenditure from the grant was US$ 340,000, i\.e\. less than the cost to the Bank \. The Region has pointed out that the staff input was also used to manage the parallel UNDP Grant but this was not reported in the NCO \. It would have been helpful to have reported this use of Bank resources, both in the body of the Note and in the Annex table, and also whether any of this work was reimbursable, i \.e\. whether the resources reported in the table represented the gross or net amounted expended on this and any companion operations \. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Not Rated Not Rated Risk to Development Non-evaluable Non-evaluable Outcome : Bank Performance : Moderately Moderately Unsatisfactory Unsatisfactory Borrower Performance : 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: In fragile situations such the West Bank and Gaza, project design should be simple, minimizing the need for coordination among a significant number of actors \. If the operation may have to undertake emergency actions, such as carrying out mass vaccination campaigns to counter a pandemic, arrangements with an external agency to ensure the availability of trained staff is necessary \. In these conditions projects that are primarily based on the concerns of external actors have limited chances of success \. Considerable emphasis should be placed during preparation and appraisal on building demonstrable ownership in local institutions and securing the basis of close collaboration and coordination between ministries, and with UN agencies where this is essential \. In such situations all conditions should be met before Board presentation to ensure that the operation can move swiftly to effectiveness and implementation \. The project's outcome raises the question of whether, in high risk situations such as were faced by this operation, the Bank's rather ponderous procedures for approval and supervision of projects, and for procurement, allow it to effectively use its comparative advantage in mobilizing financial resources and in helping introduce international best practices \. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The Note provides a satisfactory review of the performance and outcome of this cancelled operation \. However, it would have been helpful if the NCO had reported, both in the body of the Note and in the Annex table, that Bank resources had been used to manage the parallel UNDP Grant as well as activities funded from the bank managed Trust Fund\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P036041

 ICRR 11532 Report Number : ICRR11532 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 08/14/2003 PROJ ID : P036041 Appraisal Actual Project Name : Fiscal Technical Project Costs 105\.5 76\.5 Assistance Project US$M ) (US$M) Country : China Loan /Credit (US$M) Loan/ US$M ) 50\.0 47\.6 Sector (s): Board: PS - Central Cofinancing government administration US$M ) (US$M) (94%), Sub-national government administration (6%) L/C Number : C2709; L3873 Board Approval 95 FY ) (FY) Partners involved : Closing Date 12/31/1999 12/31/2002 Prepared by : Reviewed by : Group Manager : Group : Elliott Hurwitz Jorge Garcia-Garcia Kyle Peters OEDCR 2\. Project Objectives and Components a\. Objectives The project was designed to support the implementation of recent fiscal and tax reforms and the preparation of future reforms by: (a) developing and implementing a new national tax administration (system); (b) improving capacity for tax policy analysis; (c) developing and implementing a central -provincial grants scheme; and (d) improving budgetary processes and practices \. As a result of a change in government priorities, objective (c) was narrowed to "improving the central-provincial grants scheme\." b\. Components Tax administration : (1) Consulting assistance to improve tax administration procedures and information system development; (2) training in IT systems development and administrative and managerial functions; (3) provision of equipment and software for the information system in 18 cities, at the national office, and in a training center \. Tax Policy Analysis : (1) Design appropriate databases and models to support tax policy analysis; (2) provide computer equipment to support the new databases, analytical tools and improved communication between national and provincial tax policy offices; (3) training for central and provincial government officials in tax policy analysis; and (4) studies to provide analytical background for future tax reforms \. Intergovernmental Fiscal Relations : (1) Consulting assistance to design the center -provincial tax scheme and develop an adequate information system to support it; (2) training for the implementation of an improved grants scheme; and (3) IT equipment for the needed information system \. Budget System : Provide assistance to strengthen institutional capacity for budget preparation and implementation : (1) provide training and studies to assess current budget systems and draw lessons from international practice; (2) provide consulting on improving budgetary procedures and practices; and (3) provide consulting, training, and computer equipment for establishing a modern treasury system \. c\. Comments on Project Cost, Financing and Dates Project cost was US$76,520,000 as compared to appraisal estimate of US$ 105,000,000\. No explanation was provided for the shortfall\. Bank/IDA contribution was a 50/50 blend\. Counterpart funding was around 32% less than envisioned\. The project closing date was extended twice --mainly due to procurement delays --and was closed in December, 2002, compared to an original date of December, 1999\. 3\. Achievement of Relevant Objectives: (a) Developing and implementing a new national tax administration (system ): The State Administration of Taxation (SAT) developed uniform procedures for tax administration and collection, which led to a national tax administration information system\. The China Tax Administration Information System (CTAIS) was tested and piloted in 19 cities, and by project close covered 110 cities and 7 provinces\. SAT built on the new system and linked it to data systems for customs administration, the banking system, and the State Administration for Foreign Exchange \. The Fiscal TA project provided hardware, software, and training to support the new system \. (b) Improving capacity for tax policy analysis : The Fiscal TA Project assisted the Tax Policy Department of the MOF to build capacity at headquarters as well as in local offices \. Assistance was provided in the areas of, e \.g\., equalizing treatment of foreign and domestic corporations; reform of enterprise income taxes; broadening the base for the personal income tax; reforming the local tax system; and expanding the scope of the VAT \. The project assisted the government to assess the impact of WTO accession on revenue, and in adjusting the tax system to be WTO-compliant\. Tax reforms that have been implemented with the assistance of the project include rural tax reform, which was implemented in 20 provinces in 2000-2002, and is expected to be implemented nationwide in 2003\. In supporting MOF tax policy reform, the Fiscal TA Project provided financing and advice on design of appropriate databases, and also provided modeling expertise; training in tax policy (seminars and analytical models); tax forecasting models; and IT equipment to support better communication between MOF and local offices \. Studies and analyses were distributed to local tax offices nationwide \. (c) Developing and implementing a central -provincial grants scheme : As noted above, this objective was narrowed and de-emphasized in accordance with government priorities, and little assistance was provided \. A workshop on intergovernmental fiscal relations was held in July, 1997, and officials attended several international workshops on this subject in 1999 and 2000\. (d) Improving budgetary processes and practices \. Activity in this area encountered substantial delay, with little activity until 1999\. In 1999, the MOF Budget Department began an effort to strengthen budget management, and in support of this effort, the Fiscal TA project funded workshops on budget management, fiscal decentralization and intergovernmental transfers\. Additional training included international workshops on single treasury accounts and budget formulation, and classification of revenues and expenditures; training programs on budget management; and study tours on transfer payments, classification of revenue and expenditures and management of state treasury \. Following a reorganization in 2000 of the MOF Budget Department (in charge of intergovernmental transfers and budget classification) and the Treasury Department (in charge of budget execution ), assistance was provided to these agencies\. With the assistance of the Fiscal TA project, these 2 offices combined to develop a comprehensive Government Financial Management Information System (GFMIS), which connected central and local governments regarding the functions of budget preparation, implementation, accounting, and the management of cash, debt, and risk\. The project also facilitated reforms that reoriented budget management from broad sectoral allocations toward departmental budgets, with greater emphasis on performance monitoring \. Under this area, the Fiscal TA project provided a large number of international workshops, seminars, training programs, consultancies, and studies on public expenditure analysis, budget evaluation and preparation, the role of Parliament, analysis and management of risk, and budget statistics \. Computers and other equipment were also provided \. 4\. Significant Outcomes/Impacts: Based on new procedures established during the project, SAT developed and piloted a national uniform CTAIS \. By project close, CTAIS managed collection of one third of the country's budgetary revenue Under the Tax Policy Analysis component, 10 studies were completed that significantly influenced the development of tax policy\. The MOF used these studies to design and submit several tax reform proposals (e\.g\., VAT, personal income tax, enterprise income tax, a single approach to taxation of domestic and foreign -funded enterprises)\. The Fiscal TA Project provided key assistance to the Government's high -priority program of budget management reform, contributing to a reorientation from a broad sectoral approach toward one utilizing departmental budgets, and also moving from emphasizing inputs toward monitoring of performance 5\. Significant Shortcomings (including non-compliance with safeguard policies): Realization of project benefits occurred much later than envisioned, mainly due to ineffective project management (see Section 6), procurement difficulties, and lack of a government consensus on tax reform issues from 1995-99\. Because of weak project management, the training provided yielded fewer benefits than envisioned (see section 6) The Borrower's lack of a consensus on tax reform during the period 1995 to 1999 limited the benefits derived from TA provided during that period \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Satisfactory Project benefits were less than envisioned because of substantial delay and weak project management\. Institutional Dev \.: High Substantial The substantial delay in achieving project IDI objectives and the lower level of benefits achieved indicate a rating of "substantial\." Sustainability : Highly Likely Likely The ICR provides insufficient evidence to support a rating of Highly Likely \. Bank Performance : Satisfactory Satisfactory Bank performance was satisfactory but with several deficiencies :  Readiness for implementation was deficient\. For the first 3 years after effectiveness, project PSRs reflect weak project management arrangements and inadequate Borrower understanding of procurement requirements\. In particular, the original management arrangement, involving the Ministry of Finance (International, Tax Policy, and Budget Departments), State Administration of Taxation, and the People’s Bank of China, was unwieldy\. During the first 4 years of supervision, the Bank did not effectively resolve Borrower project management and procurement problems, which greatly hindered project progress\. The Bank also "provided misguided advice on a draft bidding document (PSR, June 1997)," which necessitated a special mission to resolve the problems caused by the advice \. Borrower Perf \.: Satisfactory Unsatisfactory Borrower performance was unsatisfactory for the first 4 years of project implementation (1995-99), but was satisfactory during the last 3 years (2000-02) The Borrower's interest in tax reform at certain points in the project was low, which contributed to delays \. While the Borrower was highly interested in tax reform in 1993-94, that interest waned from 1995 to 1999, which diminished the effectiveness of some of the TA provided under the project\. After 1999, interest in tax reform increased, and the Borrower could make much better use of the TA provided \. For around 4 years, project management was ineffective, which delayed project progress and diminished the benefits produced \. Management problems included: --Lack of effective coordination among participating agencies --Inadequate financial management controls, especially between the TA Unit of the International Department (MOF) and other participating agencies --Minimal oversight by the project management office, which reduced the benefits of the TA (see section 9\.c\.) The Borrower insisted on use of a single-stage bidding procedure, and custom-made bidding documents, rather than the Bank’s standard documents\. This caused major delays in project progress (procurement mistakes by the Bank also contributed to the delay )\. Also, SAT at first insisted on developing the  Tax Administration data system in-house, before accepting the Bank's recommendation to out-source the contract\. Quality of ICR : Unsatisfactory 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 a TA project, if the Borrower's policy priorities change substantially, the Bank should formally restructure the project or consider cancellation 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: 9\.a\. Introduction The ICR is unsatisfactory\. There are substantial discrepancies between the ICR's assessment of project performance and assessments provided by other sources (sec sec 9\.c); in many cases, the ICR makes sec 9\.b); the ICR states that assertions of project achievement, but provides little or no evidence of this achievement (sec there was no change of objective (developing and implementing a central -provincial grants scheme), when in fact this objective was modified\. Also, the ICR does not explain why the project cost was 27% less than planned, why the envisioned participation of the IMF did not occur, or the reasons for or consequences of the 32% shortfall in counterpart funds\. 9\.b\. Insufficient evidence : CTAIS and the Golden Tax Project were vital pillars in improving tax administration efficiency, and have been publicly credited for strong 2001-2002 revenue performance (p\. 4); the project enabled MOF Tax Policy Department to provide better support to the budget process by improving revenue forecasting quality, enhancing effectiveness and timeliness of communication between the MOF and local tax policy offices on new tax policies and their interpretation, and promoting information dissemination across tax policy offices in China \. (p\. 6); "Institutional capacity of MOF and local governments has been significantly strengthened in intergovernmental fiscal reform and tax policy, which was the objective of the Fiscal TA Project " (p\. 8); "Thanks to the CTAIS, tax compliance is estimated to have increased significantly " (p\. 4)\. 9\.c\. Discrepancies between ICR and other sources ICR other sources "There were three different counterpart agencies, the "Management decisions are made by committee, leading MOF, SAT, and the People's Bank of China, with very to long delays and distrust of outside experience has exacerbated the problem\.Plans to merge some of the clear responsibilities defined under the project \." (p\. 3) departments, e\.g\. local budget under the budget department, may help to end the peculiar situation where the TA project was housed in the wrong department after the task assignment had shifted \. This should help to speed up project implementation\.the impact of the [Intergovernmental Fiscal] component hinges on participation of the local budget department, which MOF is not yet encouraging\." (PSR, June, 1998) "The project was ready for implementation at approval \." "Most project activities now lag far behind the time -bound (September, 1995) (p\. 3) action plan in the minutes of the negotiations, and only the tax policy component has shown sufficient progress \.the Hardware bid is on hold, waiting for SAT to deliver a satisfactory systems development plan \.In the tax administration component, delays are most pronounced\.Technical difficulties experienced in finalizing hardware bidding documents are due to inadequacy of consultant input, inadequate support from tendering company and project management problems \." (PSR, June, 1998) "Implementing agencies, including the Tax Policy, Budget "Overall, minimal oversight by the project management and Treasury Departments of MOF, SAT and PBOC, office means that study tours, training and seminars are quickly assumed leadership in formulating and executing not adequately screened which reduces their project activities and played a vital role in the effectiveness\. Financial controls also need strengthening \. implementation of the project\. They managed well the Counterpart funds have not been recorded \.Overall, implementation of their respective components and management will need significant strengthening \. Project coordinated with the International Department of MOF on activities need to be more focused on achieving the an as-needed basis\." (p\. 11) projects goals, quality and financial controls and project and financial reporting need to be improved \. Under the budget management component, the MOF budget  department and the PBC treasury management department have set up a leading group to further develop plans\. However, the budget department is reluctant to reallocate project funds to implement the new system \." (PSR, June, 1998) "Although the project saw three different task team (see also discussion above on project management leaders during its life, its implementation was smooth \." (p\. difficulties) 10) The project was extended twice from an envisioned 4\.5 years to 7\.5 years The project was rated "U" on Implementation Progress for nearly 2 years "Project accounts and audits were submitted on a regular "Compliance with Legal Covenants is downgraded due to basis\. The project audits were timely and the audit overdue Audits\." PSR, September, 1996) opinions were generally positive \." (p\. 9)

REVIEW

P004209

 ICRR 10419 Report Number : ICRR10419 ICR Review Operations Evaluation Department 1\. Project Data : OEDID: OEDID : C2821 Project ID : P004209 Project Name : Third Structural Adjustment Credit Country : Lao People's Democratic Republic Sector : Economic Management L/C Number : C2821 Partners involved : Prepared by : Alice C\. Galenson, OEDCR Reviewed by : John Johnson Group Manager : Laurie Effron, Acting Manager Date Posted : 08/16/1999 2\. Project Objectives, Financing, Costs and Components : Objective : to support greater efficiency in private and public investment, deepening the reforms carried out under SAC I and II\. Components : (1) creating a private sector enabling environment through reform of the state enterprise sector, the regulatory framework and the financial sector; and (2) enhancing public resource management by improving public expenditure management, increasing professionalism and cost effectiveness of the civil service, and reforming the social security system\. Costs US$40 million equivalent, of which $20 million (2nd tranche) was canceled\. Financing /Costs: Dates : Board approval Jan\. 22, 1996; closed December 31, 1998, 18 months behind schedule, following two extensions\. 3\. Achievement of Relevant Objectives : Many of the specific conditions were achieved \. Under reform of the state enterprise sector, five strategic state owned enterprises (SOEs) were commercialized, and a plan prepared for the rest; all non -strategic ones were privatized, liquidated or offered for sale, but there was little investor interest, so most remained in the public sector; hard budget constraints continued for SOEs; an enterprise performance monitoring system was established \. Regulatory reform was only partially achieved, with the adoption of two implementing regulations \. Under financial sector reform, the government improved prudential regulations for commercial banks, and carried out required bank audits\. All conditions under public expenditure management were met : a new budget nomenclature was adopted and a project monitoring system was established and produces quarterly reports \. However, progress towards the main objectives was modest at best \. 4\. Significant Achievements : Substantial improvements were made in the budgetary process and in budgetary transparency \. External audits of banks provided important information on the health of the financial sector \. Initial steps were taken to commercialize key public utilities\. 5\. Significant Shortcomings : Success of the reforms required the maintenance of a sound and stable macroeconomic framework, and the government failed to do this\. (The exogenous impact of the Asian crisis was only part of the problem \.) It also failed to meet some of the conditions for second tranche release \. Regulatory reform made little progress : implementing regulations for the Foreign Investment Law and the Budget Law were drafted, but were not implemented, in part because the Bank never provided feedback; the regulation for an Arbitration Decree was not prepared; and preparation of a medium-term national legal framework development plan was not completed \. Loan-loss provisioning for commercial banks was not enforced, as it would have bankrupted the banks \. Several bank managers lacked technical knowledge on how prudential regulations were to be applied, and the BOL could not provide detailed guidance\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Institutional Dev \.: Negligible Negligible Sustainability : Uncertain Unlikely Sustainability depends on a substantial number of actions by the government, and there is no reason to believe from the record that these will take place \. Bank Performance : Deficient Unsatisfactory Borrower Perf \.: Deficient Unsatisfactory Quality of ICR : Satisfactory 7\. Lessons of Broad Applicability : (1) The design of adjustment support must take account of management capacity; when it is weak, operations should be focused, limited to high impact reforms in a few areas \. (2) The Bank should focus more on the outcome and impact of reforms during supervision, rather than solely on details of specific conditionalities \. (3) The Bank needs mechanisms to ensure that the needs of smaller clients are not overlooked in the face of sudden increases in the needs of larger clients\. (4) Greater efforts are needed to build broad ownership of and support for reform at the highest levels of government; this will require efforts to understand the nature of decision making and the political economy of reform in relatively closed societies like the Lao PDR \. (5) Adjustment operations are not suitable vehicles for legal and other reforms that require a substantial build -up\. 8\. Audit Recommended? Yes No 9\. Comments on Quality of ICR : The ICR does an excellent job of evaluating the credit, except that it does not describe the outcome of the civil service or social security components \.

REVIEW

P101084

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BO Investing in Children and Youth(P101084) Report Number : ICRR0020148 1\. Project Data Project ID Project Name P101084 BO Investing in Children and Youth Country Practice Area(Lead) Additional Financing Bolivia Social Protection & Labor P123120 L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IDA-43960 31-Dec-2013 19,550,000\.00 Bank Approval Date Closing Date (Actual) 11-Mar-2008 30-Jun-2015 IBRD/IDA (USD) Grants (USD) Original Commitment 17,000,000\.00 0\.00 Revised Commitment 12,489,035\.81 0\.00 Actual 11,823,442\.27 0\.00 Sector(s) Other social services(70%):Central Government(30%) Theme(s) Social Safety Nets/Social Assistance & Social Care Services(40%):Nutrition and food security(40%):Improving labor markets(20%) Prepared by Reviewed by ICR Review Coordinator Group Katharina Ferl Judyth L\. Twigg Joy Behrens IEGHC (Unit 2) 2\. Project Objectives and Components a\. Objectives The Project Appraisal Document (PAD, p\. 8) states that the objectives of the project were to: “i) contribute to a reduction in the prevalence of chronic malnutrition in children ages 0-2 years old living in the most vulnerable rural areas of the country; ii) improve the management and operation of the skills development program to enhance its effectiveness in increasing low-income youth’s ability to find and maintain a good quality job; and iii) improve government capacity to design and manage a coherent, measurable, and effective social protection system in the medium term, and develop instruments to improve inter-institutional coordination and monitoring\." According to the Financing Agreement (p\. 5) of July 31, 2008, the objectives of the project were to: “i) reduce the prevalence of chronic malnutrition in children up to 2 years old living, in the most vulnerable rural areas of the recipient’s territory; ii) improve the management and operation of the recipient’s skills development program for low income youth to enhance its effectiveness in increasing the ability of low-  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BO Investing in Children and Youth(P101084) income youth living in urban and peri-urban areas to find and maintain a formal job; and iii) improve the recipient’s capacity to design and manage a coherent, measurable and effective social protection system in the medium term, and develop instruments to improve inter- institutional coordination and monitoring\." This validation will use the objectives as stated in the Financing Agreement\. Targets that were labeled PDO-level targets by the project were revised at a December 2013 restructuring, but as these targets were for outputs, a split rating will not be conducted\. b\. Were the project objectives/key associated outcome targets revised during implementation? No c\. Components The project consisted of three components: Component 1: Implementing and scaling up the Social Protection Program for Mothers and Children (MCP) to combat chronic malnutrition (appraisal estimate US$12\.4 million, actual US$5\.80 million, 46\.7% of appraisal estimate): This component was to finance support for the government in implementing and scaling up a program of conditional cash transfers (CCTs) to families with pregnant woman and/or mothers of children below the age of two years\. The project was to finance the implementation of the Zero Malnutrition Program (ZMP) in the 52 most vulnerable municipalities of the 164 municipalities targeted by the ZMP\. The three different types of project activities focused on: i) providing benefits for mothers and children to combat malnutrition; b) implementing an information, communication, and education strategy; and c) managing and monitoring the MCP\. Component 2: Improving and expanding a skills development program for low-income unemployed youth living in urban and peri-urban areas (appraisal estimate US$3\.60 million, actual US$4\.72 million, 131\.1% of appraisal estimate): This component was to finance improving the effectiveness of the existing “My First Job with Dignity” (MPED) program through the following activities: i) improving the effectiveness of the “First Employment Program” (FEP); ii) strengthening the institutional capacity and implementation arrangements of the Ministry of Labor (MoL) to administer and monitor the FEP; iii) providing opportunities for skills training and a first labor market experience for low-income youth; and iv) supporting the MoL to formulate a mid-term strategy for youth unemployment\. Component 3: Institutional strengthening of the Social Protection and Integrated Community Development Network (RPS-DIC) (appraisal estimate US$1\.0 million, actual US$1\.14 million, 113\.9% of appraisal estimate): This component was to finance support to the government to meet RPS-DIC’s long-term objective to build a sustainable and integrated social protection system\. Activities focused on: i) strengthening the technical coordination unit (TCU) of the MDP and developing a mid-term social protection strategy; ii) designing and testing a registry of beneficiaries and a monitoring and evaluation (M&E) system for the RPS-DIC; and iii) evaluating selected programs of the social protection network, including a pilot of the FEP and the initial expansion of the MCP to the first 10 municipalities\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost: According to the PAD (p\. 92), the project was estimated to cost US$17 million\. Actual cost was US$11\.66 million (68\.6% of appraisal estimate) due to lower than expected enrollment rates in the MCP\. Financing: The project was to be financed by an International Development Association Credit of US$17 million, of which US$11\.66 million was disbursed (68\.6% of appraisal estimate)\. Borrower Contribution: There was no planned contribution to be made by the borrower\. Dates: The project was restructured three times: • On January 13, 2011 the project was restructured to: i) transfer responsibility for the implementation of component 3 from the MDP’s Technical Coordination Unit (TCU) to its Economic and Social Policy Analysis Unit (UDAPE), and to support UDAPE in its technical and administrative capacity and information technology (IT) infrastructure to execute the defined monitoring instruments; ii) transfer the responsibility of the TCU’s project coordination to each executing agency (Ministry of Health, MoL, and USAPE) to become the Bank’s direct counterparts for the respective components; and iii) adapt the description and cost of component 3 and the related intermediate outcome indicators to reflect the institutional changes and the revision to the evaluation work program\. • On December 23, 2013 the project was restructured to: i) extend the closing date by 12 months from December 31, 2013 to December 31, 2014 to allow for the completion of ongoing and remaining activities under components 2 and 3; ii) reallocate part of the unused funds: US$1\.69 million was reallocated from component 1 to component 2, and US$0\.34 million was reallocated from component 1 to component 3\. The remaining funds of US$3\.83 million were cancelled as of December31, 2013; and iii) adjust targets for several indicators in the Results Framework, mainly downwards\.  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BO Investing in Children and Youth(P101084) • On October 31, 2014 the project was restructured to: i) extend the closing date by six months from December 31, 2014 to June 30, 2015 to allow for completion of activities; ii) create a new expenditure category under component 2 to finance the stipends of MPED beneficiaries through a new payment system; iii) create a new expenditure category under component 1 to finance a contractual procurement audit; iv) reallocate US$1\.03 million within the expenditure categories of component 2 and US$0\.04 million within the expenditure categories of component 1; and v) eliminate the legal requirement to complete a procurement audit for component 3 given the reduced number of procurement processes, the existence of ex-ante revision mechanisms, and the satisfactory procurement track record of UDAPE\. 3\. Relevance of Objectives & Design a\. Relevance of Objectives High: At the time of project preparation, approximately 60% of Bolivia’s population was living in poverty\. Children and youth, representing the majority of the Bolivian population, were particularly vulnerable\. Over 80% of children below five years of age in rural areas lived in poverty\. This project was aligned with the government’s efforts to strengthen the effectiveness of its social protection system by supporting the design, financing and implementation of two flagship interventions, the Social Protection Program for Mothers and Children (MCP) (later renamed to “Juana Azurduy Grant”) and the First Employment Program (FEP) (later renamed to “My First Job with Dignity”)\. Both programs focused on the poorest and most vulnerable children and youth\. The objectives of the project were also in line with the government’s National Development Plan, which aimed to reduce poverty and inequality through social protection interventions\. The project's objectives were also highly relevant to the three pillars of the Bank’s Interim Strategy Note for Bolivia (FY07-08), which aimed to improve good governance, foster job creation, and promote social inclusion\. The project's objectives were still highly relevant at project closing, since one of the pillars of the Bank's strategy (2012-2015) focused on improving the living conditions of the most vulnerable through programs to promote human capital, reduce infant and maternal mortality and chronic malnutrition, increase school enrollment, and reduce dropout rates by extending education and health services and providing water, electricity, and basic sanitation\. Rating High b\. Relevance of Design Substantial: Planned activities to reduce the prevalence of chronic malnutrition in children up to two years old included a conditional cash transfer program aiming to increase the food consumption of beneficiary households and the utilization of health care services among participating pregnant women and children, providing information and implementing a communication and education strategy\. In order to increase the employability of low-income youth, the project planned to improve and expand a skills development program, strengthening the capacity implementation arrangements of the MoL\. Activities to enhance capacity to design and manage a social protection strategy included strengthening the technical coordination unit of the Ministry of Development Planning, developing a mid-term social protection strategy, and designing and testing a registry of beneficiaries and a M&E system to assess different programs\. The causal relationships between these interventions and underlying assumptions about how program actions would lead to intended outcomes were logical and properly laid out\. Rating Substantial 4\. Achievement of Objectives (Efficacy) PHREVISEDTBL  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BO Investing in Children and Youth(P101084) Objective 1 Objective Reduce the prevalence of chronic malnutrition in children up to 2 years old living, in the most vulnerable rural areas of the recipient’s territory Rationale Outputs: • As of December 2012, 46,500 pregnant women and 83,609 children between the age of 0 and 2 years enrolled in the MCP program in participating municipalities\. Between 2009 and 2012, on average, only 30\.3% of mothers with children younger than two years of age living in the targeted municipalities received MCP transfers, not achieving the original target of 70% or the revised target of 50%\. This indicator lacked a baseline\. • In December 2014, 45% of children below two years of age participated in growth monitoring sessions in the areas of intervention, not achieving the revised target of 50%, which was reduced from 80% during the 2013 restructuring\. This indicator did not have a baseline\. • 35% of pregnant women living in the targeted areas had complete prenatal controls, achieving the revised target of 30%, which was reduced from 70% during the 2013 restructuring\. The baseline at 43% is higher than the target, as it was based on national data rather than data in target areas, where the country’s most vulnerable municipalities are located\. A 2012 Impact Evaluation showed that the MCP had a positive impact on the demand for prenatal and postnatal care as follows: i) a 6- and 10\.3-percentage-point increase in the probability of having at least one and four prenatal check-ups, respectively; ii) an 11% increase in the probability of having a health check-up before week 20 of pregnancy and a decrease equivalent to 2\.3 weeks of pregnancy for the first prenatal control; and iii) an increase of 4\.9 percentage points in the joint probability of having an institutional delivery and having the first post-partum check-up, in rural areas\. • In December 2012, approximately 91% of female beneficiaries knew their rights to access services and co-responsibilities to participate in the program, surpassing the target of 91%\. This indicator lacked a baseline\. • 340 municipalities signed agreements to enter the program, achieving the target of 340\. • The Management Information System (MIS) was completed and is operational, achieving the target\. All the participating municipalities now have adequate IT-related equipment and are connected with the MIS, achieving the target\. Outcomes: • The percentage of children participating in the MCP program who had anemia decreased from 84% in 2008 to 74\.1% in 2012, not achieving the target of 40%\. A 2012 impact evaluation found that the likelihood of utilization of nutritional supplements by children participating in the MCP program was 10\.8 percentage points higher than those who did not participate in the program\. This impact evaluation also showed that the MCP had a positive impact on reducing low birth weight (8\.3 percentage point decrease in the probability of birth weight being below 2,500 grams in rural areas)\. • The percentage of two-year-old children participating in the program with a height-for-age below 2 Z scores decreased from 38% in 2008 to 21\.4% in 2012, exceeding the target of 22% (a 2 Z score is used as cut-off to classify low-weight-for-age, low-height-for-age, and low weight- for-height as moderate and severe undernutrition)\. However, this outcome cannot solely be attributed to this project, as these outcomes are also influenced by other factors that were beyond the project’s control\. Given the attribution issues noted above, lack of anticipated progress on anemia, and the overall relatively low participation rate of children under two years in the targeted poor municipalities, achievement of this objective is rated Modest\. Rating Modest PHREVISEDTBL Objective 2 Objective Improve the management and operation of the recipient’s skills development program for low income youth to enhance its effectiveness in increasing the ability of low-income youth living in urban and peri-urban areas to find and maintain a formal job Rationale Outputs:  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BO Investing in Children and Youth(P101084) • 1,367 low-income youth were enrolled in the skills development program during the project-supported expansion, not achieving the original target of 3,800 or the revised target of 1,750\. • The national unit for the First Employment Program (FEP) was not fully staffed and operational as described in the operations manual, not achieving the target\. • Three departmental offices for the FEP have adequate staffing, are operating and are connected to the MIS, not achieving the target of five offices\. • The targeting mechanism to select low-income youth was designed and tested and the system to certify providers was tested and is operational, achieving the target\. • The process evaluation was designed and implemented, achieving the target\. • 93% of the youth enrolled in the program completed the in-class phase of the program, surpassing the target of 80%\. • Of those participants who completed the in-class training, 86% completed the internship, surpassing the target of 80%\. • 59% of youth who completed the internship were women, surpassing the target of 40%\. • 1,095 beneficiaries (80% of participants that were enrolled) completed the entire program and received a medium-level technical degree accredited by the Ministry of Education\. • 46 training programs focusing on apparel construction, gastronomy, construction, metallurgy, and domiciliary service installations were conducted, of which 44 programs were successfully completed\. Outcomes: • The final survey indicated that 72% of beneficiaries had an employment contract for four months or more after the end of the internship, surpassing the target of 50%\. The Impact Evaluation found that 21\.9 percentage points of the employment rate could be attributed to the MPED\. This indicator did not have a baseline\. However, even though the outcome targets, based on percentages, were achieved, the absolute number of enrollees was significantly lower than anticipated\. • The formal employment rate (with social security contributions) increased from 5\.2% to 18% among male and from 2\.2% to 10% among female participants\. • All participants enrolled during the expansion of the program were poor, achieving the target\. Due to the low number of program enrollees relative to targets and lower-than-anticipated development of program infrastructure, achievement of this objective is rated Modest\. Rating Modest PHREVISEDTBL Objective 3 Objective Improve the recipient’s capacity to design and manage a coherent, measurable and effective social protection system in the medium term, and develop instruments to improve inter-institutional coordination and monitoring Rationale Outputs: • The register of beneficiaries (RUB) was unified and the monitoring system was designed, achieving the target\. • The new operational manual of the BJA, based on results of impact and process evaluations, is in use, achieving the target\. • In 2012 a health and nutrition evaluation survey was conducted to collect information for the BJA Impact Evaluation\. 8,433 households were interviewed\. • Surveys of beneficiaries were conducted at the time of enrollment and in December 2013 and 2014\. The data collected was used to conduct an impact evaluation of the MPED program in 2015\. • A Social Program Monitoring System was operationalized, aiming to support the management of social programs by systematically monitoring progress in outputs and outcomes under each program’s logical framework\.  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BO Investing in Children and Youth(P101084) Outcomes: • An Impact Evaluation of the BJA program was conducted in 2013\. • Data from the Social Monitoring System is being used to monitor progress of seven national social programs\. The MPED program is being incorporated into the Social Monitoring System\. Also, data from the Social Monitoring System is used for annual progress reports on the social protection and integrated community development networks\. • The Unified Register for Beneficiaries is now operational\. • All bi-monthly reports on compliance with co-responsibilities are systematized through the MIS, surpassing the target of 80%\. • All payment agencies have enough funds to pay beneficiaries on time, achieving the target\. Rating Substantial 5\. Efficiency Modest: The PAD (p\. 34) provides an economic analysis estimating an Internal Rate of Return of the project between 17\.9% and 19\.5% for a 30- to 60-year time period\. This result is higher than the standard discount rate of 10% used in the Bank’s project evaluations\. The ICR conducts an economic analysis for the BJA program based on the Impact Evaluation conducted by the UDAPE in 2015\. The analysis assumes an economic value for each Disability Adjusted Life Year (DALY) gained by the BJA equal to the GDP per capita as a proxy to estimate the economic benefits of the project through the product of the quantity of the DALYs prevented and the GDP per capita\. The analysis also compares the cost-benefit values it derives with the values published by the WHO’s CHOosing Interventions that are Cost Effective (CHOICE) program, to evaluate the relative effectiveness of an intervention\. The ICR estimates a cost-benefit ratio of the BJA of 0\.298, indicating high cost-effectiveness\. The ICR also uses the incremental social benefits generated by the MPED, the program costs, and the social discount rate to compare the benefits and costs at present value\. The analysis assumes that the wage gain due to the program will remain throughout the beneficiary’s working life\. The analysis estimates an Internal Economic Rate of Return of 52% and a cost benefit-ratio of 0\.18 for a discount rate of 3%, a cost-benefit ratio of 0\.37 for a discount rate of 6%, and a cost-benefit ratio of 0\.72 for a discount rate of 12%, indicating that the program is efficient\. The ICR does not conduct an economic analysis for component 3\. However, the project experienced significant implementation challenges (see Sections 9 a/b and 11b), indicative of inefficient use of project resources\. As a result, project 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\.  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BO Investing in Children and Youth(P101084) 6\. Outcome The relevance of objectives is rated High given Bolivia’s high poverty rate among children and youth at the time of project appraisal and relevance to Government and Bank strategy\. The relevance of design is rated Substantial given the plausible link between project activities and intended results\. The achievement of the first and second objectives is rated Modest, and the achievement of the third objective is rated Substantial\. Efficiency is rated Modest given the delays and challenges in project implementation\. These ratings are indicative of significant shortcomings in the project's preparation and implementation, resulting in an Outcome rating of Moderately Unsatisfactory\. a\. Outcome Rating Moderately Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating The government continuous to be committed to supporting the BJA and MPED programs\. This commitment increases the likelihood that outcomes achieved under the project will be sustained\. Also, a new Bank operation will continue to support skills development programs in 15 urban centers and expand MPED training modules to attract poor youth entrepreneurs, as well as secondary education programs\. The MPED program will continue to benefit from technical support under the new Bank operation\. Achievements made under component 3 are likely to be sustainable due to the strong institutional and technical capacity of the UDAPE and the MDP\. In addition to cash transfers, the BJA conducted workshops and provided counseling to change behaviors related to infant health and nutrition among beneficiary households, aiming to sustain lower malnutrition and anemia rates\. However, the sustainability of achieved outcomes under the BJA might be negatively impacted by the limited implementation capacity of the MoL and the MoH\. Also, a less favorable economic situation might impact improvements made in regards to malnutrition and the availability of internships to complement training programs and post-training opportunities\. a\. Risk to Development Outcome Rating Modest 8\. Assessment of Bank Performance a\. Quality-at-Entry The Bank ensured that the project design benefited from lessons learned through an extensive survey of similar projects, conducted under the Social Protection Analytic and Advisory Activities (AAA) program, which was prepared at the same time\. The Bank identified relevant risk factors\. Those that were rated high included the conflict of roles between the national and local administration, systematic corruption, a difference in views among the implementing agencies regarding basic program design issues, implementation capacity and sustainability, implementing agencies with limited procurement skills, and financial sustainability of the programs after project closing\. The Bank addressed these risks by providing technical assistance, phasing implementation, carrying out evaluation activities, having a government unit responsible for overall project coordination, and establishing an independent payment agent for the BJA\. However, these mitigation efforts were not sufficient, as the Bank overestimated the commitment by the government to implement these measures\. Also, the project was overly ambitious and supported the implementation of two very different and complex programs by two line ministries that had limited technical and institutional capacity\. Furthermore, the Results Framework had significant shortcomings (see Section 10a)\. Quality-at-Entry Rating Moderately Unsatisfactory b\. Quality of supervision The Bank conducted regular supervision missions that included appropriate sector specialists and ensured ongoing tracking of key  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BO Investing in Children and Youth(P101084) indicators during each supervision mission, as well as fiduciary compliance\. Also, the Bank conducted trainings in financial management and procurement to overcome implementation challenges that resulted from limited capacity in the implementing agencies\. However, the Bank agreed with the government’s decision to eliminate the TCU as the project coordination unit, which made supervision more challenging and costly since the Bank had to support three different implementing agencies\. Continuing supervision activities by the TCU might have helped to overcome some of the implementation challenges with the MoH and the MoL and decrease long delays in contract approval and submission of financial statements and audits\. During the mid-term review the Bank identified weaknesses that led to the second restructuring of the project\. Quality of Supervision Rating Moderately Satisfactory Overall Bank Performance Rating Moderately Unsatisfactory 9\. Assessment of Borrower Performance a\. Government Performance The government was strongly committed to the implementation and sustainability of the two programs\. The government ensured the availability of financial resources to support the implementation of the programs and the continuation of financing of cash transfers for component 1 once the Bank’s support in this area was stopped after the mid-term review\. The project was designed to be a pilot program in selected municipalities to allow for modifications of its design and of the administrative and Information Technology and Communication (ITC) systems\. However, the government decided to implement the program nation-wide, leading to implementation challenges due to the MoH’s limited capacity\. Also, the amount of the CCTs had not been adjusted since 2009 and therefore did not reflect current transportation and opportunity costs especially for mothers living in rural areas\. Furthermore, the BJA program was implemented at the ministerial level and was not integrated within the existing health care services delivery network at the departmental and municipal levels\. In 2011, the government moved responsibility for project implementation from the TCU to the three executing agencies, the MoL, MoH, and UDAPE, leading to coordination challenges\. Throughout project implementation the MoH and MoL experienced high turnover of ministerial and project staff, resulting in slow implementation and financial management challenges\. Government Performance Rating Moderately Unsatisfactory b\. Implementing Agency Performance The project was implemented by three implementing agencies, the MoH, the MoL, and the UDAPE\. MoH: Unsatisfactory The MoH weakly implemented component 1 for several reasons\. First, the MoH did not allocate sufficient resources to implement the program on a national level and enable synergies between the provision of health care services and the management of the BJA program at the local level\. Second, the MoH established a central fiduciary unit for the lifetime of the project, which lacked qualified staff and did not sufficiently coordinate with the BJA’s technical unit, which was responsible for the operation of the program\. Third, the MoH experienced high turnover of staff at the project and ministerial levels\. MoL: Moderately Unsatisfactory The MoL was responsible for the implementation of component 2\. The performance of the MoL had several shortcomings\. Due to changes in administration within the MoL, the implementation start of the program was delayed from 2011 to 2012, which made an 18- month extension of the original closing date necessary\. The MoL did not fully disburse the resources that were reallocated to component 2 under the 2013 restructuring, encountered difficulties in complying with some financial management requirements, and left key positions in the national project coordination unit empty, negatively impacting project implementation\. Furthermore, the MoL was not able to reach the expected number of beneficiaries over the extended project implementation period\. UDAPE: Satisfactory The UDAPE was responsible for the implementation of component 3\. All project activities under this component were implemented as planned\. The UDAPE’s financial management and procurement performance was adequate\. Also, the UDAPE carried out an impact evaluation of the BJA and MPED programs, which required significant inter-institutional efforts\.  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BO Investing in Children and Youth(P101084) Implementing Agency Performance Rating Moderately Unsatisfactory Overall Borrower Performance Rating Moderately Unsatisfactory 10\. M&E Design, Implementation, & Utilization a\. M&E Design The PDOs of the project were broad and lacked specificity and clarity\. PDO 1 did reflect the objective of the BJA program, to reduce chronic malnutrition, but it was overly ambitious and influenced by external factors outside the control of the project\. PDOs 2 and 3 were vague, and the PAD did not specify how “enhanced effectiveness” for PDO 2 should be measured and what baseline should be used\. The Results Framework included a large number of indicators (31), with many lacking baselines\. The M&E design planned to conduct two process evaluations\. One evaluation was intended to assess the BJA program once the first 10 municipalities had been incorporated and households and communities were receiving their benefits\. It was also planned to conduct another process evaluation of the MPED program during the first year of implementation to assess the pilot and, if necessary, make adjustments\. An Impact Evaluation to assess the outcomes of the BJA was to be conducted in cooperation with the Health Adaptable Program Loan III project, which was implemented in the same target municipalities\. In addition, beneficiary surveys were to be conducted during the implementation of the BJA program\. b\. M&E Implementation The Management Information Systems at the MoH and MoL tracked physical and financial progress\. Implementation progress reports were generated on a regular basis\. While these two systems could be improved, they were fully operational\. The implementation of the BJA evaluation was delayed and took place eventually in 2012\. Although delayed, the evaluation provided useful information and represented 73% of beneficiaries\. The MPED evaluation measured the impact of the program in regards to employment and remuneration and interviewed beneficiaries at three different times, at enrollment in 2012, in 2013 and 2014\. Planned beneficiary surveys to collect data on the proportion of indigenous beneficiaries who were satisfied with the BJA program were never conducted\. Also, data on education activities, conducted with beneficiaries in health centers, was poorly registered, and no records were included in the BJA’s MIS\. c\. M&E Utilization The results of the BJA and MPED evaluations continue to inform the implementation of these two programs\. Results from the BJA impact evaluation and process evaluation provided inputs for the modification of the BJA operational manual to improve the implementation and performance of the program\. M&E Quality Rating Modest 11\. Other Issues a\. Safeguards The project was classified as category C and triggered safeguard policy OP/BP 4\.01 (Indigenous People)\. However, an indigenous people plan was not required as the majority of the beneficiaries in 52 municipalities was indigenous, and the project design complied with the  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BO Investing in Children and Youth(P101084) requirements of the Bank’s policy on indigenous people\. Also, the project design included a communication strategy to improve understanding of the program among all stakeholders, complement cash benefits with information on program co-responsibilities, outcomes, social control, and accountability, and provide information to beneficiaries about the program’s goals and beneficiary rights and responsibilities\. b\. Fiduciary Compliance Financial Management The MoL, the MoH, and the UDAPE were responsible for the financial management of the project\. Each agency had its own financial management procedures, operational manual, and staff\. While UDAPE had adequate financial management arrangements throughout implementation, the MoL and the MoH implemented inadequate accounting practices, had limited coordination between their technical and administrative teams, and suffered from a weak internal control system to provide reliable financial information that was necessary for monitoring and enabling the transfer of funds\. Interim financial reports and audited financial statements were submitted late due to a lack of adequate financial records\. As a result, the Bank suspended the financing of BJA transfers by the end of 2012\. Also, external auditors identified significant weaknesses in internal controls, which led to delays in project implementation and the occurrence of ineligible expenditures\. Except for the last two audits of the MOL for 2014 and part of CY2015, all the external auditor’s opinions were unqualified\. The Bank worked with the counterpart to obtain more information that led to the limitation of the auditor’s opinion\. Almost all aspects were eventually resolved\. Procurement The Bank’s procurement guidelines were followed appropriately\. According to the procurement post-review mission and procurement audits for components 1 and 3, the project did not encounter any serious procurement issues\. However, the project experienced delays in some contracting processes due to limited technical capacity and centralized approval processes\. c\. Unintended impacts (Positive or Negative) None noted\. d\. Other --- 12\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Outcome Moderately Unsatisfactory Moderately Unsatisfactory --- Risk to Development Outcome Modest Modest --- Project design was overly ambitious, and the Results Bank Performance Moderately Satisfactory Moderately Unsatisfactory Framework had significant shortcomings\. Borrower Performance Moderately Unsatisfactory Moderately Unsatisfactory --- Quality of ICR Substantial ---  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BO Investing in Children and Youth(P101084) 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 (p\. 22-24) identifies several valuable lessons, including the following: • High-level project objectives lead to attribution difficulties\. In this project, the objective to reduce malnutrition was overly ambitious and was influenced by several factors beyond the project’s intervention scope\. Therefore, outcomes cannot be solely attributed to this project\. • Testing programs on a smaller scale allows for the modification of program design and for building implementation capacity where needed\. Originally, it was planned to pilot the BJA program with a focus on a high-priority target population\. However, the program ended up being implemented on a national level, leading to implementation challenges giving the MoH’s limited capacity\. • The main aim of CCTs is to attract the target population\. In this project, the CCTs did not adequately reflect the transportation costs of the primary target group, low -income populations in rural areas\. Also, the program did not ensure that CCTs remained attractive when economic circumstances changed and employment opportunities improved\. However, the MPED took transport and opportunity costs of the target population into account, and stipends were adjusted to reflect an increase in the minimum wage, resulting in a low rate of abandoning the program\. 14\. Assessment Recommended? No 15\. Comments on Quality of ICR The ICR provides a good overview of project preparation and implementation\. The ICR is concise, consistent in its analysis, and includes a traditional economic analysis\. Also, it identifies challenges and provides useful lessons learned\. Taking everything together, the ICR is rated Substantial\. a\. Quality of ICR Rating Substantial

REVIEW

P001007

 Social and infrastructure relief project Report No: ; Type: Report/Evaluation Memorandum ; Country: Guinea-Bissau; Region: Africa; Sector: Other Finance; Major Sector: Finance; ProjectID: P001007 Guinea-Bissau: Social and Infrastructure Relief Project (Credits 2020/2020-1-GUB) The Guinea-Bissau Social Infrastructure Relief project (SIRP), supported by Credit 2020-GUB for US$5 million equivalent, was approved in FY89 and closed on June 30, 1993\. A supplemental credit (2020-1-GUB) for 2\.9 million equivalent was approved in FY92 and closed on June 30, 1995 after a two-year delay\. Both credits were fully disbursed\. The governments of Japan, Norway, Portugal, and Sweden provided cofinancing\. The Africa Regional Office prepared the Implementation Completion Report (ICR), to which the borrower's report is appended\. The project's objective was to increase income and employment opportunities among low-income and unemployed urban and rural workers\. Specifically, the project was to (a) rehabilitate and maintain urban and social infrastructure, (b) develop sites for low-cost urban housing, (c) improve delivery of education and health services (including those for AIDS), (d) help to find jobs for laid-off civil workers and other unemployed workers, (e) develop a system for monitoring the social impact of economic policy, and (f) strengthen the government's capacity to manage and implement the SIRP\. The project met most of its objectives, but with delays and cost overruns because donor and government contributions were significantly less than appraised\. After the approval of the supplemental IDA credit, virtually all components were satisfactorily implemented\. The exception was the low-cost housing component, which is now being financed by UNDP and IDA-assisted projects\. Basic infrastructure_roads, markets, sewage canals, drainage systems, and water supply_was improved or built (with substitutions because of changes in government priorities and other ongoing IDA social sector projects) benefiting some 400,000 people\. Schools were rehabilitated and equipped, raising the quality of education\. Health facilities were upgraded and drug supplies distributed, but with delays and not to government standards\. The project trained unemployed youths and retrained civil servants for jobs in both the public and private sectors\. Finally, the government improved its ability to develop social policies and increased its understanding of women's issues in the informal and agricultural sectors through project-financed studies and surveys\. Maintenance of the rehabilitated facilities and the continued provision of social and sanitation services will depend on the government's willingness to fund recurrent expenditures and the implementation of effective and equitable cost-recovery mechanisms\. The Operation Evaluation department agrees with the ratings in the ICR\. Outcome is rated as satisfactory and institutional development as substantial\. Government's capacity to plan, manage and implement urban and social infrastructure projects has been strengthened and IDA has approved a follow-on infrastructure project\. Project sustainability is rated as uncertain, given the weak financial commitment of the government and the lack of cost- recovery systems\. IDA's performance is rated as satisfactory\. The project offers some important lessons\. One is that firm donor and government commitments should exist when preparing a plan for project financing\. Another is that a multisectoral project requires careful evaluation of other ongoing projects to ensure that activities complement on-going initiatives\. The ICR is satisfactory, but could have benefitted from greater consistent use of US$ equivalency throughout the document\. No audit is planned\.

REVIEW

P125595

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) Report Number : ICRR0021544 1\. Project Data Project ID Project Name P125595 Ghana - PPP Project Country Practice Area(Lead) Ghana Finance, Competitiveness and Innovation L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IDA-50970 31-Aug-2016 19,529,108\.38 Bank Approval Date Closing Date (Actual) 27-Mar-2012 30-Jun-2018 IBRD/IDA (USD) Grants (USD) Original Commitment 30,000,000\.00 0\.00 Revised Commitment 21,975,388\.10 0\.00 Actual 19,529,108\.38 0\.00 Prepared by Reviewed by ICR Review Coordinator Group Paul Holden Fernando Manibog Christopher David Nelson IEGFP (Unit 3) 2\. Project Objectives and Components a\. Objectives The Project Development Objective (PDO) was to support the Recipient’s efforts to improve the legislative, institutional, financial, fiduciary and technical framework to generate a pipeline of bankable public private partnership projects (Financing Agreement [FA] dated November 22, 2012, p\. 5)\. At appraisal, this was designed to be a two-phased Adaptable Program Lending (APL) initiative to enhance Ghana’s infrastructure and social services through a program of Public Private Partnerships (PPPs), with the Page 1 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) objective of leveraging greater volumes of private sector investment in infrastructure provision\. Since the World Bank discontinued APL as a financing instrument in June 2015, the second phase did not take place\. There were two restructurings of the project\. There were no changes to the PDO in the restructurings, although the results frameworks were changed\. 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: Institutional, Fiduciary, Legislative and Financial Capacity Building: Appraisal estimate US$10 million; actual cost US$10 million\. This component had 5 parts, which were: • Develop the capacity of the Ministry of Finance and Economic Planning (MoFEP) and other ministries, departments (MDAs) and Metropolitan, Municipal District Assemblies (MMDAs) to identify, assess, develop, implement and manage PPP transactions\. This would include: (a) developing the capacity to fully analyze potential projects; (b) developing the capacity to manage and monitor PPP performance; (c) provide training; (d) build the capacity of the private sector for PPP engagement through outreach; and (e) develop in house capacity and operating procedures that would develop projects that were not financially self-supporting, but which were in line with the national development agenda, through the implementation of a Viability Gap Scheme (VGS) that would “operate according to standard operating procedures and guidelines issued for VGS managers and user/beneficiaries\.” (PAD, p\. 83)\. The VGS would provide rule-based incentives for projects of this type\. • Facilitate the development of PPP legislation • Develop a framework within MoFEP that would be capable of effective management of fiscal commitments and contingent liabilities for PPP projects • Enhance the capacity of the Bank of Ghana to undertake fiduciary assistance and to provide operating procedures that would enable it to fulfill its envisaged role as the apex manager that would, among other things, select prospective financial intermediaries that would be recipients of a proposed financial intermediary loan • Assist with the development of long-term financing capacities and financial instruments to fund infrastructure, which would include bond and equity market development as well as the capacity to undertake due diligence for a potential infrastructure financing facility\. Page 2 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) Component 2: PPP Pipeline Preparation and Transaction Advisory Support: (Appraisal estimate US$10 million; actual cost, US$10 million)\. This component would develop a commercially viable “government backed pipeline of competitively bid PPP projects and bring them to financial close” (FA, p\. 6) through: • Providing upstream advisory services, including due diligence on safeguards to MDAs and MMDAs for “First Mover PPP Projects (FA\. P\. 6)\. • Providing advisory and technical upstream support on PPP development resulting from unsolicited PPP bids; • Assisting the Public Investment Division (PID) of the MoFEP to develop a PPP development facility to provide funding for the preparation of PPP projects and advisory services\. Component 3: Project Management and Monitoring & Evaluation: (Appraisal estimate, US$1\.5 million; actual cost US$1\.5 million) This component would develop and strengthen the capacity of the PID to implement and manage the project, which would include creating a comprehensive M&E system that would track project effectiveness and assess the development impact of the PPPs that had been developed through the program\. e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates a\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost: The original amount of the loan was SDR19\.4 million (US$30 million equivalent); the revised amount in the first restructuring was US$21,975,388 and the actual amount disbursed was US$19,529,108, or 65% of the total\. Financing: The project was financed by an IDA credit\. Borrower Contribution: The borrower did not contribute\. Dates: The project was approved on March 27, 2012 and became effective on December 26, 2012 with an original closing date of August 31, 2016\. It was restructured twice\. The first restructuring was on July 9, 2015, when there were changes to the intermediate results framework and the loan closing date was extended to February 28, 2018\. The project was restructured again on November 8, 2017 when there was an additional change to the intermediate results framework and the loan closing date was further extended to June 30, 2018, which was the actual closing date\. The World Bank did not accede to a request by the Government of Ghana for a further two-year extension of the project\. Page 3 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) 3\. Relevance of Objectives Rationale The Project Appraisal Document (PAD) states (p\. 5) that up to the time of the project, most PPPs in Ghana had emerged from proposals that had not been solicited, had been primarily through divestures, and had been concentrated in the telecoms sector, arguably one of the less challenging sectors for undertaking PPPs\. Additional PPPs had been undertaken in the energy sector\. In terms of value, 67% had been accounted for by telecom PPPs and 32% by energy, with the total amount of PPP investment being equivalent to 15% of GDP\. The Country Partnership Strategy (CPS) for FY2013-FY2016 points out that in 2010-2011, there had been a successful PPP for a fertilizer import program, which had involved payment of a subsidy to fertilizer importers\. The program raise fertilizer use by “commercially viable” farmers that had increased their productivity\. World Bank involvement in these projects was limited\. The PAD (p\. 20) states that Ghana faced a very large infrastructure gap, which it estimated to be some US$1\.5 billion per year, or about 5% of GDP in 2008\. Deficiencies existed in almost every area, including electricity generation, a dysfunctional railway system, and a poor road network\. Provision of the required funding was beyond the capacity of the state, and it was the government’s view that a project based on PPPs was “both timely and appropriate” (ICR p\. 14)\. At appraisal, it was in accordance with key policy documents such as the Government Coordinated Program for Economic and Social Development, for 2011 – 2014\. It was also in accordance with the World Bank CPS for FY2013 – FY2016, which had as an outcome indicator that by 2012, at least 3 PPPs would be established\. One of the pillars of the CPS was improving economic institutions, which is broadly in accordance with developing a framework for PPPs\. However, this pillar in the CPS places greater emphasis on improving SOEs, which it described as providing “poor service delivery, financial losses, and debt accumulation”\. The CPS does not, however, link SOE reform with PPP creation as a solution to these problems\. The ICR states (p\. 11) that “with hindsight, the project should have been more strongly linked to the SOE reform program”\. There is no discussion in the CPS, nor in the PAD of the complexity of many PPP transactions, particularly within the context of limited capacity within government to prepare, execute and manage PPP projects\. While capacity building technical assistance was to be provided, executing PPPs is challenging as noted in the PAD\. Since a new Country Partnership Framework has not yet been developed, the project at closing remained consistent with the goal of developing at least 3 public private partnerships in the FY2013 – FY2016 CPS\. Although the ICR (p\. 10) indicates that the PDO was relevant, it downgrades the overall relevance of objectives on the grounds that the indicators are poorly designed\. While this is the case, the issue of poor indicators should have been addressed in the efficacy and monitoring & evaluation sections (See Section 4, below), not the relevance of objectives\. Page 4 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) Given that Ghana has a very large infrastructure deficit and that PPPs are a suitable vehicle for addressing this, relevance of objectives is rated substantial\. Rating Substantial 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective The objective of the Project was to support the Recipient’s efforts to improve the legislative, institutional, financial, fiduciary, and technical framework to generate a pipeline of bankable public private partnership (PPP) projects\. For the purposes of this assessment, the five complementary activities -- related to legislative, institutional, financial, fiduciary, and technical improvements -- comprise the project's outputs\. Given critical governance and political support assumptions (see Figure 1, page 8 of the ICR), outputs from these five activities working together would causally lead to the achievement of the over-arching objective of generating bankable PPPs\. Rationale Objective 1 The theory of change associated with the PDO is that successful bankable PPPs require a framework that contains the five key factors mentioned above, designed to work together and be mutually supportive in providing a strong framework for PPPs, which usually are undertaken over lengthy time periods\. Thus, one aspect of the foundation of the theory of change is that the rights and obligations of both the government and the investor need to be clearly defined as do the legal processes and responsibilities for initiating and developing a PPP project\. A strong framework for PPPs requires clear guidelines for project tendering, evaluation and awarding of PPP contracts, which would lead to the pipeline of “bankable” PPP projects\. This can be undertaken most effectively through a sound legal framework\. One of the 3 outcome indicators was that a PPP law be enacted\. This did not occur\. A draft PPP Bill and draft PPP regulations were submitted to Cabinet on four occasions (in 2014, 2015, 2017, and 2018)\. Since the criteria for the adequacy of the law were not specified in neither the outcome indicator, nor in the output indicators, exactly what constitutes improving the legal framework could have lead to the withdrawal of the PPP bill\. This would explain at least partly the withdrawal of the law that had been submitted to Cabinet in 2014 when reform enthusiasm was at its highest\. The Borrower's ICR (p\. 47) states that the main factor causing the delays and limited progress was the desire by the World Bank and other stakeholders to ensure first that the law was adequate as a robust foundation for PPP transactions\. Page 5 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) Problems with passing the legislation continued\. Although the Cabinet approved a PPP bill that was then submitted to Parliament in 2016, it could not be passed before Parliament was dissolved while elections occurred and the ICR (p\. 12) points out that “during the entire duration of the project, PPP projects were thus initiated and prepared without the benefit of a robust legal framework\." Another outcome indicator was that PPP regulations associated with the legislation be passed\. This also did not occur because of the failure to pass the legislation\. Furthermore, having the PPP law and the regulations as separate outcome indicators was a serious design flaw (see Section 9, M&E for more discussion\.) The intermediate indicators were that the PPP Bill would be submitted to Cabinet and that draft regulations would be submitted to Parliament\. The first of these was achieved as stated above – the Bill was submitted to the Cabinet 4 times\. The second indicator appears to be a case of “putting the cart before the horse\.” Submitting regulations to Parliament for a Bill that had itself not been submitted to Parliament is not meaningful\. Furthermore, government has no control of the legislature; making the passage of the legislation a prior action would have been preferable\. One of the complementary aspects to the legal framework was a sound institutional framework, that would support PPPs\. A key part of creating a robust institutional framework for PPPs is the establishment of a PPP unit that is responsible for selecting project ideas initiated by government departments, state-owned enterprises and the private sector\. Typically, such units undertake an initial screening and then shepherd approved projects through to the contract structuring stage\. This was partly achieved – an intermediate indicator was the “establishment and operationalization of a PPP approval committee” (ICR, p\. 16), which was accomplished by mid 2016\. However, the next stage, that the unit achieve the capacity to shepherd approved projects to contract, appears not to have occurred\. This is confirmed by the failure to achieve the PDO outcome indicator related to a project pipeline, namely that Expressions of Interest (EOIs) are issued for prospective sponsors or concessionaires for three PPP transactions after due diligence\. This indicator was put in place because of the World Bank requirement that the due diligence stage be completed prior to the EOI being issued\. By project end, two had been completed\. The ICR (p\. 12) points out that eight PPP transactions had been supported by the project up to the pre-feasibility stage and that these potential transactions amounted to over US$3 billion\. Nevertheless, problems surfaced in the form of procurement processes associated with one of the major components of the PPP pipeline, namely the Takoradi Port Integrated Terminal\. The Ghana Ports and Harbor Authority terminated the competitive procurement process for the Terminal unilaterally, which constitute a “significant issue for the project” (ICR p\. 11)\. In terms of strengthening the financial framework for PPPs, it is not mentioned in the ICR and does not appear in high level indicators\. This was at least partly because a second phase had been planned – the PAD (p\.7) states “the second phase will build on Phase 1 outcomes by providing…catalytic financing through an innovative Financial Intermediary Loan and Viability Gap Scheme mechanisms to assist in bringing bankable transactions with high public priority to financial close”\. However, beyond this, what constitutes an improved financial framework is not defined in either the ICR nor in the PAD\. A strong fiduciary framework has a robust place in the theory of change that results in promoting PPPs\. While PPPs have the potential to improve productivity and efficiency, they also involve risks that could arise Page 6 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) from unsuccessful projects, which could lead to the government having to assume fiscal obligations that arise from the contingent liabilities of a PPP project\. The PAD notes (p\. 4) that as Ghana expands its PPP program, it could incur potential fiscal commitments in the form of contingent liabilities\. The national PPP policy required a system for allocating risk, which would be assessed by the Debt Management Division of the Ministry of Finance and Economic Planning, through evaluating the fiscal sustainability of PPP projects\. The PAD recognized the need for the institutional capacity to deal with contingent liabilities and potential fiscal obligation of the government in the event that PPP operations were unsuccessful\. To this end, the PAD specified that an intermediate results indicator involved the requirement that a Fiscal Commitment and Contingent Liability Framework be approved by the PPP Approval Committee\. This issue is not discussed in the ICR, apart from including it in the intermediate results table (ICR p\. 24)\. The establishment of the Framework was part of the original targets and the revised targets, but the ICR reports that it was not achieved by completion\. An additional component of improving the fiduciary framework for generating a pipeline of bankable PPP projects was the establishment of a Viability Gap Scheme (VGS) to assist in bringing PPP projects to fruition\. The rationale for the scheme was that there were projects that had a high public priority, but the commercial potential of which required substantial initial capital expenditure in order to ‘bring them to market’, which could not be supplied by the private sector\. The VGS would establish an operating framework that would assist in rectifying the financing gap\. This was to be funded through Phase 2 of the project, which did not occur\. Creating a technical foundation for PPPs is an important part of an environment that promotes their use\. Since PPPs in any particular sector are often large scale, frequently, the establishment of PPPs involves activities that are either monopolies or are oligopolies\. Without a robust regulatory capacity, awarding PPPs could involve substituting a public monopoly for a private monopoly\. A sound competition framework and an effective regulatory body are often prerequisites for effectively functioning PPPs\. However, the technical framework issue does not appear in the ICR apart from (incorrectly) placing it as part of the PDO, nor is it defined\. It is also not defined in the PAD and no indicators are defined to measure it so that it is not possible to evaluate any progress on this this aspect of strengthening the PPP framework\. Of the 3 outcome indicators for the project, passage of the PPP legislation did not occur, nor were PPP regulations created\. The other outcome indicator was that EOIs be issued for prospective sponsors or concessionaires for three PPP transactions after due diligence, of which the ICR reports, two were achieved\. With two of the three indicators not being achieved and one only partly achieved, and taking into account outputs achieved, efficacy is rated modest\. Rating Modest PHREVDELTBL Page 7 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) PHOVRLEFFRATTBL Rationale The only objective for the project was rated Modest, thus overall Efficacy is rated Modest\. Overall Efficacy Rating Primary reason Modest Low achievement 5\. Efficiency The ICR does not attempt to calculate a rate of return on the project because of the problems in measuring quantitative outcomes\. One of the PDOs was to generate a pipeline of 3 PPP projects but this does not provide a meaningful data set because until the projects are actually underway, no comparison with either local or international data was possible\. Therefore, a qualitative approach was undertaken, although the ICR does utilize some quantitative data\. It utilizes 5 criteria; the value of project investment potential against project cost; the cost per project; the efficiency in disbursement; time overruns; and staff turnover\. However, it is difficult to see the relevance of these criteria\. Any measure of project investment potential is speculative, and no credible value can be assigned to the projects in the pipeline\. The ICR (p\. 14) estimated the value of all projects in the pipeline to be US$4 billion\. However, only 2 projects met World Bank criteria for due diligence; the other projects were at various stages behind these in the approval pipeline\. Furthermore, estimating values from expressions of interest is little more than hypothetical\. Therefore, the ratios of the value of project investment potential against project cost and the cost per project have little meaning\. The efficiency of disbursement indicator, which shows that one third of the loan remained undisbursed is likewise of little relevance\. Time overruns and staff turnover also gives no indication of value for money of this project\. In any case performance under these criteria was poor\. The ICR (p\. 15) rates the efficiency as Substantial but this rating is difficult to justify, even though the ICR states that the project’s use of resources relative to the project pipeline is “in line with other PPP programs in Sub-Saharan Africa\.” (p\. 18)\. Given the very modest achievements under the project, it is quite possible that the same results could have been achieved without the project, since the government was intent on undertaking PPPs as part of its policy\. Efficiency is therefore rated as negligible\. Efficiency Rating Negligible 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: Page 8 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) Rate Point value (%) *Coverage/Scope (%) Available? 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 With sub-ratings of substantial for relevance of objectives, modest for efficacy, and negligible for efficiency, the overall outcome rating is unsatisfactory\. The PPP law and regulations, which were meant to provide the institutional foundation for the project and for all future PPP transactions had not been passed by project closing\. a\. Outcome Rating Unsatisfactory 7\. Risk to Development Outcome There are significant risks to development outcomes\. The problem with the lack of a robust legal framework is illustrated by the termination of competitive bidding process for the Takoradi Port project, which demonstrates the fragility of the PPP institutions in Ghana\. Since several other projects were at critical procurement stages as the project closed, risks to development outcomes are substantial\. 8\. Assessment of Bank Performance a\. Quality-at-Entry The ICR points out (p\. 18) that at entry, World Bank focus appeared to have been on “the financial and commercial viability of PPP projects”, citing the focus on “bankability” of projects as evidence\. The term is defined as the ability of the project to service its debt as specified in PPP contracts\. The PAD also specifies commercial viability and investor returns as a key factor in the preparation of PPP projects\. The ICR states that this might have led to social, environmental, and resource impacts being ignored as “key indicators of project success” and that “over-focus on a single parameter of financial or commercial viability led to uncertainty with respect to other elements”\. Page 9 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) An additional implementation issue of substantial importance related to safeguards, which resulted in confusion regarding the relative responsibilities between the Bank and the Borrower and which placed the goal of mobilizing private sector participation in PPP projects at risk\. Furthermore, as is discussed in the Safeguards part of Section 10, other serious problems emerged as the project proceeded because of non- compliance on the part of the Borrower\. Quality-at-Entry Rating Moderately Unsatisfactory b\. Quality of supervision The ICR (p\. 14) points out that “initial disbursement challenges” led to a 2 1/2-year delay in project implementation, although disbursements improved in the last 3 years of the project\. There were 13 ISRs during the course of the project as well as a mid-term review that included an assessment by an independent PPP expert\. The ICR (p\. 18) identifies 2 specific issues with implementation: • Once it was clear that the second operation would not occur as a result of a change in World Bank policy regarding APLs, the Bank initiated a review of alternatives, but decided not to proceed because of performance issues; • The lack of clarity regarding safeguards and the respective roles of the Borrower and the Bank, discussed in the design section, resulted in substantial issues and disagreements with respect to certain projects\. The ICR (p\. 15) also points out that both World Bank and Borrower staff turnover was high\. There were delays in the recruitment of key personnel on the part of the Government and over the period of the project\. On the Bank side, there were several TTLs which contributed to inefficiency of supervision\. Quality of Supervision Rating Moderately Unsatisfactory Overall Bank Performance Rating Moderately Unsatisfactory 9\. M&E Design, Implementation, & Utilization a\. M&E Design Page 10 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) ICR p\. 16 states “The PDO-level results indicators as well as the intermediate-level results indicators were well designed and required simple tracking and performance reporting templates\.” This statement is difficult to reconcile with the fact that outcome indicators did not fully relate to the PDO and were seriously inadequate\. Furthermore, the results framework for the project had minimal data requirements, that did not allow for effective tracking of progress\. The ICR points out (P\. 16) that in terms of design, there should have been and indicator to identify progress on strengthening capacity of the PPP counterparts\. b\. M&E Implementation The Ministry of Finance and Economic Planning was responsible for project monitoring, reporting and evaluation\. M&E implementation failed to identify problems that arose during the project as a result of the cancelling of the second phase\. Until the final two ISRs, issues of implementation that resulted in the failure to achieve the outcome indicators were not flagged\. The ICR (p\. 16) also states that no beneficiary assessments were undertaken other than routine monitoring information\. c\. M&E Utilization The ICR points out (p\. 18) that although weekly reports were submitted, which met the formal M&E requirements, there was no evidence that any of the information collected was utilized to identify issues that emerged as the project progressed, nor was any of the information collected utilized to strengthen project implementation\. M&E Quality Rating Negligible 10\. Other Issues a\. Safeguards The safeguard categories triggered by the project were: • Environmental assessment (OP/BP4\.01) Category A • Involuntary resettlement (OP/BP4\.12) Page 11 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) The poor compliance with the project’s safeguards compliance framework for the project gave rise to additional problems\. Issues arose with respect to the project’s environmental and social management framework as well as the resettlement policy framework\. The ICR observes (p\. 17) that implementing Ministries, Departments and Agencies had poor appreciation of Bank safeguards requirements and there was a lack of capacity within the project unit to engage in safeguard issues\. The ICR states (p\. 17) that these issues raised “serious reputational and implementation risks for projects that should have been identified and to some extent mitigated, earlier in the project preparation process\.” There was no evidence provided in the ICR regarding gender impact, nor was evidence provided on poverty reduction and shared prosperity\. b\. Fiduciary Compliance While there were not reported instances of lack of fiduciary compliance, the unilateral withdrawal of the Takoradi Port Integrated Terminal from the competitive procurement process by the Ghana Ports and Harbor Authority constituted a significant fiduciary issue\. c\. Unintended impacts (Positive or Negative) No unintended impacts were identified\. d\. Other --- 11\. Ratings Reason for Ratings ICR IEG Disagreements/Comment With substantial relevance of objectives, modest efficacy, and negligible efficiency, overall outcome is Moderately Outcome Unsatisfactory unsatisfactory, in line with the Unsatisfactory Bank's ICR preparation guidelines dated September 27, 2018, Appendix H, page 38\. Moderately Moderately Bank Performance --- Unsatisfactory Unsatisfactory Page 12 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) The M&E framework had poorly designed indicators and Quality of M&E Modest Negligible did not effectively track progress, nor was it used\. Quality of ICR Modest --- 12\. Lessons The following lessons are taken from the ICR with some adaptation of language: • Vested interests often oppose PPP projects, which suggests that there needs to be substantial focus on SOE reform and regulation at project outset\. Strong links between SOE reform and PPP reform are necessary\. • If a law is essential for project completion, analyzing political economy issues at the outset raises chances for success, especially in those projects involving difficult areas, such as PPPs \.If such a law is essential for project implementation having it in place at the outset might be a precondition for proceeding with the project\. IEG adds an additional lesson\. • If multi-phase projects are anticipated, the first project is often designed with the follow-on in mind\. If circumstances change and the follow-on is cancelled, major redesign of the first project is often warranted\. 13\. Assessment Recommended? No 14\. Comments on Quality of ICR The ICR contains useful information and project insights\. However, the analytical content of the document is spotty because it fails to sufficiently identify key failings in the project, from design to implementation\. Furthermore, discussion of outcome indicators and output indicators is inadequate and at times the ratings in the ICR do not match the narrative and the limited evidence provided\. Page 13 of 14  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Ghana - PPP Project (P125595) a\. Quality of ICR Rating Modest Page 14 of 14

REVIEW

P057952

Document of The World Bank Report No:ICR000092 IMPLEMENTATION COMPLETION AND RESULTS REPORT ( IDA-33480; WBTF-24403 ) ON A CREDIT IN THE AMOUNT OF SDR 14\.9 MILLION (US$20 MILLION EQUIVALENT) TO ARMENIA FOR A SOCIAL INVESTMENT FUND II PROJECT April 11, 2007 Human Development Sector Unit South Caucasus Country Unit Europe and Central Asia Region  CURRENCY EQUIVALENTS ( Exchange Rate Effective 03/28/2007 ) Currency Unit = Armenia Dram 1\.00 = US$ 0\.002 US$ 1\.00 = Armenian Dram 360 Fiscal Year January 1 ­ December 31 ABBREVIATIONS AND ACRONYMS ASIF Armenian Social Investment Fund ASIF PIU ASIF Project Implementation Unit CAS Country Assistance Strategy DFID Department for International Development (UK) ECA Europe and Central Asia GDP Gross Domestic Product FSU Former Soviet Union GOA Government of Armenia IA Implementing Agency ICR Implementation Completion Report IDA International Development Association IMF International Monetary Fund LG Local Government Marz Region MDGs Millenium Development Goals MIS Management Information System NGOs Non-governmental Organization(s) PDO Project Development Objective QER Quality at Entry Review SIF Social Investment Fund SDR Special Drawing Rights TA Technical Assistance UNDP United Nations Development Program USAID United States Agency for International Development WUA Water Users Association ERR Economic Rate of Return Vice President: Shigeo Katsu Country Director: Donna Dowsett-Coirolo Sector Manager: Hermann A\. von Gersdorff Project Team Leader: Caroline Mascarell ICR Primary Author: Hermann Nissenbaun 2  Armenia Social Investment Fund 2 Project (SIF 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 Project Performance in ISRs H\. Restructuring I\. Disbursement Graph 1\. Project Context, Development Objectives and Design \.5 2\. Key Factors Affecting Implementation and Outcomes\.9 3\. Assessment of Outcomes \.18 4\. Assessment of Risk to Development Outcome\.27 5\. Assessment of Bank and Borrower Performance\.28 6\. Lessons Learned\.31 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners\.32 Annex 1\. Project Costs and Financing \.34 Annex 2\. Outputs by Component\.35 Annex 3\. Economic and Financial Analysis (including assumptions in the analysis) \.38 Annex 4\. Bank Lending and Implementation Support/Supervision Processes\.40 Annex 5\. Beneficiary Survey Results (if any)\.43 Annex 6\. Stakeholder Workshop Report and Results (if any) \.46 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR\.47 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders \.48 Annex 9\. List of Supporting Documents\.49 Annex 10\. Additional Annexes\.50 10\.1 Armenia: Poverty Targeting Strategy: Regional Allocation of Funds in the ASIF II Project\. \.50 10\. 2 Methodologies of the Assessments and Reviews\.52 MAP\.56 3  A\. Basic Information Social Investment Fund Country: Armenia Project Name: 2 Project (SIF 2) IDA-33480,WBTF- Project ID: P057952 L/C/TF Number(s): 24403 ICR Date: 04/23/2007 ICR Type: Core ICR REPUBLIC OF Lending Instrument: SIL Borrower: ARMENIA Original Total USD 20\.0M Disbursed Amount: USD 20\.9M Commitment: Environmental Category: F Implementing Agencies: Armenia SIF II PIU Cofinanciers and Other External Partners: UK-funded DFID B\. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 09/02/1998 Effectiveness: 10/23/2000 10/23/2000 Appraisal: 01/31/2000 Restructuring(s): Approval: 05/11/2000 Mid-term Review: 03/17/2003 10/06/2003 Closing: 12/31/2005 08/31/2006 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Low or Negligible Bank Performance: Satisfactory Borrower Performance: Satisfactory 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: Highly Satisfactory Overall Bank Overall Borrower Performance: Satisfactory Performance: Satisfactory i  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) General education sector 41 41 General water, sanitation and flood protection sector 26 26 Irrigation and drainage 17 17 Other social services 16 16 Theme Code (Primary/Secondary) Access to urban services and housing Primary Primary Improving labor markets Primary Primary Participation and civic engagement Secondary Primary Rural services and infrastructure Primary Primary Small and medium enterprise support Secondary Primary E\. Bank Staff Positions At ICR At Approval Vice President: Shigeo Katsu Johannes F\. Linn Country Director: D-M Dowsett-Coirolo Judy M\. O'Connor Sector Manager: Hermann A\. von Gersdorff Michal J\. Rutkowski Project Team Leader: Caroline Mascarell Caroline Mascarell ICR Team Leader: Caroline Mascarell ICR Primary Author: Herman J\. Nissenbaum F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The aim of the ASIF II Project was to support the Government's continuing efforts to improve the living standards of its lower income groups among the Armenian population ii  and to strengthen institutions at the local level\. The specific objectives of the project were to: (i) Improve basic social and economic infrastructure that can result in immediate improvements of the living conditions of the poorest among the population and short- term employment opportunities\. (ii) Develop partnerships at the local level between the local government authorities and communities through effective outreach programs to improve planning, coordination, management, and information dissemination activities\. (iii) Enhance greater stakeholder participation and empowerment at the local level, by supporting the decentralization of activities which will provide clearer roles, and greater accountability for the local governments and communities in the design, implementation, sustainability of microprojects, and the eventual transition to direct contracting of works\. (iv) Promote institution building and social capital formation at the local level focusing on strengthening local government and communities in decentralized management of basic public services\. (v) Promote private sector development by creating opportunities for the local construction industry, fostering competitive bidding processes, and by training small- scale contractors\. Revised Project Development Objectives (as approved by original approving authority) The Project objectives were not revised (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 : Completed Community Infrastructure Projects to improve the living conditions of the poorest among the Armenian population A total of 332 A total of 270 Community Value No Baseline value due to Community Infrastructure quantitative or the demand driven nature Infrastructure projects were Qualitative) of community Projects are completed and infrastructure projects\. targeted heating systems were installed in 50 schools\. Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 2 : Satisfactory rating by beneficiaries regarding quality of works No Baseline Value due to No target value The vast majority Value the link between due to the link (90%) expressed quantitative or beneficiary assessments between satisfaction - two Qualitative) and demand driven nature beneficiary thirds of these were of community assessments with highly satisfied iii  infrastructure projects\. demand driven regarding the nature of quality of works\. community infrastructure projects\. Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 3 : Community meetings organized during microproject promotion and types of participants A total of 1,000 community No target value meetings were No Baseline Value due to was set due to the organized with the Value the link of community link of the participation of quantitative ormeetings with demand community 155,000 community Qualitative) driven nature of meetings to members of which community infrastructure demand-driven approximately projects infrastructure 69,177 (44%) were projects\. women and 2,000 were Government officials\. Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 4 : Implementing Agencies formed for microproject supervision and types of participants A total of 905 Implementing No Baseline Value due to Agencies formed of Value the link of Implementing which close to quantitative orAgencies with demand A total of 270 IAs 1,840 were women, Qualitative) driven nature of are targeted\. 615 were community infrastructure government projects\. officials and 3,315 were community members\. Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 5 : Satisfactory rating by beneficiaries regarding levels of participation relating to microprojects Value No Baseline Value due to No target value The vast majority quantitative orthe link of beneficiaries todue to the link (90%) expressed Qualitative) demand driven nature of between satisfaction ­ 55 % community infrastructure beneficiary of these were iv  projects\. assessments with highly satisfied demand driven with levels of nature of participation\. community infrastructure projects\. Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 6 : Satisfactory ratings by beneficiaries regarding partnerships formed with local governments as a result of microprojects 90% of beneficiaries were highly satisfied No target value regarding due to the link partnerships formed No Baseline Value due to between with local Value the link of beneficiaries tobeneficiary governments as a quantitative or demand driven nature of assessments with result of Qualitative) community infrastructure demand driven microprojects\. projects\. nature of Close to 70% of community beneficiaries also infrastructure stated that their projects\. relationships with local governments improved as a result of microprojects\. Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 7 : Community contribution raised as a result of ASIF promotional activities No Baseline value due to A total of US$2\.6 Value the link of community million (8% of total quantitative or contribution to demand A target of US$2\.0 project funds) was Qualitative) driven nature of miilion was set\. received as part of community infrastructure community projects\. contribution Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Trained local municipal officers in financial management, budgeting and Indicator 8 : accounting, and asset management and number of three-year plans developed by municipal officers as a result of financial management training received\. Value No Baseline value due to A total of 1,000 A total of 1,050 quantitative or the link of the training municipal officers mayors (485 were Qualitative) program to demand targeted\. women) were v  driven nature of training in financial community infrastructure management projects\. training\. A total of 885 three-year plans were submitted and 873 annual budgets were developed by municipal officers\. Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 9 : Satisfactory ratings by trainees regarding the quality and relevance of financial management training No target value due to the link A total of close to No Baseline value due to between 90% of participants were highly Value the link of the training beneficiary satisfiedwith the quantitative orprogram to demand assessments with quality and Qualitative) driven nature of demand driven community infrastructure nature of relevance of the projects\. community financial infrastructure management projects\. training\. Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 10 : Trained School principals, school accountants, and school council members in support of the decentralized school governance program\. A total of 80 school principals (of No Baseline value due to whom 30 were women), 180 Value the link of the training A total of 500 school accountants quantitative orprogram to demand participants (of whom 130 were Qualitative) driven nature of targeted for school community infrastructure training\. women), and 250 projects\. school council members (of whom 120 were women) trained\. Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 11 : Satisfactory ratings by trainees regarding the quality and relevance of school training\. vi  No target value due to the link No Baseline value due to between A total of close to 90% of participants Value the link of the training beneficiary were highly quantitative or program to demand assessments with satisfied with the Qualitative) driven nature of demand driven community infrastructure nature of quality and projects\. community relevance of the infrastructure school training\. projects\. Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 12 : Trained members of Implementing Agencies No Baseline value due to A total of 6,510 Value the link of the training members of the quantitative or program to demand A total of 4,000 IA Implementing Qualitative) driven nature of members targeted\. community infrastructure Agencies received projects\. on-the-job training\. Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 13 : Satisfactory ratings by members of Implementing Agencies (IAs) regarding the quality and relevance of microproject level training No target value due to the link 80% of IA No Baseline value due to between members expressed satisfaction - two Value the link of the IA training beneficiary thirds of these quantitative or program to demand assessments with were highly Qualitative) driven nature of demand driven community infrastructure nature of satisfied with projects\. community quality and infrastructure relevance of projects\. training received\. Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 14 : Trained local contractors No Baseline value due to the link of the local Value contractor training A total of 1,000 A total of 1,677 quantitative or program to demand contractors contractors received Qualitative) driven nature of targeted\. training\. community infrastructure projects\. vii  Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 15 : Local contractors who participated in ASIF microprojects A total of 148 No Baseline Value due to contractors Value the link of local A total of 150 participated in quantitative orcontractors to demand contractors ASIF Projects, of Qualitative) driven nature of which 76 community infrastructure targeted\. participated in more projects\. than one microproject\. Date achieved 10/23/2000 10/23/2000 08/31/2006 Comments (incl\. % achievement) Indicator 16 : Short-term employment generation No target value Creation of a total due to the link of 322,000 job-days between short- in participating Value No Baseline value due to term employment poor communities quantitative orthe demand driven nature generation with where community Qualitative) of community demand driven members were infrastructure projects\. nature of employed by local community contractors to work infrastructure on infrastructure projects\. projects\. Date achieved 10/23/2000 10/23/2000 08/31/2006 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 : Does not apply to this project Value (quantitative or Qualitative) Date achieved Comments (incl\. % achievement) viii  G\. Ratings of Project Performance in ISRs Actual No\. Date ISR Archived DO IP Disbursements (USD millions) 1 06/28/2000 Satisfactory Satisfactory 0\.00 2 12/28/2000 Satisfactory Satisfactory 0\.58 3 06/28/2001 Satisfactory Satisfactory 0\.87 4 12/26/2001 Satisfactory Satisfactory 2\.77 5 06/28/2002 Satisfactory Satisfactory 3\.84 6 12/12/2002 Satisfactory Satisfactory 6\.95 7 06/23/2003 Satisfactory Satisfactory 9\.14 8 12/17/2003 Satisfactory Satisfactory 11\.28 9 06/28/2004 Satisfactory Satisfactory 13\.87 10 12/28/2004 Satisfactory Satisfactory 16\.90 11 06/17/2005 Satisfactory Satisfactory 19\.15 12 06/01/2006 Satisfactory Satisfactory 22\.73 H\. Restructuring (if any) Not Applicable I\. Disbursement Profile ix  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 macroeconomic and structural/sector background, rationale for Bank assistance) Armenia is a small, landlocked, mountainous country in the Caucasus Region, with limited natural resources and a population estimated at 3\.2 million\. The country experienced a virtual collapse of its economy after independence in 1991\. By the end of 1993, real GDP shrank by more than 50 percent relative to the pre-transition level, real wages had fallen to about 6 percent of their 1991 level, and hyperinflation of over 1000 percent had thrown a vast majority of the population into poverty\. To address these problems, the Government launched a macroeconomic stabilization program in 1994, and as a result, the economy began to recover with real GDP growth rates of 5\.4 and 6\.9 percent in 1994 and 1995\. Some improvement in living conditions was achieved; the average wage doubled in real terms between 1994 and 1996 and substantial increases were achieved in the proportion of households with electricity and piped water\. Nevertheless, the 1996/97 Household Budget Survey showed that about 55 percent of the population was living below the poverty line and 28 percent of the population was under the food line\. The average wage was still only one-third of its 1992 level\. Although the trend of rapidly increasing inequality appeared to have stabilized since 1994, it remained very high\. The Gini coefficient for per capita income distribution had reached 0\.58 compared to the pre-transition level of 0\.26 in 1989\. For household expenditures, which are more consistent, the Gini coefficient was estimated at 0\.44 in 1996\. Nevertheless, in 1996/97, per capita consumption was still 18 times higher in the top decile than for the poorest 10 percent\. These problems were aggravated by natural disasters (notably the devastating 1988 earthquake which left thousands without shelter, property or basic means of existence), and the immigration of some 360,000 refugees after the Nagorno-Karabakh conflict, plus an unprecedented energy crisis\. A large number of ethnic Armenian refugees who had become internally displaced persons were living in very poor dwellings\. Furthermore, Armenia still needed to change from its central planning during the Soviet rule of more than 70 years, and to redress a) subsequent lack of infrastructure maintenance, and b) inadequate social assistance due to underdeveloped government capacity and insufficient funds\. Although Armenia remains a centralized state, incremental development of a decentralization policy and a comprehensive legislative framework for local self- government since the mid-1990s created new possibilities\. In line with the Armenian constitution of 1995, the Government took steps to create an effective decentralized administrative structure by delegating service delivery functions to the local self-government units supported by the Armenian Law on Local Self-Government introduced in 2002\. The Law introduced incremental changes and represented a further development in strengthening the framework for decentralization\. A number of amendments to the law were introduced in 2004\. In 2005, a new Law on Municipal Service was adopted, with provisions concerning the hiring, qualifications, and terms of reference and security of tenure of municipal employees\. In 1995, the ASIF I Project was designed to support the key objectives of the Bank's Country Assistance Strategy to raise the living standards of the people by reducing the pockets of poverty that had emerged over the years\. Specifically the ASIF I Project sought to reverse the deterioration of basic social services infrastructure and stimulate some short-term employment, thereby generating a positive, visible impact on the people and reducing hardship during the economic transition\. The ASIF I Project successfully achieved this objective with the 5  implementation of nearly 200 microprojects and approximately 470,000 community members in Armenia benefiting form microprojects\. At a broader level, the Project has given primacy to the active involvement of community members in decisions which affect the quality of their lives by putting in place a framework for greater stakeholder participation\. It promoted self-help mechanisms, increased the sense of community ownership, promoted greater cohesion among members, and set the foundation for future social fund operations\. Against this backdrop, the 1997 CAS judged that the country's difficulties and meager economic prospects meant that Armenia's future economic growth was unlikely to lift many out of poverty quickly\. It concluded that directly targeted remedial interventions were necessary to improve the living conditions of those who had not benefited from economic growth\. On this basis, the Bank decided to mount a follow-up operation to its first assistance to the Armenian Social Investment Fund\. This led to the ASIF II Project, on which the Government and IDA signed a Credit Agreement in May 2000\. The Project was designed to build a link between, on the on hand, initiatives to support local communities and the engagement of members of the community in decision-making, and, on the other, efforts to strengthen local government and implement the Government of Armenia's decentralization program\. 6\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The aim of the ASIF II Project was to support the Government's continuing efforts to improve the living standards of its lower income groups among the Armenian population and to strengthen institutions at the local level\. The specific objectives of the project were to: (i) Improve basic social and economic infrastructure that can result in immediate improvements of the living conditions of the poorest among the population and short- term employment opportunities\. (ii) Develop partnerships at the local level between the local government authorities and communities through effective outreach programs to improve planning, coordination, management, and information dissemination activities\. (iii) Enhance greater stakeholder participation and empowerment at the local level, by supporting the decentralization of activities which will provide clearer roles, and greater accountability for the local governments and communities in the design, implementation, sustainability of microprojects, and the eventual transition to direct contracting of works\. (iv) Promote institution building and social capital formation at the local level focusing on strengthening local government and communities in decentralized management of basic public services\. (v) Promote private sector development by creating opportunities for the local construction industry, fostering competitive bidding processes, and by training small- scale contractors\. The key performance indicators approved include: (i) completed infrastructure projects; (ii) short- term employment generation; (iii) satisfactory ratings by beneficiaries regarding quality of works and services received; (iv) trained local municipal officers in financial management, budgeting, accounting, and asset management and development of three-year plans with budget lines for the maintenance of public facilities developed by municipal officers, as a result of financial management training; (v) trained members of Implementing Agencies (IAs); (vi) trained school accountants, school principals, and school council members in support of the decentralized school governance program; (vii) trained local contractors; (viii) satisfactory ratings by trainees regarding 6  the quality and relevance of the training programs carried out under the project covering financial management training, school training, contractor training; and Implementing Agency (IA) training; (ix) participation of local contractors in ASIF infrastructure projects as an indicator for creating opportunities for the local construction industry; (x) Implementing Agencies (IAs) formed for microproject supervision and types of participants; (xi) community meetings organized during microproject promotion and types of participants; (xii) satisfactory ratings by beneficiaries regarding levels of participation relating to microprojects; (xiii) satisfactory ratings by beneficiaries regarding partnerships formed with local governments as a result of microprojects; and (xix) short-term employment generation\. 1\.3 Revised PDO and Key Indicators (as approved by original approving authority), and reasons/justification The Project objectives and key indicators 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 ASIF II Project targeted the following main beneficiaries: (a) the poorest communities of Armenia in both rural and urban areas; (b) poor primary and secondary school children in urban and rural areas; (c) poor farmers in urban and rural areas; (d) poor urban and rural households; (e) vulnerable groups such as ethnic Armenian refugees; (f) private contractors participating in competitive tendering of small works; (g) local governments at the city (city councils, mayors) and community level (village councils, mayors); (h) established community-based associations (e\.g\. Schools Councils, Water Users Associations, Condominium Associations); and (i) local-based training entities (e\.g\. Finance Officers Association, Mayors Association)\. Original Components (as approved) With the support of the IDA Credit of SDR 14\.9 million, co-financing from UK-funded DFID in the amount of GBP 1\.2 million, and community contribution of US$ 2\.0 million, the ASIF II Project was designed to support the following three project components, as approved\. Component 1\. Rehabilitation of Small-Scale Infrastructure (original base cost US$24\.11 million): Building upon the work carried out under the ASIF I project, the ASIF II project sought to rehabilitate basic social and economic infrastructure at the local level through the financing of microprojects\. To ensure the sustainability of project outcomes, the ASIF II project was to intensify institution building at the local level\. Accordingly, the ASIF II project was to finance a comprehensive capacity building and technical assistance program benefiting implementing agencies, local governments, contractors and ASIF staff\. Financing of Microprojects to Support the Rehabilitation of Small-Scale Infrastructure Sub- Component: The microproject types to be proposed and carried out by Implementing Agencies included: kindergartens, primary and secondary schools, special schools for disabled children, art, music and sports schools, children's playground in urban areas, local health posts, water supply systems, sewage and sanitation systems and irrigation works\. The project would also finance: (i) microprojects involving the rehabilitation or upgrading of school heating systems to better assure school attendance during the cold winter months; and (ii) school furniture (desks, chairs, blackboards, etc\.)\. In addition, this sub-component was to finance consultant services for microproject design and supervision to assure the good quality of works\. 7  Capacity Building and Technical Assistance to Implementing Agencies and Local Contractors Sub-Component: The ASIF II project sought to intensify the capacity building efforts started under the ASIF I benefiting the IAs and the local contractors\. On-the-job training was to be provided to Implementing Agencies in the areas covering: the preparation, design, procurement, implementation and maintenance of Microprojects\. Specific topics covered under the training program, included: (a) project identification and formulation; (b) project costing and accounting, (c) competitive bidding procedures; (d) mobilization of community involvement in construction and maintenance activities, (e) management of partnerships with LGs, NGOs and other entities, (f) quality control, and (g) monitoring and evaluation\. On-the-job training was also to be provided to contractors in competitive bidding procedures and technical standards\. Special workshops and seminars were to be organized at the local level to discuss issues of interest to communities regarding the microproject cycle\. Component 2: Local-Level Institution Building (original base cost US$1\.06 million): This component was to complement the microproject component enabling local level institutions to address the needs and priorities for local development through a comprehensive capacity building program\. Local governments and community-based associations were to be targeted in this component with the objectives of strengthening partnerships between them and enhancing their capacities for greater effectiveness in service delivery\. Local Government Training Sub-Component: Local governments at the city level (city councils, mayors) and at the community level (village councils, mayors) were to receive training from both indigenous and international experts in such functions as: financial management, budgeting, taxation and asset management\. The training sought to support local governments to: (i) develop, plan and manage their own budgets; (ii) gain a better understanding of the basic concepts and applications of property tax, land tax, duties and fees, and equalization; and (iii) acquire a basic knowledge of asset management covering inventory monitoring, operation and maintenance of assets, and planning of future investments\. Community-Based Training Sub-Component: Community-based organizations (school councils, WUAs,) and community members involved in the microprojects were to receive technical assistance and training in areas relevant to their activities and involvement in sector specific microprojects\. The initial phase of this program was to focus on school microprojects\. Technical assistance and training was to be provided by qualified experts to support the Government's decentralized school governance agenda directed at: (i) school principals in the areas of leadership and management, school legislation and regulation; (ii) school accountants in the areas of financial management and accounting; and (iii) school council members in the formation and operation of school councils\. Component 3: Institutional Support to the ASIF (original base cost US$4\.15 million): This component sought to support the Project Management Unit through the provision of limited office equipment, vehicles, salaries, operating costs such as communications, local travel, utilities, printing and publication, office supplies, fuel, vehicle insurance and inspection, vehicle maintenance and repair, project audits, training and technical assistance, and monitoring and evaluation\. Capacity Building and Technical Assistance to ASIF staff Sub-Component: This sub- component was to finance technical assistance and training to ASIF staff\. Specifically, technical services of foreign and local advisors/supervisors were to be financed in the areas of quality of works, procurement, MIS and cost accounting systems, and compliance with the Operational 8  Manual\. Training was to be provided to the ASIF staff on a range of topics identified on the basis of perceived needs during ASIF I implementation and ASIF II preparation\. Such training covered participatory community development, institutional assessment, capacity needs assessment, quality of works, operations and maintenance, project supervision, and environmental standards\. Study tours and workshops were also to be organized under this component\. Co-financing from UK-funded DFID provided support to Component 1 described above in the form of technical assistance for microproject design and supervision, and to Component 2 covering training for local level institutional strengthening benefiting local governments, community members, and ASIF staff\. 1\.6 Revised Components None\. 1\.7 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) During the implementation of the Armenia SIF II Project there were changes in funding allocations and closing dates extensions of both the ASIF II Credit and of the DFID Grant\. As a result of substantial savings under Category (3) Consultants' Services, due largely from the hiring of local consultants and firms to carry out key assessments, reviews, capacity building programs and microproject design and supervision, a total of US$1\.4 million was reallocated from the Consultants' Services Category (3) to the Works Category (1) (a)\. This reallocation was requested by the Government of the Republic of Armenia to support: (i) the Earthquake Recovery Program; (ii) critical needs for school heating in the neediest communities; and (iii) critical needs for community infrastructure projects in the neediest communities\. The implication of the reallocations was an increase in the volume of works under the Community Infrastructure component\. This led to the Government's request for extensions of the closing dates of both the Credit (8 months) and the DFID Grant (6 months)\. The extensions allowed additional time to adequately complete the ongoing work under the Project and to start key project preparation activities under the ASIF III Project\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry (including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy of participatory processes, as applicable) The project's design and preparation were done well\. The background analysis and rationale for Bank support were thorough and provided solid grounds for the proposal\. The design was clearly ambitious but not complex or unrealistic\. There was evidence of Government commitment and stakeholder interest\. The project preparation team prudently assessed the operation's risks and set suitable provisions for mitigating them\. The importance given by the project team to project preparation, design and quality at entry was critical to the successful implementation and outcomes of the ASIF II Project\. Project preparation activities were carried out on a timely basis and provided valuable inputs for the design of the follow-up operation\. These activities, which were largely financed under the ASIF II PHRD Grant (US$494,000), consisted of: (i) the carrying out of key technical assessments, studies and reviews; (ii) capacity building activities in the ASIF 9  Office to strengthen the capacity of technical staff in improved procedures; and (iii) the development of strengthened procedures particularly relating to community outreach and participation, quality of works, and an improved Management Information System\. Although the National Assembly took a long time to ratify the PHRD Grant, the Fund was nonetheless able to proceed with these preparations with the use of the PHRD program's provision of an "advance" drawdown to circumvent the delay related to the Grant's ratification\. This "advance" was helpful in facilitating key project preparation activities supported by total disbursements amounting to US$177,000\. The project design benefited from all of these activities in addition to the lessons learned under the ASIF I project and from other innovative social funds\. The following are key factors of project preparation, design and quality at entry affecting project implementation and outcomes\. Strengthened Project Approach\. The ASIF I Project was primarily oriented to the delivery of infrastructure and service improvements with the aim of raising living standards for the poor and other vulnerable groups\. Its main institutional development aim was to help equip the Fund for managing the investments for these improvements\. This also entailed assisting local governments and communities, mostly for their parts in preparing and carrying out the investments\. The project experience, however, demonstrated that relatively little had been accomplished in strengthening local governments\. Meanwhile, developments in Armenia had shown that there was a need for an overall upgrading of the public sector\. The Government viewed decentralization as a key building block in the process of evolving good governance -- contributing to the effectiveness of planning and implementation of local development programs\. Accordingly, the Government began moving towards decentralization, and adopted new strategies for improving social protection, health and education\. In this context, it was decided that ASIF II should differ from its predecessor\. The Fund's function was broadened from community investments and related capacity building, and moved towards wider social development\. Its functions were expanded to helping strengthen local institutions and communities for their roles in a planned decentralization of the management of public services\. Through capacity building activities, the ASIF successfully created a link between initiatives to support local communities and the engagement of members of the community in decision-making, and efforts to strengthen local government and implement the Government of Armenia's decentralization program\. Improved Poverty Targeting Strategy\. With the implementation of the ASIF I Project in 1996, the Government became increasingly aware of its importance as a tool for poverty reduction\. It formed an integral component of the Government's program to improve accessibility, sustainability quality of social services provided to the poor\. The ASIF had been effective in carrying out this mandate by financing the construction and rehabilitation of social and economic infrastructure to complement the work of other line ministries\. The ASIF has also been crucial in strengthening social capital and providing short-term employment opportunities to the low income groups\. However, a change in methodology for the allocation of funds had become necessary as described below\. 10  The poverty targeting strategy adopted for the ASIF II Project represented a major advance relative to that adopted for ASIF I\. The main deficiency highlighted by the Operations Evaluation Department (at that time) in regard to the latter was that the distribution of assistance was actually regressive on a household basis\. A likely contributory factor was that the data required for systematic poverty targeting was unavailable from poverty assessments until well into ASIF I's implementation\. Taking into account the data constraints at the time of Appraisal, the allocations under ASIF I were computed on the basis of limited data from a poverty ranking exercise and a needs and capacity study\. Allocations were also were influenced by non-poverty factors and intentions to help regions damaged by the 1988 earthquake and those which suffered most from the border dispute\. Since then, progress has been made to address these data deficiencies in the State Statistics Department and the Bank's Poverty Assessment analyses\. With the availability of new data from the 1996/1997 Household Budget Survey, it was decided that the ASIF II's preparation should benefit from an improved methodology for poverty targeting\. Taking into account a Bank review of social fund experiences worldwide, the Fund elected to apply lessons learned of having clearly formulated targeting and allocations using objective criteria and poverty data\. In broad terms, the design of the poverty targeting strategy under ASIF II was based on allocations by marz (region) determined by the marz's population, its poverty indicators, and regional preference factors related to location in the earthquake zone or in a border area affected by conflicts\. The data for this exercise was based on the findings of the Household Budget Survey of 1996/97 and the Bank's report entitled "Improving Social Assistance in Armenia" of June 1999\. To ensure regional equity in the use of ASIF II funds, mitigate political pressures, and to target such funds to poor communities, the allocation to marzes outside the capital city of Yerevan were, in the first instance, based on two general factors: (a) population; and (b) the poverty score computed from three poverty indicators and two regional preference factors representing earthquake and border zones\. The three poverty indicators were: (i) the poverty incidence (head count index) or the proportion of the population below the national poverty line -- representing the extent or "quantity" of poverty; (ii) the severity index representing the intensity of poverty; and (iii) unemployment -- representing the lack of opportunity to secure a means of sustainable livelihood\. For the Yerevan region, the allocation was based on a share of 22\.5 percent of the total allocation, as compared to approximately 26 percent of the amount disbursed under the ASIF I Project\. The table in Annex 13 shows the final allocations by region\. As the table shows, the Shirak Marz received the highest allocation reflecting its highest poverty score in an earthquake prone area, and the second highest regional population\. In contrast, the Vajoc Dzor Marz received the lowest allocation largely reflecting the lowest regional population, and to a lesser extent, its poverty level and location in a border zone\. The Project's figures show that the actual allocations made under ASIF II were much in line with different regions' poverty and population levels\. A statistical analysis of the relationship between the IDA Credit's disbursements and the regional population-poverty index demonstrated a very high correlation coefficient (0\.95)\. Overall, ASIF's project targeting is considered to have been progressively improved in design and application\. It has kept poverty alleviation at the forefront of its decisions\. It has also kept 11  "counting" other socially important factors affecting living conditions as reasons for priority allocations, e\.g\., the special problems of mountainous and border regions (for which additional indicators have been incorporated in the formula for Fund allocations under ASIF III)\. Support to the Government's Social Sector Reform\. The Bank's country strategy then provided for advancing education and health reforms\. Accordingly, although ASIF II was not intended to contribute directly to these reforms, its definition called for helping to broaden support of the two sectors, along with coordinating Fund activities with their policies\. The project, therefore, aimed at remedying the deteriorated school and health clinic infrastructure, these sectors' overly centralized management, and local governments' and civic associations' weaknesses in these fields\. With regard to the social protection sector, the design of the ASIF II Project focused on addressing the following key issues: (i) widespread and severe poverty in Armenia with 55 percent of the population estimated to be living in poverty; (ii) growing number of ethnic Armenian refugees, which at the time of project preparation was estimated at 333,000 living in temporary dwellings - - with some 132,000 living in very poor conditions; (iv) poor targeting of social assistance; and (v) the growing threat of the emergence of social exclusion as a result of long-term structural poverty\. Upgraded Instruments\. The Fund's tools were upgraded to address issues raised in the assessments and reviews carried out under the ASIF I Project\. One action provided for the implementation of its Quality of Works enhancement program for improving infrastructure designs and supervision\. It was aimed at raising their technical standards, accompanied by provisions for more comprehensive training of implementing agencies, local governments and communities\. More appropriate technical norms and standards were developed for different kinds of microprojects, particularly on seismic construction\. These were better enforced through specialists' oversight of procurement procedures and the Fund's own supervision, supplemented by technical experts' advice on design and supervision\. It also tightened ASIF requirements regarding building materials, raising some to "Euro-standards\." The Management Information System was upgraded for a more effective monitoring and evaluation of project activities\. Community participation and outreach was also strengthened with the development of a community participation framework consisting of training, technical assistance, assessments and information dissemination\. In addition, a new matching fund arrangement in partnership with local donors was devised, to which thirty percent of the IDA Credit proceeds designated for works funding was assigned\. Effective Use of Assessments and Action Plans\. The project preparation team effectively addressed issues from ASIF I's experience, notably regarding: (i) quality of works relating to technical design and supervision, construction carried out in accordance to construction norms and standards, and sustainability of public facilities rehabilitated; (ii) community outreach and participation to enhance community engagement and empowerment; and (iii) capacity building to address capacity gaps at the local level regarding service delivery\. The team was able to address these issues drawing from the findings and recommendations made in the beneficiary assessments, quality of works reviews and in the Mid-term Review carried out under the ASIF I Project\. They 12  also drew from the Action Plans developed to address issues raised in these reviews and to help them identify remaining issues that needed to be addressed under the follow-up operation\. In addition, the project design drew from two key technical reviews: the Institutional Assessment of Local Government and the Cost-Effectiveness Review carried out during the project preparation\. The preparations provided adequate coverage of technical and economic aspects, poverty and social development issues, fiduciary and institutional elements, and implementation requirements\. The project's activities also called for addressing the national decentralization program under the very difficult conditions\. Some of the key problems were the lack of a comprehensive decentralized policy, limited capacity and resources for carrying out local government activities, and partial measures in undertaking decentralization initiatives\. Addressing these problems no doubt would have required the development of a comprehensive decentralization program by the Government of Armenia, currently being supported under the IDA financed Public Sector Modernization Project (PSMP)\. While this process was gradually evolving in Armenia, the Government's decentralization initiatives provided a good opportunity for the ASIF II Project to develop greater stakeholder participation and capacity building at the local level in the preparation, design, implementation, and sustainability of microprojects\. The ASIF II Project was thus designed to contribute to this endeavor by providing support in the areas of partnership development, project participation and ownership, institution building and community outreach\. During project preparation, a Decentralization and Institution Building Action Plan was developed to present specific areas of support under the proposed ASIF II Project for greater stakeholder participation and ownership at the local level within the Government's decentralization program\. The Action Plan drew from studies carried out as part of project preparation, which included the Institutional Assessment of Local Government and the Cost-Effectiveness Review mentioned above\. Specifically, these studies provided valuable insights and analysis and specific recommendations on how the ASIF II Project could assist local government and communities to prepare, implement and manage microprojects on a sustainable basis\. The Action Plan focused primarily on helping communities and local governments respond to particular needs and functions associated with microprojects, as well as addressing the priority needs for local development with the objective of strengthening partnerships and increasing effectiveness\. Thus the plan, which was kept within the framework of microprojects, was effective in four key areas: (i) the design of the component on local level institutional strengthening; (ii) the development of the section on capacity building of the ASIF II Operational Manual; (iii) the implementation of training activities; and (iv) the delivery of key outcomes in support of the Government's decentralization program\. 2\.2 Implementation (including any project changes/restructuring, mid-term review, Project at Risk status, and actions taken, as applicable) The key project changes and actions taken during project implementation are described below\. The Need to revise the Regional Allocation of Funds\. In December 2002, at the request of the Government of Armenia, the regional allocation of project funds was revised on the basis of: (i) 13  population size of each marz; (ii) the poverty score, equivalent to the average of six indicators; and (iii) a reallocation of the amount initially set aside to compensate for shortfalls in regional disbursements under the ASIF I Project\. As a result of this revision, the largest expenditures at the regional level were made in the Lori and Shirak marzes, and a proportionally large expenditure in the Aragacotn marz\. This reflected the Government's priority in first addressing the urgent reconstruction needs in these three marzes in the earthquake zone, which had suffered the most damage from the last earthquake\. Implications of Large Increases in Prices of Construction Materials\. During project preparation, the ASIF encountered some problems in carrying out its civil works because of large increases in the prices of construction materials boosted by the local construction boom\. This problem was aggravated by the fact that US $-denominated transactions slowed after a decline in the relative value of the dollar vis-a-vis the Armenian dram\. These hiked contract prices reduced significantly the number of contractors participating in work bids, causing delays and some contracts to be terminated\. Faced with these serious constraints, the ASIF took action by raising the microprojects' financing thresholds, revising some 25 contracts to increase their values, and adjusting payment arrangements and pricing provisions\. These measures were timely and appropriate responses to the problems\. However, the problem that remained was the implementation of fewer microprojects in the targeted communities resulting from an increase in microproject costs\. To address this serious issue, the Government requested a significant reallocation of Credit funds in the amount of US$1\.4 million from the Consultant Services Category, where there were considerable savings, to the Microproject Category\. Implementation Improvements as a result of the Mid-term and other Reviews\. A Mid-term Review of the ASIF II Project carried out in November 2003 provided helpful recommendations for implementation improvements drawing on the findings from the Beneficiary Assessments (2), Quality of Works Reviews (2), Institutional Assessments (2), and a Cost-Effectiveness Review\. These included: (a) on community participation, clarification of the roles and responsibilities of implementing agency members, expanding information dissemination on microprojects, strengthening assessments on microproject beneficiaries; and extending special training to weaker communities particularly to develop proposals, mobilize community members, and manage microprojects; (b) on operation and maintenance (O&M), providing special training to ASIF promotional staff, so that they could in turn better training communities in this critical area; (c) on quality of works, additional follow-up measures on construction design and supervision, special training to contractors in the areas relating to quality of works, and the introduction of a budget line, as part of total microproject cost, to ensure for initial period the operations and maintenance of public facilities renovated under the ASIF; (d) on cost-effectiveness, improving ASIF's cost accounting system\. Action Plans for each review and assessment carried out were developed and agreed to with the ASIF setting out the recommended actions and a timeframe for carrying them out\. Following the Mid-term Review, a number of workshops were organized by the ASIF to discuss the finding and recommendations of the reviews and assessment carried out and the Action Plans agreed to\. Actions were taken in a timely manner, as well as on the recommendations of the social capital and institutional assessments, contributing to the ASIF II's successful execution\. 14  Corrective Actions taken relating to Institutional Strengthening Activities\. During the course of project implementation two institutional assessments were carried out to evaluate and assess the impact of the local level institutional assessment component\. As a result, some corrective actions were taken during the mid-term review which included: (i) wider dissemination of the results of the local level institutional strengthening activities; (ii) the inclusion of village level council members as participants of local government training; (iii) the development of special training for local governments to deal with refugees; (iv) provision of follow-up training on the changing legislations related to Local Self Government; and (v) the inclusion of joint two-day workshops for school principals, school accountants, and school council members, as part of the school training program\. These recommendations were discussed and agreed to in a timely manner with UK-funded co-financier DFID, which supported the component on Local Level Institutional Strengthening\. A number of workshops were organized to disseminate the results of the capacity building activities and to elicit feedback from key stakeholders\. Several joint supervision missions were carried out by DFID and the Bank to assess the progress, impact and issues relating to capacity building activities\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization Monitoring and Evaluation Design\. ASIF II's provisions included performance indicators concerning: (a) the number of microprojects completed by typology; (b) the number of capacity building programs completed for local governments, implementing agencies, contractors and the total number of participants; (c) cost-effectiveness of microprojects; (d) the quality of civil works projects; (e) operations and maintenance of public facilities; (f) ASIF's service delivery regarding promotional, appraisal and follow-up activities; and (g) short-term employment generation\. These were appropriate for monitoring the Fund's progress towards achievement of the Project Development Objectives\. The resulting data was also usefully employed, e\.g\., to gauge microprojects' costs per beneficiary, and for comparisons with unit costs and comparator agencies' works\. ASIF III plans similarly call for drawing on M&E assessments of municipal government capacities for defining its activities in local institutional strengthening\. In line with these provisions, project monitoring activities were assigned to ASIF's project implementation unit at the outset of the project, which tasked these to a special M&E entity under the newly-created Institutional Development Department of the Fund\. Their objectives were: (a) ensuring that microproject processing followed Operational Manual rules and requirements; (b) providing progress information to the Fund's board of directors, the Government and donors; (c) alerting managers on problems in project implementation; (d) determining how the project was affecting the intended beneficiaries; and (e) assessing and reporting on project outputs and outcomes\. The M&E framework included microproject monitoring data from ASIF staff and implementing agencies, management information system (MIS) findings, annual technical reviews and audits, and periodic impact assessments\. Monitoring and Evaluation Utilization\. The Fund's strengthened MIS was relied upon as the major tool for performance monitoring of both the project as a whole and individual 15  microprojects, in line with the agreed impact indicators\. The ASIF progress reports and Bank mission reports regularly documented the effectiveness of the M&E Framework in assessing the linkage between inputs, outcomes and results and the achievement of project development objectives to deliver benefits to the target groups\. The impact of project activities were derived from beneficiary and institutional assessments, a social capital assessment, other assessments carried out in the field by the ASIF promotional team, and from workshops organized under the project to share the results of microproject and capacity building activities carried out under the project\. Physical monitoring of the implementation of microprojects was done through routine visits to all infrastructure microproject sites in order to check the progress and quality of the works\. The implementation process was followed up by: ASIF engineers, supervisors, and IA representatives\. Detailed checking on microproject documentation was done routinely\. Inspection was done on the submitted official requests, project applications, minutes of community meetings organized, capacity assessments of IA members and communities, desk and field appraisals, environmental checklists and final Appraisal reports\. Checking was also done on designs, specifications, required permits and approvals, quality certificates, and on other documents\. The Project's M&E system is gaining importance as it is becoming an integral part of the Government's framework for poverty monitoring capacity to monitor sector outcomes and progress towards attaining MDGs\. In November 2004, the PRSP working group adopted the PRSP monitoring indicators' system with the approval of a Government decree\. The system encompasses 177 indicators, which are clustered in groups concerning poverty reduction and improved living conditions, education, health, basic public services and housing, civil isolation and inequity, and sustainable environmental development\. The indicators are broadly consistent with the key IDA 14 sector outcomes\. Data on the indicators and targets have to be submitted to the Finance Ministry, and are currently being used for monitoring progress on poverty reduction and towards attaining the MDGs\. They derive from the work of ASIF's new Management Information, Monitoring and Evaluation Department which is charged with data collection and analysis, along with the preparation of periodic reports\. Data on indicators and targets draw on the Fund's upgraded MIS which was refined by new database server software\. These new arrangements and facilities helped sustain the Fund's M&E activities, beyond ASIF II's implementation period\. 2\.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution, as applicable) The Fund satisfactorily manages safeguard and fiduciary issues\. A Bank financial management assessment in mid-2006 concluded that ASIF had acceptable arrangements for meeting Bank standards in these fields\. ASIF's accounting and reporting policies and practices, based on internally developed methods and software, were judged to be reliable\. Its internal controls and filing system were also found satisfactory\. The Bank team's assessment and an independent consultant concluded that ASIF's accounting staff was extensively experienced in Bank norms\. They also complimented the Fund on the quality of training it had provided to local implementing agencies on their procurement practices\. Moreover, during the project's execution, 16  there were no substantial auditing problems identified\. Neither were there significant procurement issues\. A complementary factor was the Fund's upgrading of its MIS\. It was linked with its internal accounting operation, thereby permitting both systems to use only one database\. This improvement enabled the Fund, to carry out its monitoring and supervision more effectively\. In this connection, the Fund's upgraded supervision was exemplified by its action in one particular instance\. When it noted that potential contractors for its microprojects were withdrawing lowest priced bids, ASIF promptly tightened its bid security requirements\. It did this in order to reduce significant collusion among the contractors\. In fact, this tightening of these requirements served to effectively curb this problematic practice\. A second fiduciary-related circumstance which ASIF handled well related to the emergence of fund shortages\. When these occurred, ASIF promptly resolved these conditions through resort to short-term borrowings\. It was notable that these circumstances were quickly identified with the help of Government and Bank monitoring actions\. Apart from these measures, the Fund developed new procedures which were aimed at minimizing financial management risks\. An additional element of ASIF's safeguard improvements concerned possible environmental issues\. A Bank review of its operations concluded that no microprojects presented environmental problems\. Moreover, to further upgrade the Fund's activities in this sector, it introduced additional special environmental protection standards\. These were designed to help obtain even fuller consistency with national policies and Bank norms\. As indicated above, thus, the Fund operates in a quite satisfactory environment related to safeguard and financial compliance\. But there is some need for caution\. According to a recent BEEPS (business and enterprise survey) report, the Fund has to function under conditions of high perceived corruption in national commercial activities\. Also, a CFAA report said that there was a significant overall fiduciary risk in Armenia because of weaknesses in core control and regulatory agencies and in the quality of auditing, monitoring and supervision\. However, it concluded that the fiduciary risk of stand-alone financial management arrangements for Bank-financed investment projects was low\. The only negative fiduciary issue experienced under the project relates to the frozen account in the bankrupted Credit-Yerevan where project funds in the amount of USD350,000 were deposited\. The funds were frozen in the early part of project implementation and affected all Bank financed projects in Armenia at that time that had accounts in Credit-Yerevan\. This reduction in funds only marginally affected the actual recipients of the sub-projects under the ASIF II Project - - with the reduction of the equivalent of about 2 infrastructure microprojects\. The Armenian Government handled the issue of the frozen accounts in a systemic manner\. 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) Notwithstanding infrastructure investments in recent years, complemented by the ASIF program, major infrastructure gaps remain in Armenia, with adverse consequences on the living conditions of the population\. These deficiencies largely reflect years of neglect in maintenance after the break-up of the Soviet Union, unclear responsibilities for maintenance, and ineffective institutional arrangements at the local level\. Infrastructure gaps are most acute in the rural areas, especially in the remote and isolated communities, as well as in mountainous and border zone 17  communities ­ indicating the need for a large number of small scale investment of the type carried out by the ASIF\. The main strength of ASIF is its capacity to penetrate into remote, isolated, and poor communities, induce effective discussion on their perceived priorities, and to bring into fruition project proposals to serve their needs\. The technical and the professional capacity to carry out these activities has built upon a solid foundation of experience and expertise gathered over the past ten years, during which 619 microprojects were completed under the ASIF I and II Projects\. The ASIF has the capacity to execute community investment projects to a level of about US$8\.0 million per year\. The success of the ASIF II Project, in particular, led to the Government's interest in a follow-up operation and a specific request for Bank assistance\. A follow-up operation was prepared and was approved by the Board in October 2006\. It became effective in December 2006\. It is directed at deepening and expanding the efforts which were implemented under ASIF II\. Under the proposed follow-up operation, the ASIF would help implement a development program supporting community investments, strengthened social service delivery and good governance, including greater accountability in line with evolving government policies and programs\. Its approval reflected the Bank's satisfaction that the follow- up project had appropriate technical, financial and institutional provisions to ensure effective project activity, adequate inputs, and proper policy underpinnings\. Furthermore, the Fund's own plans indicate favorable prospects of ensuring suitable post- completion operations with the help of the following policies and provisions, supplementing its continuing efforts to provide high level project quality\. Requiring local governments and communities to finance up to 7 percent on average of microproject costs to ensure adequate stakeholder participation and project sustainability\. This is considered to represent a realistic degree of resource mobilization, given the communities' limited financial resources\. Development of a further improved two-stage poverty targeting strategy based on a community mapping and profiling exercise\. Pursuing increased central government financial support for ASIF's program\. Charging user fees to cover operations and maintenance costs in the case of revenue- generating investments\. Expanding the training of local government officials in financial management and budgeting to include procedures for asset maintenance and financial provisions regarding the maintenance of public facilities\. Ensuring that municipal authorities and communities have well defined roles in microproject implementation arrangements\. In addition, Armenia's local governments are being supported to acquire greater capacities for autonomous management, revenue mobilization and funding improvement activities and for public accountability\. These capacities are planed to be strengthened under ASIF III\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation (to current country and global priorities, and Bank assistance strategy) 18  The project objectives, design and implementation were intrinsically linked and relevant to the project's key aim of providing significant poverty alleviation of Armenia's lower income groups and contributing to strengthening local institutions for community development and empowerment\. The objectives continue to be just as important now as when ASIF II was established\. They remain consistent with the Government's October 2003 PRSP and its current development priorities\. Also, the May 2004 CAS underscored the importance of raising the living standards of the poor and vulnerable groups through better health, education and other basic services in order to reduce the non-income poverty that the country strategy stressed for the Bank's concentration\. 3\.2 Achievement of Project Development Objectives (including brief discussion of causal linkages between outputs and outcomes, with details on outputs in Annex 4) The Project achieved its intended development objectives to deliver benefits to the target groups efficiently and satisfactorily through the successful delivery of a number of key outputs and outcomes which are highlighted below\. The Outputs achieved under the Project are reflected in quantitative data (measurable improvements) relating to project benefits\. They represent project deliverables (on the supply side) that are designed to stimulate development outcomes (on the demand side) based on the causal chain\. The Project outputs relating to its specific objectives are as follows: Improvement of basic social and economic infrastructure 332 high-quality and cost-effective community infrastructure improvements covering schools, potable water facilities, irrigation systems and community centers in remote, isolated and poorer communities (which had not benefited much from economic growth)\. 57 schools rehabilitated or newly built in the earthquake zone (which constituted the largest contribution from a single agency in support of the Government's national program for the recovery of this area)\. 20 specialized schools for the youth in poor remote rural areas covering sport facilities, music and art schools, and a socio-psychological rehabilitation center\. Furniture provided for 620 schools\. Heating systems installed or repaired in approximately 50 schools\. Water supply services rehabilitated or constructed in 50 villages\. Institution building at the local level, enhancement of stakeholder participation, social capital formation, and development of partnerships Training of some 1,050 mayors (of whom 485 were women) in financial management, budgeting, accounting and asset management\. Submission of 885 three-year plans and development of 873 annual budgets by municipal officers as a result of the financial management training received\. Training of about 180 school accountants (of whom 130 were women); 80 school principals 19  (30 women), and 250 school council members (half women) in support of the Government's decentralized school governance program\. Training of some 6,510 community members of Implementing Agencies in planning, management, information dissemination, and operations and maintenance\. Formation of 905 Implementation Agencies with a total membership of 6,510 community members (of whom 1,840 were women, 615 were government officials, and 3,315 were community members) reflecting partnerships of community members and municipal officials\. Organization of 1,000 community meetings with the participation of 155,000 community members (of whom close to 70,000 were women and 2,000 were government officials)\. Carrying out 7 workshops comprising: (i) one regional conference on Social Funds and Decentralization; (ii) four national level workshops covering project launch, decentralization and capacity building, ASIF implementation results, quality of works; (iii) two workshops on quality of works for the benefit of ASIF staff\. Training of 20 technical staff in ASIF through international conferences, special workshops, and study tours to enhance their capacity in the areas covering decentralization and institution building, service delivery at he local level, quality of works, promotion and outreach, and monitoring and evaluation\. Institution building, private sector development, and partnership formation Participation of some 148 local contractors in ASIF infrastructure projects, of whom 76 participated in more than one project, creating opportunities for local construction industry\. Training of some 1,400 contractors on tender procedures, bid preparation, and quality of works\. Participation of 15 local firms in microproject design and supervision, supporting private sector development\. Participation of 6 local firms to carry out capacity building activities\. Creation of an estimated 322,000 job-days in participating poor communities where community members were employed by local contractors to work on infrastructure projects\. Participation of the Center for Education Reform (CER), a government owned training institute under the Ministry of Education and Science, to carry out training for school principals and school councils\. Developmental effectiveness\. There were also important outcomes/results from these ASIF activities highlighting the impact of the Project's development intervention\. These outcomes reflect the demand-side of behavioral responses by the beneficiaries as a result of the project, validating the causal linkage between outputs and outcomes\. Thus, the outcomes reflect feedback received from beneficiaries that was documented in the Beneficiary Assessments (see Annex 5) carried out under the Project\. Given that the developmental impact of the project often reflects a combination of more than one objective, this section presents the key results that were brought about by the Project, as follows: The provision of cleaner drinking water contributed to the improvement of household 20  hygiene, better health for children and the community in general, as well as income savings\. Improved school conditions for better education in terms of the quality of classes, better class attendance (especially during the winter months), greater enrollments, upgraded class performance, in conjunction with improved student health and hygiene\. Upgraded health services resulting from the rehabilitation of health clinics, along with better working conditions for medical personnel\. Boosted yields and income levels from community agricultural lands resulting from improved water irrigation, which led to increased cultivation and subsequent expanded production\. Contribution of financial management training to strengthening the quality of works of the community administration and providing a stronger foundation of knowledge for the leadership role of mayors\. The training also contributed to building the confidence of municipal officers in budget-making and budget management\. Improvement of school management arrangements through specialized training benefiting school principals, school accountants, and school council members during the transition to a self-governing structure of schools\. Contribution to short-term employment in poor participating communities\. Increased civic participation and empowerment of Armenian youth in community development through their engagement in activities of the newly built and renovated community centers\. Expanded engagement of municipal and civic society leaders in intra-community bonds and cooperation\. Helped lessen the level of tension in a number of poor rural communities, as a result of providing equal access to irrigation water\. Enhanced capacity of ASIF technical staff in the areas of decentralization and institution building, service delivery at the local level, quality of works, and monitoring and evaluation\. Strengthening of partnerships and information dissemination among key stakeholders through a series of regional, national, and local level workshops and conferences\. To sum up, the development impact of the Project has contributed to significant improvements in the quality of life of the poor and vulnerable groups in Armenia\. Some residents of Armenia's poorer communities are now enjoying rehabilitated and warmer schools, more potable water in their homes, better specialized schools for particularly needy students, the increased involvement and engagement of local governments with strengthened capacity, and comparable poverty reduction benefits\. Furthermore, the ASIF project program complemented and thereby contributed to the development programs in Armenia which helped reduce the poverty rate in Armenia from 56\.1 percent in 1998/99 to 34\.6 percent in 2004\. This was achieved through the combined efforts of the ASIF I and II projects with the implementation of over 600 priority infrastructure projects in poor communities throughout Armenia\. The ASIF was singled out in the Poverty Assessment for its contribution to the national goal of supporting access to safe drinking water\. ASIF II provided improved incentives and mechanisms for Armenia's local governments and 21  communities to carry out poverty-alleviating and development-enhancing programs\. These include: broadening the Fund's activities beyond its earlier role; developing more comprehensive assistance, proceeding to village level activities, getting into the network of community connections and communications (i\.e\., not just physical improvements); targeting its assistance to support the Government's development priorities such as school heating, school furniture, and infrastructure needs in the earthquake zone; training mayors and municipal accountants and thereby contributing to the improved quality of local administration, the preparation of better documentation to the regional offices of central ministries, and to mayors' strengthened leadership; the increased success in encouraging local ownership and broad participation; the greater attention to sustaining completed works projects; the Fund's progress to greater efficiency and cost-effectiveness; the Fund's improved approach to poverty targeting; the Fund's more effective structure, systems and procedures; the Fund's assistance to improve services in schools, health clinics and water systems\. Beneficiary assessments concluded that the Fund's microprojects had provided a useful framework for strengthening local governments and mobilizing community members (ref\. Annex 8)\. The intended beneficiaries voiced strong support for the microprojects; the vast majority (90%) expressed satisfaction - two thirds of these were highly satisfied regarding (a) quality of life (health, education, access to potable water) improvements in the communities; (b) enhanced empowerment of governments and communities; and (c) improved interactions between local governments and communities\. The Beneficiary Assessment of 2002 highlights the contribution of the project in generating short-term employment in poor communities\. It noted that in almost all beneficiary communities assessed, an average of 20 people in each community took part in civil works on a paid basis for a period of 3-4 months\. Community members expressed satisfaction in seeing projects being implemented in their communities that yield tangible, visible results which are designed for the common good of the community\. Significantly, as well, the assessment respondents considered that the activities carried out demonstrated that decentralized approaches in Armenia could help raise the poor's living standards\. They also recommended that ASIF's mandate be extended to a longer term status, increasing its potential for tackling even more challenging development problems and for having a still greater impact on local institutional development\. In this connection, Annex 13 describes the methodology used for both the beneficiary and other assessments conducted under the Project\. 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) The Project's economic rate of return was not calculated, as operations of this type in the public sector yield a wide range of external benefits to society which are not readily quantifiable and are 22  therefore not expected to achieve verifiable monetary results\. Moreover, the demand-driven character of the microprojects (and the fact that neither their sizes nor their types were known ex- ante) precluded the use of traditional methods of cost-benefit analysis\. At the microproject level, although the costs of projects are known with some precision at the appraisal stage by ASIF, data deficiencies at the community level precluded the quantification and valuation of the wide range of benefits and externalities generated by microprojects\. In these circumstances, the measurement of efficiency was directed towards studying the cost-effectiveness of ASIF microprojects vis-à-vis those of comparator organizations, and accordingly a Cost-Effectiveness Study was conducted in 2004 by specialized local consultants under the guidance and advice of an international consultant\. The approach adopted was to examine the economic use of project funds at the macro and micro levels as follows: (i) the project rationale within the broader context of national development objectives, government strategy, and the Bank's country assistance strategy and programs; and (ii) the cost-effectiveness of microprojects completed under ASIF II compared with those completed under traditional government programs and NGO programs\. The macro level analysis demonstrated that the project rationale was consistent with the Government's development strategy and the Bank's Country Assistance Strategy (CAS) of May 2004, specifically the CAS goal (iii) of reducing non-income poverty through better health, education, and basic services\. At the micro level, the cost-effectiveness study, which covered a sample of 93 microprojects, revealed favorable results\. In school projects which constitute more than half of ASIF's microprojects, the average cost of a new school constructed was favorable (US$116,000) compared those constructed by a relevant NGO selected for the study (US$147,410) and the Government (US$158,620)\. The cost per beneficiary in new schools constructed by ASIF (US$123\.82) also was marginally lower than that of the NGO (US$124\.14) and significantly lower than that of the Government (US$146\.55)\. Water supply projects -- which constitute around 20 percent of ASIF microprojects -- had the lowest cost per beneficiary (US$23) compared to those constructed by the NGOs (ranging from US$24 to US$35)\. However, due to the size and complexity of ASIF projects, they were on average more costly than those of the NGOs\. In the irrigation sector, the ASIF's cost-effectiveness profile has been only slightly better than those of its comparators -- an NGO and the Government's Irrigation Project, which are well managed\. Although ASIF's cost per beneficiary was lower than that of the Government's program, it was higher than that of the NGO\. On the other hand, the Government's cost per meter has been more favorable than those of ASIF and an NGO, reflecting economies of scale\. In the health sector, the ASIF has also made a modest contribution towards achieving the Government's objective of enhancing primary health care services\. (See Annex 5 for details)\. The analysis thus demonstrated that the ASIF II Project utilized a cost-effective means of meeting the targeted infrastructure needs of poor and vulnerable communities, consistent with the country's development strategy\. 3\.4 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs, and efficiency) Rating: Satisfactory The Project achieved its development objectives by effectively delivering benefits to target groups that have not received many benefits from economic growth\. Its work on infrastructure improvements and related activities benefited the poorest communities in remote and isolated areas, the socially vulnerable including orphans, refugees, and disabled persons, as well as high mountainous communities, earthquake zone communities, and border-zone communities\. The Project was not marred by significant shortcomings, inefficiencies or other material inadequacies\. 23  Although Project's activities were launched several years ago, its accomplishments are still consistent with Armenia's present development priorities and current Bank strategies and goals\. They therefore remain highly relevant\. With regard to the project's local level institutional strengthening activities, it is difficult to evaluate the full impact of these activities regarding assistance to the national decentralization program\. Its essentially pilot activities have not been in place very long and their across-the-board results are not yet entirely manifested\. It is clear, though, that there were some innovative advances made towards broader community and local government involvement, significantly in relatively remote and less developed parts of the country\. A good example of this innovation in these areas is the aforementioned three-year municipal development plans with corresponding budgets\. These initiatives were substantial in pointing the way towards modernizing relatively outdated and unproductive local governments (ref\. para\. 8\.5b)\. Some of these exhibited interest in and demonstrated intentions of undertaking greater self-management as a consequence of the assistance they received\. Another important outcome was the indication that the changed situation has enabled some local administrations to receive greater attention from regional governors and to exercise larger influence on local budgets\. Furthermore, each ASIF project has to some degree served as a tool of decentralization\. To illustrate this point, the construction of a potable water or irrigation system creates an expansion of the national system of service capacity in the form of a locally owned asset\. In the process, ASIF works hard to develop the management capability within the client community to enhance long- term project sustainability\. The ASIF also seeks active community participation so that the community feels joint ownership of the asset and supports it\. Thus, one can conclude that the Government's decentralization program reflects the same goals of the ASIF II Project of localizing a portion of the national system and developing local management capability and community involvement and support\. The operation's 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 Social Development\. The Social Capital assessment (ref\. Annex 13) showed that ASIF II successfully built on and strengthened existing levels of social capital, which had figured important in many communities' capacities to initiate and effectively manage microprojects\. The same factor was also influential in ASIF's choices of beneficiaries of its microproject financing\. The existence of social capital stocks similarly created opportunities for effective decentralized systems built on partnerships between the public and governments\. This involved redefining the roles and responsibilities of municipal authorities and citizens regarding the delivery of municipal services, as well as the dissemination of public information\. In the process, the Fund helped both the Government and the public better 24  understand the fundamentals of participation, project management and accountability\. These created incentives for community members to become more actively engaged in microprojects, as well as in the maintenance of the facilities they produced\. Beneficiary Assessments reported that the microprojects had boosted participatory spirit and civic identity\. They also judged that these activities had provided a helpful framework for promoting the strengthening of local governments, mobilized community members, and created links between them which enhanced interpersonal bonds and trust\. In addition, they reported finding evidence of the following phenomena: (a) -"Bridging" --interactions between strengthened local governments and mobilized community members participating in ASIF's microprojects, which created linkages between them\. The institutional network between local mayors and regional governors was strengthened, which built ties between the two levels\. (b) -"Bonding"--the active engagement of community leaders with their constituents in the microprojects strengthened intra-community bonds and cooperation\. Ties between school principals in (and outside of) project areas were created by ASIF program training (which also produced a stock of better trained principals beyond those in immediate project areas)\. The practices of community-priority setting in community meetings showed considerable potential for engaging community residents in the making of major decisions, as well as building better understanding of local governance\. The Social Capital assessment commended the Project's promotion of participatory methods, concerns with capacity building and attention to long-term service needs\. It concluded that these elements were useful catalysts for institutional development and social capital formation, which they considered especially important in areas of needy populations\. (b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development) A number of institutional strengthening efforts under the ASIF II project contributed to longer- term capacity and institutional development\. These range from institutional changes in the structure, systems and procedures under the Project, to broader based institutional changes in support of the Government's decentralization program, and to the emergence of a common vision for the future of the ASIF program in Armenia\. The ASIF improved its operational effectiveness and efficiency in a number of ways\. It revised its organizational structure to make it more responsive to changes in country needs and new Government policies\. It undertook an important role in Armenia's PRSP framework and processes, as an agent of development\. The Fund's organizational changes also encompassed more significant monitoring and evaluation functions, as well as expanded community outreach and promotional activities, and training and technical assistance functions\. These changes augur well for increasing 25  ASIF's potential to assist the Government to progress further towards its long-term economic growth and social development goals\. In addition, the Project contributed to strengthening community and local government capabilities in significant ways\. ASIF's microprojects directly engaged these entities in mobilizing and carrying out municipal improvement activities in a more systematic and professional manner\. Other aspects of the Project's operations enhanced social capital formation at community levels and created opportunities for effective decentralized local governance through stimulation of public-government partnership ties\. These latter measures reflected worthy efforts to change Armenia's meager institutional endowment from the Soviet regime, which was marked by a scarcity of adequate capacities at local levels, especially in the more rural and isolated communities\. Given this near void, the Fund's program in this operation constituted a formative approach to putting in place several essential institutional elements\. These centered on broad scaled training activities for improving local competencies\. A large share of these was channeled in orienting community groups and local governments in the fundamentals of mobilizing citizen participation, project design and management, and civic accountability\. Capacity building in the mayors' ranks concentrated on building up their appreciation of the concepts and tools that are fundamental institutional mechanisms (e\.g\., budgeting, taxation, investment planning, and asset management)\. There was also considerable effort devoted to upgrading the knowledge and skills of school principals, accountants and school council members for better performance in their communities' main function\. All these might constitute preliminary steps towards helping localities to engage more fully in becoming able to carry out their own planning, implementation, resource mobilization, etc\. Further, the Project also contributed usefully to strengthening the Government's capacity for poverty monitoring (which figures important for its PRSP activity)\. It helped to improve its ability to analyze poverty, from which a national database on household welfare was created\. All these factors suggest good possibilities of ASIF's sustaining a strategy that affords sufficient flexibility to meet specific infrastructure and service requirements while making its allocations on a strongly poverty-oriented needs basis\. As such, the Project's actions comprised useful building blocks for future institutional developments and for strengthening the enabling environment for local self-government\. These may be less visible in the creation of official organizations than in these pioneering arrangements for participatory decision-making, collective accountability and other aspects of self-governing\. That should be satisfactory, however, given their limited starting points and the continuing formidable constraints on what can be done in these localities\. These include: (a) the still predominant central government powers and the lack of suitable division of labor from local administrations; (b) inadequate autonomy and resources of local governments; (c) numerous gaps and uncertainties in governance arrangements; and (d) substantially unskilled personnel and instabilities in municipal administrations\. Barring substantial changes in these areas, it might be advisable to confine future efforts in this area to solely seeking further progress in upgrading local 26  public administrations' collaboration with the Fund, perhaps mainly in Armenia's smaller communities\. In this connection, the Government and ASIF have agreed on a common vision for the future in which the Fund will function as an active partner with other executive branch agencies\. The Fund's role will be to concentrate on small and medium-sized infrastructure works within the Government's overall development effort (in which it is important for the Government's quasi- "outsourcing" of infrastructure and other improvements), while also handling additional responsibilities in the decentralization program\. (c) Other Unintended Outcomes and Impacts (positive or negative, if any) None\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) ASIF's beneficiary assessments, as well as the social capital and institutional reviews (ref\. Annexes 8 and 13), found that the beneficiaries considered that the Project had improved their lives through the opportunities afforded for participation in the microprojects\. They also concluded that ASIF II's institutional framework had served as an effective catalyst for institutional development and social capital formation, manifested in improved service delivery by local communities and government agencies\. Benefiting communities also commended the Fund staff's performance and dedication\. 4\. Assessment of Risk to Development Outcome Rating: Low or Negligible There is only a Negligible to Low risk that the Project's development outcomes will not be maintained\. That is, in part, because Armenia's economic and social perspectives indicate that there will be both an ongoing need for, and likely continuing public policy to provide the types of assistance which ASIF's activities have supported\. Further repetition of the past development outcomes thus, in all likelihood, will remain priority Government objectives\. The current arrangements for these activities appear to be sufficiently flexible and strong to deal with various possible risks\. A second but more important reason for assessing the overall Risk to Development Outcome to be relatively low is that Armenia now has a respectable standing in social and economic development\. Its positive features that could be drawn on to sustain the gains achieved under ASIF II include: The Government's successful stabilization and structural reform record indicates a progressively improving policy and financial viability environment, which could be replicable\. The ASIF program has become an increasingly more important Government tool for 27  carrying out those reforms, and figures centrally in its PRSP which aims at reducing poverty, lowering inequality and improving human resources\. Armenia's recent strong economic growth and prospects of continuing large external fund receipts should enable it to maintain (and expand) ASIF II-type activities\. The changes which strengthened the Fund could help mitigate possible risk problems\. Experience with social fund-type projects has shown that the sustainability of these funds can best be achieved through the integration of community-based projects with progress in local institution building and self-management\. ASIF has successfully advanced in this direction\. 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 (i\.e\., performance through lending phase) Rating: Highly Satisfactory The Bank's work during the preparation of the Project was of high quality\. Its strategy and instruments were very appropriate\. The assessment of different alternatives was balanced and its conclusions well justified\. The Project's design took into account lessons from previous projects in Armenia and other countries\. Appraisal of the commitments and the capacities of the Government, the implementing agency and potential beneficiaries for the tasks appears to have been generally sound\. Technical aspects were thoroughly examined, as were the fiduciary elements\. Links with other donors were well considered and incorporated\. The implementation plan was thorough and well balanced\. The Bank's assistance helped the Government initiate the Project on a timely and appropriate basis in response to its priority needs\. This was especially useful in view of Armenia's external problems at the time and the continued difficulties the country faced in dealing with a variety of issues related to poverty\. It was particularly helpful that, although the Project was modeled on its predecessor and prepared expeditiously, it also skillfully accommodated changes to adapt to evolving public policies\. The Bank's performance in ensuring quality at entry of the Project is rated Highly Satisfactory\. This takes into account the efficacy of the work carried out in the activities described above, which covered the most important aspects of the Project's strategic relevance and its preparation and design\. The preparation team's work also warrants particular credit for its service in helping ASIF broaden its vision from the past relatively routine social fund origin to a more comprehensive social development cast\. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Satisfactory 28  Task management conducted field supervisions, together with special studies and assessments of the project\. These covered broad issues about the Fund's operations and their benefits, as well as technical, administrative and procurement matters, and qualitative assessments of the activity's progress, functioning and impacts\. Their reports were quite comprehensive and well documented and effectively informed the Government and Bank Management of the operating conditions in an objective and timely manner\. They dealt professionally with the problems and possible solutions\. The Mid-term Review assessed overall performance comprehensively and quite substantively\. The social capital and institutional assessments were especially helpful\. The Bank's flexibility was put to useful purposes and produced timely benefits when ASIF had to solve some implementation difficulties\. One case necessitated speedy relief of the special rehabilitation needs of earthquake zone and border communities\. Others involved permitting increased values of some subprojects to compensate for price rises, and adjusting funding ceilings and payment amounts correspondingly, along with raising the procurement threshold review level\. These actions helped the Fund maintain good progress overall on the Project\. In addition, it was agreed that any subsequent comparable Bank-supported activity should seek to compensate communities for the "shortfalls" in their Fund allocations which resulted from a previous reduction in the number of microprojects funded (ref\. para\. 7\.2)\. The Bank's performance record during project supervision does not show any shortcomings in the identification of opportunities and resolution of issues\. Therefore, it is recommended that the Bank's rating here be judged Satisfactory\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory Based on the Bank performance during the lending and supervision phases as discussed in section 10\.1, Overall Bank performance is rated as satisfactory\. 5\.2 Borrower (a) Government Performance Rating: Satisfactory The Government team which helped to prepare the project participated actively in the definition of its strategy and funding and implementation plans\. It was particularly helpful in establishing the agreements for ensuring firmer and more adequate counterpart funding than ASIF I provided, an important requirement for ensuring the achievement of the desired objectives\. The Government also collaborated well in the efforts made to link the project with the results of assessments of Armenia's problems and requirements in the social sectors, as well as with the planning of its decentralization program\. Its Local Self-Government Law and several similar measures provided useful policy backing for improving community-level management and empowerment, although the Government accomplished less in their implementation and in decentralization program measures than would have been desirable\. 29  The Government also deserves credit for its positive measures to help ensure ASIF's continued support in help advancing Armenia's growth at least over the medium term by confirming its place in the public sector structure for purposes of the implementation of this project\. By the same token, the Government took other significant policy actions, especially in the later part of project implementation, through its issuance of the Poverty Reduction Strategy Paper, supplemented by its successful stabilization and structural reform program\. The Finance Ministry was constructive in its assistance with the project's arrangements but not fully successful in mobilizing the envisaged level of external co-financing\. It was helpful with its own funds (total Government contribution of US$2\.0 million), however, in seeing that ASIF consistently had adequate resources for project implementation\. During that process, moreover, the Government`s participation was timely and very cooperative\. The Government's performance in the Project is rated Satisfactory\. (b) Implementing Agency or Agencies Performance Rating: Highly Satisfactory Implementing Agency Performance The Project clearly demonstrated ASIF's main strength of being able to penetrate remote, isolated and poorer communities, obtain their residents' consensus on development priorities, help mobilize collaborative efforts to address them, and to bring them into fruition\. The Fund has built up a solid technical and professional capacity based on a now well established fount of experience and expertise of some 10-years depth with substantial quality\. An additional comparative advantage has been ASIF's ability to effectively impact Armenia's smaller and medium-sized communities, in which it has earned widespread popular trust, perhaps more than that of other national institutions\. Its demand-driven character and partnership arrangements have earned it substantial backing\. In the ASIF II operation, the Fund provided a valuable base for the Project's timely initiation and takeoff, and demonstrated a strong commitment to achieving its development objectives throughout its life\. Its readiness for the tasks remained energetic, well directed and altogether commendable\. Independent experts judged that the ASIF team engaged in promotion, appraisal and follow-up activities which were effective in providing technical, managerial and organizational support to community members\. They also judged its staff to be professionally competent, hard working, committed and responsible\. In addition, the benefiting communities explicitly commended the staff's dedication, particularly praising the Training and TA unit's work, and ASIF's services in diffusing development knowledge\. ASIF's performance was particularly valuable in the solutions for the problems which emerged from the increases in the prices of construction materials, the foreign currency realignments, and 30  the resulting program delays\. As noted previously, when the Fund found that contractors were withdrawing their lowest priced bids (even with the loss of the related security guarantees), it prudently increased bid security levels in order to discourage possible collusion\. Better previous pricing practices might have helped\. Further, its success in adapting ASIF's role to help support the Government's decentralization program demonstrated a constructive initiative in trying to move from a technical engineering-type entity to a more development-oriented one\. The Fund also effectively acted to try to ensure strict conformity in the allocation of its and the IDA Credit's resources with the poverty targeting formula\. On the other hand, its decisions to make investments in some large water networks were debatable choices\. In addition, ASIF had to upgrade its cost accounting system in order to overcome past deficiencies\. With ASIF's project implementation experience, it effectively monitored microproject implementation consistent with both Armenia's and the Bank's environmental requirements\. ASIF's performance is rated Highly Satisfactory\. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory Based on the Government's overall performance described in section 10\.2, the overall Borrower Performance is rated Satisfactorily\. 6\. Lessons Learned (both project-specific and of wide general application) Poverty Targeting\. The improved poverty targeting strategy developed under the ASIF II Progress contributed significantly to the project's ability to benefit the poorest communities and to poverty reduction in Armenia\. The lesson that can drawn here is the importance of having a clearly formulated poverty targeting and an allocation mechanism based on objective criteria and poverty data ensuring the flow of project benefits to the neediest segments of the population\. The poverty targeting for ASIF II was well developed having sufficient flexibility within the overall allocations to target specific needs on a demand-driven basis\. The poverty targeting strategy was further refined under the ASIF III Project using a two-stage process consisting of geographical targeting of project funds by region followed by the identification of needy communities within each region through a community mapping and profiling exercise, based on a set of detailed criteria\. Quality of Works\. Experience under the ASIF program, as in other SIF programs, has underlined the importance of delivering good quality community works projects identified as priority projects by poor communities\. A number of measures were taken under ASIF program to improve the quality of works, obtain client satisfaction with services received, increase contractor accountability, and to address the issues of corruption\. While there were a number of very useful measures described in this ICR, one measure that was particularly effective was the sub- contracting of local firms to carry out the design and supervision of microprojects\. Other useful 31  measures adopted were the training of local contractors on technical standards and the setting up of a showcase room in the ASIF Office to display the technical standards and quality of output in typical components expected under the ASIF program\. These procedures, together with regular post procurement reviews, quality of works reviews contracted out, and regular financial management reviews and financial audits, comprise a comprehensive and effective approach to dealing with quality of works\. Sustainability and Link to Government Decentralization\. The approach of the ASIF II project to integrate multi-sector community-based projects with local institution building and self- management has been effective in ensuring the sustainability of its operations\. The success of this approach derives from the convergence of several mutually reinforcing factors: (i) deliberate responsiveness to local needs and priorities; (ii) local institutional capacity building complementing the Government's decentralization policy; (iii) innovations in poverty targeting, promotion and outreach; and (iv) systematic and continuous monitoring and evaluation\. The ASIF's experience in supporting the national decentralization program demonstrated the Fund's ability to be helpful in such activity\. In a context where management skills were scarce at the local level, that "added value" became an attractive asset\. However, care should be taken to avoid possible overexpansion of the Fund's responsibilities and excessive drain on its faculties\. The Government's Shared Vision of the ASIF\. During project design and in the course of project implementation, discussions with the ASIF and with the Government focused on the strengths of the ASIF, the opportunities ahead, the challenges the ASIF is likely to face in the medium and longer term, and the vision of its future role\. These discussions were important as they contributed to the process of gradually mapping the future direction of the ASIF\. The good reputation of the ASIF, its proven strengths in its capacity to penetrate into remote, isolated, and deliver priority infrastructure needs combined with capacity building, and the opportunities ahead, particularly in ASIF's "market share" in the construction and rehabilitation of small and medium- scale infrastructure, have brought forth a common vision for the future of ASIF\. This vision is one of having the ASIF become a relatively independent entity functioning as an active partner to the Government of Armenia\. The ASIF would continue to target communities in poor isolated communities through the provision of small-and-medium scale infrastructure work where the Government would not be involved\. This partnership of the ASIF and the Government is an important lesson that reflects that an effective development agency can work alongside Government to complement and enhance effective and sustainable development for and by the people\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies Borrower comments on the ICR were considered and appropriate changes have been made where applicable\. (b) Cofinanciers None 32  (c) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) None 33  Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Appraisal Components Estimate (USD Actual/Latest Percentage of M) Estimate (USD M) Appraisal COMMUNITY INVESTMENTS 18\.68 25\.13 134\.54 LOCAL LEVEL INSTITUTIONAL 0\.90 0\.78 86\.33 STRENGTHENING PROJECT MANAGEMENT 3\.60 3\.48 96\.56 Total Baseline Cost 23\.18 29\.39 Physical Contingencies 1\.80 0\.00 0\.00 Price Contingencies 4\.34 0\.00 0\.00 Total Project Costs 29\.32 0\.00 PPF 0\.50 0\.08 0\.00 Front-end fee IBRD 0\.00 0\.00 0\.00 Total Financing Required 29\.32 29\.47 100\.50 (b) Financing Appraisal Source of Funds Type of Actual/Latest Percentage of Cofinancing Estimate (USD M) Estimate (USD M) Appraisal Government BORROWER 1\.43 2\.02 175\.52 Counterpart Funds Community COMMUNITIES 2\.00 2\.55 111\.70 Contribution IDA Credit 20\.00 20\.87 104\.35 LOCAL Matching Fund 3\.18 1\.93 60\.72 DONORS DFID Co-financing 2\.71 1\.92 70\.96 34  Annex 2\. Outputs by Component A\. Component 1: Rehabilitation of Small-Scale Infrastructure The project successfully met its infrastructure improvement goals, expanded on the Fund's past accomplishments on the ground, substantially raising the standards of its operational performance and helping to improve living standards of the poor and strengthen institutions at the local level\. This was accomplished through a large number of high quality cost-effective microprojects supported by complementary training to implementing agencies, local contractors and communities, and enhanced participation to ensure the sustainability of projects\. Completed Microprojects\. ASIF II was credited with the successful completion of 332 microprojects with the help of the IDA Credit and local contributions\. The actual disbursements for these projects amounting to US$25\.13 million far exceeded the $18\.68 million estimated for these activities during appraisal\. It also was also substantially greater than the level of these works under ASIF I\. On the other hand, the works completed were less in volume than what they were meant to accomplish\. This was due to price hikes which followed significant increases in the costs of construction materials due to a construction boom and the decline in the relative values of US$ vis-à-vis the Armenian dram\. These caused the prices of works contracts to rise by up to 45 percent, as well as a reduction in the number of contractors who bid for the microprojects\. The infrastructure projects generated short-term employment in some of the poorest communities of Armenia with the creation of 322,000 job-days\. The Beneficiary Assessment of 2002 highlights that in almost all beneficiary communities assessed an average of 20 people in each community took part in civil works on a paid basis for a period of 3-4 months\. To ensure good quality of works, a total of 15 local firms were contracted to carry out microproject design and supervision\. School Microprojects\. An estimated 65 percent of the completed involved 57 small-scale school renovation and new construction works, along with school heating system renovations covering 50 schools, and complementary school furniture for 620 schools\. The ASIF also rehabilitated 20 specialized schools for the youth in poor remote rural areas covering sport facilities, music and art schools, and a socio-psychological rehabilitation center\. This emphasis followed the priorities set out in ASIF II's objectives and design\. In the process, as originally envisaged, the microprojects helped support the Government's education reform agenda through expanding the facilities and services of key schools in the targeted regions\. The microprojects in the education sector were supported by the Project's training activities for school personnel\. An estimated total of 510 participants comprising 180 school accountants, 80 school principals, and 250 school council members benefited from specialized training financed under the project in support of thee Government's decentralized school governance program\. Furthermore, as documented in the Beneficiary Assessments carried out, the school microprojects were assessed to have generated valuable social and economic benefits\. These included improvements in school enrollments, class performance and class attendance, as well as student health and hygiene\. Potable Water and Irrigation Microprojects\. An estimated 20 percent of the completed microprojects encompassed water supply, waste disposal and irrigation activities\. In particular, water supply services were rehabilitated or constructed in 50 villages\. Their nature and scope closely followed ASIF II's objectives and design\. The Fund's successful fulfillment of these targets resulted in improved living conditions in the more remote and poorer areas of Armenia\. The provision of cleaner drinking water contributed to the improvement of household hygiene, better health for children and the community in general, as well as increased income savings\. 35  Capacity Building and Community Participation\. To ensure the sustainability of microprojects the ASIF took the following measures: (i) intensified its capacity building efforts started under the ASIF I Project benefiting Implementing Agencies (IAs), community members and local contractors; and (ii) enhanced community participation in project activities\. One significant output was the training of some 6,510 community members of IAs in planning, management, information dissemination, and operations and maintenance\. A total of 905 IAs were formed with a total membership of 6,510 community members (of whom 1,840 were women, and 615 were government officials) reflecting the partnership of community members and municipal officials\. The ASIF effectively organized 1,000 community meetings with the participation of 155,000 community members (of whom close to 70,000 were women and 2,000 were government officials)\. In addition, 1,400 local contractors were trained on tender procedures, bid preparation, and quality of works\. Of these, 148 local contractors participated in ASIF infrastructure microprojects creating opportunities for the local construction industry\. As a result of the training and promotional activities under the Project, a significant amount of US$2\.6 million was received as community contribution, equivalent to 8 percent of total project costs\. B\. Component 2: Local Level Institution Building The local level institutional building activities carried out under the Project complement nicely the microproject component enabling local level institutions to address the needs and priorities for local development through a comprehensive capacity building program\. The ASIF's engagement in capacity building activities reflects the broadening of the Fund's focus and functions in support of the Government's decentralization program\. Specialized training programs were developed and carried out in the areas covering: a) financial management, budgeting accounting and asset management to benefit municipal mayors and financial officers; and b) decentralized school management arrangements in support of the transition to a self- governing structure of schools benefiting school principals, school accountants and school council members\. Through these training activities, the ASIF successfully built a link between, on the one hand, initiatives to support local communities and the engagement of members of the community in decision-making, and on the other, efforts to strengthen local government and implement the Government of Armenia's decentralization program\. The training of mayors and municipal accountants contributed to strengthening the quality of work of the community administration, and by providing a stronger foundation of knowledge for the leadership role played by the mayor\. The training program helped build their confidence in budget formulation and budget management\. The training also contributed to the mayors' and accountants' improved ability to prepare the documents required by the marzpeteran to the expected standards\. Local officials were also pleased with the detailed review and attention and analysis of the new local government legislation and its implications\. The school training carried out helped improve school management arrangements in line with the Government's decentralized school governance program during the transition to a self-governing structure of schools\. Specialized training benefited school principals, school accountants, and school council members\. School staff who participated in the organized training commented on their ability to put to immediate use the skills acquired in rational budgeting and staff plans\. They felt more self assured and were better able to manage their increased responsibilities under the new school management arrangements\. The specific outputs of the local level institutional building component are as follows: Training of some 1,050 mayors (of whom 485 were women) in financial management, budgeting, accounting and asset management\. 36  Development of some 885 three-year plans and submission of 873 annual budgets by municipal officers as a result of the municipal training\. Training of about 180 school accountants (of whom 130 were women); 80 school principals (30 women), and 250 school council members (half women) in support of the Government's decentralized school governance program\. Participation of 6 local firms to carry out capacity building activities\. Participation of the Center for Education Reform (CER), a government owned training institute under the Ministry of Education and Science, to carry out training for school principals and school councils\. Carrying out of a national workshop to (i) disseminate the findings from the local level institutional strengthening component of the Project in support of the Government's decentralization program; (ii) exchange lessons learned with key donors and agencies involved in similar activities; and (iii) discuss with central and local government officials upcoming development programs focusing on decentralization\. B\. Component 3: Institutional Support to the ASIF The project helped to develop the Fund into a much stronger, broader based institution\. It also expanded its capacity to penetrate into more remote, isolated, and poorer communities, stimulate effective discussions on their perceived priorities, and to bring to fruition proposals to meet their needs\. ASIF's improvements are credited to large measure to the Credits' inputs along with DFID's support\. These provisions included technical assistance to the Fund's management and staff, purchases of vehicles and equipment for various departments, administrative support of the organization, and various assessments covering Beneficiary Assessments (2), Quality of Works Assessment (2), Institutional Assessment (2), the first Social Capital Assessment, and a Cost- Effectiveness Review\. The financing also covered the Fund's operating costs and the expenditures related to the monitoring and evaluation work, financial audits and MIS improvements\. Government counterpart funding helped cover the costs of this component\. The further strengthen the capacity of ASIF staff, enhance partnerships with key stakeholders, and disseminate results under the Project, the outputs delivered under this component were as follows: Carrying out 7 workshops comprising: (i) one regional conference on Social Funds and Decentralization; (ii) four national level workshops covering project launch, decentralization and capacity building, ASIF implementation results, quality of works; (iii) two workshops on quality of works for the benefit of ASIF staff, local contractors and local firms specialized in infrastructure design and supervision\. Training of 20 technical staff in ASIF through international conferences, special workshops, and study tours to enhance their capacity in the areas covering decentralization and institution building, service delivery at he local level, quality of works, promotion and outreach, and monitoring and evaluation\. 37  Annex 3\. Economic and Financial Analysis (including assumptions in the analysis) As in other community development projects, the demand driven nature of the project ­ which responds to microproject proposals from poor communities during the life of the ASIF II Project ­ clearly precluded the ex-ante use of traditional methods of cost-benefit analysis and the calculation of economic rates of return\. Neither the size nor the types of proposals were known ex-ante\. And consequently, projects of this type were not expected to achieve quantifiable and verifiable monetary results\. Even at the microproject appraisal stage, the non-availability of reliable data at the micro or the community level precluded the ASIF from calculating expected ERRs\. Although the costs of projects were known, reliable data did not exist to quantify the expected benefits and project externalities in a meaningful manner\. In these circumstances, the ASIF adopted the least cost approach to microprojects, based on project alternatives and project designs, while meeting the requisite standards\. In the absence of ex ante ERR estimates as noted above the ICR analyzed the Project's efficiency using cost-effectiveness criteria to determine whether it represented the effective use of project funds\. The results are spelled out in this ICR's discussion of the cost effectiveness of the uses of public funds for a sample of 93 microprojects completed under ASIF II compared with those carried out under more traditional government programs and those assisted by NGOs\. At the micro level, the Cost-Effectiveness Study conducted in 2004 has revealed some very useful results\. In school projects which constitute more than half of ASIF's microprojects, the average cost of a new school constructed was favorable (US$116,000) compared those constructed by a relevant NGO selected for the study (US$147,410) and the Government (US$158,620)\. The cost per beneficiary in new schools constructed by ASIF also was lower than that of the NGO and the Government\. As regards water supply projects, although ASIF projects are, on average more costly than those of the NGO, due to the size and complexity of ASIF projects, they had the lowest cost per beneficiary compared to those constructed by the NGOs\. In the irrigation sector, the ASIF has played an important role in complementing the large-scale irrigation projects of the Government\. However, its cost-effectiveness profile has been only slightly better than those of its comparators ­ an NGO and the Government's Irrigation Project, which are well managed\. Although ASIF's cost per beneficiary (US$37\.65) is lower than that of the Government's program (US$77\.68), it is higher than that of the NGO (US$30\.95)\. On the other hand, the Government's cost per meter (US$16\.07) has been favorable than those of ASIF and the NGO, which were around US$20\.00, reflecting economies of scale\. In the health sector, the ASIF has also made a modest contribution towards achieving the Government's objective of enhancing primary health care services\. The study also showed that ASIF's cost per beneficiary (US$2\.32) to be significantly lower than those of one NGO (US$4\.35) and another NGO (US$3\.43)\. Thus, the Cost-Effectiveness Study has shown that the costs of ASIF's microprojects, both in terms of average costs and costs per beneficiary, largely compared favorably with those of others\. They were, on the whole, lower than the costs of comparable activities\. Moreover, at the macro level, the analysis showed that the project rationale is consistent with the Government's development strategy, and the Bank's Country Assistance Strategy (CAS) of May 2004, specifically the CAS goal (iii) of reducing non-income poverty through better health, education, and basic services\. The 38  analysis thus concluded that the ASIF II Project demonstrated that the ASIF employed a cost- effective means of meeting the targeted infrastructure needs of poor and vulnerable communities, consistent with the country's development strategy\. Table 1: Average Costs of Completed ASIF II Microprojects by Type Project Type No\. of Av\. Cost Units Cost per Unit Cost per Projects (US$) (UD$) Beneficia ry (US$) Schools (New & Rehab\.) 50 82,208 sq\.m 58\.00 60\.54 Water Supply 19 41,345 M 14\.66 23\.26 5 25,773 M 20\.05 37\.65 Irrigation Health 4 48,851 sq\.m 104\.00 2\.32 Total/Average 93 62,556 - - 22\.92 Table 2: School Projects Comparative Table for School Construction and Renovation New School Construction School Renovation Cost per sq\. m\. Cost per beneficiary Cost per sq\. m\. Cost per (USD) (USD) (USD) beneficiary (USD) ASIF 116\.0 123\.82 34\.00 31\.11 AAF 147\.41 124\.14 90\.52 48\.75 MoE 158\.62 146\.55 68 64\.66 SC - - 45 40\.72 UNDP - - 50\.24 55\.96 Table 3: Water Supply Projects Comparative Table for Water Supply Projects Average cost Cost per Cost per unit Cost per liter per of MP beneficiary length, M second pumped (USD) (USD) (USD) (USD) AAF 36,529 35\.00 25\.00 N/A OXFAM 10,906 27\.00 8\.98 N/A SC 63,691 23\.95 15\.08 N/A ASIF 41,345 23\.26 14\.66 4,237\.53 39  Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility/Specialty Lending Caroline Mascarell Sr\. Operations Officer ECSHD Team Leader Aleksandra Posarac Sr\. Economist ECSHD Program Team leader Alexander Marc Sr\. Social Scientist ECSSD Social Investment Funds Hilarian Codippily Sr\. Social Economist ECSHD Economic Analysis Lead Public Sector Tim E\. Campbell LAC Local Governance Specialist Sr\. Financial Roberto Tarallo ECSPS Financial Management Management Spec\. Evelyn Villatoro Sr\. Procurement Spec\. ECSHD Procurement Financial Management Naira Melkumyan ECCAR Financial Management Specialist Maria Gracheva Operations Officer ECSHD Project Implementation Hiwote Tadesse Project Assistant ECSHD Operations Supervision/ICR Caroline Mascarell Sr\. Operations Officer ECSHD Team Leader Aleksandra Posarac Sr\. Economist ECSHD Program Team Leader Susanna Hayrapetyan Sr\. Health Spec\. ECSHD Social Protection Financial Management Naira Melkumyan ECCAR Financial Management Specialist Plamen Stoyanov Procurement Spec\. ECSPS Procurement Kirov Sr\. Financial Arman Vatyan ECSPS Financial Management Management Spec\. Financial Management Ekaterina Arsenyeva ECSPS Financial Management Spec\. Hilarian Codippily Sr\. Social Economist ECSHD Economic Analysis Nicole la Borde Program Assistant ECSHD Operations 40  (b) Ratings of Project Performance in ISRs No\. Date ISR Archived DO IP Actual Disbursements (USD M) 1 06/28/2000 Satisfactory Satisfactory 0\.00 2 12/28/2000 Satisfactory Satisfactory 0\.58 3 06/28/2001 Satisfactory Satisfactory 0\.87 4 12/26/2001 Satisfactory Satisfactory 2\.77 5 06/28/2002 Satisfactory Satisfactory 3\.84 6 12/12/2002 Satisfactory Satisfactory 6\.95 7 06/23/2003 Satisfactory Satisfactory 9\.14 8 12/17/2003 Satisfactory Satisfactory 11\.28 9 06/28/2004 Satisfactory Satisfactory 13\.87 10 12/28/2004 Satisfactory Satisfactory 16\.90 11 06/17/2005 Satisfactory Satisfactory 19\.15 12 06/01/2006 Satisfactory Satisfactory 22\.73 41  (c) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands No\. of staff weeks (including travel and consultant costs) Lending FY98 3\.95 FY99 81\.36 FY00 53 171\.33 FY01 13 4\.20 FY02 0\.00 FY03 0\.00 FY04 0\.00 FY05 0\.00 FY06 0\.00 FY07 0\.00 Total: 66 260\.84 Supervision/ICR FY98 0\.00 FY99 0\.00 FY00 0\.00 FY01 24 76\.80 FY02 37 90\.38 FY03 26 70\.98 FY04 22 100\.68 FY05 28 97\.54 FY06 22 65\.14 FY07 2 10\.71 Total: 161 512\.23 42  Annex 5\. Beneficiary Survey Results (if any) This section summarizes the beneficiary survey results documented based on feedback received from representatives of local government administrations, community and school council members, members of the Implementing Agencies, community members, and other stakeholders\. It encompasses the findings of: (a) a beneficiary assessment carried out in September 2002 which provided some preliminary information; (b) a 2003 field research study; and (c) subsequent interviews conducted for the institutional and social capital assessments\. 1\. ASIF microprojects provided a useful framework for involving and strengthening local governments, mobilizing community members, thus demonstrating that a decentralized approach in Armenia could help raise the poor's living standards\. 2\. ASIF microprojects had had strong participatory bases and reflected the immediate needs and priorities of the benefiting communities\. Most of their residents took part in community meetings, provided labor or other support during implementation, and periodically monitored progress\. However, direct involvement of the greater community was the highest at the stage of microproject identification and selection of members of the Implementing Agencies\. 3\. Not all Implementing Agency (IA) members were equally active in the microproject management\. A number of IA members admitted that their role in the microproject was rather formal and that they could have benefited from more specialized and ongoing training in order to empower them to take a more proactive role in microproject management\. 4\. The intended beneficiaries voiced strong support for the microprojects; the vast majority (90%) expressed satisfaction - two thirds of these were highly satisfied regarding: a) quality of life improvements in the communities; b) enhanced empowerment of governments and communities; and c) improved interactions between local governments and communities\. 5\. The microprojects significantly improved the quality of essential social infrastructure and services in those communities, and produced some better basic welfare outcomes\. Benefits included improved class attendance, access to potable and irrigated water and higher quality medical services\. These showed that decentralized approaches could help raise living standards of the poor\. 6\. A number of community members mentioned that they received some information on the status of microproject implementation from IA members, particularly at the start of the project, but that they could have benefited from more regular information dissemination on the part of the IAs at all stages of construction\. 7\. ASIF microprojects helped lessen the level of tension in some communities, as a result of providing all residents with access to irrigation water\. 43  8\. ASIf microprojects played the role of a catalyst by enabling local leaders to demonstrate hard work, and reinforce their position and reputation within their communities\. This provided an opportunity for the local leaders to be more effective in mobilizing community members around the most immediate local problems\. Through shared experience, the framework of the microprojects contributed to strengthening the links between community leaders and residents, and has enhanced the credibility and the reputation of mayors and school principals as those "who can get things done\." 9\. The microprojects are well regarded on the grounds that their selection, planning and delivery processes were viewed as fair, efficient and effective\. At the same time, they were sometimes criticized in communities by those residents who did not personally benefit from these activities\. 10\. The microprojects filled gaps in a situation in which funds for capital improvements were scarce, thereby strengthening the base for community economic and social development\. They also helped strengthen existing stocks of social capital and community self-confidence, and the skills of community leaders\. 11\. Community leadership at all stages of the process was good and effective\. The most active roles were played by formal leaders, mayors and (in the case of schools) principals\. 12\. Mayors and community accountants greatly valued the financial management training organized under the project, which has made a direct and practical contribution to strengthening the quality of work of the community administration and provided a stronger foundation of knowledge for the leadership role played by the mayor\. All mayors who had participated emphasized the helpfulness of the combination of "theoretical" and practical work, the relevance of the topics selected, and the quality of the lecturers\. Particular attention was made of the contribution of the training program to building their confidence in budget-making and budget management\. The detailed attention to review and analysis of the new local government legislation and its implications was also very much appreciated\. 13\. The School principals interviewed expressed high levels of satisfaction with the quality of training they received including the coverage of the program and the results of the training\. They learned the basics of school management and administration, how to formulate budgets and manage and monitor resources\. They also learned about the rights and responsibilities as school principals and how to work with new school councils\. 14\. School accountants also gave a strongly positive response in their evaluation of the training received\. All who had received training commented that they now felt more self-assured as professional accountants, well able to manage their increased responsibilities under the new school management arrangements\. They also noted benefits of the training program including sharing experiences, establishing friendships, and expanding their professional network with school accountants from other regions\. An interesting finding of the Beneficiary Assessment was 44  that the relations between the trained school accountants and the regional Education Department of a particular region (Vanadsor) improved as a result of the training\. 15\. School council members who participated in school training were particularly pleased with the knowledge they acquired about the roles and responsibilities of school council members\. As a result of the training, school council members came to the realization that their active participation in school matters provided them with a voice to raise important issues concerning school matters and the overall well being of the students\. It also brought them closer to school principals and made them more willing to actively participate in monitoring activities of microprojects, as well as in the maintenance of completed school microprojects\. 16\. The joint two-day training workshop organized on demand for school principals, accountants, and school board members allowed participants to gain a better understanding of the basic roles and responsibilities of each school staff member, how they can improve their services to the community, and ultimately strengthen their partnership\. 17\. ASIF II training contributed to the strengthening of old, and the establishment of new, social networks in the communities\. It also provided local leaders vital knowledge about their rights and responsibilities\. 18\. The ASIF is well regarded by Government, other donors, by local self-government and by other observers\. It is viewed as effective and professional in its ability to match priority community needs with external investments\. It is also valued for the quality and the scope of the training it provides\. 45  Annex 6\. Stakeholder Workshop Report and Results (if any) Not applicable\. 46  Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR The following comments were submitted by Mr\. Ashot Kirakosyan\. Executive Director of ASIF on behalf of the Ministry of Finance, on February 13, 2007\. The objectives were fully achieved\. The project's main success was that the goals were achieved in full\. Its setbacks were: (i) the decline in USD/AMD exchange rate and the sharp rise in building materials prices which led to the breaching of a number of construction contracts\. New biddings were announced to complete the micro-projects; (ii) the significant amount of funds (more than USD350,000) was frozen in bankrupted Credit-Yerevan bank despite the ASIF's unsuccessful efforts to retrieve the funds\. It should be noted that the funds were fozen in the early part of project implementation and affected all Bank financed projects in Armenia at that time that had accounts in Credit-Yerevan\. This reduction in funds only marginally affected the actual recipients of the sub-projects under the ASIF II Project - - with the reduction of the equivalent of about 2 infrastructure microprojects\. The Armenian Government handled the issue of the frozen accounts in a systemic manner\. ASIF II surpassed ASIF I in many aspects\. The second project included large and well designed component of Local Level Institutional Strengthening\. A big number of community leaders, school principals and accountants received training under this component, which was highly appreciated by the Government of Armenia\. Provision of school furniture also was one of the features of the second project, which favorably distinguished it from the first one\. The main problems were caused by the drop-down of USD/AMD exchange rate and the growth of building materials prices, which brought to the breaching of a number of construction contracts and new biddings were announced to complete the micro-projects\. Some training on rehabilitated infrastructure maintenance could have been provided to communities\. Changes in the regional allocation of ASIF's funds were directed to help the Government's Poverty Reduction Program\. At the very beginning of the project, a significant time was consumed to agree on procurement procedures\. This should be done during the preparation phase\. If more attention had been paid to ASIF staff remuneration, a smaller number of highly qualified staff would have been lost\. The consultants hired showed themselves in a very favorable way\. The midterm review provided the Government and other interested parties with very detailed and useful information on project implementation\. 47  Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders The following comments were received from Mr\. Matt Lesslar on behalf of DFID, United Kingdom on April 11, 2007\. DFID supported the Armenia Social Investment Fund II with a commitment of £1\.2m\. DFID's project nested within the structure of the much larger World Bank loan\. The purpose of DFID's support was to strengthen the capacity of the ASIF Project Implementation Unit to effectively administer and manage the Social Investment Fund\. Project outputs focused upon developing partnerships at the local level between authorities and communities, empowering stakeholders at the local level, capacity building and improving service delivery to communities\. DFID TA has strengthened the capacity of the ASIF team and the contractors who undertake the design, appraisal and monitoring of the micro-projects so that the overall effectiveness of ASIF 2 has improved\. DFID TA has also strengthened the capacity of local government, local councillors, school leaders and accountants and has therefore contributed to the developmental benefits of the SIF instrument\. These investments in local actors last well beyond individual micro projects and have been considered particularly important by the SIF management\. DFID found evidence that partnerships at local level were being enhanced and developed\. The Social Capital Impact Assessment conducted in 2003 provides independent evidence of how partnerships at local level have been developed and enhanced through ASIF, emphasising the crucial role played by local mayors and school directors in mobilising the community\. Specifically, short term local level employment has been generated\. In 2004 alone 73,820 worker day workplaces were created\. The beneficiary impact assessment 2002 highlights that in almost all beneficiary communities assessed on average 20 people in each community took part in civil works on a paid basis for a period of 3-4 months\. The community members employed in the civil works were some of the poorest in their communities\. The 2004 cost effectiveness study concluded that compared with similar investment mechanisms (UNDP, SCF, Oxfam and the government), the 68 ASIF micro projects in education, potable and irrigation water showed impressive cost effectiveness\. The Micro-Projects structure allowed for real benefits to be made at a local level and provided a focus for activities\. They had succeeded in generating much interest and enthusiasm from the local community and feedback received was of a generally positive nature\. ASIF has contributed to the development of partnerships between local government authorities and communities\. DFID's Project Completion Report concluded that ASIF II was contributing to poverty reduction in Armenia\. The achievement of the project purpose has made a valued and significant contribution to the capacity of the World Bank loan to achieve its purpose\. 48  Annex 9\. List of Supporting Documents 1\. Staff Appraisal Report, April 18, 2000 2\. ASIF II Project Aide-Memoires 3\. Mid-Term Mission Report, January 2004 4\. ASIF Operational Manual (updated) 5\. Social Capital Assessment Concept Note May 2003 6\. Social Capital Impact Assessment September 2003 7\. Institutional Assessment January 2004 8\. Institutional Review April 2006 49  Annex 10\. Additional Annexes 10\.1 Armenia: Poverty Targeting Strategy: Regional Allocation of Funds in the ASIF II Project\. An Explanatory Note on the Methodology 1\. The objective of this annex is to outline the poverty targeting strategy and the allocation of funds across marzes (regions) under the ASIF II project\. In broad terms, the allocations by marz were determined by its share of the population, its poverty indicators, and regional preference factors which depend on whether or not it is in the earthquake zone or in a border area affected by military conflicts\. The poverty data for this annex is based on the findings of the Household Budget Survey of 1996/97 and the Bank's report entitled "Improving Social Assistance in Armenia" of June 1999, as presented in the ASIF II Project Appraisal Document\. The main features of the allocation process under the ASIF II Project were as follows: ASIF II funds were primarily allocated by marz\. The objective of this allocation was to ensure regional equity in the use of ASIF II funds and to provide the basis for planning of ASIF expenditures by marz\. In addition, fixing such an allocation was intended to mitigate political pressures to reallocate funds during the project life\. A further sub- division of these allocations to urban and rural areas within each marz was not considered due to the lack of data at the marz level\. The total funds available for regional allocation in ASIF II were divided into two categories: (i) ASIF II marz allocations, excluding the Matching Fund; and (ii) "Adjustment Funds"\. The Matching Fund was based on an IDA contribution of US$2\.71 million, and was supplemented by an equivalent amount from the sponsors, local communities and the Government\. The "Adjustment Funds" referred to funds that were underspent in various marzes during ASIF I implementation, estimated at approximately US$1\.45 million\. Accordingly, marzes which were disadvantaged during the ASIF I, benefited from funds equivalent to the shortfalls automatically added to their marz allocations\. For marzes outside Yerevan, the poverty targeting formula developed was used to calculate the allocation of funds, and thereby ensure a greater shift of funds to these marzes\. For the Yerevan region, the allocation was based on a share of 22\.5 percent of the total allocation, as compared to approximately 26 percent of the amount disbursed under the ASIF I Project\. The allocation to marzes outside Yerevan were, in the first instance, based on two general factors: (a) population; and (b) the poverty score computed from three poverty indicators and two regional preference factors representing earthquake and border zones\. The three poverty indicators were: (i) the poverty incidence (head count index) or the proportion of the population below the national poverty line -- representing the extent or "quantity" of poverty; (ii) the severity index which is the Foster-Greer-Thorbecke (FGT) measure P2 -- representing the intensity of poverty; and (iii) unemployment -- representing the poverty of opportunity to secure a means of sustainable livelihood\. 50  The actual allocations were then calculated using a special formula developed for the purpose\. However, no specific allocations were made to communities within marzes as the ASIF II Project was demand-driven, and microprojects were appraised by ASIF according to agreed appraisal criteria\. 2\. As agreed during the Supervision Mission of June 2001, the targeting formula for the revised allocation included the following new variables: the number of populated areas in each region, except Yerevan, which has a special allocation, based on the proportion used for ASIF I; the number of populated areas in the earthquake zones i\.e\., Aragacotn, Lori, Shirak, and Tavush; and the number of populated areas in the conflict zones, Ararat, Gegarqunick, Sunik, Tavush, and Vajoc Dzor\. 3\. The allocation of funds for the ASIF II Project was developed through a three-step process\. The total amount allocated was equivalent to the total civil works component of ASIF II\. Step 1: The data inputted to the first Excel table included: (a) population by region; (b) the poverty index by region; (c) the severity of poverty index by region; (d) unemployment by region; (e) number of populated areas in all regions except Yerevan; (f) number of populated areas in earthquake zones; and (g) number of populated areas in conflict zones\. The source for (a) was the Armenian State Department of Statistics, while the source for (b), (c), and (d) was the World Bank report "Improving Social Assistance in Armenia" June 1999 (Report No\. 19385- AM)\. The source for (e), (f) and (g) were data presented during the June 2001 Supervision Mission (SPN)\. Step 2: The next step was to normalize the input data into indicators\. Thus, the numbers for (b), (c), (d), and (e) above were expressed as proportions of the respective averages in a second Excel table\. In the case of the regional preference factors in (f) and (g), a scoring system was used to give a higher weight to the earthquake and conflict zones\. Thus, each region received a 'basic' score of 0\.5, while the earthquake and conflict zones were given an additional score as a function of the number of communities in the particular region\. Step 3: The final step in the exercise was to present the regional allocations in a third Excel table on the basis of a number of computations: A poverty score for each region was calculated as an average of the six indicators\. The poverty score was then multiplied by the population to yield a Population-Poverty (P-P) index\. Funds from ASIF II of $8,231,162 (agreed during the June 2001 SPN Mission) were then allocated proportionately to each region (except Yerevan) based on the P-P index\. 51  ASIF I shortfalls were then added to produce the regional allocations (except Yerevan)\. An allocation of $2,809,800 for Yerevan (based on the ASIF I proportion) is added to produce the final allocations for all ten regions\. 4\. Results Achieved: An analysis of IDA disbursements in relation to the regional allocations as of September 5, 2006 showed a high degree of correlation\. The correlation coefficient between disbursements and allocations was calculated to be 0\.95 from the Table below\. Table1: Final Regional Allocations Vs\. Actual Disbursements Marz Allocation of Funds IDA Credit Aragatsotn $ 1,394,706 $ 1,041,165 Ararat $ 1,748,994 $ 1,664,337 Armavir $ 1,268,106 $ 328,431 Gegharkunik $ 1,503,203 $ 1,418,949 Lori $ 3,040,199 $ 2,357,201 Kotaik $ 1,990,462 $ 1,670,312 Shirak $ 3,811,946 $ 2,948,247 Syunik $ 1,113,022 $ 183,740 Vayots dzor $ 517,737 $ 386,381 Tavush $ 1,231,193 $ 1,078,164 Yerevan $ 3,748,431 $ 3,186,947 Total $ 21,368,000 $ 16,263,873 10\. 2 Methodologies of the Assessments and Reviews The following note describes the methodologies used for the several assessments made for and during the implementation of the Project\. Social Capital Impact Assessment The Armenian Center for Social Dialogue and the Yerevan State University collaborated in the preparation of the Social Capital Impact Assessment which was conducted during September- October 2003\. Its main objective was to examine the ways in which ASIF influenced local social and institutional organizations in the Armenian communities, whose advancement was one of the Project's aims\. The assessment was designed to be a qualitative measurement drawn on the views and perspective of ASIF II's beneficiaries\. Its designers, at the same time, crafted the assessment so as to obtain a picture which would also reflect the views of all social groups in the targeted communities\. Also, the study was intended to follow up on the beneficiary assessment carried out in September 2002 which provided more preliminary information on the effects of ASIF's microprojects on local social organizations\. In addition, the Social Capital Assessment set out to determine whether the Project's observed 52  outcomes were attributable to the microprojects themselves, as well as to take account of variances in the communities and the outcomes\. In order to explain the outcomes, the Assessment adopted a control-treatment group comparison, along with in-depth qualitative research techniques\. In-depth interviews were conducted in five control group communities in which ASIF did not finance microprojects\. These were chosen for their similarities to the microproject communities in their main social and economic characteristics\. The causality factor was verified through an in-depth qualitative assessment of the ASIF-assisted communities\. In order to isolate the Project's effects, information was gathered about these communities' histories of social organizations and the levels of community participation before and after the microprojects\. This also examined what roles some particularly active individuals and community leaders played in these communities before the microprojects\. The Assessment's fieldwork was carried out in fourteen urban and rural communities\. The sample included four communities (treatment group) where there were microprojects\. These were statistically matched (using propensity score matching) with another five communities which had no ASIF interventions\. The nine were selected based on the results of the 2001 Living Standards household survey\. The sample also included another five communities which had ASIF microprojects, chosen for purposive or illustrative sampling, in which the Fund was considered likely to have impacted their social capitals\. The Assessment's respondents included (a) local leaders and elites, and (b) community members (who consisted of both those were--and were not--involved in the microproject processes\. Those in the second category were selected through random purposive sampling, stratified so as to reflect the social composition of the beneficiary communities and the views of all existing beneficiary groups\. The main social groups represented included men and women, the elderly and schoolchildren, newcomers and refugees, the disabled, marginally poor and socially excluded households\. The beneficiary sample was not selected to be statistically representative of ASIF communities' total beneficiary communities\. However, because of the in-depth qualitative methodology, the findings are considered to represent an accurate account of the situation in the beneficiary communities\. The Assessment's methods included in-depth interviews (conversational and semi-structured), and focus group interviews (all conducted in Armenian)\. The fieldwork was conducted by six Armenian field researchers, all scholars of Yerevan State University's Sociology Department\., experienced in sociological studies\. They all participated in pilot evaluations at two sites for testing the interview guides and the research methodology\. Microproject Beneficiary Assessment The Beneficiary Assessment (BA) was conducted during December 2005-Febrtuary 2006 by the Armenian Center for Social Dialogue\. Its aim was to examine the effectiveness and impact of the microprojects for different groups of beneficiaries, as well as to gather data on how ASIF might 53  improve its mechanisms\. The Assessment effectively studied the level of beneficiary awareness of ASIF and satisfaction with its microprojects; level of participation in these activities; level of transparency and accountability of the organizations involved; and the impacts of the microprojects on the social capital of the communities, on partnership development and on overall institutional development The Assessment was carried out in 20 urban and rural communities where microprojects were financed (including 12 school, 4 water, 2 community center, 1 health and 1 irrigation activities)\. Those selected for assessment were determined by the microproject's ratio in the overall ASIF program\. The Assessment respondents consisted of (a) leaders and elites, some of whom were involved in project initiation and execution; (b) community members, some of whom also participated in the microprojects; and (c) the latter's contractors responsible for their construction\. The second group were selected through random purposive sampling, stratified to reflect overall social composition of beneficiary communities and groups\. The BA used qualitative and quantitative methods for gathering and measuring data\. There were in-depth interviews (both one-on-one and groups in type) with the local leaders, community members and contractors\. There were focus groups conducted for gathering beneficiaries' feedbacks, which averaged 8-12 participants, and generally lasted up to two hours\. These were used to--and served to--cross-check the information gathered during the in-depth interviews, gauge their validity and reliability\. In addition, there were standardized interviews carried out with 320 direct and indirect microproject beneficiaries\. In the case of school microprojects, the sample universe included all pupils, teachers and parents\. Only 5th-10th grade pupils were surveyed\. Sample distribution was made by an "even distribution" strategy\. Eleven pupil units were selected by systematic random selection; five from 5th-10th grade lists and six from all pupils' lists\. The BA's fieldwork was conducted by eight researchers, balanced in gender\. All had relevant backgrounds in social sciences and experience in sociological studies (both qualitative and quantitative)\. All first completed pilot assessments with random selected beneficiaries to test study instruments and methods\. Pre-test results were discussed with ASIF and some necessary adjustments were made\. Institutional Assessment An institutional report was issued in April 2006\. It built on earlier studies from field visits carried out in July 2003, as well as a field research study conducted in the same year by a team from Armenia's Center for Social Dialogue and Yerevan University\. Similarly, the fieldwork drew on the aforementioned Social Capital Assessment\. The Institutional Assessment (IA) related to the Government's emerging policy and program for 54  decentralization and enhancement of local self-government (which became a significant feature of the design of the ASIF II Project)\. With this background, the IA was chartered to examine the status of the Government's reform measures within the context of the environment of the local communities\. It studied the character and quality of governance arrangements as they influenced efforts to facilitate local economic and social development\. The IA sought to examine progress made and steps taken to establish functional decentralized administrative structures at municipal levels, stressing the delegation of responsibilities and financial authority for service delivery functions there\. It also addressed the range of government activities intended to support decentralization reform at local and regional levels\. Meanwhile, the IA reviewed the communities which had benefited from ASIF investments to assess the quality and impact of local level institutional strengthening activities\. Moreover, the IA was tasked to examine a wide range of possible new activities, such as the preparation of regional development plans, establishment of inter-community unions, options for capacity building in selected municipalities, social services delivery functions, for consideration in the preparation of possible new ASIF programs (including the aforementioned ASIF III Project, now already underway)\. The main IA field mission took place in January 2006\. It consisted largely of interviews in Yerevan, regional centers and local communities, mainly with the Deputy Minister of Territorial Administration, community officials, and representatives of DFID, USAID, PADCO and the UNDP\. These were supplemented by a review of the growing number of Government documents and legislation on governance and local self-government, plus donor reports on these subjects\. Quality of Works Review The Quality of Works Reviews were carried out by local specialists (engineers) who had the task of reviewing a sample of 15 to 20 works projects of different typology that were under construction and completed in different regions\. The review covered: (i) quality of technical designs according to required norms and standards; (ii) construction carried out in accordance with technical designs, drawings, and standards; (iii) quality of workmanship and materials used; (iv) review of environmental effects of the projects by assessing implementation arrangements for ensuring that sub-projects meet environmental requirements and that full consideration is given to environmental safeguards; (v) quality of procedures, supervision and reporting; (vi) the beneficiaries' perceptions of quality of works; and (vii) Development of an Action Plan to address issues identified in the review\. The review also covered an assessment of the actions taken under the agreed Action Plan developed under the previous Quality of Works Review\. In some cases, depending on the specialization of the consultant carrying out the review, special training sessions were organized at the ASIF Office to address technical issues raised in the review\. 55

REVIEW

P058684

 ICRR 11554 Report Number : ICRR11554 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 09/22/2003 PROJ ID : P058684 Appraisal Actual Project Name : Gz-community Dev\. Ii Project Costs 15\.00 20\.82 US$M ) (US$M) Country : West Bank & Gaza Loan /Credit (US$M) Loan/ US$M ) 8 8\.01 Sector (s): Board: SP - Other social Cofinancing 5\.5 11\.69 services (88%), US$M ) (US$M) Sub-national government administration (10%), Central government administration (2%) L/C Number : Board Approval 99 FY ) (FY) Partners involved : OPEC Fund, European Closing Date 10/31/2002 10/31/2002 Investment Bank Prepared by : Reviewed by : Group Manager : Group : Nalini B\. Kumar Roy Gilbert Alain A\. Barbu OEDST 2\. Project Objectives and Components a\. Objectives The project objective was to rehabilitate community infrastructure through labor intensive micro projects while improving their targeting towards poor and marginalized areas, including refugee camps \. The project objective was not revised\. The project built on the success of the first Community Development Project \. b\. Components The project had three components : (i) Civil works, infrastructure improvements (90 percent of project support) ; (ii) Technical assistance--capacity building for LGU/contractors (4 percent of project support); and (iii) project Management Support (6 percent of project support)\. c\. Comments on Project Cost, Financing and Dates The project was appraised in January 1999 and approved in March of the same year \. The mid term review (MTR) took place in February 2001\. The project closed in October 2002, on schedule\. At appraisal co-financiers were expected to provide US $ 5\.5 million but they had not been identified \. Actual co-financing was more than double the amount envisaged at appraisal \. The success of the first project attracted financing from OPEC and the European Investment Bank (EIB) which committed US$ 8 million and US $ 10 million respectively by the time the project became effective\. However EIB suspended its operations after disbursing about 3\.5 million Euros due to the socio-political unrest\. OPEC disbursed 90 percent of the committed amount\. 3\. Achievement of Relevant Objectives: No rate of return calculations were made for the project either at appraisal or completion \. However, the project exceeded its target of rehabilitating infrastructure \. More than 200 micro-projects--road rehabilitation, water and sanitation systems schools --were completed, But the project had a limited impact on employment creation \.The implementation of a large number of non -labor intensive road projects pushed down employment generation averages\. Initially the location of the sub -projects were in areas identified by the poverty map prepared by the Palestinian Center Bureau of Statistics\. However, with the political unrest, unemployment rates rose significantly in all the Palestinian territories reducing the relevance of the poverty maps themselves \. The project was overtaken by events during the Intifada and the critical need for rehabilitation /upgrading of access and link roads became a major deciding factor for the kind of sub-projects undertaken\. 4\. Significant Outcomes/Impacts: The project far exceeded the planned target of rehabilitating infrastructure, well above the 125 micro-projects initially envisioned; one million people are reported to have benefitted from project activities (more than 32 percent of the population of West Bank and Gaza); 325 kms\. of roads were rehabilitated and reconstructed and provided the critical lifeline for inter -community  travel and commerce; 5\. Significant Shortcomings (including non-compliance with safeguard policies): The project had limited impact on employment creation; Delays in implementing the technical assistance component reduced the possible institutional capacity building impact; A significant disconnect between community priorities and actual sub -project implementation (graph, page 4 ICR)\. Most of the rehabilitation of infrastructure was for roads; 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]\. The project achieved its objectives in rehabilitating community infrastructure but with significant shortcomings as noted in section 5\. Institutional Dev \.: Substantial Substantial Sustainability : Unlikely Unlikely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Highly Satisfactory Satisfactory Although performing well overall, the Borrower steered the project too far away from its employment generation and poverty reduction goals\. Quality of ICR : Unsatisfactory 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 project was intended to be a Community Driven Development (CDD) operation\. The Evaluation Summary identifies one project specific and two CDD relevant lessons \. Project specific lessons: In conflict and post conflict situations, where the ongoing security and political situation creates a high degree of uncertainty, a Bank operation has to be realistic right from the design stage about sustainability expectations \. A follow-on operation called the Integrated Community Development Project (ICDP) is being supported in West Bank and Gaza\. Given the current political situation in the region, sustainability could be an issue even in that intervention and this risk should be factored in the approval process of other follow -on projects\. CDD relevant lessons: (i) It is important to clearly recognize that the CDD approach cannot work effectively in all situations \.Given the uncertain and politically volatile environment in which it was being implemented, the project in West Bank and Gaza consulted with communities about their preferences but could give them little actual control over decisions and resources\. Community preference for sub-projects could not also be realistically met for a variety of reasons, some of which are noted here: other agencies were already active in supporting interventions in the health and educations sectors and the Bank was to supplement rather than replace their work, road rehabilitation had been neglected in the past and required urgent attention, the uprising made village access roads even more critical (para 4\.2, ICR)\. Ultimately, there was a significant disconnect between local community priority and actual sub -project execution by sector (graph page 4)\. ii) Even in demand driven interventions calculations of rates of return should be emphasized at least at the (ii) project completion stage \. In the Second Community Development Project no ERR was undertaken ex -ante on the ground that the sub-projects were to be demand driven \. However an ex-post ERR can be calculated and should be attempted to get a reliable indicator of efficiency \. 8\. Assessment Recommended? Yes No Why? For two reasons: (i) to verify the outcome and institutional development impact; (ii) to provide input to OED's post conflict study\. 9\. Comments on Quality of ICR: The ICR is rated unsatisfactory overall because it fails to give a complete picture of project performance \. It focuses only on the post Intifada phase giving practically no information on the pre Intifada phase during which substantial project disbursements were made \. Hence it is difficult for the reader to clearly understand how project implementation actually changed because of the uprising \.

REVIEW

P003688

 ICRR 10009 Report Number : ICRR10009 ICR Review Operations Evaluation Department 1\. Project Data : OEDID : OEDID: L3074 Project ID : P003688 Project Name : Third Telecommunication Country : Fiji Sector : Telecommunications & Informatics L/C Number : Loan 3074-FIJ Partners involved : EIB, Australia Prepared by : Alain A\. Barbu, OEDST Reviewed by : Yves J\. Albouy Group Manager : Roger H\. Slade Date Posted : 04/15/1998 2\. Project Objectives, Financing, Costs and Components : The project, supported by a loan of US$ 8\.1 million, was approved in FY89 and closed one year behind schedule in FY97 at which time a balance of US$0\.5 million was canceled\. The project encompassed Fiji Post and Telecommunications Limited (FPTL)'s 1990-94 investment program for a total cost of US$ 47\.9 million, to be co-financed by the Australian government and EIB \. Actual cost of the program was US$ 104\.9 million, due to an increase in project scope \. The project's primary objectives were : (i) establishment of an appropriate policy and regulatory framework; (ii) commercialization of Fiji's P&T; (iii) institutional strengthening of P&T; and (iv) expansion and modernization of the telecommunications network, including broadening of range of services and improvement in quality of service \. FPTL's investment program included, inter alia, construction of 15,000 new DELs, digital switching and transmission equipment, and rural radio telephone stations \. In addition, the project provided for technical assistance (via twinning) and training for FPTL and a newly-created Government Regulatory Unit, as well as a sector restructuring study \. 3\. Achievement of Relevant Objectives : Physical objectives were either met or slightly exceeded (as program was expanded to include modernization/replacement of equipment, beyond original plans )\. Most efficiency and quality of service targets were achieved, albeit later than scheduled \. Although FTPL's financial situation worsened between 1994 and 1995 due to insufficient tariff increases, it had turned around by 1995 when all financial covenants were met anew \. On the institutional and policy side, however, objectives were only partially met as the restructuring of the sector and the set up of a regulatory framework were hampered by senior management turnover and lack of Government commitment \. Lately, sector reform appears to have regained impetus with the establishment of separates companies for posts (PFL) and telecoms (TFL) in 1996 and the initiation of a study of TFL's privatization in mid -1997\. 4\. Significant Achievements : Physical objectives met or exceeded and commendable improvements in efficiency and quality of service (see above)\. TPFL's finances recovered in 1995 after several years of insufficient tariff increases \. 5\. Significant Shortcomings : Belated progress on restructuring and regulatory front (see above)\. Lower-than estimated ERR (5\.3 vs\. 22 percent), which the ICR attributes primarily to expanded scope of investment program (in spite of decreases in unit costs per line permitted by advances in technology )\. Possible other explanation for lower ERR could be that tariffs remain below long -term economic cost of service \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Marginally Satisfactory Achievement of physical targets marred by mixed financial performance (see above)\.  Institutional Dev \.: Partial Modest Because some basic ID objectives were not met, improvements in the sector's performance were mixed; e\.g\., substantial for quality of service, negligible for pricing regulation\. Hence the impact is rated modest\. Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Satisfactory Satisfactory Mostly on account of more recent progress achieved in sector reform Quality of ICR : Satisfactory 7\. Lessons of Broad Applicability : Key importance of staff continuity on both Borrower and Bank side for smooth project implementation and policy dialogue\. 8\. Audit Recommended? Yes No 9\. Comments on Quality of ICR : Generally satisfactory on most counts, with one major exception, i \.e\. the lack of discussion of factors explaining apparent significant increase in unit costs per line constructed and correspondingly low ERR (see above)\. Region subsequently provided clarifications \. Also, no comments from co-financiers included\.

REVIEW

P089082

Document of The World Bank Report No: Report No: ICR00003082 IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF-57296) ON A GLOBAL ENVIRONMENTAL FACILITY TRUST FUND GRANT IN THE AMOUNT OF US$ 5\.0 MILLION TO THE REPUBLIC OF THE PHILIPPINES FOR A GEF MANILA THIRD SEWERAGE TREATMENT PROJECT November 4, 2014 GWADR EACPF East Asia and Pacific  CURRENCY EQUIVALENTS (Exchange Rate Effective November 28, 2006) Currency Unit = Philippine Peso1\.00 = US$ 0\.020 US$ 1\.00 = Peso 51\.00 (Exchange Rate Effective May 31, 2014) Currency Unit = Philippine Peso 1\.00 = US$ 0\.023 US$ 1\.00 = Peso 43\.83 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank LGU Local Government Unit BOD Biochemical Oxygen Demand LISCOP Laguna de Bay Institutional BOD5 Dissolved oxygen consumed in Strengthening and Community five days by biological processes Participation breaking down organic matter\. LLDA Laguna Lake Development CAS Country Assistance Strategy Authority CWA Clean Water Act M&E Monitoring and Evaluation DAO DENR Administrative Order MBCO Manila Bay Coordinating Office DENR Department of Environment and MM Metropolitan Manila Natural Resources MMDA Metropolitan Manila DOH Department of Health Development Agency DPWH Department of Public Works and MOA Memorandum of Agreement Highways MOU Memorandum of Understanding EIA Environmental Impact MSSP Manila Second Sewerage Project Assessment MTSP Manila Third Sewerage Project EMB Environmental Management MWCI Manila Water Company Inc\. Bureau MWSI Maynilad Water Services, Inc EMP Environmental Management MWSS Metropolitan Waterworks and Plan Sewerage System EUF Environment User Fee NCR National Capital Region FASPO Foreign Assisted and Special OSEC Office of the Secretary Projects Office, DENR PASS Public Assessment on Sewerage FM Financial Management and Sanitation Services GEF Global Environmental Facility PAWS Public Assessment of Water GEO Global Environmental Objective Services GOP Government of the Republic of PCC Project Coordinating Committee Philippines PCR Project Completion Report IBRD International Bank for PDO Project Development objective Reconstruction and PEMSEA Partnerships in Environmental Development Management for the Seas of East JSSTP Joint Septage and Sewage Asia Treatment Plant PIC Partnership Information Centre PMO Project Management Office Sanitation Master Plan PRRC Pasig River Rehabilitation STP Sewage Treatment Plant Commission TA Technical Assistance RO Regulatory Office TOR Terms of Reference SDP Sector Development Program TWG Technical Working Group SpTP Septage Treatment Plant WQMA Water Quality Management SSMP MWSS updated Sewerage and Area Vice President: Axel van Trotsenburg Country Director: Motoo Konishi Practice Manager: Ousmane Dione Project Team Leader: Maya Villaluz ICR Team Leader: Claire Grisaffi  REPUBLIC OF THE PHILIPPINES GEF Manila Third Sewage Treatment 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 \. 3 3\. Assessment of Outcomes \. 9 4\. Assessment of Risk to Development Outcome \. 15 5\. Assessment of Bank and Borrower Performance\. 15 6\. Lessons Learned\. 16 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 16 Annex 1\. Project Costs and Financing \. 18 Annex 2\. Outputs by Component\. 19 Annex 3\. Economic and Financial Analysis \. 21 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 25 Annex 5\. Beneficiary Survey Results \. 27 Annex 6\. Stakeholder Workshop Report and Results \. 28 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 32 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders \. 35 Annex 9\. List of Supporting Documents\. 36 MAP A\. Basic Information PH-GEF-Manila Third Country: Philippines Project Name: Sewerage Project Project ID: P089082 L/C/TF Number(s): TF-57296 ICR Date: ICR Type: Core ICR Lending Instrument: SIL Borrower: Original Total US$ 5\.00M Disbursed Amount: US$ 4\.97M Commitment: Revised Amount: US$ 5\.00M Environmental Category: B Global Focal Area: I Implementing Agencies: DENR, MWSS, LLDA Cofinanciers and Other External Partners: Maynilad Water Services Inc\. (MWSI) provided co-financing of US$3\.35M B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 08/10/2005 Effectiveness: 08/16/2007 Appraisal: 09/06/2006 Restructuring(s): 11/27/2012 Approval: 06/26/2007 Mid-term Review: 12/15/2010 12/13/2010 Closing: 11/30/2012 05/31/2014 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 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 C\.3 Quality at Entry and Implementation Performance Indicators Implementation Indicators QAG Assessments Rating  Performance (if 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: Unsatisfactory D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Wastewater Treatment and Disposal 56 56 Central government administration 37 37 Sub-national government administration 7 7 Theme Code (as % of total Bank financing) Environmental policies and institutions 25 25 Pollution management and environmental health 25 25 Water resource management 24 24 Other public sector governance 13 13 Other Private Sector Development 13 13 E\. Bank Staff Positions At ICR At Approval Vice President: Axel van Trotsenburg Country Director: Motoo Konishi Joachim von Amsberg Practice Manager: Ousmane Dione Keshav Varma Project Team Leader: Maya Gabriela Q\. Villaluz Luiz Claudio Martins Tavares ICR Team Leader: Claire Grisaffi ICR Primary Author: F\. Results Framework Analysis Global Environment Objectives (GEO) and Key Indicators(as approved) The GEF project development objectives are to assist the GOP in the Project Areas in: (a) identifying essential adjustments to administrative, institutional, and regulatory practices and existing legislations in order to attract private investments in the Recipient's wastewater sector; (b) promoting innovative, simple and effective wastewater treatment techniques; and (c) increasing the effectiveness of the agencies responsible for water pollution control through improved coordination\. Revised Global Environment Objectives (as approved by original approving authority) and Key Indicators and reasons/justifications (a) GEO Indicator(s) Original Target Formally Actual Value Baseline Values (from Revised Achieved at Indicator Value approval Target Completion or documents) Values Target Years Indicator 1: Coverage of sewage service in MWSS jurisdiction (% of population) Value (quantitative or 12 20 18 12 qualitative) Comments (incl\.% Target not achieved\. Outside of the scope or control of the achievement) project\. 06/26/200 Date 11/30/2012 11/27/2012 05/31/2014 7 Indicator 2: Coverage of sanitation services in MWSS jurisdiction (% of population) Value (quantitative or 24 57 100 38 qualitative) Comments (incl\.% 38% of target met\. Outside of the scope or control of the project achievement) and therefore quantifying attribution to the project is difficult\. 06/26/200 Date achieved 11/30/2012 11/27/2012 05/31/2014 7 Indicator 3: Reduction of pollution reaching Manila Bay; 000 metric tonnes of BOD5/year Value (quantitative or 0 9 9 2 qualitative) 22% of target met\. Outside of the scope or control of the project Comments (incl\.% and therefore quantifying attribution to the project is difficult\. No achievement) direct measurement available for this figure, value is estimated by MWSS\. 06/26/200 Date achieved 11/30/2012 11/27/2012 05/31/2014 7 (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Baseline Values (from Achieved at Indicator Revised Value approval Completion or Target Values documents) Target Years Component 1 - Partnership strengthening among the Government agencies responsible for water pollution control Indicator 1: Agencies responsible for water pollution control signing a Memorandum of Understanding (MOU) (cumulative #) Value (quantitative or 0 7 - 7 qualitative) Comments (incl\.% 100% Target No change achievement) achieved Date achieved 06/26/2007 01/31/2013 11/27/2012 01/31/2013 Indicator 2: Other stakeholders signing on to this MOU (cumulative #) Value (quantitative or 0 17 14 14 qualitative) Comments (incl\.% 100% Target achievement) achieved Date achieved 06/26/2007 11/30/2012 11/27/2012 01/31/2013 Indicator 3: Bi-annual Partnership meetings (cumulative #) Value (quantitative or 0 10 - 19 qualitative) Comments (incl\.% No change Target exceeded\. achievement) Date achieved 06/26/2007 11/30/2012 11/27/2012 01/31/2013 Indicator 4: Water quality monitoring areas established Value (quantitative or 0 - 3 1 qualitative) Comments (incl\.% Introduced at 33% of target achievement) restructuring completed Date achieved 06/26/2007 11/30/2012 11/27/2012 05/31/2014 Indicator 5: Numbers of policy issuance (administrative orders) on sewerage and sanitation related matters issued by national authorities Value (quantitative or 0 8 - 4 qualitative) 50% of target met Notifications on three WQMAs and the Sanitation Ordinance issued in draft by DILG\. Following Comments (incl\.% No change completion three achievement) more Administrative orders were issued on policy documents developed under the project\. Date achieved 06/26/2007 11/30/2012 11/27/2012 05/31/2014 Indicator 6: Publication of annual Metropolitan Manila (MM) Water Quality Monitor (cumulative #) Value (quantitative or 0 3 2 0 qualitative) Comments (incl\.% Target not met achievement) Date achieved 06/26/2007 11/30/2012 11/27/2012 05/31/2014 Indicator 7: Testing of Public Assessment of Water Services with sewerage and sanitation parameters Value (quantitative or 0 1000 1000 1000 qualitative) Unit changed Cumulative from number Comments (incl\.% number of of barangays – Target met achievement) barangays – 20 hh to number of per barangay households Date achieved 06/26/2007 11/30/2012 11/27/2012 05/31/2014 Component 2 - Planning and policy development Indicator 1: Sewerage and sanitation master plan with new criteria updated Value (quantitative or 0 1 - 0 qualitative) Master Plan is updated, but not yet Comments (incl\.% No change approved\. achievement) Estimated 80% complete Date achieved 06/26/2007 11/30/2012 11/27/2012 05/31/2014 Component 3 - Innovative financing Indicator 1: Number of investment proposals using innovative financing mechanism for sewerage and sanitation in Metropolitan Manila Value (quantitative or 0 2 - 3 qualitative) Changed from number of Contracts using Comments (incl\.% innovative Target exceeded\. achievement) financing mechanism to number of proposals\. Date achieved 06/26/2007 11/30/2012 11/27/2012 05/31/2014 Component 4 - Use of Market-based Incentives Indicator 1: Number of establishments covered by the environment user fee (cumulative #) Value (quantitative or 1000 1800 2400 2922 qualitative) Target exceeded\. Comments (incl\.% Difficult to attribute achievement) to the project\. Date achieved 06/26/2007 11/30/2012 11/27/2012 05/31/2014 Indicator 2: Parameters covered by the environment user fee (cumulative #) Value (quantitative or 1 3 - 1 qualitative) Target not met\. Comments (incl\.% No change Policy achievement) recommendations  drafted\. One additional indicator (TSS) was introduced under another project\. Date achieved 06/26/2007 11/30/2012 11/27/2012 05/31/2014 Indicator 3: Biochemical Oxygen Demand (BOD) discharged from all regulated sources (metric tonnes per year) Value (quantitative or 1500 1215 4682 4104 qualitative) Baseline Target Target reduction Comments (incl\.% revised to reduction of exceeded\. Difficult achievement) 5202 in 10% from to attribute to the 2010 2010 baseline project Date achieved 06/26/2007 11/30/2012 11/27/2012 05/31/2014 Component 5 - Rate rebasing Indicator 1: Coverage of sewerage service in Manila Water Company, Incorporated (MWCI) concession area as result of 2008 rate rebasing adjustment (as % of water connections) Value (quantitative or 10 30 18 12 qualitative) Recipient 40% of target Baseline Comments (incl\.% revised from increase reached\. revised to achievement) MWCI to Attribution to rate 8% in 2010 MWSI rebasing is difficult Date achieved 06/26/2007 11/30/2012 11/27/2012 05/31/2014 Indicator 2: Coverage of sanitation service in MWCI concession area as result of 2008 rate rebasing adjustment (as % of water connections) Value (quantitative or 5 70 68 47 qualitative) Recipient 66% of target Comments (incl\.% revised from increase reached\. achievement) MWCI to Attribution to rate MWSI rebasing is difficult Date achieved 06/26/2007 11/30/2012 11/27/2012 05/31/2014 Component 6 - Joint sewage and septage treatment plant (JSSTP) Indicator 1: Reduction of costs per m3 of septage collection, treatment and disposal using joint treatment as compared to separate septage treatment (%) Value (quantitative or 0 20 - 20 qualitative) Comments (incl\.% No change Target reached\. achievement) Date achieved 06/26/2007 11/30/2012 11/27/2012 05/31/2014 G\. Ratings of Project Performance in ISRs Actual Date ISR No\. GEO IP Disbursements Archived (US$ millions) 1 06/27/2008 Satisfactory Satisfactory 0\.56 2 06/03/2009 Satisfactory Moderately Satisfactory 1\.00 3 05/20/2010 Satisfactory Moderately Satisfactory 1\.32 4 04/05/2011 Satisfactory Moderately Satisfactory 1\.99 5 02/25/2012 Satisfactory Moderately Satisfactory 2\.83 6 04/22/2013 Moderately Satisfactory Moderately Satisfactory 3\.49 Moderately 7 12/29/2013 Moderately Satisfactory 4\.97 Unsatisfactory Moderately 8 05/09/2014 Moderately Unsatisfactory 4\.97 Unsatisfactory H\. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in US$ millions (a) Extension of Grant Closing Date by 18 months to May 31, 2014, to enable financing equipment for the JSSTP\. (b) Amendment of Indicators to reflect realistic baseline 11/27/2012 No S MS 3\.24 conditions and achievable targets\. (c) Addition of one indicator for establishment of WQMAs (d) Correction of Name of Recipient Agency for rate rebasing I\. Disbursement Profile \. 1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal 1\. Metropolitan Manila (MM), the capital of the Philippines is located in the hydraulically complex Pasig River - Laguna de Bay - Manila Bay watershed\. Manila Bay is an important economic zone, producing 35-40% of the national GDP\. All MM waterways are heavily polluted and the key watercourses, the Marikina and Pasig Rivers, are biologically dead\. Up to 75% of pollution is caused by domestic sewage, with the rest originating from industry\. Within MM less than 15% of residents are connected to a sewerage system, and most of the wastewater from sewerage and septage is discharged without treatment\. 2\. The water pollution control sector is complex and fragmented; many government agencies are involved, including: Department of Environment and Natural Resources (DENR), Metropolitan Waterworks and Sewerage System (MWSS) - and its two concessionaires, Manila Water Company Inc\. (MWCI) and Maynilad Water Services Inc\. (MWSI) - Department of Health (DOH), Laguna Lake Development Authority (LLDA), Pasig River Rehabilitation Commission (PRRC), and local government units (LGUs)\. The Government of the Philippines (GOP) has taken steps to address the problems in the sector, including policy changes and investment\. The GOP enacted the Clean Water Act 2004 (CWA-2004) 1 which aims to protect the country’s water bodies from pollution from land-based sources and provides for a comprehensive strategy to prevent and minimize pollution through a multi-sectoral approach\. DENR is the primary government agency responsible for the implementation and enforcement of this Act; the responsibility for environmental sanitation, specifically domestic wastewater was a new extension to its mandate\. 3\. The World Bank has been involved in wastewater sector development in MM for many years, primarily through a series of investment projects under the leadership of MWSS\. The GEF project was developed to provide technical assistance (TA) to the Manila Third Sewerage Project P079661 (MTSP) financed by an IBRD loan of US$64 million (approved by the Board in 2005 and closed 2012) and implemented by MWSS\. The GEF project was also initially envisaged to be implemented by MWSS and preparation started at around the same time\. However the scope of activities required in identifying and targeting hot spots and water quality monitoring meant that it was ultimately within the mandate of DENR\. At the time of appraisal, despite their assigned mandate, DENR did not have any experience in domestic wastewater management projects, had no dedicated sanitation department and did not consider domestic wastewater as a high priority\. The level of ownership within DENR and enthusiasm to take on this new role in domestic wastewater was relatively limited\. On the contrary MWSS has an established role in implementing wastewater management projects, but no mandate in overall water quality management and monitoring\. There was therefore a level of tension over the potentially competing and overlapping responsibilities and mandates\. The discussions between the implementing agencies took almost two years before the GEF project eventually started in 2007\. 1 Key relevant aspects of this Act are; (a) the requirement for DENR to designate water quality management areas and establish multi-sectoral governing boards to manage water quality issues within their jurisdiction; (b) the requirement for all owners or operators of facilities that discharge wastewater to get a permit to discharge from the DENR or the Laguna Lake Development Authority; and (c) the development of Fiscal and non-fiscal incentives for LGUs, water districts, enterprise, private entities and individuals who undertake outstanding and innovative projects in water quality management 1 4\. This project was financed by the Strategic Partnership Investment Fund for Pollution Reduction in the Large Marine Ecosystems of East Asia (the Fund), under the GEF’s Contaminant-Based Operational Program No 10\. The objectives of the project were consistent with the World Bank, 2001 Global Environment Strategy and the 2005 EAP Environment Strategy\. 1\.2 Original Global Environment Objectives (GEO) and Key Indicators 5\. The GEO is to assist the GOP in the Project Areas in: a\. identifying essential adjustments to administrative, institutional, and regulatory practices and existing legislations in order to attract private investments in the Recipient's wastewater sector; b\. promoting innovative, simple and effective wastewater treatment techniques; and c\. increasing the effectiveness of the agencies responsible for water pollution control through improved coordination\. 6\. Key original GEO indicators are as follows: a\. Coverage of sewage service in MWSS jurisdiction (% population); increase from 12 to 20 b\. Coverage of sanitation service in MWSS jurisdiction (% population); increase from 24 to 57 c\. Pollution reaching Manila Bay (1,000 metric tons of BOD5/year); reduction of 9 1\.3 Revised GEO (as approved by original approving authority) and Key Indicators, and reasons/justification 7\. There were no changes to the GEO\. Following the midterm review the baseline and the targets for the key indicators were revised as follows: a\. Coverage of sewage service in MWSS jurisdiction (% population); increase from 8 to 18 b\. Coverage of sanitation service in MWSS jurisdiction (% population); increase from 24 to 100 c\. Reduction of pollution reaching Manila Bay (1,000 metric tons of BOD5/year); no change 8\. Changes were made to the baseline and target values for the intermediate indicators as described in the project data sheet\. One additional indicator was added; establishment of Water Quality Management Areas (WQMAs)\. Both the GEO and the intermediate indicators were revised with the aim to reflect realistic baseline conditions and achievable targets\. 1\.4 Main Beneficiaries 9\. The project activities will have a direct impact on around 19 thousand people, including the following beneficiary groups: a\. 18,500 people within Quezon City, whose wastewater will be treated in the Joint Septage and Sewerage Treatment Plant (JSSTP), benefiting from improved sewerage and septage services\. b\. 14 LGUs who have been supported through an MoU with DENR to develop action plans to improve wastewater management c\. 60 staff from; DENR, MWSS, MWCI, MWSI, DPWH, DILG, MMDA, PPRC and 11 LGUs who have been trained on data management systems and Geographic Information Systems d\. 160 staff from DENR, LLDA, DoH, MWSS and concessionaires, MMDA, PRRC and nine LGUs (including Barangay officials) who benefitted from workshops on community organizing for sanitation and sewerage improvement and water quality monitoring e\. LLDA who benefitted from technical assistance market based instruments, including (i) extending and restructuring the Environmental User Fee (EUF) and (ii) innovative financing models for investments into environmental sanitation f\. DENR who benefitted from technical assistance to develop draft policies on sanitation and 2  sewage management\. In addition, Makati and Quezon LGUs which benefitted from the draft policy on septage management to develop Ordinances g\. MWSS, and DENR, who benefitted from technical assistance to draft updates to the Sewerage and Sanitation Master Plan (SSMP), pilot the Public Assessment on Sewerage and Sanitation Services (PASS) and improve the rate rebasing process 10\. Indirect beneficiaries are extensive and include (a) Low income-class communities around the JSSTP who benefit from improved quality of effluent and reduced odor; (b) National and local institutions benefitting from support to the implementation of the CWA-2004; (c) Large sections of MM who are expected to benefit from improved water quality in the long term; and (d) National and local agencies as well as MM communities that will benefit from the future implementation of the policies\. 1\.5 Original Components 11\. The seven GEF project components are described below\. Component 1-6 combine to identify impediments to cooperation among sector agencies and to investments in sewerage and sanitation\. Component 7 supports project management, monitoring, evaluation and dissemination\. 1\. Partnership strengthening among the Government agencies responsible for water pollution control ($1\.00M) 2\. Planning and policy development ($0\.5M), including Updating the 2013 MM SSMP\. Developing or updating relevant policy instruments 3\. Innovative financing ($0\.5M): Development and testing of financing options and identification of incentives for private sector participation 4\. Use of Market-based Incentives ($0\.1M) 5\. Support to MWSS Rate rebasing ($0\.6M) 6\. Joint sewage and septage treatment plant (JSSTP) ($4\.7 million - $1\.3 million financed by GEF, remainder from the Counterpart funds) 7\. Project Management ($1\.0 Million) support to DENR 1\.6 Revised Components 12\. During restructuring one activity was added to Component 1; establishment of three WQMAs\. 1\.7 Other significant changes a\. The end of the project was extended from November 30, 2012 to May 31, 2014\. This 18 month extension was required to ensure that the joint septage and sewage treatment plant (JSSTP) to be fully operational before the grant closing date\. There was no increase to the project budget as a result of this extension\. b\. The name of the Technical Assistance (TA) recipient agency for rate rebasing was changed from Manila Water Company Inc\. (MWCI) to Maynilad Water Services Inc\. (MWSI)\. MWCI had completed rate rebasing negotiations before the Grant was approved\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 13\. Application of Lessons Learned\. The GEF project preparation was supported by analysis and experience gained through the previous Manila Sewerage Projects\. The project made efforts to identify and incorporate lessons learned\. One of the issues highlighted was the need to engage all stakeholders, including civil society, in order to catalyze large-scale structural change 3 in the sector\. The project incorporated a strong focus on building partnerships between different agencies in order to increase efficiency and impact\. In addition, the project took on board the lessons learnt during the 2002-03 rebasing exercise when the Government had insufficient information to prioritize environmental issues during its negotiations with concessionaires\. 14\. Stakeholder Participation\. Stakeholder participation during preparation was good\. All participating agencies were involved in consultation and their concerns were incorporated into the project which led to a much broader project scope\. While this process increased ownership by the different stakeholders it also contributed to the complexity of the project\. Several public consultations were done during the Environmental Assessment, including meetings with local residents, communities, local government representatives, and analysis of public opinion\. 15\. Implementation arrangements: A number of agencies were responsible for project implementation, reflecting the complexity of the water pollution control sector and the different responsibilities and mandate of each agency\. Components 1-3 were led by DENR’s Environmental Management Bureau (EMB)\. Component 4 was implemented by the Laguna Lake Development Authority (LLDA)\. Components 5 and 6, and also part d of Component 1, were carried out by Metropolitan Waterworks and Sewerage System (MWSS)\. Coordination of these agencies and day-to-day management of the project was carried out by the Project Management Office (PMO) within DENR\. General administration (including procurement, financial management, selection and contract management of consulting services), and progress reporting, was provided by the Foreign Assisted and Special Projects Office (FASPO), also within DENR\. The Pasig River Rehabilitation Commission (PRRC) and the Manila Bay Coordinating Office (MBCO) were involved in the activities to harmonize water quality monitoring\. Submission of policy DENR documents for approval Joint review and FAPSO: PMO-EMB: Administration and Coordination and approval of the SSMP financial management technical MWSS: C5-6 and EMB: C1-3 LLDA: C4 C1d (SSMP) NCR-EMB: MWSI: JSSTP Hosting PIC implementation 16\. The institutional and technical capacities of DENR and MWSS were reviewed during preparation and found to be largely adequate\. Some capacity building needs were identified and conducted during project implementation\. 17\. A detailed study of the capacity of LGUs to improve environmental sanitation was not completed\. LGUs were known to have relatively low capacity in the domestic wastewater sector and not to see it as a priority area for budget allocation; these constraints were the drivers for engaging the LGUs in the project as important stakeholders\. 18\. Risks and their mitigation\. The majority of the risks identified during preparation did 4 materialize during project implementation, and led to delays including; (a) procurement delays due to low capacity, (b) the risk of low investment from the concessionaires (c) the difficulties of reaching efficient working partnerships among the major agencies; and (d) potential administrative bottlenecks given the numerous participating agencies\. There were no new risks found during implementation and in this sense the identification of risks was very accurate\. However the ‘modest’ risk level identified during preparation did not fully reflect the fact that DENR had previously done little work on regulation of domestic wastewater, had limited capacity in the sub sector, regarded domestic waste as a relatively low priority and had no direct mandate in sanitation infrastructure provision\. For example both (a) the risk of low investment from the concessionaires; and (b) difficulties in partnering among the major agencies; should have been set at ‘high’, rather than ‘modest’\. Mitigation measures were integrated into the design of the project – for example through partnership development, but were not sufficient to address the difficult context\. Additional measures should have been taken, such as reducing the scope and simplifying the GEO to include a single aim\. With hindsight, despite the small size of the project, given the complex design and ambitious scope the risk level should have been assessed as ‘substantial’\. 19\. Assessment of overall design\. The project was relevant and responded to the needs and priorities of DENR and MWSS\. It directly supports the implementation of CWA-2004 and also contributed to the Country Assistance Strategy’s (CAS 2006-2008) focus on efficient provision of basic services and the importance of good environmental management to support growth\. The preparation met Bank fiduciary, social and environmental safeguard policies, including public disclosure of all required documents\. 20\. The project design attempted to reflect the realities of the water pollution control sector and such is highly complex, with seven components covering a diverse range of technical areas and three implementing agencies\. Locating the PMO under the supervision of both FASPO and EMB introduced additional reporting and approval steps in the project management\. Combining the implementation of sewage treatment works under the auspices of the environmental regulatory authority, DENR, introduced additional complexities and, as described above, there was an inherent tension in the project due to the new mandate of DENR and the existing role of MWSS\. In addition during project preparation there were limited attempts to provide systematic support which might have made partnership development more successful, for example the project did not complete an assessment of each agency to determine how their organization and procedures might help or hinder partnership development\. The design of the monitoring framework reflected the complexity and ambition of the project; with GEO indicators projecting ambitious MM wide improvements in sanitation and sewerage\. 21\. There was no formal Quality at Entry review for the project\. Due to the high level of complexity in the design, and under estimation of the risk, this ICR concludes that Quality at Entry was Moderately Unsatisfactory\. 2\.2 Implementation 22\. Overall Implementation was rated as consistently Moderately Satisfactory in Implementation Status Reports (ISRs)\. Although the project has completed the majority of the planned outputs, and disbursed the full grant allocation, only 8 of the 15 intermediate indicators and none of the GEO indicators, have been achieved\. In the final ISR the Implementation Progress was therefore downgraded\. The project implementation faced a number of challenges as summarized below; a\. Rapid staff turnover of all PMO members, for example the Project Manager changed four 5  times during implementation\. This high turnover was due in part to a requirement that the Project Manager be at Director Level which aimed to increase the profile of the project, but instead led to reduced management support as Directors had few incentives to stay with the project\. The technical staff assigned to the project were only assigned part time and were therefore also working on their regular tasks which made it difficult for them to focus in accomplishing their project assignments on a timely basis\. This turnover has led to loss of institutional memory, poor information management, weakened coordination and slowed the momentum behind implementation\. The most tangible impact of this is in the delivery of the SSMP; which was drafted and consulted upon, but not finalized under the project; b\. Lack of resources to provide sustained follow up, particularly with LGUs\. LGUs are often under resourced and sanitation and sewerage is typically a low priority\. The 3 year election cycle for LGUs also made developing long term partnerships difficult; c\. Delays in procurement\. Implementation of TA started in earnest 2-3 years after approval due to difficulties in finding qualified consultants\. The first bidding process for the Joint Sewage and Septage Treatment Plant (JSSTP) failed due to the low quality of submissions – leading to the main project delay and need for a grant extension; d\. Difficulties in contract management; the rate rebasing contract was based on person-weeks, rather than outputs which meant that work was completed by Government agencies; the consultant drafting the policies moved away from the Philippines and transferred this task to a sub-contractor without a full handover of documents; e\. Working across a number of implementing agencies and LGUs and with supervision from both EMB and FASPO within DENR delayed implementation\. For example, during construction of the JSSTP the project team found a number of points where the different procedures of DENR and MWSS contradicted each other or had different requirements; the team had to develop shared procedures (including reconciling billing procedures and health and safety procedures) during implementation\. 23\. The roots of these problem stem from project design as (i) the project was attempting to advocate for an increased priority to be given to domestic wastewater by DENR, from within the organization, and (ii) Partnering between organizations is widely recognized to take additional resources, including substantial political will, and the PMO was not adequately resourced for the task\. However it should also be noted that a number of good practices were developed during project implementation to support partnership development, for example; a\. The implementing agencies developed TWGs for each component to review the procurement and deliverables of all consultants and civil works\. The head of each TWG also served as the focal point for that component\. These TWGs were made up of permanent staff which supported internal capacity building even with the overall reliance on consultants for implementation; b\. In the initial stages of the project the main focus was on consultation and training with LGUs to develop the base for implementing CWA-2004\. The large number of LGUs engaged with DENR through MoUs (14 in total) proved difficult to support in practice\. Introducing the establishment of WQMAs, a provision under the CWA-2004, during the project restructuring facilitated LGU engagement\. c\. Frequent Partnership meetings were used for cross agency coordination and to resolve problems in implementation\. These meetings resolved many of the issues faced during the construction of the JSSTP, for example working times and haulage in crowded urban spaces, and are partly credited with ensuring that the construction was completed on schedule\. d\. The draft reports and policy instruments have undergone extensive stakeholder consultations and the project has supported public release of water quality data\. 24\. Mid Term review and restructuring\. During the mid-term review, when the 6 restructuring process was started, the project was rated as Moderately Satisfactory\. The team noted at the mid-term review that the GEO indicator targets were impossible to achieve by project closure and were not consistent with the MWSS business plan\. The main aims of the restructuring were to: (a) Amend Indicators to reflect realistic baseline conditions and realistic and less ambitious, achievable targets; (b) Corrected name of Recipient Agency for rate rebasing\. (c) Extend the Grant closing date to enable financing equipment for the JSSTP and support the process proofing\. 25\. The restructuring was approved in November 2012 and met aims (b) and (c)\. Aim (a) was also partially met; the baseline was amended and targets for intermediate indicators were revised to be more realistic\. An additional intermediate indicator to complete the establishment of three WQMAs was introduced to support an integrated approach to water quality management in the catchment\. These WQMAs were also used to facilitate the engagement of LGUs in this project which has proved to be an effective approach\. However, at the GEO indicator level targets for sanitation and sewerage coverage and BOD loading were either unchanged or made more ambitious\. At the mid-term review the Bank team advised the Client that they should reduce the ambition of the project, given the challenges faced\. However the Client felt strongly that the activities included were essential and that the contribution of the project to wider impacts in terms of improved sanitation should be measured\. The restructuring did not consider changing the implementation arrangements as the work under DENR, LLDA and MWSS were already well advanced\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 26\. The GEO indicators were chosen to reflect the links with the IBRD financed investment projects and to keep all actors focused on the long term aim of the partnerships\. This important objective has unfortunately impacted negatively on the evaluation of the project as the GEO indicators are well beyond the scope of the project activities and the implementation timeline and have therefore not been met\. The monitoring completed by the PMO and participating agencies has focused largely upon the intermediate indicators, which are specific, achievable and relevant for the scale and period of the grant\. Regular reports have been completed capturing progress on outputs and the intermediate indicators\. MWSS has provided regular updates on the sewerage and sanitation coverage in MM\. It has not been possible to measure the “before and after” BOD load for the whole of Manila Bay so the numbers presented were based on good engineering assessment\. LLDA have provided regular updates on the pollution rates in Laguna Lake and the institutions monitored\. In general reporting has been consistent, although there has not been extensive monitoring of the impact of outputs and indicators once they had been achieved, so this last link in the project cycle is not always clear, as described later in the ICR\. 2\.4 Safeguard and Fiduciary Compliance 27\. Safeguards\. The project complied with Environmental and Social policies and procedures\. The project was determined as a Category B project with OP/BP 4\.01 Environmental Assessment triggered, due to the construction of the JSSTP, and a partial environmental assessment required\. No other policies are triggered as there is no resettlement, the work is within an existing site used for wastewater storage/treatment and there are no indigenous groups\. The project overall had positive environment and social benefits; the new construction has improved the local environment through reduced odor and improved effluent quality and new techniques of wastewater reuse are also being piloted as described later in the ICR\. The quality of the treated effluent from this facility now meets the required standards improving the local environment\. Given the scale of the pollution in MM the impacts on the greater Manila Bay and Laguna Lake 7 areas may be difficult to establish\. 28\. The JSSTP is located in a dense urban area\. The site was previously the location of an Imhoff tank; effectively a large septic tank, refilled by desludging trucks\. The site footprint was unchanged and therefore impacts were minimized; there were no land acquisition issues and no increase in disturbance due to desludging trucks\. The property is owned by the Quezon City government and its continuing use was secured through Usufruct Agreement between the Quezon City government and MWSS\. Using an intensive community relations approach the support of the neighborhood was achieved, through collaborating with Barangay leaders, regular community awareness and education programs, hiring local people as laborers and effective traffic management\. The original Imhoff tank was constructed in 1955 and had long exceeded its design life\. Due to the highly polluted effluent from this tank MWSI has been paying penalties regularly for at least the last six years\. 29\. The environmental impact of the civil works for the JSSTP was analyzed using the Philippines environmental assessment process (largely compatible with World Bank OP 4\.01)\. The MWSI submitted an Environmental Management Plan (EMP) to DENR, and the World Bank, in 2006 and was granted a Certificate of Non Coverage (CNC No\. 0610-16-011)\. The scope of the environmental monitoring program carried out by MWSI was comprehensive\. Overall the project showed good compliance; third party monitoring of environmental parameters were carried out during different phases of construction and provided the basis for mitigation actions, all documentation was in place, good industry health and safety practices were utilized and there were zero lost man hours during construction\. An environmental report was completed as part of the construction completion report which cited the compliance requirements that were accomplished during the construction, commissioning and operation phases of the project\. 30\. The social and environmental safeguard supervision missions were carried out as part of the project implementation support missions\. There were no significant findings recorded\. All other work under the project was Technical Assistance aiming to improve domestic wastewater management and did not trigger any safeguard policies\. 31\. Procurement\. Generally procurement has improved over the project implementation period following a number of delays in the early years of the project\. In addition to the issues noted above, the following challenges were faced: a\. It was often difficult to find staff with the required qualifications and expertise; a number of contracts had to be re-advertised\. In one case, for the Water Quality Monitor, the procurement process was ultimately cancelled due to repeated delays\. b\. The finalization of some deliverables proved difficult as contracts were by person-months, rather than outputs; these include the study for the Rate Re-basing process and for the seven policies, where Consultants moved off the project before submitting final documents\. These deliverables were therefore finalized by the Client under counterpart funding\. c\. For the SSMP the consultant firm changed individual consultants without completing the required assessment to ensure they met or exceeded the specified qualifications d\. During construction of the JSSTP, procurement was managed by both DENR and MWSS\. The lengthy process of obtaining approvals delayed payments to the contractor\. 32\. Financial management\. Financial Management (FM) performance was generally rated as Moderately Satisfactory and FM risk rated moderate to substantial throughout the life of the project\. The project has substantially complied with the financial covenants which include the submission of the quarterly Interim Financial Reports (IFR) and the annual audited project financial statements\. The IFRs were submitted regularly and were acceptable to the Bank and 8 there were no issues arising from their review\. Only one IFR was received on time and at least half of the IFRs were more than 30 days late\. Similarly, despite delays every year, annual project Financial Statements have been submitted and the opinions of the auditor were always acceptable to the Bank\. Out of the six audit reports submitted, three have unqualified audit opinions and three have qualified audit opinions\. Reasons for qualifications include (a) failure to conduct physical inventory-taking casting doubt on the existence, validity and accuracy of the Property, Plant and Equipment (PPE) balances, (b) unreliable cash balance resulting from the unreconciled difference between the general ledger and subsidiary ledger, (c) overstatement of Consultancy Services and Bank Charges, and understatement of Cash in Bank resulting from the double recording of payment to Consultant, and (d) erroneous recording of taxes withheld on payment to Consultant causing overstatement in the Prior Years’ Adjustment and understatement of the account Due to Bureau of Internal Revenue\. Appropriate actions had since been taken by the project to resolve the issues raised by the auditor\. During implementation, there were also delays incurred by the project while waiting for government approvals\. Savings made in some components, including the JSSTP and the PASS, have been reallocated effectively to finance other components\. However overall management of fund flows has been challenging, partly due to the separation of administrative oversight (FASPO) and technical management (EMB)\. Over the last two years the fluctuation of exchange rates has impacted the project (at appraisal the exchange rate was 51PhP/US$, now reduced to 43PhP/US$)\. The project ran short of funding by about US$451,322 due to continuous depreciation of US Dollars against the Peso\. GOP has responded positively by financing or incorporating activities into Agencies’ future work plans\. 2\.5 Post-completion Operation/Next Phase 33\. Overall\. The continued implementation of CWA-2004 and the 2008 Supreme Court Mandamus 2 are the drivers supporting the outputs of this project\. DENR will be supported through the Manila Bay Integrated Water Quality Management Project (MB-IWQM) to develop monitoring and evaluation systems for Manila Bay and establish the mechanisms for management of the Manila Bay Catchment\. In addition the ongoing IBRD financed MM Wastewater Management Project, effective since 2012, will continue to support investments into wastewater treatment in priority environmental areas\. Specific support for different outputs post completion is described below: a\. The JSSTP is transferred to MWSI in August 2014\. The operation and maintenance (O&M) manual has been completed and MWSI staff are working in parallel with the contractor to ensure a smooth transition\. The O&M of the plant will be financed using established systems; b\. DENR is supporting the formation of the Governing Board for the WQMA (San Juan River System) designated under Component 2\. DENR will complete the designation of the additional two WQMA (NMTT and Las Pinas) developed under the project; c\. The integration of the PASS into the existing Public Assessment on Water Services (PAWS - developed in 2000) is fully supported by MWSS- Regulatory Office (MWSS-RO); d\. EMB National Capital Region (NCR) has committed to both hosting the Partnership Information Centre (PIC) website and also setting up a physical space to support access to information\. The PIC website has continued to be updated following project closure; e\. The restructuring of the EUF and the additional parameters is awaiting review by the LLDA board, but are expected to be formally adopted; f\. All draft policies have been consulted on internally were endorsed by the Inter-agency 2 The 2008 Supreme Court Mandamus ordered Government agencies to work together to restore to and maintain Manila Bay water quality at Class SB (safe for swimming)\. 9  Technical Working Group, reviewed at the Director level and submitted by the PMO to EMB-DENR on May 30, 2014 for endorsement and recommendation to other national government agencies for issuance\. Sections of these policies are already in use\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation 34\. Rating: High\. The relevance of the aims and scope of the project continues to be high\. Pollution from industrial and domestic wastewater is leading to the significant degradation of the ecosystem in MM; fecal coliform levels in Manila Bay and Pasig River still greatly exceed the DENR standards leading to problems of eutrophication\. The 2008 Supreme Court Mandamus underlines the relevance and also gave increased impetus to implementation\. The activities under this project were reported to the Supreme Court as part of the main interventions in response to the Mandamus\. However the project provides only a fraction of the solution; a massive investment (approximately US$5 billion) into wastewater management is required in order to return Manila Bay to a good status\. The alignment with CWA-2004 is demonstrated through the continued investment in elements of the project, described in Section 2\.5\. The relevance of the project was underlined during the joint Asian Development Bank (ADB) and World Bank run conference on wastewater management in January 2014 where a number of Water Districts and other actors highlighted the support needed in order to meet the requirements of CWA-2004\. The project aligns with the objective in the Philippines Development Strategy 2011-2016 (NEDA) to improve environmental quality for a cleaner and healthier environment\. The project is highly relevant to the World Bank Philippines Country Assistance Strategy 2010-2013 and its commitment to invest in water quality management\. 3\.2 Achievement of Global Environmental Objectives Overall Rating: Moderately Unsatisfactory\. 35\. Overall the project did not manage to achieve the indicators for the Global Environmental Objectives\. Coverage of sewage service in MWSS jurisdiction did not markedly increase during the project period\. Coverage of sanitation services in the MWSS jurisdiction increased by 14% over the last 7 years (compared to the target of 76%) and the reduction in pollution reaching Manila Bay is estimated as 2000 metric tons of BOD5/year (compared to a target of 9000)\. Attribution of these changes to this project is very difficult\. 36\. Despite not meeting these high level indicators the project did make some progress towards achieving the GEO\. In total 8 of the 15 intermediate indicators were fully achieved, 3 intermediate indicators were partially achieved and the majority of the planned outputs were completed satisfactorily\. This progress is described in the following section, broken down by the three major elements of the GEO\. Details of the outputs under each component are provided in Annex 2 and further information on the intermediate indicators is given in Section F of the Datasheet\. The rating of Moderately Unsatisfactory takes account of the large amount of work, completed across a wide range of sectors, in a difficult context\. Identifying essential adjustments to administrative, institutional, and regulatory practices and existing legislations in order to attract private investments in the Recipient's wastewater sector (US$ 1\.95 million) Rating: Moderately Unsatisfactory 37\. This component of the GEO was supported through three main areas of Technical 10 Assistance; (i) rate rebasing, planning and survey support to MWSS and Concessionaires (ii) policy support to private sector investment and (iii) innovative approaches to financing using market-based instruments; environmental user fees and investment proposals\. 38\. The main outputs and outcomes of the project are described below\. Four of the eight related indicators have been achieved or exceeded\. Achievement of the indicators is as follows: a\. Testing of Public Assessment of Water Services with sewerage and sanitation parameters: 1000 households, 100% of target met b\. Sewerage and sanitation master plan with new criteria updated: Master Plan is updated, but not yet approved, target not met c\. Number of investment proposals using innovative financing mechanism for sewerage and sanitation in Metropolitan Manila: 3, 133% of target achieved d\. Number of establishments covered by the environment user fee: 2922, 122% of target exceeded - difficult to attribute to the project e\. Parameters covered by the environment user fee: No change from baseline, 0% of target achieved f\. Biochemical Oxygen Demand (BOD) discharged from all regulated sources: Reduced by 1098 metric tonnes per year, target exceeded, difficult to attribute to the project g\. Coverage of sewerage service in Manila Water Company, Incorporated (MWCI) concession area as result of 2008 rate rebasing adjustment: 12% of water connections, 40% of target increase reached, attribution to rate rebasing is difficult h\. Coverage of sanitation service in MWCI concession area as result of 2008 rate rebasing adjustment: 47% of water connections - 66% of target increase reached, attribution to rate rebasing is difficult 39\. Support to MWSS and Concessionaires a\. MWSS and MWSI were supported to complete rate rebasing (renegotiating the tariff within the MWSS service area) during 2008\. The tariff restructuring removed the sewer connection costs and sewerage fee and replaced them with an increased environmental fee which is mandatory for all households\. This environmental fee covers desludging services and sewer connections; meaning that these are effectively seen as ‘free’ services\. This new tariff structure is expected to increase uptake of these services\. Over the project period in the MWSI concession area coverage of sanitation services increased from 5 to 47% and coverage of sewerage service increased from 8% to 12%, however it is difficult to attribute this specifically to the project\. MWSS-RO noted that the TA provided during the 2008 rate rebasing resulted in a much greater involvement of the corporate office during the 2013 rate rebasing exercise and, linked to this, in 2014 MWSS ordered a reduction in water rates in Metro Manila for the first time since services were privatized in 1997\. b\. The draft 2005 MWSS Sewerage and Sanitation Master Plan (SSMP) was largely updated under the project to respond to the Supreme Court Mandamus, clarify the strategy and ensure consistency with the business plans of the two private concessionaires\. At project closure some elements of the SSMP were still under discussion and there was not yet a final consensus on the scope, for example the inclusion of solid waste\. These challenges were partly due to the implementing arrangements (EMB was responsible for the procurement of the SSMP consultant and MWSS for the supervision of deliverables) and also due to the much wider consultation with other Government stakeholders than previously\. Therefore, although this indicator was not achieved, the development process is thought to have had some positive impacts in terms of bringing different actors into the discussion on water and sanitation services in MM\. c\. The Public Assessment of Sewerage and Sanitation Services (PASS) was developed under the project and a pilot survey was completed in 1,000 households within MM\. The PASS 11  collects data from customers on the perceived performance of the MWSS concessionaires, including local issues on quality of service, politeness and responsiveness of staff and so on\. The suitability of the PASS to rate performance of the services provided (and thereby increase accountability and inform operation and investment decisions) was demonstrated through the pilot survey\. At the time of writing both the PAWS and PASS had been temporarily suspended due to lack of funding, therefore the immediate impact of this activity has been limited\. These surveys are expected to restart within the next few years\. 40\. Policy support to private sector investment\. Two key policy areas to increase private sector investment were identified through extensive consultation; making septage manage compulsory and increasing minimum standards for industrial pre-treatment\. The following policies were then drafted under the project; (a) Septage Management Ordinance; (b) Guidelines for the Adoption of New Design Parameters for Septic Tanks; (c) National Registry of Desludgers or Entities Engaged in Septage Management; (d) Pre-Treatment Standards for Wastewater Effluents Discharged by Commercial and Industrial Wastewater Sources to Publicly- owned Sewer Systems\. The draft policies are expected to put into place a stronger framework for private sector investment; both by supporting a consistent framework for septage management which facilitates both public and private investment from septage collection to treatment and disposal and by promoting private investment in pre-treatment\. There has already been some impact from this policy development as the draft Ordinance template for mandatory septic tank desludging was issued by DILG and adapted by Makati and Quezon City - these initial ordinances are expected to serve as a model for adoption by other LGUs\. The four policy documents were submitted for endorsement from EMB-DENR in May 2014; two policy documents for septic tanks and desludging have been endorsed by EMB-DENR and adopted by the LGUs through an administrative order\. The remaining two policy documents are going through the technical review process and are expected to be endorsed in 2015\. 41\. Innovative approaches to financing using market-based instruments; a\. LLDA manages industrial effluent into Laguna Bay through imposing an Environmental User Fee (EUF)\. A study was completed examining options to enhance the effectiveness of the existing EUF framework and assess the ways in which the systems for LLDA and DENR could be harmonized\. The technical study has been submitted to the LLDA Board and feedback from LLDA on the process and deliverables has been very positive\. During the life of the project there has been an increase in coverage of the EUF from 1000 establishments to 2992 and a reduction in BOD from 5202 to 4104 from establishments monitored by LLDA; exceeding the intermediate indicator targets\. These indicators include the combined impacts of the Laguna de Bay Institutional Strengthening and Community Participation (LISCOP) project and the GEF project\. The major contribution of the GEF project has been through awareness raising activities and stakeholder engagement\. For example the project supported partnership strengthening between LLDA and LGUs, which then triggered additional actions including (i) an MoA that requires all businesses to have an LLDA permit in order to get an LGU business permit and (ii) LGUs opening up their business permit database for LLDA to verify who has a permit and which businesses are not compliant\. b\. A long list of potential investments was identified within LLDA’s catchment area\. Sanitation investment proposals using innovative approaches to financing were prepared with three prospective borrowers and submitted to several financial institutions for consideration and possible financing\. Currently Quezon City LGU is in the process of site selection and Los Baños Water District is awaiting LGU ordinance before proceeding\. San Jose Water District ultimately decided not to move forward with private sector financing\. 12 Promoting innovative, simple and effective wastewater treatment techniques (US$4\.70 million - US$1\.30 million financed by GEF, remainder from the Counterpart funds) Rating: Highly Satisfactory 42\. This component exceeded the indicator for the reduction of costs per cubic metre of septage collection, treatment and disposal using joint treatment as compared to separate septage treatment\. The JSSTP has achieved a 40% reduction of costs per cubic meter of septage collection, treatment and disposal using joint treatment as compared to separate septage treatment (compared to a target of 20%)\. 43\. The JSSTP combines and treats sewage from the piped network and sludge collected by truck from septic tanks\. It therefore gives greater flexibility in areas where both systems are in use and offers cost savings over separate treatment of sewage and septage\. The JSSTP is only the second of its type in the Philippines and the first to use a Sequencing Batch Reactor, thereby having a much smaller footprint\. 44\. The selection and construction of the JSSTP has been highly satisfactory and includes examples of good practice already being replicated elsewhere\. During the process proving the contractor identified a number of cost-saving measures including reducing aeration time to save energy and more effective coagulants reducing chemical use\. Promotion of the JSSTP has been active and involved site visits and presentations for Water Districts (WD) and civil society groups\. A number of WDs have already requested further information and support in applying this technology\. MWSI has identified the following elements within the JSSTP which they are replicating elsewhere; (a) Technology Selection Study to improve quality of design and build contracts; (b) Wastewater reuse; using activated carbon filters to allow wastewater to be reused on site for flushing toilets and washing cars; (c) SCADA system for remote monitoring and control; and (d) Automatic receipt system to record and document septage delivery\. Increasing the effectiveness of the agencies responsible for water pollution control through improved coordination (US$ 1\.75 million) Rating: Moderately Unsatisfactory 45\. This component of the GEO included three main areas of work; (i) partnership building (ii) harmonizing water quality monitoring and increasing access to data; and (iii) policy support for a coordinated response\. Outcomes and outputs are described below\. Three of the six indicators have been met or exceeded\. Progress on the indicators is given below: a\. Agencies responsible for water pollution control signing a Memorandum of Understanding (MOU): 7, 100% of target achieved b\. Other stakeholders signing on to this MOU: 17, 121% of target achieved c\. Bi-annual Partnership meetings: 19, 190% of target achieved d\. Numbers of policy issuance (administrative orders) on sewerage and sanitation related matters issued by national authorities: Four, 50% of target achieved e\. Publication of annual Metropolitan Manila (MM) Water Quality Monitor: Zero, 0% of target met f\. Water quality monitoring areas established: One, 33% of target achieved 46\. Partnership building\. One of the main aims of the project, and also the main risk mitigation measure, was partnership building between the implementing agencies\. A number of activities supporting the partnership building process were completed under this project, including (i) a total of 19 bi-annual partnership meetings (ii) MoUs signed between DENR and 13 six Agencies responsible for water pollution control and (ii) MoUs signed between DENR and 14 LGUs\. These MoUs laid out agreed responsibilities on water pollution control and were supported by workshops where action plans for sewage and sanitation were developed aiming to motivate LGUs to invest in sanitation\. A Water Quality Management Area has been designated and Governing Board appointed (San Juan WQMA); two additional WQMA have been identified and base lines developed\. Notifications have been issued on these three WQMAs\. 47\. It has been noted during interviews for the ICR that all agencies now recognize the need to work in partnership to achieve improvements in water pollution control and also give higher priority to consultation with other actors\. For example, both LLDA and EMB-DENR reported that it was increasingly easy to access data and get inputs/feedback from other partner agencies due to closer working relationships\. In addition the San Juan River System WQMA (integrating 7 of the 14 LGUs targeted) is currently setting up its Governing Board and has enthusiastic support from businesses, service providers and LGUs\. The WQMA appears to be a successful model for partnership for water pollution control – bringing together a wide range of stakeholders around common issues\. The level of support seen for the San Juan WQMA illustrates the potential of this framework for partnership development\. In comparison, the use of MoUs with individual LGUs was not found to be effective as the PMO did not have the resources for continued follow up with each LGU on the action plans developed and the initial momentum for change was not sustained\. 48\. Harmonizing water quality monitoring and increasing access to data\. A key positive impact of the ongoing policy dialogue with the government has been the release of the water quality data on the Open Data Initiative of the Office of the President\. The project has also supported DENR to provide water quality data to MWSS which helped them to guide their investments to areas with highest pollution load\. The impact is illustrated through the ongoing World Bank financed MM Wastewater Management Project which targets pollution hotspots\. 49\. Integrated water quality monitoring guidelines have been developed and issued to stakeholders and the recommendations have been incorporated into the development of the draft policy for Procedural Guidelines for Harmonized Water Quality Monitoring in NCR\. The policy was submitted to EMB-DENR for endorsement and is currently going through the technical review process; it is expected to be endorsed in 2015\. The implementation of the guidelines has been supported by training in water quality monitoring, including provision of demonstration kits\. The budget to roll out the full implementation of these guidelines is currently being reviewed by EMB\. 50\. A Partnership Information Centre (PIC), aiming to provide a shared space for all agencies to access data, has been developed and launched\. A wide range of training was completed to support different agencies to improve data management and link to this system\. Some implementing agencies are submitting data for inclusion into the on line database under the PIC, including the PASS survey data\. The PIC website is also linked to the MBCO water quality database and has supported MBCO to respond to the Supreme Court Mandamus as referenced earlier\. At the time of writing, the PIC did not yet have a dedicated physical space and the website is still hosted by the Consultant\. The objectives of the PIC have been partially met – further investment is required by EMB to ensure that this becomes a fully functional service that promotes and facilitates data sharing\. 51\. Policy support for a coordinated response\. Two key policy areas to increase coordination were identified through extensive consultation; water quality monitoring and management of waste\. Water quality monitoring is described above, in addition the following 14 policies were drafted; (a) Industry- Specific Effluent Standards for Sewerage and Septage Treatment Facilities Operated by Public Water Utilities, and (b) Joint DENR-DOH Administrative Order on Bio-solids\. The two draft policy documents are expected to put into place standard approaches to harmonize responses on water quality management\. The policies would for example increase the limit for Biological Oxygen Demand (from 50 to 100mg BOD/liter), for sewage treatment plants, making treatment more cost effective\. The policy documents were submitted for endorsement from EMB-DENR\. The Industry Specific Effluent Standards has passed the second review by the policy technical working group and is expected to be endorsed in early 2015\. The Joint DENR-DOH Administrative Order was endorsed by EMB-DENR and has been adopted by the Department of Health through a Department Order issued in October 2014\. 3\.3 Efficiency Rating: Modest 52\. During project preparation an incremental cost analysis was completed for the GEF project\. The analysis predicted that the grant would catalyze a significantly higher additional investment during the period 2005 - 2025 through replication of the technology demonstrated under the project, and infusion of new investment in pollution control from private sector investors using the project’s financial innovations\. During the period 2007-2014 the concessionaires have increased investment into the sector, however it is difficult to attribute this directly to the GEF project as the investments were not linked to replication of the JSSTP or implementation of the financial instruments developed\. 53\. The economic rate of return (ERR) of the JSSTP is estimated to be 15% with benefits comprising of environmental benefits, health benefits, savings from non-payment of discharge fees to LLDA, and benefits from water re-use\. This reduces to an ERR of 10% with either a 20% increase in assumed O&M costs or a 20% reduction in assumed health benefits\. The ERR reduces to 12% with a 20% reduction in inflow\. An additional benefit, which was not estimated due to incomplete data but which would increase this economic rate of return, is the cost saving from reduced distances for septage collection\. Calculation details are included in Annex 3\. 54\. The key value added of the GEF financing was to support the introduction of an innovative technology (the JSSTP) which led to a 20% reduction in O&M costs and introduced many aspects which are now being replicated as noted above\. The project is expected to lead to future efficiency through further knowledge sharing and replication; the guidelines developed under the project for the establishment of WQMAs are now being applied elsewhere, improved data sharing will enable MWSS and the MM concessionaires to target investments to pollution hotspots, increasing environmental efficiency\. The draft policies, once in place, are expected to lead to an improved framework for investments into septage management and pre-treatment\. The future efficiency improvements from the PASS can be inferred from the use of the PAWS to target service improvements – including increasing monitoring in some areas and resolving local problems of poor water quality\. 3\.4 Justification of Overall Outcome Rating 55\. Rating: Moderately Unsatisfactory\. This overall rating is determined from the combination of the high relevance, moderately unsatisfactory achievement of the GEO and a modest level of efficiency\. The project has developed technical assistance which will form the basis of many essential adjustments to administrative, institutional and regulatory practices; including policies on septage management, changes which would expand and restructure the EUF, 15 and support to MWSS in their management of the two private concessionaires in MM\. Simple wastewater treatment technology has been supported through the completion of the JSSTP and extensive promotion of this technology\. Coordination between the different agencies has been supported and there are some examples of increased effectiveness\. However, some important elements were not finalized and most TA has only been endorsed at the level of the Technical Working Groups and PMO\. Budget allocations and higher level endorsement which will enable the TA to be translated into real impacts are not yet secured in most cases\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 56\. The impacts of the project on poverty, gender aspects and social development would be realized in the future through increased coverage of sewerage and sanitation services\. Sanitation improvements would have a greater impact on women as the main care givers and domestic support\. This was reflected in the PASS where the vast majority of respondents were women\. The rate rebasing is considered to have a positive impact as the increase of the environmental fee supports wastewater management services to all households, whether connected to the sewerage system or not\. The Policy on the National Registry of the De-Sludgers or Entities Engaged in Septage Management also aims to legitimize the informal desludgers through the policy and therefore have an impact on poverty alleviation\. Meetings were held with a number of representatives; these discussions and the recognition that a valuable service is being provided is thought to have opened the gates for smaller desludgers to be engaged by concessionaires\. (b) Institutional Change/Strengthening 57\. In addition to the points outlined above the project has contributed to the increased awareness of the importance of sewage and sanitation within DENR through active stakeholder engagement within Government Agencies\. This is evidenced by the increased resources provided to the sector; for example during the recent restructuring DENR introduced new units specializing in sewage and sanitation and increased staffing levels, including the new post of Sanitary engineer, at a time when many other sectors were being downsized\. The persistent policy dialogue with DENR in building the water quality monitoring database using the PIC has contributed to the release of water quality data as part of the GOP’s Open Data initiative\. The water quality dashboard is available on www\.data\.gov\.ph as one of the 6 featured dashboards\. It represents the only dashboard focused on environmental issues\. This data sharing has been seen as a catalyst for increased transparency and discussion about water quality issues\. (c) Other Unintended Outcomes and Impacts (positive or negative) 58\. The technical assistance helped to catalyze a twinning program, financed by the Government of Spain, on innovative financing mechanisms in support to the scaling up of investments on sewage and sanitation services\. As part of this a study tour was undertaken in March 2013 by DENR FASPO, EMB and LLDA officials and staff involved in the GEF project\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 59\. Stakeholder workshops for implementing agencies were completed as part of the Client’s PCR and details are given in Annex 6\. 4\. Assessment of Risk to Development Outcome 60\. Rating: Substantial\. As described in Section 2\.5 the JSSTP, WQMA, restructured EUF and PIC have well established plans for follow up and future support\. These elements are believed to be mainstreamed and will support sewage and sanitation expansion\. The draft policies 16 relating to septage management and water quality monitoring have gained momentum and have follow on support from the sanitation units now formed within DENR\. In addition the Joint DENR-DOH Administrative Order on Biosolids has been adopted and the review of the Industrial Effluent Standards has completed the second round\. The remaining policy endorsement is pending however all policy documents are expected to be endorsed within 2015\. The time required is highly uncertain; however there are some recent positive steps, including progress in endorsing related policy documents such as the General Effluent Standards (GES) which are expected to be endorsed before the end of 2014\. The updated SSMP will need additional work, before it can be an effective tool and meetings are ongoing with the support of MWSS in order to finalize the document\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry 61\. Rating: Moderately Unsatisfactory\. During project preparation the Bank task team ensured that all safeguards and Bank procedures were complied with and supported extensive consultation with partner agencies\. However sufficient attention was not paid to the complexities of the outdated policies, overlapping agency mandates and institutional arrangements and lack of national support to sanitation and sewerage\. In addition wide consultation led to scope creep and a high level of complexity in project design\. The Bank team should have pushed for the project to be simpler and more focused\. The risks from the complexity of the project and the ambitious results framework were not mitigated by a properly supported PMO and a comprehensive assessment of the ability of the government agencies to partner effectively\. (b) Quality of Supervision 62\. Rating: Moderately Unsatisfactory\. Overall all implementing agencies noted that the Bank team were very supportive and provided clear recommendations on how to improve performance\. The Financial Management and Procurement teams provided training and ongoing support\. The Bank team took an active role in supporting coordination and communication between the different implementing agencies\. During the life of the project four different Task Team Leaders were assigned to the role, which caused some disruption\. 63\. Enhanced candor in the ISRs could have led to increased project support and improved outcomes\. The ISRs were too optimistic in their ratings; despite a significant delay in progress, ratings were often higher than what could have been concluded from the project performance\. Realistic ratings would have focused management attention and increased problem solving support, especially in the first half of the project\. The project restructuring did not go far enough to address the problems clearly identified before the mid-term review\. The opportunity to significantly revise the GEO indicators re-orientate the project and potentially revise the implementing arrangements was not fully taken (c) Justification of Rating for Overall Bank Performance 64\. Rating: Moderately Unsatisfactory\. Many of the problems faced under the project were due to the complex design and implementing arrangements\. The rating given reflects the lack of evidence of action taken to address the issues faced\. There was also a high turn-over rate of the World Bank task team leaders given the ongoing reorganization of the sectors in the East Asia Region\. 5\.2 Borrower Performance 17 (a) Government Performance 65\. Rating: Moderately Unsatisfactory\. GOP ensured that counterpart funds were provided in a timely fashion\. This included financing the PMO during the last months of the project in order to ensure that the project was closed successfully\. However high level interventions from overseeing agencies to resolve implementation issues and improve coordination were limited\. Problems found stemming from conflicting aims and unaligned processes are very typical in developing new partnering arrangements and often need additional management support to be resolved\. (b) Implementing Agency or Agencies Performance 66\. Rating: Moderately Unsatisfactory\. DENR has committed to moving the sewerage and sanitation agenda forward and has integrated a number of deliverables into the future work program\. The high turnover of the PMO and complex design of the project has made coordination difficult\. In addition insufficient resources were allocated to the PMO during project design; both the project manager and the assistant project manager were only allocated part time to the PMO and the team was slowly downsized during project implementation, for example the role of the Project management specialist was removed in 2010\. The weak PMO, and specifically the loss of institutional memory, was identified by many project participants as limiting the momentum and progress of the project\. Although MWSS and DENR were very successful working together on the construction of the JSSTP, there were difficulties in managing the consultant for the SSMP\. (c) Justification of Rating for Overall Borrower Performance 67\. Rating: Moderately Unsatisfactory\. The Borrower complied with the fiduciary and safeguards policies of the Bank and implemented many aspects of the program despite the complicated implementing arrangement\. As outlined in the sections above there has been a change in the perception of the importance of domestic wastewater within GOP\. This shift needs to be translated into practical outputs, including implementing the project outputs or supporting the implementation of policy changes\. 6\. Lessons Learned 68\. As in many projects, the problems faced were caused due an overly ambitious design and limited restructuring\. Additional actions should have been taken during preparation to reduce project complexity and ambition in order to reduce risks; implementing arrangements should have been kept as simple as possible, the project should have focused on fewer activities with partnership built into the process – as illustrated by the WQMA - and components 3 and 4 could have been merged\. More generally time invested in preparatory work, both to ensure the design is optimized and to more procurement forward as far as possible, is critical to avoid significant delays after approval\. The results framework should have been based upon data available from existing monitoring systems, rather than on assumed improvements to be developed during the lifetime of the project and the GEO indicators should have been within the scope and timeframe of the project\. \. 69\. Time and resources, including strong leadership, are needed to build partnerships, both within DENR and also with other agencies\. Active and credible champions are needed to effect institutional and policy change in traditionally low priority areas such as septage and sanitation and a properly supported PMO is critical to project success\. Assessments of mandates, functions and processes, in national and local agencies - a fit for partnering assessment - should have been be completed during the design of the project and actions to build institutional capacity to partner effectively identified 18 70\. Financial incentives and increased awareness can bring results; for example the feedback from LLDA that expanding the pollutants covered under the Environmental User Fee (through LISCOP) and the awareness raising (through GEF MTSP) has led to reduction of pollution 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 71\. As described in the Project Completion Report (PCR), in Annex 7, the Borrower and implementing agencies have rated the project considerably higher than the Implementation Completion Report; Satisfactory to Highly Satisfactory as compared to Moderately unsatisfactory\. There is overall agreement in terms of deliverables completed\. The main area of difference is in terms of the approach used for project evaluation\. The PCR rated the project in terms of outputs, rather than in terms of the project results framework, results attributable to the project and likely future impact\. (b) Cofinanciers 72\. Not applicable (c) Other partners and stakeholders 73\. No issues raised\. 19 Annex 1\. Project Costs and Financing (a) Project Cost by Component (in US$ Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (US$ millions) Appraisal (US$ millions) Goods 1\.500 1\.577 105% Consultants Services 3\.200 3\.117 97% Incremental Operating Costs 0\.300 0\.280 93% Total Baseline Cost 5\.000 4\.974 99% Physical Contingencies - - - Price Contingencies - - - Total Project Costs 5\.000 4\.974 99% Front-end fee PPF - - - Front-end fee IBRD - - - Total Financing Required 5\.000 4\.974 99% Category Amount of the %of Grant Allocated Expenditures (Expressed in US Dollars) to be Financed (inclusive of Taxes) (1) Goods 1,500,000 100% (2) Consultants’ services 3,200,000 100% training, and workshops (3) Incremental Operating 300,000 100% Costs TOTAL AMOUNT 5,000,000 (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (US$ millions (US$ millions Appraisal ) ) GEF Grant 5,000,000 5,000,000 100% Government co-financing Counterpart 3,350,000 3,350,000 100% 20 Annex 2\. Outputs by Component Component Description of Outputs 1 - Partnership Development and signing of MoUs between seven Agencies responsible for strengthening water pollution control; DENR, MWSS, DoH, MMDA, Coast Guard, LLDA among the and PRRC Government MoUs signed with 14 LGUs, workshops held and sanitation action plans agencies developed responsible for 19 Bi-Annual Partnership Meetings Conducted water pollution Integrated water quality monitoring guidelines control PASS developed and 1000 Households Sampled/Surveyed Partnership Information Center PIC online database and IT platform PIC Content Management System, GIS and Database training for LGUs and Partner agencies San Juan Water Quality Monitoring Area designated and Governing Board appointed Baseline surveys and initial consultation completed for Water Quality Monitoring Areas in Las Pinas – Paranaque and Navotas-Malabon-Tullahan- Tenejeros (NMTT) Sewerage and sanitation awareness workshop: Significant impact of community organizing for sewerage and sanitation improvement – for LGUs and Barangays Training in water quality management 2 - Planning and Metro Manila Septage and Sewerage Management Plan updated based on new policy criteria, to respond to the Supreme Court Mandamus with new projections to development reach 100% coverage by 2037, clarify the strategy and ensure consistency with the business plans of the two private concessionaires - still in draft Draft Policy 1 - Septage Management Ordinance An Act Establishing a Septage Management System in the City: submitted by the PMO for endorsement by EMB-DENR Draft Policy 2 – Guidelines for the Adoption of New Design Parameters for Septic Tanks: submitted by the PMO for endorsement by EMB-DENR Draft Policy 3 – Pre-Treatment Standards for Wastewater Effluents Discharged by Commercial and Industrial Wastewater Sources to Publicly- owned Sewer Systems: submitted by the PMO for endorsement by EMB- DENR Draft Policy 4 – National Registry of the De-Sludgers or Entities Engaged in Septage Management: submitted by the PMO for endorsement by EMB- DENR Draft Policy 5 – Industry- Specific Effluent Standards for Sewerage and Septage Treatment Facilities Operated by Public Water Utilities, Revising DAO 34 and 35, Series of 1990: submitted by the PMO for endorsement by EMB-DENR Draft Policy 6 – Procedural Guidelines for Harmonized Water Quality 21  Monitoring in NCR: submitted by the PMO for endorsement by EMB-DENR Draft Policy 7 – Joint DENR-DOH Administrative Order on Bio-solids: Guidelines for Bio-solids in the Philippines: submitted by the PMO for endorsement by EMB-DENR 3 - Innovative Three (3) Investment Proposals produced using innovative financing financing mechanisms for sewerage and sanitation in Metro Manila; San Jose Water District is looking for alternative routes outside of the project; Quezon City LGU is still in the process of site selection; Los Baños Water District is awaiting LGU ordinance before proceeding 4 - Use of Studies on pollutant parameters to be introduced under the Environmental Market-based User Fee (EUFS), including cover COD and Heavy Metals Incentives Studies on how BOD and TSS and additional parameters will be applied to regulated establishments through the EUF and how the EUF should be restructured Roadmap for implementation and harmonization with DENR 5 - Rate rebasing MWSS and MWSI supported to complete rate rebasing during 2008 Logistical support to consultation during the 2013 rate rebasing 6 - Joint sewage Technology selection study and septage Construction and Commissioning of JSSTP – with a capacity of 2400m3 of treatment plant sewage per day and 240m3 of septage per day\. (JSSTP) O&M manual and Commissioning report 7 – Project Supporting the PMO and cooperation and collaboration between agencies – Management no outputs 22 Annex 3\. Economic and Financial Analysis 1\. The project’s objective was to support the development of the policy environment for the scaling up of investments in pollution control, and to improve environmental efficiency of investments through better targeting of environmental hotspots\. The baseline scenario for investments in sewerage and sanitation management at appraisal was estimated at US$104 million for the period 2005 - 2025\. The GEF provided incremental financing in the amount of US$8\.35 million, of which US$5 million constituted the grant and US$3\.35 million, the counterpart funding from Maynilad Water, the west zone concessionaire\. It was expected that the incremental financing would catalyze significantly higher investment levels through the scaling up of technology demonstrated in this project within the mechanism of the rate rebasing exercises every five years\. 2\. There were three project components that were completed and officially accepted by the government as of loan closing date, as follows: (a) expansion of public assessment to cover sewerage and sanitation services; (b) technical assistance to MWSS in the rate rebasing; and (c) upgrading of a communal septic tank in Project 7 (Quezon city) to a upgrading of a communal septic tank in Project 7 (Quezon city) to a JSSTP\. The economic impact of these completed components is potentially significant\. However, quantifying the benefits is difficult except for the JSSTP where the economic rate of return was estimated\. The other remaining components are in different stages of completion, and official adoption by the government is pending\. Expansion of Public Assessment to Cover Sewerage and Sanitation Services 3\. The design and piloting of this component was completed and the results officially accepted by the government\. As it has with the public assessment of water services (PAWS) earlier implemented, the public assessment of sewerage and sanitation services (PASS) is expected to improve concessionaire performance and to enhance regulation through direct consumer assessment of performance\. Based on the PAWS experience, the concessionaires have been attentive to the survey results and responsive to the complaints and shortcomings in service provisioning as perceived by the consumers, resulting in improved services to the benefit of the consumers\. The PASS was to be implemented together with the PAWS\. The PASS was completed in 2010; however, the survey has not been repeated or rolled out to date\. Implementation of the PAWS has been suspended since 2009 due to policy issues raised by the MWSS-RO, and this has affected the roll out of PASS\. At the technical level, MWSS RO is hopeful that the PASS would be implemented and mainstreamed once policy issues are resolved\. Assistance to MWSS in the 2008 Rate Rebasing 4\. The assistance to MWSS in the 2008 rate rebasing was specifically to assist in the restructuring of the environmental tariff, and to institutionalize involvement of government environmental agencies (DENR, LLDA) in the review of investments particularly in aligning these to environmental hotspots\. While the environmental tariff was eventually restructured to a single tariff (i\.e\., increasing it to 20% from 10% of the water bill and to cease the 50% sewerage charge), it is not clear to what extent the project contributed to the work inasmuch as the consultancy commissioned for this purpose was terminated prematurely, and that remaining work was done in-house by MWSS-RO with this project providing logistical support\. With regard to the targeting of investments towards environmental hotspots, this was expected to be achieved through the participation of the concerned government environmental agencies in the review of business plans of the concessionaires\. However, it is not clear how this was done, if at all\. Nonetheless, in a follow-on loan by the World Bank on sewerage and septage management to the 23 two concessionaires in 2011 (Manila Water Management Project with the World Bank loan provided through the Land Bank of the Philippines), the investments funded supported environmental hotspots identified by DENR\. Total cost of the program was US$343\.275 million, with the World Bank loan amounting to US$275 million, and the balance financed from concessionaires’ counterpart\. In this sense, the objective of the component was achieved, although the contribution of this project is at best implied\. MWSS updated the Manila sewerage and sanitation master plan through this project\. Review of the master plan by the government environmental agencies would mainstream the process of aligning investments in sewerage and sanitation to environmental priorities\. Joint Sewage and Septage Treatment Plant (JSSTP) in Project 7, Quezon city 5\. Prior to this project, the Project 7 facility was an Imhoff tank serving a sewered area under the management of Maynilad\. The facility had outlived its design (facility was constructed in 1955), and as consequence, Maynilad had been paying penalties to LLDA for non-compliance to effluent standards\. The project upgraded the facility into a 2640 MLD joint sewage and septage treatment facility that would serve the same sewered area in Project 7 as well as accept septage in the non sewered areas in the vicinity\. Total project cost was P266 million, with the grant financing P57 million and the balance provided by Maynilad to be recovered through the rate rebasing\. The project cost included the investment, the operation and maintenance cost during the commissioning period of three months and during one-year of process proving, net of tax and contractor’s profit\. The technology adopted (Sequencing Batch Reactor or SBR) was selected based on a Technical Options Study and the selected technology garnered the lowest net present value\. The facility is operating at full capacity\. 6\. The economic rate of return of this component was estimated to be 15% with benefits comprising of environmental benefits, health benefits, avoided cost from non-payment of discharge fees to LLDA, and benefits from water re-use\. An additional benefit but which was not estimated due to incomplete data is the cost savings of diverting vacuum trucks to a closer destination for treatment rather than to the Dagat-dagatan treatment facility of Maynilad\. 7\. Environmental benefits\. Environmental benefits are difficult to measure\. Benefits were estimated based on willingness to pay for improved water quality, and using as proxy, the environmental fee of 20% of the water bill\. In the calculation, per capita water consumption was assumed at 130 liters per day, a return rate for wastewater of 80%, and a tariff of P38\.25 per m3 (the average for the west zone in 2013)\. Only consumers served by the JSSTP were included in the calculation, although benefits are expected to accrue to a larger population\. 8\. Health benefits\. Health benefits would come from reduced risk of people coming in contact with raw wastewater from overflowing septic tanks\. The impacts of poor sanitation on health, water, tourism, and other welfare impacts were estimated for the Philippines to be in the order of US$1\.4 billion per year, equivalent to 1\.5% of gross domestic product in 2005\. 3 Health impacts represented 72% of total economic costs, and these include health care costs, productivity costs due to adult and child sickness and premature mortality, and 23% accounted for the impact on water resources\. For purposes of these calculations, a per capita sanitation benefit of US$65 3 Source: Economic Impacts of Sanitation in the Philippines, Water and Sanitation Program – East Asia and the Pacific, World Bank, 2008 24 was assumed which include only health impacts\. 4 Benefits were assumed to grow by 2% a year to represent the increase in the level of incomes\. BOD elimination from treatment was assumed to be 10% of sanitation benefits\. 9\. Avoided cost from non-payment of discharge fees to LLDA\. 20% of total treated effluent discharge is being re-used in the facility, generating an organic load of 5\.28kg BOD per day\. The discharge fee imposed by LLDA is P5 kg BOD\. Annual savings from non-payment of discharge fees to LLDA is estimated to be P9,636\. 10\. Benefits from water re-use\. The benefit from water re-use is the cost of water supply saved, equivalent to 20% of the design capacity of 2640 MLD\. Annual savings from water re-use is estimated to be P18,912,000\. Table 1\. Economic rate of return cost Investment costs Maintenance Operation & Total costs l benefits Environmenta benefits Health fees of discharge nonpayment Savings from water re-use Savings from Total benefits Net benefits Year 89,722, (89,722,65 2012 650 - 89,722,650 - - - - - 0) 92,846, (92,846,06 2013 063 - 92,846,063 - - - - - 3) 8,767,4 2014 13 30,209,256 38,976,669 4,188,375 29,563,427 4,818 9,456,000 43,212,620 4,235,951 2015 60,418,511 60,418,511 8,927,550 60,309,391 9,636 18,912,000 88,158,577 27,740,066 2016 60,418,511 60,418,511 8,927,550 61,515,578 9,636 18,912,000 89,364,764 28,946,253 2017 60,418,511 60,418,511 8,927,550 62,745,890 9,636 18,912,000 90,595,076 30,176,565 2018 60,418,511 60,418,511 8,927,550 64,000,808 9,636 18,912,000 91,849,994 31,431,483 2019 60,418,511 60,418,511 8,927,550 65,280,824 9,636 18,912,000 93,130,010 32,711,499 2020 60,418,511 60,418,511 8,927,550 66,586,440 9,636 18,912,000 94,435,626 34,017,115 2021 60,418,511 60,418,511 8,927,550 67,918,169 9,636 18,912,000 95,767,355 35,348,844 2022 60,418,511 60,418,511 8,927,550 69,276,533 9,636 18,912,000 97,125,719 36,707,208 2023 60,418,511 60,418,511 8,927,550 70,662,063 9,636 18,912,000 98,511,249 38,092,738 2024 60,418,511 60,418,511 8,927,550 72,075,305 9,636 18,912,000 99,924,491 39,505,979 2025 60,418,511 60,418,511 8,927,550 73,516,811 9,636 18,912,000 101,365,997 40,947,486 2026 60,418,511 60,418,511 8,927,550 74,987,147 9,636 18,912,000 102,836,333 42,417,822 2027 60,418,511 60,418,511 8,927,550 76,486,890 9,636 18,912,000 104,336,076 43,917,565 2028 60,418,511 60,418,511 8,927,550 78,016,628 9,636 18,912,000 105,865,814 45,447,303 2029 60,418,511 60,418,511 8,927,550 79,576,960 9,636 18,912,000 107,426,146 47,007,635 2030 60,418,511 60,418,511 8,927,550 81,168,499 9,636 18,912,000 109,017,685 48,599,174 2031 60,418,511 60,418,511 8,927,550 82,791,869 9,636 18,912,000 110,641,055 50,222,544 4 Calculated using Gross Domestic Product purchasing power parity (PPP) of US$591 billion (estimate for 2012), population of 97 million (estimate for 2012), and a peso-dollar exchange rate of P43\.50\. The source of data for GDP at PPP values and population is the World Bank\. 25  2032 60,418,511 60,418,511 8,927,550 84,447,707 9,636 18,912,000 112,296,893 51,878,382 2033 60,418,511 60,418,511 8,927,550 86,136,661 9,636 18,912,000 113,985,847 53,567,336 2034 60,418,511 60,418,511 8,927,550 87,859,394 9,636 18,912,000 115,708,580 55,290,069 2035 60,418,511 60,418,511 8,927,550 89,616,582 9,636 18,912,000 117,465,768 57,047,257 2036 60,418,511 60,418,511 8,927,550 91,408,914 9,636 18,912,000 119,258,100 58,839,589 2037 60,418,511 60,418,511 8,927,550 93,237,092 9,636 18,912,000 121,086,278 60,667,767 Economic rate of return 15\.27% 26 Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Rose Abena Ampadu Program Assistant AFCW1 Administration Environmental Bebet Gozun Consultant CCGCC Management David C\. Hanrahan Consultant SASDI Technical Specialist Patchamuthu Illangovan Manager, Operations SACAF Management Nicolas Kotschoubey Consultant MNSHD Technical Specialist Juan D\. Quintero Consultant EASDE Technical Specialist Financial Joseph G\. Reyes Financial Management Specialist EASOS Management Environmental Jitendra J\. Shah Lead Environmental Specialist ECSEN Management Luiz Claudio Martins Lead Water and Sanitation Spec AFTU1 Task Team leader Tavares Cecilia D\. Vales Lead Procurement Specialist EASR1 Procurement Environmental Maya Gabriela Q\. Villaluz Senior Operations Officer EASPS safeguards Mei Wang Senior Counsel LEGAM Legal Mara K\. Warwick Manager, Operations EACCF Management Supervision/ICR Financial Preselyn Abella Senior Finance Officer CTRLN management Aisha Lanette N\. De Financial Financial Management Specialist EASFM Guzman management Mingyuan Fan Sr Sanitary Engineer EASCS Technical Specialist Demilour Reyes Ignacio Program Assistant EASIN Operations support Imogene B\. Jensen Consultant EASNS Technical Specialist Isabel Duarte A\. Junior Program Assistant EASIN Operations support William D\. Kingdom Lead Water and Sanitation Spec SASDU Task Team Leader Nicolas Kotschoubey Consultant MNSHD Technical Specialist Victoria Florian S\. Lazaro Operations Officer EASPS Social safeguards Gia Mendoza Program Assistant EACPF Operations support Noel Sta\. Ines Senior Procurement Specialist EASR1 Procurement Rene SD Manuel Senior Procurement Specialist EASR1 Procurement Financial Tomas JR\. Sta\.Maria Financial Management Specialis EASFM management Maya Gabriela Q\. Villaluz Senior Operations Officer EASPS Task Team Leader Environmental Leonardo Paat EASPS safeguards Claire Grisaffi Water and Sanitation Specialist EASIN ICR Author Mariles Navarro Consultant Economist 27 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle US$ Thousands (including No\. of staff weeks travel and consultant costs) Lending FY05 8\.23 46\.41 FY06 19\.92 136\.22 FY07 29\.53 106\.42 FY08 0\.00 0\.00 Total: 57\.68 289\.05 Supervision/ICR FY05 0\.00 0\.00 FY06 0\.00 0\.00 FY07 0\.00 0\.00 FY08 9\.34 16\.91 FY09 10\.76 36\.37 FY10 15\.02 61\.28 FY11 10\.26 37\.15 FY12 6\.73 29\.91 FY13 8\.07 18\.43 FY14 11\.25 25\.32 Total: 71\.43 225\.36 28 Annex 5\. Beneficiary Survey Results Not applicable 29 Annex 6\. Stakeholder Workshop Report and Results 1\. The workshop to develop the PCR was held over three days January 27-30, 2014\. The following Agencies attended; FASPO, EMB, Philippine Coast Guard, LLDA, DOH, MWSS, Maynilad, APTES, LGU Mandaluyong\. The structure of the workshop was as follows: a\. Review overall status of project implementation and PCR process  Discuss overall status of the project implementation; develop a Common Understanding of the Status of Project Implementation To-Date  Level-off on the Process and Content of the Project Completion Report (PCR) Preparation; develop a Common Understanding on the Process and Content of PCR Preparation  Discuss activities that are relevant in the PCR preparation; List of PCR Activities, People Involved & Timelines in the PCR Preparation b\. Stakeholder data gathering and validation for the PCR  Review the project component implementation and provide information on the accomplishment vs\. targets, achievement of Development Objectives, challenges, Issues and Concerns facilitating and hindering factors lessons learned and good practices  Analyze Results & draw policy recommendations for consideration in future interventions c\. Critical next steps  Identify recommendations and next steps in the PCR preparation 2\. There were a number of open forums to discuss the development of the Master plan\. This are not summarized here apart from overall status\. Many of the issues were addressed through question and answer sessions and are presented in their original form below\. 3\. Progress on deliverables was summarized and is as shown in Annex 2\. The following additional information was given in terms of unresolved issues and efforts at mainstreaming outputs: a\. The scope of work required to complete the update of the MWSS Master Plan (Component 2) needs to be clarified\. The consultant believes that the scope of work is still unclear and the demands are greater than the update described in the original ToR\. The range of comments which have been received was very wide and some issues are not suitable for inclusion in the Master Plan b\. All tasks for Use of Market-based Incentives (Component 4) were finished in 2013 and LLDA has worked on mainstreaming the recommendations since this time, including requesting the Operating Department to review the recommendations and roll out the priority reform agenda based on the roadmap\. New parameters, such as Chemical Oxygen Demand, will be included once the General Effluent Standards are approved by DENR c\. All seven draft policies were presented to the public for consultation before the policies were developed\. However some documentation is missing which may mean some consultation processes need to be redone\. The policies are unlikely to be institutionalized before the end of the project as they are for DENR and other agencies 4\. Project Preparation: Q: Was the design of the project appropriate? Why/Why not? A: Yes, the design is appropriate since the main objectives of the project were attained, and the different components were assigned to appropriate agencies\. Q: Was preparation made prior to project proposal sufficient? In what ways? A: Yes; the concerned agencies were properly consulted in the preparation of TORs, KPIs, etc\. 30 Q: Did the Bank provide adequate advice and facilitation? Please provide examples\. A: Yes; • During the first failure of bidding for Component 6 JSSTP, the Bank approved the re-bidding based on one pre-selected technology in order to have an “apple to apple” evaluation of bids\. • The Bank approved the Grant extension up May 2014\. • Bank’s issuance of “NOL” on the request for the amendment of APTES’ (consultant) contract to include general/conceptual design of the P7 JSSTP\. 5\. Project Implementation: Q: What difficulties did you face in implementing the project (e\.g\. procurement and financial management)? Could any of these have been avoided? A: Component 1 Partnership strengthening: There were difficulties in the management of LGUs Component 2 Planning and policy development: The scope of works was not clear and the resource requirements were underestimated\. Consultants were paid by person months, rather than deliverables, leading to problems in completion of outputs\. Documentation of public policy consultations were not retained in all cases meaning that they may need to be repeated in order for policy approvals to move forward Component 4 Use of Market-based Incentives: Expansion of EUF is dependent upon external factors; lack of COD standard in DAO 35 and delays in approval of GES by DENR may block implementation Component 6 JSSTP: Change of procurement route led to some delays during the bidding stage\. Minor delays were also caused due to increase in local counterpart funding and delays in possession of the site Q: Are there ways which DENR/MWSS/Bank could have worked on to turn around things earlier/more effectively? A: Yes, changes should have been made during the project preparation stage Q: Were the capacity building components effective? If so, in what ways and how was this demonstrated? Are there any ways to enhance the mode in providing capacity building? A: Transfer of knowledge for Component 6 JSSTP was effective through trainings conducted on proper operation\. Other trainings were also conducted (GIS, others) for LGUs Q: What factors within DENR/MWSS’s control (e\.g\. management effectiveness, staffing adequacy and quality and effective use of TA) affected project implementation? A: Component 4 (Use of Market-based Incentives) and Component 6 (JSSTP); Effective project management; inter-agency cooperation Q: What factors beyond the control of government or implementing agencies (e\.g\. credit conditions in the post financial crisis period) affected the success of the project? A: Change in exchange rate (peso devaluation) leading to a shortfall in project funding\. Problems with the limited capability of Consultants working on Component 1 (Partnership Strengthening) and the change in Consultants without consultation on Component 2 (Planning and policy development) 6\. Project Impact Output and Indicator Impact Component1 Partnership Strengthening: • Stakeholder signing MOU • Awareness, involvement, commitment and • Partnership meetings compliance • Policy advice • Test PAWS with sewerage and sanitation • MWSS-RO monitored and validated the 31  parameters concessionaires installed facilities Component 2 Planning and policy • Investment cost to comply the identified development: changes/upgrading • Sewerage and sanitation master plan with • New set of guidelines to improve new criteria updated treatment, management and effluent • Seven policies compliance Component 3 Innovative Financial Commitment, awareness Mechanisms: Signing of contract using innovative financing mechanism for sewerage and sanitation Component 4 Market based incentives: • Maintains water quality Use of market based incentives • Reduction of pollution load • Increased revenue from EUF Component 5 Rate rebasing: Cost of tariff Rate of sewerage and sanitation services increased in negotiated contract Component 6 JSSTP: • Demonstrated technical, economic and Reduction of cost per m3 of septage using joint financial viability of joint sewage and treatment as compared to separate treatment septage treatment • Demonstrated reduced treatment cost from existing treatment facility o Existing treatment cost: Sewage = P8\.00/m3 Septage = P167\.00/m3 o For joint SPTP treatment cost: Sewage = P7\.00/m3 Septage = P99\.00/m3 Joint Sp/STP = P17\.00/m3 7\. Additional information, challenges and lessons learnt: Q\. In what ways has the project affected the Sanitation and Sewerage Sector? A: It improved the sanitation and sewerage project and services through the Pilot Project of JSSTP; Strengthened collaboration/coordination and Policy Development and Compliance Q\. What is the regulatory framework like and how has this changed? A: The regulatory framework is the same, however, additional mandates of the Clean Water Act of 2004 and DPWH Sewer design criteria need to be addressed\. Q\. Were any of these factors attributable to the project? A\. No Q: Are there other co-benefits that have transpired? A: Job generation resulting from projects investments\. A healthy environment equates to a healthy community Q: Is there any gender impact? A: None Q: What circumstances (other than those raised earlier) helped/hindered the project? A: Helped: 32 • Expertise and technical capability of each implementing agencies’ staff assigned to the project; • Support of the top management of each agency; • Support of the Bank Hindered: • Insufficient records of consultation and project decisions (for example lack of consultation records is hindering issue of the draft policies • Changes in personnel, e\.g\. PMO’s Project Manager, consultants • Multi-level approval process of the different partner agencies • Change in LGU leadership • Too much autonomy of LGUs in terms of policy crafting, implementation, etc\. They tend to do it their own way\. • Unclear deliverables of the Consultant to merit an acceptable report (e\.g\. SSMP) Q: What lessons can we learn from the project that would be applicable to future bank projects in the Philippines? A\. • Each agency should assign a dedicated group to handle and closely monitor the project; • PMO should conduct regular coordination meetings among partner agencies to get updates and immediately address problems • Project design should incorporate the approval processes, i\.e\. payments, acceptance of reports/outputs, etc\. • Project leadership should be maintained from the beginning of the project until the end of implementation • Increase capacity building component for all stakeholders • For multi-stakeholder project, commitment and active participation is essential\. Lesser commitment/participation results to delay in project implementation\. • Project objectives, timelines, and deliverables of Consultants/Contractors should be known by top management of concerned government agencies/entities\. Q: How was the bank’s performance? A\. Very satisfactory; timeline for WB actions are strictly followed, NOLs are issued promptly and funds are released on time, technical advice supported implementation\. 33 Annex 7\. Summary of Borrower's ICR 1\. The context, project description, project beneficiaries and basic data in the Borrowers PCR are essentially the same as the information contained in this ICR and is not repeated here\. The overall assessment, challenges, lessons learnt and conclusions are summarized below\. 2\. The key differences between the PCR and the World Bank ICR are the much higher ratings given in the PCR\. Ratings are higher in the PCR due to the different approaches used to evaluate success; the PCR assesses deliverables finalized by the PMO and gives greater weight to anecdotal feedback, the ICR assesses achievement by the project results framework and outcomes attributable to the project\. However, despite these differences in ratings the Borrower and Bank teams are largely in agreement on the achievements of the project and challenges faced\. Overall Assessment of Project Implementation 3\. The overall rating of the project is as follows (translated from a 6 point score): Relevance Highly relevant Effectiveness Satisfactory Efficiency Moderately satisfactory – Satisfactory Implementation Satisfactory 4\. The project has encouraged greater understanding of sectoral issues and needs for many stakeholders, resulting in more positive behaviors\. Most Agency staff felt their capacity was increased through being involved in the program; including increased confidence to coordinate with other agencies and helped them to appreciate the ‘big picture’ and need for integrated approaches\. Component 3 helped to open up new options and orientate LGUs away from public financing\. Component 4 created a road map that outlines the strategic direction for improving and expanding the Environmental User Fees (EUF) for LLDA\. Component 6 set a new industry benchmark for constructing a sewage and septage treatment plant\. Social impacts; about 11 families raised issues and concerns about odor and noise during the works, these concerns were discussed and resolved with the support of barangay officials\. \. 5\. Assessment by component: a\. Component 1: Partnership Development\. i\. The 21 MoAs were signed as planned ii\. The strategy to create three WQMAs was approved by DENR iii\. A site for the PIC was launched online including databases which are planned to be populated with water quality information\. It is recommended that, in order to make the PIC fully functional, water quality data should be regularly uploaded and budget and staff need to be assigned for maintenance and operation of the site iv\. Annual Metro Manila Water Quality Monitoring Reports were not published under the project v\. PASS was developed and pilot was completed\. MWSS need to confirm whether the mainstreaming of the PASS is covered by a legal document and will continue in the future b\. Component 2: Master Planning and Policy development i\. The updated SSMP was submitted on May 30, 2014\. This key output has been delayed ii\. Seven policies were drafted and packaged and issued by the PMO\. It is recommended that these policy documents be approved for adoption and implemented by concerned 34  agencies\. c\. Component 3: Innovative financing Mechanisms i\. Detailed proposals have been completed and LGUs have completed initial coordination to source financing\. San Jose del Monte has passed a municipal ordinance on sewerage and septage\. Los Banos is waiting for a similar ordinance to be passed\. Quezon City has an existing ordinance\. d\. Component 4: Use of Market Based Incentives i\. The study has been completed and the recommendations developed in agreement with LLDA, including restructuring the EUF and developing market based industry for domestic sewage e\. Component 5: Technical Assistance for Rate Rebasing i\. Technical assistance was provided to MWSS in 2008 to support rate rebasing with MWSI\. It was intended that this would be guided by the updated SSMP, however this was not possible due to delays f\. Component 6: JSSTP i\. The design, construction and commissioning of the JSSTP was completed on schedule\. Training was completed for MWSS, MWSI, DENR and the contractor\. All operators and engineers were trained and also completed on the job training with guidance from the JSSTP design consultant\. Operation and maintenance manuals were produced\. ii\. The treatment cost has reduced from PhP 165 to PhP 100 and in addition MWSI has seen cost savings from re-diverting loads from Dagat Dagatan to Project 7 6\. Financial status: Total disbursement is around 87%; total obligated funds are 97% of total grant\. Organization and management: A total of 29 key stakeholders were involved in project implementation Challenges 7\. The following challenges were faced during implementation: a\. The delay in finalizing the SSMP affected the process of establishing a clear strategy and approach, including the advocacy for policy documents\. These delays therefore limited the impact of the project\. b\. Project management issues including high turnover of project managers and the separation of technical and fiduciary roles which left the PMO with little control – these led to many problems including the loss of institutional memory, weakness in contract management and monitoring consultants, lack of quality assurance and less effective dissemination of key information among stakeholders c\. Delays in billings and procurement – particularly for the JSSTP where centralization of payment led to delays\. d\. Frequent delays in the issue of the sub allotment release order for the project led to delays in the release of funds for salaries and wages of the PMO staff as well as shortage of funds to pay contracts e\. Institutionalization of results of technical assistance and outcomes; the TA provide recommendations which should be seriously considered for formal adoption and implementation in order to achieve the grant objectives\. However there was a lack of effort and no mechanism was developed to campaign and advocate to partner agencies to make water quality improvement a priority f\. The fluctuation of the peso against the dollar caused problems in financial management g\. The system for ensuring quality outputs from the consultants were not adequate 35 8\. For component 3 it was found that the workshops held were sufficient to stimulate the demand for financing mechanisms, but not sufficient for implementation\. The time required to obtain institutional (municipal) approvals of project components was longer than expected\. Lessons learnt 9\. The benefits of collaboration between implementing Agencies far outweighed the risks\. The project resulted in heightened awareness and improved Agency responses to emerging issues\. Stakeholder views of the implementation arrangement were positive and there were increased opportunities for collaboration\. Partner agencies were able to improve coordination and working arrangements contributed to professional growth and advancement\. The Technical Working Group (TWG) was an effective mechanism to address the lack of regular venues for project review and provided a troubleshooting role – helping to identify solutions to emerging issues\. 10\. The approach to capacity building by consultants varied\. Some agencies reported that there benefitted from working together with the consultant\. However this was not an explicit capacity building role in the ToR for most consultants\. 11\. Integrating all components is not easy\. Some stakeholders still view their component as an independent project resulting in a fragmented view of the goal and objectives of the project\. Conclusions and Recommendations 12\. The following main conclusions and recommendations are made for future implementation: a\. The integration process is critical\. Joint activities and events should be programmed to support partnership building\. b\. Under similar projects in the future the PMO should be strengthened, including combined control over technical and fiduciary functions and regular review and updating of its functions\. The PMO should have an explicit function to support advocacy within DENR, monitor components and improve the implementation and organize events for all agencies to update on progress\. c\. The approach to capacity building should be more proactive to address implementation issues\. Trainings should be preceded by a needs assessment and be designed to promote institutionalization of results and sustainability of benefits\. The delivery of capacity building should be a part of the Terms of Reference d\. Terms of reference for consultants should have had greater inputs from DENR and the World Bank to ensure they were aligned to the actual needs and expectations of the donor and client including setting standards for quality of deliverables e\. Programming and scheduling of project outputs should have been improved, for example the draft policies should have been programmed to be produced near the beginning of the project so that their implementation could have been supported during the project f\. Sustained LGU participation needs to be ensured by getting LGUs involved in the project design, implementation and review\. Mechanisms are needed to monitor and document engagement\. 36 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders Not applicable 37 Annex 9\. List of Supporting Documents Supporting Document Reviewed: 1\. DENR, Memorandum of Agreement on Strengthening Partnerships to Address Issues on Water Pollution Sewerage and Sanitation with DoH, MWSS and MMDA, 2011 2\. DENR, Memorandum of Agreement on Strengthening Partnerships to Address Issues on Water Pollution Sewerage and Sanitation with LLDA, PRRC, Coast Guard, 2011 3\. DENR, Memorandum of Agreement on Strengthening Partnerships to Address Issues on Water Pollution Sewerage and Sanitation with Local Government of Quezon City, 2009 4\. DENR, Draft Policy 1 – Septage Management Ordinance An Act Establishing a Septage Management System in the City, May 2014 5\. DENR, Draft Policy 2 – Guidelines for the Adoption of New Design Parameters for Septic Tanks, May 2014 6\. DENR, Draft Policy 3 – Pre-Treatment Standards for Wastewater Effluents Discharged by Commercial and Industrial Wastewater Sources to Publicly-owned Sewer Systems, May 2014 7\. DENR, Draft Policy 4 – National Registry of the De-Sludgers or Entities Engaged in Septage Management, May 2014 8\. DENR, Draft Policy 5 – Industry- Specific Effluent Standards for Sewerage and Septage Treatment Facilities Operated by Public Water Utilities, Revising DAO 34 and 35, Series of 1990, May 2014 9\. DENR, Draft Policy 6 – Procedural Guidelines for Harmonized Water Quality Monitoring in NCR: submitted by the PMO for endorsement by EMB-DENR, May 2014 10\. DENR, Draft Policy 7 – Joint DENR-DOH Administrative Order on Bio-solids: Guidelines for Bio-solids in the Philippines, May 2014 11\. DENR, Manila Third Sewerage Project: Components 3 and 4 Consulting Services for Innovative Financial Mechanisms (IFMs) and Use of Market-based Instrument (MBIs), ITAC, May 2012 12\. Hibbert, P\., Huxham, C\. & Ring, P\. S\. 2008\. Managing collaborative inter-organizational relations\. In: Cropper, S\., Ebers, M\., Huxham, C\. & Ring, P\. S\. (eds\.) The Oxford Handboook of Inter-Organizational relations\. 13\. Global Environmental Fund (GEF) Manila Third Sewerage Project (MTSP), Annual Progress Report, 2011 and 2013 14\. GEF MTSP, Exit Report for the Project Monitoring and Evaluation Specialist, June 2010 15\. GEF MTSP, Project Completion Report, June 2014 16\. GEF MTSP, Record for the Project Completion Report Workshop, 30 January 2014 17\. Metropolitan Waterworks and Sewerage System (MWSS), Water Supply, Sewerage and Sanitation Master Plan for Metro Manila: Final Report\. World Bank, November 2005 18\. MWSS (2014), Metropolitan Waterworks and Sewerage System Draft Updated Master Plan Version 1, Berkman International, Inc\. April 2014 19\. National Engineering Centre (2010), Public Assessment of Sewerage and Sanitation Services Pilot Year 1 – Accomplishment Report, University of the Philippines, MWSS, December 2010 20\. San Juan River System, Water Quality Management Area, Governing Rules, April 2014 21\. Water and Sanitation Program, Economic assessment of sanitation interventions in the Philippines, World Bank, 2011 22\. World Bank, Aide Memoir (Preparation and Implementation), Dated February 2006, June 2008, March 2009, February 2010, October 2011, January 2013 23\. World Bank, Country Assistance Strategy for the Republic of the Philippines, April 2005 24\. World Bank, East Asia and the Pacific Region Urban Sanitation Review; Philippines Country 38  Study, World Bank, December 2013 25\. World Bank, Global Environment Facility Grant Agreement (GEF-Manila Third Sewerage Project) Between Republic of the Philippines and International Bank for Reconstruction and Development acting as an Implementing Agency of the Global Environment Facility, August 2007 26\. World Bank, IFR Reporting and Compliance Schedules 2007-2014 27\. World Bank, Implementation Completion and Results Report (IBRD-73110) on a loan in the amount of Japanese Yen 6,592\.00 Million (US$64 Million equivalent) to the Land Bank of the Philippines with the Guarantee of the Republic of the Philippines for the Manila Third Sewerage Project, December 2012 28\. World Bank, Implementation Status Reports, Archived June 2008, June 2009, May 2010, March 2011, February 2012, April 2013, December 2013, May 2014 29\. World Bank, Project Appraisal Document on a Proposed Loan in the Amount of US$ 275 million to the Land Bank of the Philippines for the Metro Manila Wastewater Management Project, April 2012 30\. World Bank, Project Document on a Proposed Grant from the Global Environment Facility Trust Fund in the amount of $5 million to the Republic of the Philippines for a GEF-Manila Third Sewerage Project, May 2007 31\. World Bank, Restructuring Paper on a Proposed Project Restructuring of GEF-Manila Third Sewerage Project August 16, 2007 to the Republic of the Philippines, November 27, 2012 Organizations met during the ICR mission, April - May 2014 1\. Aqua Prisms Technology and Environmental 6\. Manila Bay Coordinating Office, DENR Services 7\. Marikina Local Government Unit 2\. Environmental Management Bureau, DENR 8\. Maynilad Water Services, Inc 3\. Foreign Assisted and Special Projects Office, 9\. MWSS Corporate Office DENR 10\. MWSS Regulatory Office 4\. GEF MTSP Project Management Office 11\. San Jose WQMA Governing Board 5\. Laguna Lake Development Authority 12\. World Bank task team 39  INSERT MAP HERE AFTER APPROVAL BY COUNTRY DIRECTOR AN ORIGINAL MAP OBTAINED FROM GSD MAP DESIGN UNIT SHOULD BE INSERTED MANUALLY IN HARD COPY BEFORE SENDING A FINAL ICR TO THE PRINT SHOP\. NOTE: To obtain a map, please contact the GSD Map Design Unit (Ext\. 31482) A minimum of a one week turnaround is required 2

REVIEW

P151215

Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00005262 IMPLEMENTATION COMPLETION AND RESULTS REPORT TF 3235-TD ON A GRANT IN THE AMOUNT OF SDR 11\.9 MILLION (US$18 MILLION EQUIVALENT) AND ADDITIONAL FUNDING IN THE AMOUNT OF SDR 11\.4 MILLION (US$16 MILLION EQUIVALENT) TO THE REPUBLIC OF CHAD FOR THE EMERGENCY FOOD AND LIVESTOCK CRISES RESPONSE PROJECT (P151215) January 15, 2021 Agriculture And Food Global Practice West and Central Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 2020) Currency Unit = XAF XAF534 = US$1 US$ =1\.4404 SDR 1 FISCAL YEAR January 1 - December 31 Regional Vice President: Ousmane Diagana Country Director: Soukeyna Kane Regional Director: Simeon Kacou Ehui Practice Manager: Chakib Jenane Task Team Leader(s): Ziva Razafintsalama ICR Main Contributor: Mohamed Medouar  ABBREVIATIONS AND ACRONYMS AF Additional Financing CAR Central African Republic CNARR National Agency for Refugees (Commission Nationale d’Accueil de Réinsertion des Réfugiés et des Rapatriées) CPF Country Partnership Framework CSO Civil Society Organization EMP Environmental Management Plan ESMF Environmental and Social Management Framework ESMP Environmental and Social Management Plan FAO Food and Agricultural Organization FM Financial Management GoC Government of Chad ICRR Implementation Completion and Results Report IDA International Development Association IOM International Office of Migration ISN Interim Strategy Note MAE Ministry of Agriculture and Environment MAIE Ministry of Agriculture, Irrigation and Agricultural Equipment MDG Millennium Development Goal MEWF Ministry of Environment, Water and Fishery MLH Ministry of Livestock and Hydraulics MoU Memorandum of Understanding M&E Monitoring and Evaluation NGO Non-governmental organization OCHA Office for the Coordination of Humanitarian Affairs OP Operational Policy PAP Person Affected by the Project PCU Project Coordination Unit PDO Project Development Objective PIM Project Implementation Manual PIU Project Implementation Unit PMP Pesticide Management Plan POM Project Operational Manual PRAPS Regional Sahel Pastoralism Support Project PROPAD Climate Resilient Agriculture and Productivity Enhancement Project PURCAE Emergency Food and Livestock Crises Response Project (Projet d’Urgence de Réponse à la Crise alimentaire et d’Elevage) RF Results Framework RRHCs Refugees, returnees and host communities SIF Islamic Charity (Secours Islamique France) ToC Theory of Change UN United Nations UNDP United Nations Development Program UNHCR United Nations High Commissioner for Refugees UNICEF United Nations International Children’s Emergency Fund WB World Bank WBG World Bank Group WFP World Food Program  TABLE OF CONTENTS DATA SHEET \. 1 I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES \. 6 A\. CONTEXT AT APPRAISAL \. 6 B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION \. 11 II\. OUTCOME \. 13 A\. RELEVANCE OF PDO…………………………………………………………………………………………………………………\.13 B\. ACHIEVEMENT OF PDO (EFFICACY)……………………………………………………………………………………………\.13 C\.EFFICIENCY………………………………………………………………………………………………………………………………\. 17 D\. JUSTIFICATION OF OVERALL OUTCOME RATING \. 18 E\. OTHER OUTCOMES AND IMPACTS \. 19 III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOMES \. 20 A\. KEY FACTORS DURING PREPARATION \. 20 B\. KEY FACTORS DURING IMPLEMENTATION \. 21 IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEV\. OUTCOME \. 22 A\. QUALITY OF MONITORING AND EVALUATION (M&E) \. 22 B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE \. 23 C\. BANK PERFORMANCE \. 25 D\. RISK TO DEVELOPMENT OUTCOME \. 26 V\. LESSONS AND RECOMMENDATIONS \. 27 ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS \. 29 ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION \. 42 ANNEX 3\. PROJECT COST BY COMPONENT\. 44 ANNEX 4\. EFFICIENCY ANALYSIS \. 45 ANNEX 5\. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS \. 49 ANNEX 6\. SUPPORTING DOCUMENTS (IF ANY) \. 56 ANNEX 7\. MAP OF CHAD \. 57  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P151215 Emergency Food and Livestock Crisis Response Project Country Financing Instrument Chad Investment Project Financing Original EA Category Revised EA Category Partial Assessment (B) Partial Assessment (B) Organizations Borrower Implementing Agency International Organization for Migration, Food and Republic of Chad Agriculture Organization (FAO), UNICEF Project Development Objective (PDO) Original PDO The project development objective is to improve the availability of and access to food and livestock productive capacity for targeted beneficiaries affected by the conflict in the Central African Republic on the Recipient's territory\. Page 1  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 18,000,000 18,000,000 16,617,373 IDA-H9930 16,000,000 16,000,000 12,790,212 IDA-D2350 Total 34,000,000 34,000,000 29,407,585 Non-World Bank Financing 0 0 0 Borrower/Recipient 0 0 0 Total 0 0 0 Total Project Cost 34,000,000 34,000,000 29,407,585 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 14-Oct-2014 02-Mar-2015 30-Apr-2017 05-Jun-2020 Page 2  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 31-Mar-2017 16\.62 Change in Loan Closing Date(s) 29-Sep-2017 16\.62 Additional Financing Change in Implementing Agency Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Reallocation between Disbursement Categories Change in Disbursements Arrangements Change in Safeguard Policies Triggered Change in Legal Covenants Change in Institutional Arrangements Change in Financial Management Change in Implementation Schedule 18-Jan-2019 24\.45 Change in Implementing Agency Change in Results Framework Change in Loan Closing Date(s) Reallocation between Disbursement Categories Change in Institutional Arrangements Change in Implementation Schedule 15-Jun-2020 32\.68 Change in Loan Closing Date(s) KEY RATINGS Outcome Bank Performance M&E Quality Satisfactory Moderately Satisfactory Modest RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No\. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 25-May-2015 Moderately Satisfactory Moderately Satisfactory 0 02 16-Jan-2016 Moderately Satisfactory Moderately Satisfactory 16\.62 03 18-Nov-2016 Moderately Satisfactory Moderately Satisfactory 16\.62 04 28-Mar-2017 Satisfactory Satisfactory 16\.62 Page 3  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) 05 26-Sep-2017 Satisfactory Satisfactory 16\.62 06 28-May-2018 Moderately Satisfactory Moderately Satisfactory 24\.45 07 11-Dec-2018 Moderately Satisfactory Moderately Satisfactory 24\.45 08 27-Jun-2019 Moderately Satisfactory Moderately Satisfactory 28\.72 09 26-Dec-2019 Moderately Satisfactory Moderately Satisfactory 32\.34 10 17-Jun-2020 Satisfactory Moderately Satisfactory 32\.68 SECTORS AND THEMES Sectors Major Sector/Sector (%) Agriculture, Fishing and Forestry 62 Fisheries 16 Crops 30 Livestock 16 Social Protection 38 Social Protection 38 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Private Sector Development 100 Jobs 100 Social Development and Protection 100 Fragility, Conflict and Violence 100 Human Development and Gender 40 Nutrition and Food Security 40 Nutrition 20 Food Security 20 Page 4  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) Urban and Rural Development 20 Rural Development 20 Land Administration and Management 20 Environment and Natural Resource Management 40 Renewable Natural Resources Asset Management 40 Biodiversity 20 Landscape Management 20 ADM STAFF Role At Approval At ICR Regional Vice President: Makhtar Diop Ousmane Diagana Country Director: Paul Noumba Um Soukeyna Kane Director: Juergen Voegele Simeon Kacou Ehui Practice Manager: Martien Van Nieuwkoop Chakib Jenane Task Team Leader(s): Bleoue Nicaise Ehoue Ziva Razafintsalama ICR Contributing Author: Mohamed Medouar Page 5  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A\. CONTEXT AT APPRAISAL Context 1\. Chad is one of the least developed countries in the world\. It is a landlocked country with a population estimated at about 15\.8 million\. Nearly half of the population (46\.7 percent) lives below the poverty line and approximately 80 percent of the poor live in rural areas\. The country ranks 187th out of 189 countries in the 2019 United Nations Development Program (UNDP) Human Development Index\. 2\. The emergence of the oil sector in 2003 has offered the country new opportunities to diversify\. However, agriculture and animal husbandry remain the basis of the local economy, accounting for more than 40 percent of GDP\. With a poor resource base, climatic vagaries and low levels of investment, these activities remain largely subsistence and prone to high levels of risk both from climate and from regional instability\. Water scarcity is increasing with climate change, affecting both animal husbandry and crop yields\. Food insecurity is prevalent and conflicts over access to land and water are worsening due to the combined effects of climate change and population pressure\. 3\. Over the past two decades, Chad has welcomed hundreds of thousands of refugees\. These refugees were fleeing conflict and persecution in Sudan, Central African Republic (CAR) and Nigeria\. Chad has provided them with protection and assistance\. 4\. The particular context for the project was conflict in CAR which reached unprecedented levels of violence and human rights abuse in 2013\. The gravity of the situation in CAR prompted the Government of Chad (GoC) to join with the local mission of the International Organization for Migration (IOM) to organize a mass evacuation to Chad\. By the end of 2013, about 76,000 CAR refugees and an additional 46,000 Chadian returnees had crossed the Chadian border in search of safety\. 5\. The majority of these refugees and returnees arrived in Chad’s southern provinces where most of the population are subsistence farmers and herders\. These areas are characterized by high environmental degradation, limited natural resources and inadequate basic infrastructure, particularly safe water points for people and livestock\. The arrival of refugees and returnees put further strain on the already limited resources and threatened social cohesion\. 6\. The challenge facing Chad was to integrate these returnees and refugees in the least disruptive manner\. At the time of appraisal, approximately 105,000 returnees and refugees and 250,000 cattle were being relocated in a number of sites across Chad’s southern provinces\. The challenge was to ensure food security and livelihoods for both the refugees and returnees and to support the hard-pressed local population which was being called upon to play a key role in resettling the new arrivals\. 7\. The Emergency Food and Livestock Crisis Response Project (PURCAE) was conceived as an emergency project aimed at strengthening the food security both of local communities and of those who had come across the border, taking account of both the commonality and the variety of the challenges these three vulnerable groups each faced\. The overall approach was to provide food directly to the hungry, so avoiding distress sales of assets, and to strengthen Page 6  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) resilience by reinforcing capacity to produce food crops and raise livestock in the context of heightened pressure on natural resources and fragile ecosystems\. 8\. The project was approved in October 2014 for an amount of US$18 million equivalent\. The financing became effective in March 2015 and closed on time in December 2017\. However, the vulnerability of the target populations remained extreme and more refugees and returnees had continued to flood in from CAR\. As a result, in September 2017, the Bank approved Additional Financing of US$16 million equivalent for what was essentially a second phase, with a closing date of March 31, 2021\. With some of the immediate challenges of hunger met, the project in this second phase concentrated on strengthening the resilience of the three vulnerable groups\. In the event, PURCAE closed early, in June 2020, for reasons explained in Section I B below\. 9\. Although both phases of PURCAE were emergency operations, they were nonetheless consistent with approaches that the Bank had agreed with GoC\. The FY11/12 Interim Assistance Strategy which guided Bank operations at the time of approval supported Chad’s National Poverty Reduction Strategy and emphasized sustainable agriculture and rural development\. In April 2014, in the face of the critical situation, GoC adopted a Global Emergency Response Plan for the Returnees/Refugees and appealed to the international community to raise US$ 53 million\. The Bank responded by helping to convene donor support and, in June 2014, by restructuring an existing project, the Emergency Agricultural Production Support Project, to reallocate US$ 3\.5 million to support the GoC plan\. In September 2014 the Bank processed PURCAE to bring an additional US$ 18 million to the program\. Alongside the bulk of the funds that were allocated to resilience-building activities, at GoC request, US$ 7 million was allocated for targeted food assistance to all three groups both for humanitarian reasons and to conserve livelihoods by preventing distress sales of limited productive assets\.1 10\. At the time of the September 2017 restructuring, the humanitarian financing was continued but more closely linked to resilience through sustainable productive asset building\. The restructured project was consistent with the new Country Partnership Framework (CPF 2016-2020) that was approved by the Bank Board in December 2015\. The CPF prioritized support to GoC’s poverty reduction strategy with particular focus on improving returns to agriculture, building value chains, and reducing vulnerability\. Both phases were fully aligned with Government’s National Development Plan (Plan National de Développement) which identified agriculture and livestock as key levers for a diversified, inclusive, and sustainable economy, and with the 2014 National Food Security Program which focused on overcoming hunger and combating food insecurity through sustainable increases in productivity and through improved access to food\. 11\. As an emergency response to the effects of conflict, PURCAE built on global experience outlined in the World Development Report 2011: Conflict, Security, and Development\. The main lessons incorporated into PURCAE were the need to sustain human capital, preventing the conditions of returnees, refugees and their host communities (RRHCs) from deteriorating and prejudicing their prospects for development\. An important implementation lesson drawn from the 2011 report was the advantage of leveraging United Nations (UN) capacities\. Theory of Change (Results Chain) 12\. A Theory of Change (ToC) was not required at the time of appraisal but has been built up from project documentation for the purposes of this report – see Figure 1\. The ToC shows the causal relationships between inputs, outputs and the development outcomes specified in the PAD\. 1 For the question of humanitarian assistance in relation to Bank policy and practice, see Section IV below\. Page 7  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) 13\. The ToC essentially deconstructs the PDO into two outcomes (see the discussion of the PDO and outcomes in paragraphs 15 and 16 below): (1) improved availability of and access to food; and (2) improved livestock productive capacity\. The ToC then charts how the project activities contributed to intermediate outcomes which then contributed to the two PDO level outcomes\. The ToC also indicates two longer term outcomes – food security, and resilience to which the project contributes\. 14\. A reading of the PAD suggests three critical assumptions: (i) the continued commitment of GoC, which in the event proved sustained and exemplary, as evidenced inter alia by the request for additional financing; (ii) the willingness of host communities to play a key role in resettling the new arrivals, which was strengthened by project activities and proved a positive factor in the project; and (iii) the capacity and experience of the UN agencies involved and their ability to link emergency aid and longer term development, which actual experience showed to be a strongly positive factor\. In fact, at the time of the 2017 restructuring when direct food aid was dropped, the agency responsible for that activity handed over to others more experienced in resilience-building when these activities became more central to the project\. Figure 1: Results Chain Page 8  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) Project Development Objective (PDO) 15\. The PDO was to improve the availability of and access to food and livestock productive capacity for targeted beneficiaries affected by the conflict in CAR on the Recipient’s territory\.2 Targeted beneficiaries included the returnees, refugees and their host communities (RRHCs)\. The recipient’s territory includes four southern regions of the country and, for certain animal health activities, some neighboring areas that were transit and gathering areas for pastoral and agro-pastoral populations\. Key Expected Outcomes and Outcome Indicators 16\. The major expected outcomes of PURCAE were those contained in the PDO: (1) to improve the availability of and access to food for the RRHCs; and (2) to improve productive capacity for livestock production for the RRHCs\. The PDO level results indicators were: • Number of agricultural input packages distributed to beneficiaries in the target areas (target: 15,000); • Number of direct beneficiaries of vouchers or direct food transfers (target: 31,200); • Number of livestock (cattle) vaccinated (target: 1\.5 million); • Total number of direct project beneficiaries (of which percentage female) (target: 116,200 and 50 percent)\. Beneficiaries and targeting 17\. The target population were refugees, returnees, and local (“host”) populations in the areas where the displaced populations were being resettled\. Beneficiaries were selected based on information from key agencies\.3 Project interventions took into account the beneficiary category: refugees were to receive food vouchers, nutritional packets for children, vaccines and animal feed, returnees were to receive, in addition, agricultural inputs to restore their food production capacity and livestock restocking while host population received agricultural inputs to increase their food production capacity, vaccines and animal feed\. All three categories were to benefit from conflict prevention measures\. Regarding the geographical targeting, the targeted areas were Moyen Chari, Mandoul, Logone Oriental, and Salamat, where the bulk of the refugees and returnees were located\.4 2 The PDO is as stated in the Financing Agreement\. The formulation is slightly different in the PAD and the Operations Portal but the differences are not material\. 3 Including UNHCR, IOM and the National Welcoming Center for Reinsertion and Reintegration, as well as the extensive knowledge of local NGO partners (Secours Catholique pour le Développement (SECADEV—Caritas France), Croix Rouge (Red Cross), and the Association pour le Développement Economique et Sociale (ADES—Economic and Social Development Association) 4 For certain livestock stabilization activities under Component B (vaccinations and feed), parts of Logone Occidental, Mayo Kebbi, Chari Baguirmi, Hajar Lamis, Bahr El Gazel, Guéra, Batha, and Sila were also targeted, because they are important transit and gathering areas for pastoral and agro-pastoral population\. Page 9  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) Components Component A: Targeted Food Assistance (US$7 million IDA) 18\. Component A was aimed at the objective of improving the availability of food and access to it\. The activities were: (i) the provision of vouchers; (ii) the distribution of specialized and staple food packages; and (iii) the conduct of supplemental feeding programs\. The component was designed to support WFP’s existing safety net operation for vulnerable households in Chad, providing resources to cover 31,200 refugees and returnees for 12 months\. 19\. The component was to finance two programs over the course of 12 months\. For eight months of the year when food was likely to be adequately available in local shops, WFP was to provide vouchers to purchase a local standard food basket (valued at about US$0\.30 per day) from local traders\. This approach was designed to permit a more diversified diet that included fresh foods while supporting local producers and supply chains\. In the remaining four months of the year (the lean season), WFP was to provide direct food transfers consisting of staples, legumes, oil, salt, and sugar\. The main rationale for switching to direct food transfers was because food prices typically increase in the lean season\. Children aged 6–23 months, whose nutritional status on arrival in Chad was often precarious, were to receive specialized foods (47 grams per day of ready-to-use Plumpy’Doz) for four months to stabilize their nutritional status\. Component B: Agricultural Production and Livestock Stabilization (US$11 million IDA) 20\. Component B was designed to restore and maintain crop and livestock production capacity among the affected populations in a context where socio-economic conditions were precarious and distress sales of assets were likely, and where pressure on the natural resource base was increasing rapidly\. There were three sub-components: • Subcomponent B\.1: Support for agricultural production (US$5\.4 million)\. This subcomponent aimed at securing and increasing food production capacity\. The activities were: (i) provision of technology packages to approximately 15,000 affected households; (ii) support to seed multiplication producer groups; and (iii) construction or rehabilitation of communal storage facilities\.5 • Subcomponent B\.2: Support for livestock stabilization (US$5\.0 million)\. This subcomponent was designed to support stabilization of the productive capacity of the target RRHCs’ livestock activities through: (i) a vaccination campaign for 1,500,000 animals; (ii) a targeted animal feeding program benefitting 1,500 households in areas where the grazing capacity had been exceeded; and (iii) a restocking program for 1,000 displaced households\. • Subcomponent B\.3: Support for conflict mitigation (US$0\.6 million)\. This subcomponent was to help mitigate potential conflicts among users of natural resources, help to reduce the pressure on limited grazing areas, and prevent overuse of an already fragile ecosystem\. Activities included: (i) participatory development of transhumance corridors; (ii) organization of forums for peaceful coexistence amongst stakeholders; and (iii) establishment of committees of elders\. This sub-component was also to finance implementation of a monitoring and evaluation (M&E) system\. 21\. This component was to be implemented by FAO through NGOs and decentralized units of the Ministry of Livestock and Hydraulics\. Page 10  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) Implementation arrangements 22\. The project was placed under the responsibility of the Ministry of Planning and International Cooperation\. In order to economize on scant administrative capacity in Chad and to get the emergency operation underway promptly, responsibility for overall coordination, M&E, and consolidated reporting was to be handled by the Project Implementation Unit (PIU) of an ongoing Bank-financed project, Emergency Agricultural Production Support Project (EAPSP)\. Owing to limited government capacity to respond rapidly to an emergency of this kind, implementation was to be contracted to competent UN agencies present in the field\. B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION 23\. The project was restructured three times and Additional Financing was provided\. In March 2017, the Credit closing date was extended from April 30th, 2017 to December 31st, 2017\. This was to allow time for GoC’s request for the Additional Financing to be processed, which was approved in September 2017\. A further restructuring, in January 2019, provided for another extension of the closing date\. A final restructuring in June 2020 made arrangements for an early closing of the project\. Additional Financing September 2017 24\. In September 2017, an Additional Financing (AF) of US$16 million equivalent was approved\. The AF aimed to help finance a US$1\.5 million cost overrun under activities of the parent project, resulting from the appreciation of the Special Drawing Right (SDR) against the US dollar, to scale up PURCAE emergency activities due to the continued influx of refugees and returnees from the CAR, and to help strengthen the resilience of the entire target group\. The AF shifted the balance from the initial humanitarian actions towards increased emphasis on resilience building\. In the AF, some food assistance became conditional, tied to rebuilding productive assets\. 25\. The Project Development Objective (PDO) remained unchanged\. The safeguards category remained the same (category B), and no new safeguard policies were triggered\. 26\. Component A Targeted Food Assistance: financing was increased from US$ 7 million to US$ 14\.8 million (actual at completion: US$ 12\.1 million)\. The component was split into three sub-components: • (A1) Unconditional food assistance\. The activity was unchanged • (A2) Conditional food assistance\. This linked food assistance to sustainable productive asset-building, for example through cash-for-work programs\. The rationale was to increase the focus on strengthening the resilience of beneficiary populations\. • (A3) Improving access to sustainable cooking systems and drinking water\. This new sub-component included construction and distribution of mobile cooking facilities, rehabilitation of wells, and awareness campaigns and training\. 5Expected outputs included the production of 4,500 tons of fruits and vegetables, 3,500 tons of millet, 3,000 tons of sorghum, 2,600 tons of groundnuts, and 3,750 tons of rice, together with seeds and cassava cuttings\. Page 11  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) 27\. Component B Agricultural Production and Livestock Stabilization: financing was increased from US$ 11 million to US$ 19\.2 million (actual at completion US$ 17\.6 million)\. New activities were introduced but the component description was unchanged apart from a minor addition to sub-component B2 (distribution of harvesting, milling and drilling equipment)\. 28\. Implementation arrangements were modified\. The PIU of the Regional Sustainable Pastoral Support Project (PRAPS) within the Ministry of Livestock and Animal Production took over responsibility for coordination of implementation from EAPSP which was closing\. The existing contractual arrangements with WFP and FAO were renewed\. UNICEF became the implementing agency for sub-component A3\. 29\. Changes were made to the Results Framework (see Annex 1) to reflect the changes due to the restructuring, The PDO indicators were unchanged but all targets were substantially increased\. New intermediate results indicators were introduced, and targets were substantially increased\. The closing date was extended by 21 months from December 31st, 2017 to September 30th, 2019\. Restructuring January 2019 30\. The project was again restructured in January 2019, principally to provide more resources for asset-building activities in order to strengthen the resilience of beneficiaries, favoring a more resilience-oriented approach while still providing emergency assistance\. Subcomponent A1 Unconditional food assistance was dropped and the remaining resources (SDR 1\.9 million) transferred to Subcomponent A2 Conditional food assistance\. WFP was dropped as implementing agency for Subcomponent A2 due to failure to comply with World Bank fiduciary requirements, especially regarding the fund reconciliation requirements for cash transfer type of operations\. The International Organization for Migration (IOM) was selected to implement the sub-component based on its expertise and soundtrack record in implementing food assistance and asset building in Chad\. The Results Framework was amended to reflect revised targets and to add two new intermediate indicators (Number of productive assets rehabilitated, and Number of people trained by IOM)\. The project closing date was extended by 18 months to March 31st, 2021 to enable the conditional food assistance activities under Subcomponent A2 to be adequately implemented and completed\. The extension was justified by the need to have two full agriculture campaigns to implement cash for work activities\. The remaining activities under Subcomponent A3 and Component B, implemented by UNICEF and FAO respectively, were expected to be completed by the end date of their contracts, September 30, 2019\.6 31\. The Credit closing date was again changed to provide for early closing of the project, on June 5, 2020 instead of March 31,2021\. The rationale for the premature closing was a joint GoC/WB effort to consolidate the Chad World Bank portfolio\. There were still some pending activities to be implemented by IOM, but it was decided that these activities could be efficiently integrated into the World Bank-financed Climate Resilient Agriculture and Productivity Enhancement Project (PROPAD, P162956), which had been approved on April 30th, 2018 and whose closing date was December 31st, 2023\. The remaining PURCAE activities and the implementation arrangements were unchanged\. This integration became effective with the amendment of the PROPAD Financing Agreement in May 2020, which incorporated the remaining PURCAE activities into PROPAD and its results framework\. 6 Later extended to February 29, 2020\. Page 12  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) II\. OUTCOME A\. RELEVANCE OF PDO Relevance 32\. PURCAE’s development objectives were consistent with the Interim Strategy for Chad that governed Bank approaches at appraisal\. The inclusion of a humanitarian aid component in the original project was somewhat outside the Bank’s usual development approach but was clearly relevant to the country situation and to GoC’s emergency appeal (see Section I above) and was linked to the objective of avoiding ‘de-development’ by reducing the need for distress sales of assets\. During implementation, the PDO remained relevant even as circumstances evolved\. The restructured project was in line with the CPF 2016-2020 themes of engagement, particularly improved returns from agricultural activities, investment in human capital and reduction of vulnerability\. 33\. The PDO was also in line with successive GoC policies on refugees and returnees\. 7 More particularly, the PDO was relevant to: (i) GoC’s Global Emergency Response Plan for the Returnees/Refugees (April 2014); (ii) the Letter of Development Policy, signed by the GoC in July 2017, describing the Government’s approach to addressing the refugee agenda in a strategic and coordinated manner; (iii) Chad’s 2016-2020 National Development Plan, which outlines the country’s engagement for sustainable growth and poverty reduction; and (iv) the 2018 Chad First Programmatic Economic Recovery and Resilience Grant, which, under its Pillar 4, addresses issues related to RRHCs\. 34\. This relevance was confirmed by GoC in its completion report on the project (September 2020)\. In addition, participants in four workshops organized in the Project area in August 2020 confirmed that the project objectives were highly relevant to their situation\. Assessment of Relevance of PDO and Rating 35\. The relevance of the PDO is rated High, as the project was in line with both national priorities and the CPF throughout its life, was responsive to evolving circumstances, and was welcomed by the beneficiaries as very relevant to their situation\. B\. ACHIEVEMENT OF PDO (EFFICACY) 36\. The project provided responses to key concerns identified at the design stage, particularly the deterioration of food and nutritional security for RRHCs, the risk of outbreaks of animal disease, and the risk of intra and inter community conflicts as a result of human and animal pressure and competition for the use of and access to natural resources\. The PDO was framed in simple terms to respond to these concerns: to improve the availability of and access to food and livestock productive capacity for targeted beneficiaries\. Annex 1 presents all PDO indicators together with all the intermediate indicators, both before and after the 2017 restructuring\. 7 More particularly, the PDO was relevant to: (i) the Letter of Development Policy, signed by the GoC in July 2017, describing the Government’s approach to addressing the refugee agenda in a strategic and coordinated manner; (ii) Chad’s 2016-2020 National Development Plan, which outlines the country’s engagement for sustainable growth and poverty reduction; and (iii) the 2018 Chad First Programmatic Economic Recovery and Resilience Grant, which, under its Pillar 4, addresses issues related to RRHCs\. Page 13  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) 37\. The efficacy of the project is assessed against the two outcomes that were contained in the PDO and which are mapped in the ToC: (1) improved availability of, and access to, food; and (2) improved livestock production capacity\. Assessed against the PDO targets, overall, four out of five PDO outcome indicators achieved or exceeded their end targets as revised in the December 2017 restructuring (see Table 1)\. The achievement of the indicator Beneficiaries of conditional food assistance was half achieved (51%) because the second year of the activity fell after the revised closing date and was transferred to PROPAD (see above)\. The target was not formally revised because of early closing but the target for the second year has been transferred to the PROPAD results framework and at the date of this ICRR, PROPAD is implementing the balance of the activity\. Table 1: Achievements against PDO targets PDO indicator Target Actual Percentage Degree of achievement Improved availability of and access to food Direct project beneficiaries 550,000 592,350 108 More than achieved Female beneficiaries 52% 53% 102 Achieved Beneficiaries of conditional food Partially achieved\. Activity assistance 152, 960 78,710 51 transferred to PROPAD June 2020 Beneficiaries receiving agricultural 45,200 47,038 104 More than achieved input packages Increase livestock productive capacity Livestock (cattle) vaccinated 3,926,263 3,951,460 101 Achieved 38\. For the purposes of this evaluation, we distinguish within the two outcomes, sets of intermediate results which contributed to the achievement of each outcome\. For the outcome Improved availability of and access to food, we distinguish: (1) improved nutritional status and well-being; (2) sustainable cooking systems and drinking water; (3) increased purchasing power; and (4) improved agricultural productivity and local livelihoods\. For the outcome Increased livestock productive capacity, we assess the results of improved livestock productivity\. In addition, an important result of the project was the management of the considerable social risk that so fluid a situation entailed\. Hence, we also assess what is essentially a third outcome, strengthened social cohesion\. Outcome 1: Improved availability of and access to food Improved nutritional status and wellbeing 39\. During the first phase of the project, about 32,460 people received food vouchers, more than the initial target of 31,200 beneficiaries\. At the time of the 2017 restructuring, direct food transfers were halted, and resources concentrated on the conditional food assistance sub-component which linked food assistance to asset building in order to strengthen resilience\. A new target was set – slightly over 150,000 beneficiaries\. There were delays while the contract with the new implementing agency IOM was finalized\. As a result, only one year of implementation of this activity took place under PURCAE\. The target for that year, which was to reach about 76,000 RRHCs, was met (78,700)\. As discussed above, at the date of this ICRR, PROPAD is carrying out the second year’s activities and is expected to meet the target\. From reports by WFP and IOM and from the beneficiary workshops conducted in 2020, it is evident that through its two phases, the Project had a significant impact on the nutritional status and wellbeing of the target population\. Page 14  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) Sustainable cooking systems and drinking water 40\. These activities were implemented by UNICEF, under its Water, Sanitation and Hygiene (WASH) program\. The activities benefitted a total of 46,000 people, including children and women living in host communities\. Activities included: the fabrication and distribution of improved cookstoves, rehabilitation of 172 water wells; installation of 500 water pumps; drilling or rehabilitation of 230 boreholes and pumps; and promotion of good hygiene and sanitation practices\. The project exceeded both intermediate results indicators: 13,107 improved cookstoves against a target of 9,000; and 172 water wells against a target of 157\. In addition to the results measured by the indicators, the project carried out extensive training in food preparation, hygiene and sanitation, distributed about 9,000 buckets- with-tap (for domestic water conservation) to targeted households, and constructed 70 communal latrine units\. 41\. Water security was also strengthened by the creation of 170 water management committees in the Project area, and by the implementation of awareness initiatives for better sanitation conditions\. As part of the WASH package, UNICEF provided extensive training, fielded 43 community facilitators, and supported Community-Led Total Sanitation (CLTS), with the objective of reaching Open Defecation Free (ODF) status and improved overall sanitation conditions\. Qualitative evidence from UNICEF reports is that there have been palpable improvements in community health, although not specifically measured\. Increased purchasing power 42\. The project supported the purchasing power of the most vulnerable households through the organization of 244 cash for work rotations for the creation or rehabilitation of productive community assets\.8 This activity not only provided cash for living but allowed participants to constitute small savings as start-up capital for micro- enterprises\. Focus group discussions in March 2020 reported that the money earned was invested in purchase of livestock, fabrication of bricks, small enterprises such as carpentry and food processing, and transport (typically bicycles) as well as social expenditures on health and school fees (Source: IOM)\. In addition, the program created 39 community productive assets, against a target of 40\.9 Also important to the goal of getting people back on their feet and increasing resilience was the extensive training program which supported both individual capacity building in household management, creation of small businesses, basic accounting etc\., and also group business activities, including the management of cooperative associations\.10 Improved agricultural productivity and local livelihoods 43\. Project activities implemented by FAO contributed to food security and local livelihoods through the provision of agricultural inputs, including distribution of seeds and other inputs, together with technology transfer and training\. Community-based approaches were taken to seed production and seed banks\. Market gardening was introduced to generate additional income during the lean period and to diversify and improve local diets\. Productive assets such as community markets were also rehabilitated\. Overall, 47,038 people received different agricultural packages, above the PDO target of 45,200 people\. 8 In the single year of implementation of this activity, there were 11,550 beneficiaries: 809 refugees, 3,810 returnees and 6,931 host community members\.) 9 To better understand the impact of cash for work activities, a post distribution survey was planned to be conducted towards the end of the project in collaboration with the implementing partner “Association des Temoins des Urgences et des Actions de Développement” (ATURAD)\. However, due to the early termination of the project, this was not feasible before project closure\. The exercise will be conducted under PROPAD and the survey will be administered to a representative sample of beneficiaries among the four target regions\. 10 In total, 8,371 beneficiaries were trained, many of whom represented broader groupings like associations and cooperatives\. Page 15  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) 44\. Evidence from FAO reports is that agricultural production was significantly improved with high yields of main crops: average yields amounted to 657 kg/ha for millet (enough to feed a family of 6 people for about 7 months), 891 kg/ha for sorghum, 966 kg/ha for groundnuts and 1,675 kg/ha for rice\. In total, cereals production was valued at US$ 600,000 in 2018, rising to US$ 2\.2 million in 2019\. Fruit and vegetable gardening, which was not previously much practiced in the project area spread rapidly and constitutes one of the major achievements of the project, much appreciated by the beneficiaries because it both improved household food security and generated an income\. For the two crop years covered by the project, FAO report aggregate output of fruit and vegetables of 6,850 tons (against a forecast of 2,500 tons), of which 1,000 tons for home consumption and the balance sold at market for the equivalent of US$ 3\.1 million\. Average revenue per household for the marketed share exceeded US$ 1,250\. 45\. Support to agricultural water management was provided through the creation of 20 water management committees\. In addition, local producer organizations were trained and supported, involving more than 1,900 persons, of whom 530 were women\. Outcome 2: Improved livestock productivity 46\. Under Component B, a range of activities was implemented to improve livestock productivity, including distribution of 17,500 breeding animals, animal feed and 6,000 small ruminants\. Some 250 km of transhumance corridors were established through a participatory process involving all stakeholders, including farmers, breeders, herders and local authorities\. A broad awareness campaign was carried out to promote peaceful cohabitation among farmers and livestock breeders and herders\. A massive vaccination campaign was undertaken covering nearly 4 million animals, ahead of the target of 3\.9 million animals\. Local vaccination teams were set up and equipped with motorcycles and these activities are being continued under PROPAD\. Strengthened social cohesion 47\. Although not specified in the PDO, an important outcome of project activities was likely to be the mitigation of potential conflict and strengthened social cohesion\. The project took a community development approach, with 43 facilitators trained to support communities on participatory diagnostics and on inter-community dialogue, including through the organization of specific capacity building initiatives\. More than 40 community mapping exercises led to 44 action plans, jointly developed and monitored by communities which included host, refugee and returnee populations\.11 In each of 20 target communities, Project Implementation Teams were set up and their members trained\. These teams organized the 244 cash-for work rotations, each of which included host, refugee and returnee populations and brought community members together to work towards a common goal and provided a platform for dialogue\. In addition, 35 groups were trained on collective governance and resource management\. More than 2,400 people were trained in conflict resolution\. In addition, as mentioned above, communities and users were organized around water supply, seed production and seed banks, and these contributed to the development of social capital, for example, the Community-Led Total Sanitation Program of UNICEF/WASH supported establishment and training of 170 water management committees\. Justification of Overall Efficacy Rating 48\. The overall efficacy of the Project is rated Substantial\. Annex 1 presents in a detailed table all the PDO and intermediate indicators, both before and after the 2017 restructuring\. All the PDO indicator targets bar one where 11 Nearly 7,000 people were involved, of whom 190 represented local associations pf women, youth etc\. and 274 represented local cooperatives\. Page 16  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) the activity was transferred to PROPAD were achieved, the great majority of the intermediate results indicators were achieved, and a host of other activities were successfully carried out\. Although no impact evaluation has been carried out, there can be no doubt that the main benefits targeted by the project - improved nutritional status, enhanced access to clean water, increased revenue and savings, improved agricultural and livestock productivity, and enhanced social cohesion - have been achieved for a number of beneficiaries greater than planned (more than 590,000 against a target of 550,000)\. Four beneficiary workshops conducted after the close of the project, in August 2020, confirmed general beneficiary satisfaction\. A formal survey is to be carried out in 2021 under PROPAD, designed to measure beneficiary satisfaction against the results indicator target of 75% satisfaction\. C\. EFFICIENCY Economic analysis 49\. At appraisal, the project was treated as a response to crisis , providing immediate support to affected populations, improving conditions in the near term for returnees, refugees, and host families in the target areas\. It was not designed as a long-term response\. For this reason, formal economic analysis was not conducted ex ante nor at the time of the 2017 restructuring and was not carried out at completion\. There is, nonetheless, evidence of economic benefits, for example in the increases in agricultural production and the establishment of numerous micro- enterprises discussed in the assessment of efficacy above\. There is also ‘negative’ evidence of the benefits of the animal health campaigns in the avoidance of disease outbreak\. An economic analysis of all agriculture and livestock activities including all those transferred from PURCAE is to be conducted on completion of PROPAD in December 2023\. Administrative efficiency 50\. The relatively simple design of the emergency project and the implementation arrangements employed contributed to its efficiency\. By relying on UN agencies, the Project adopted the most cost-effective means of ensuring the required rapid response\. Each agency received 7 percent of the respective contract value to cover administrative overhead charges, management of all project activities (technical, financial, and procurement), and delivery of project services to the intended beneficiaries\.12 The ratio of administrative costs to direct costs (7:93) was relatively efficient compared to similar operations in the region\. Comparable operations in South Sudan, for example, experience ratios as high as 14:86, while those in CAR are on a par with the Chad experience (6:94)\.13 51\. National NGOs were involved to help with implementation of activities at field level\. Given the emergency, the characteristics of the activities and the short duration of the Project, the alternative option to first create local capacities and then implement the project, would not have been cost-effective\. Value for money 52\. On the cost side (see Annex 4), the project spent US$29\.7 million to benefit 592,350 people, US$50 per beneficiary\. This compares favorably with the revised target of 550,000 beneficiaries for a projected cost of US$34\.0 million, US$62 per beneficiary\.14 12 Memorandum of Understanding were signed between the GoC and UN agencies: under PURCAE II, with the FAO (for US$ 8\.2 million, including US$1\.3 million retro-financing for activities implemented under PURCAE I); with the IOM (for US$ 6\.1 million); and with UNICEF (for US$1\.7 million)\. 13 South Sudan Emergency Food Crisis Response Project (P113586); and Chad Emergency Food Crisis Response and Agriculture Re-Launch Project (P149512)\. 14 Tables 1 in Annex 4 provides detailed information about estimated and actual costs per component and for each UN agency\. Page 17  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) Overall assessment 53\. Overall, there is evidence of reasonable costs and substantial benefits \. The Project clearly helped the country deal with the crisis\. With so large an influx of refugees and returnees, the without-the-project picture would have been one of increased food insecurity and competition for resources, which would doubtless have aggravated conflict and social instability\. In this context, the Project made a significant contribution to improving livelihoods and stabilizing the social situation by reducing household food insecurity, enhancing resilience and sustainability of production systems, and fostering social cohesion\. However, the lack, for the moment, of economic and financial analysis suggests that efficiency should be rated modest\. This assessment may be revised when a more systematic and quantified assessment of benefits is carried out on completion of PROPAD\. 54\. The last word should go to two of the more than half a million project beneficiaries \. In December 2019, Denise, a refugee from the CAR now living in Mainibian (Sarh), was able to employ the skills from the training she had received to strategically use the 30,000 XAF received from her participation in the cash for work rotations\. “ I lost everything and found myself here in Chad with no means to survive with my children, we spent many nights hungry\. The project gave me the means and courage to fight and take care of my family”\. 55\. Denise has been able to start a small business selling beignets and tea\. She has also begun to use a small black box to save daily, hoping to have enough one day to buy her own plot of land\. 56\. Donald, a cash for work beneficiary from Danamadja used the money he earned through cash for work to start a micro-enterprise: “I was penniless and spent my days going from shop to shop looking for work that would allow me to have a little money\. When I got the chance to work for 15 days to have 30,000 XAF, I spent 24,000 XAF on plywood, a board and joists\. These materials have allowed me to create 3 tables and 2 chairs that I sold, and which generated a good profit\.” D\. JUSTIFICATION OF OVERALL OUTCOME RATING 57\. The Project substantially achieved its objectives and exceeded many of its results indicators \. Relevance of the project is rated High\. The development objectives remained relevant throughout the Project implementation phase\. The project was relevant to both country and Bank objectives at appraisal and remained relevant throughout its duration, to the extent that significant Additional Financing was provided\. Efficacy is rated Substantial\. Although the outcomes have not been measured, the volume and breadth of project activities, the positive reactions of beneficiaries, the evident improvement in the status of the population, and the absence of significant conflict demonstrate a considerable degree of efficacy\. The range of activities planned and implemented has greatly contributed to improving the resilience of the RRHCs to crises, strengthening social cohesion, and diversifying local livelihoods\. Efficiency is rated Modest because although the UN agencies delivered project activities in a cost-effective and timely way and benefits were palpable, there has not yet been a quantitative assessment of costs and benefits\. The overall outcome rating is therefore rated Moderately satisfactory\. 58\. Split rating\. Although components and outcome targets of the Project were revised at the 2017 restructuring when Additional Finance was provided, neither the PDO not the outcome indicators were changed\. The development Page 18  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) path of the project did not change and no change to the ToC would have been necessary (had one been prepared at appraisal)\. The significant change to the project was simply that it became more ambitious and it is appropriate to assess the project as a whole against the more ambitious targets set\. E\. OTHER OUTCOMES AND IMPACTS Gender 59\. In the social and cultural context of the Project, men are the almost exclusive decision-makers\. Project design specifically addressed social and economic inequalities existing between men and women with a view to helping to close gender gaps\. Almost all project activities, including awareness-raising and capacity building initiatives, consistently supported women’s participation and a PDO indicator measured women’s participation\. Overall, women constituted 53% of beneficiaries of all activities combined (above the target of 52%) and about 55% of cash-for-work activities\. The Project contributed to increasing women’s agricultural assets and income earning and employment opportunities, as well as their meaningful participation in decision-making\. Several activities were specifically targeted at women, including safe water provision\.15 Capacity building was conducted for 217 lead women (‘Women Ambassadors’) organized in 47 groups\.16 Institutional Strengthening 60\. The UN agencies that implemented the project components delivered services largely through local NGOs\. This not only ensured effective grass roots implementation but had a significant capacity building effect on the NGOs\. It also strengthened the cooperation between NGOs and local public services and served to strengthen links between the UN agencies and local partners\. Training provided to ministry staff also helped to strengthen public service delivery capacity\.17 Poverty Reduction and Shared Prosperity 61\. The Project contributed to reducing the vulnerability of RRHCs and strengthening resilience, important components of poverty reduction\. The food assistance component provided the poorest among the target population with short term food support, reducing hunger and malnutrition, and supported sustainable productive asset-building activities and investment in improved cooking systems and clean drinking water that improved nutritional and health status\. The agriculture production and livestock stabilization component, also targeted at beneficiaries who were very poor, helped sustainable increases in food and animal production and in cash incomes that improved livelihoods on a sustainable basis\. 15 57 hand pumps were rehabilitated\. These contributed to providing drinking water for domestic use to about 18,667 people, mostly children and women\. 16 One activity of these groups was the fabrication and promotion of improved cookstoves\. 17 Secours Islamique France (SIF) was UNICEF’s main implementing partner (water committee maintenance, management of boreholes, development of 74 community action plans, etc\.)\. Along with the decentralized services of the Ministries of Agriculture and Livestock, FAO’s main partners for agriculture and livestock-related activities were: Agro-action, Association tchadienne des Acteurs en Développement rural (ATADER), Bureau Consult International (BCI) and the Association of Witnesses of Emergencies and Development Actions (ATURAD), ATURAD also partnered with IOM to deliver training)\. Page 19  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOMES A\. KEY FACTORS DURING PREPARATION 62\. Given the urgency of the humanitarian situation outlined in Section I A above, the Project was designed and implemented as an emergency operation under Bank guidelines, with accelerated project preparation and implementation procedures\.18 Project objectives and targets were realistic and clear, and the results framework and indicators were unambiguous and straightforward to monitor\. The beneficiaries were highly appropriate target groups and were relatively well-defined\. Components were designed to be specific to the needs of the three target groups – refugees, returnees and host population – and to respond to the likely conflict dynamics amongst them\. 63\. Lessons from previous operations were used in the design of the Project A key lesson learned from a previous Bank emergency project in Chad, the Emergency Agricultural Production Support Project (EAPSP), as well as from the Bank’s experience under the Global Food Crisis Program, was that simplicity of design and clear targeting mechanisms were paramount, particularly in fragile states, and that as far as possible emergency operations should help to lay a foundation for development\. Llessons learned by UNICEF from the implementation of a sustainable water project in Moyen Chari19 also provided important directions\. Other lessons learned concerned the importance of water management and the role of water committees and associations, as well as the use of voucher schemes and cash-for-work\. 64\. During project preparation, risk was correctly assessed as High, given the poor governance and inherent risk of fraud and corruption and of inappropriate use of public funds\. More specifically, the financial management risk was rated Substantial\. To limit the impact of these risks on project implementation, GoC and the Bank selected UN agencies which had good track records and experience in managing Bank funds, and also made provision for close supervision\. 65\. Both stakeholder and implementation risks were correctly assessed as high in so volatile an environment\. However, the Chadian government was committed, as evidenced by its Emergency Response Plan (see Section II A above)\. In addition, the key objectives of the project corresponded to national priorities for agriculture and food security for the poor and vulnerable\. GoC showed its clear commitment to supporting the insertion and reintegration of the returnees and refugees and to supporting the communities that hosted them\. Implementation risks at the local level, for example lack of cooperation from local traders, diversion of project benefits, conflict, or weak targeting, were expected to be managed through the use of the UN agencies which had good local experience in tackling such risks\. in their previous work as service providers\. 66\. The Environmental and Social Management Framework (ESMF) was adequately prepared at appraisal and updated at restructuring\. The objective was to ensure that activities would: (i) minimize environmental and social degradation; (ii) protect and preserve human health; (iii) enhance positive environmental and social outcomes; and (iv) prevent or adequately compensate any loss of livelihood caused by the Project\. 67\. In terms of institutional arrangements, the Project was designed to be implemented through experienced UN agencies as service providers – initially WFP and FAO, with IOM taking the place of WFP at the time of the Additional Financing, and UNICEF also being brought in at this stage\. At field level, the implementation model was that the UN agencies sub-contracted with NGOs and decentralized units of MLH and MAE\. This arrangement ensured effective implementation of activities in view of constraints on the capacity of national institutions\. Project design provided for a coordination unit in the agriculture ministry\. In the event, supervision was provided by two focal points Page 20  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) at ministerial level\. In order to avoid duplication of structures, overall coordination, M&E, and consolidated reporting for PURCAE were handled by the Project Implementation Unit (PIU) of the Bank-financed Emergency Agricultural Production Support Project (EAPSP) and, after EAPSP closed, by the Regional Sustainable Pastoral Support Project (PRAPS)\. These arrangements worked relatively well, with only minor shortcomings\. Factors at the 2017 restructuring 68\. The 2017 restructuring and the Additional Finance were a laudably prompt response to GoC’s appeal to deal with the evolution of the situation from a hunger challenge to one of combating structural vulnerability through resilience-building measures\. Project activities were appropriately broadened and scaled up, building on the experience gained\. The Financing Agreement provided clarity, but some details could have been more fully spelled out, for example, costs and financial allocations and the institutional arrangements\. Some technical details were not completely worked out – for example, arrangements for marketing the increased production of food crops and livestock products\. In practice, however, these minor shortcomings did not affect implementation or outcomes\. B\. KEY FACTORS DURING IMPLEMENTATION Factors subject to government and/or implementing entities control 69\. Although implementation was relatively smooth and activities and results were delivered, there were delays\. Despite the requirement in the financing agreements for a project implementation manual, this was never prepared\. Instead each of the UN agencies operated under their own operational manuals\. There were project operations manuals for EAPS and PRAPS, but these did not specifically cover PURCAE activities\. In the event, this shortcoming had little or no effect as the UN agencies were implementing activities with which they were well experienced, following well thought through guidelines\. 70\. Both the initial financing agreement and the agreement for additional financing required a project coordination unit\. Initially this was to be in the agriculture ministry, and at the time of Additional Financing it was to be in the livestock and animal production ministry\. In practice, two full-time focal points, one at either ministry, ensured regular monitoring of the different activities, each with their own budget and equipment\. There was a clear division of responsibility between the two focal points and the arrangement worked well\. 71\. Each UN agency supervised the implementation of its own activities in compliance with its own MoU with GoC and reported quarterly to GoC\. Overall, the expertise of UN agencies and the involvement of NGOs with proven experience in the field were key factors contributing to successful implementation\. In addition, coordination was ensured through meetings between UN agencies and GoC (for example, on beneficiary targeting and M&E)\. 72\. One possible shortcoming was that high-level coordination between MEWF and MLH was weak, mainly because of frequent changes of minister and lack of leadership at the department level\. However, the arrangement with the two focal points provided adequate working level coordination and oversight\. The coordinators were effective and remained with the project throughout its duration\. 18 OP/BP 10\.00 of the World Bank (WB) Operational Manual: Projects in Situations of Urgent Need of Assistance or Capacity Constraints\. 19 The project was supported by the Swiss Agency for Development and Cooperation\. Page 21  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) 73\. One other potential shortcoming was at local level where there was no structured coordination amongst the UN agencies\. Each agency established close collaboration only with concerned regional ministerial departments\. However, here the Bank convened regular meetings amongst the agencies and government partners and this served as an effective coordination mechanism\. Implementation delays 74\. The late contracting with IOM delayed the conditional food assistance under the 2019 level 2 restructuring\. This led to extension of the project closing date by 18 months\. 75\. All UN agencies experienced some implementation constraints\. One main challenge was the difficulty of getting qualified staff in the field\. Recruitment often proved difficult and staff turnover was high\. A second challenge was UN agency procurement processes which often proved lengthy\. This led to implementation problems, for example when the delivery of seeds arrived too late in the agricultural calendar\. There was also some question over long-term sustainability of the seed activity - one perhaps isolated example was the use of imported seeds for horticulture that could not be produced locally\. However, looked at in the difficult context of pressures of the time and place, these delays and shortcomings were of only moderate significance and did not impair the attainment of project objectives\. External factors 76\. External factors which affected the implementation of the Project included: (i) the persistent volatility of the situation in CAR and continued inflows of RRHCs; (ii) the exchange rate fluctuation between SDR and US$, causing a loss of about US$350,000 for the IOM activities which had to be reduced accordingly; (iii) delays caused by the weather, including delays in rehabilitation of water points due to floods, and generally poor road conditions during the rainy season (April to October), which prevented adequate access to remote areas and sites; and (iv) the COVID 19 crisis which led to a temporary suspension of those IOM activities that involved mass gatherings\. Again, these external factors slowed up implementation but did not detract from outcomes\. IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A\. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 77\. The design of the M&E system was solid, simple and appropriate, including clear arrangements at the level of each of the UN agencies in charge of the implementation of the different components\. The original Results Framework captured major project targets\. The Results Framework was updated at the time of the 2017 restructuring, including new indicators and revised end targets\. 3 M&E Implementation 78\. Implementing UN agencies managed their own M&E system and tracked implementation of their own activities independently\. Each agency monitored and reported on its own activities adequately, submitting both Page 22  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) regular reports and special reports on activities and missions\. For example, FAO reported on surveys to collect harvest- related information and on missions sent to supervise vaccination campaigns\. IOM conducted regular monitoring missions for its activities and prepared reports, including observation of activities and focus group discussions with beneficiaries\. UNICEF conducted regular supervision missions and reported on all its activities\. Field agents financed under the project were trained to monitor and supervise local-level activities of all three agencies\. The agents were provided with equipment (3 cars, 10 motorcycles, and 13 computers)\. 79\. Each of the UN agencies prepared good quality progress reports, which were delivered in a timely manner throughout the Project period\. Initially, the templates of the three agencies were not directly integrated into the Project’s Results Framework and indicators\. This issue was satisfactorily addressed\. The Bank convened monthly meetings with the UN agencies and GoC focal points and a unified Results Framework was shared with the UN agencies to be integrated into their M&E reporting\. M&E Utilization 80\. The M&E reports were adequate to track progress and to pinpoint delays and anomalies in implementation\. Each of the UN agencies used the reported information adequately for the management of the activities of its own components\. 81\. One shortcoming was on the GoC side\. With the lack of consolidated information and the lack of systematic communication about the project between different ministerial departments, anomalies arose\. For example, in the absence of communication channels between different departments of the Ministry of Livestock, overlapping or contradictory actions were undertaken on specific measures aimed to prevent conflicts between herders and farmers\. This had a small effect on project cost but no effect on outcomes\. Justification of Overall Rating of Quality of M&E 82\. The overall rating of quality of M&E is Substantial because there were only moderate shortcomings\. Although there were robust results reporting and tracking among service providers, the client faced capacity constraints in terms of managing a unified M&E system for the project as a whole\. That beings said, regular supervision and monitoring by the Bank team ensured that results reporting was robust and well substantiated\. B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Environment and social 82\. An Environmental and Social Screening and Assessment Framework (ESSAF) provided general policies, guidelines, codes of practice, and procedures to be integrated into the implementation of the project\. The project was classified as environmental category B, because potentially negative impacts were expected to be local and limited and specific mitigation measures had been designed\. Overall, environmental and social risk was assessed as moderate\. Two safeguards policies were triggered: Page 23  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) 83\. OP/BP 4\.01 Environmental assessment, because of potential environmental impacts in the support to the intensification and diversification of agricultural production as well as activities to address livestock health (a vaccination campaign and feed) and restocking, and the construction and/or rehabilitation of small-scale storage infrastructure\. The Environmental and Social Screening and Assessment Framework (ESSAF) and the Environmental and Social Management Framework (ESMF) were prepared before appraisal\. The later was updated for the 2017 restructuring on July 12, 2017\. No specific Environmental and Social Management Plan (ESMP) was prepared\. In practice each UN agency followed its own procedures to assess potential environmental and social risks and impacts of their activities\. For instance, the IOM engineering team utilized an environmental screening form as part of an environmental review of the proposed activity\. For each activity having a potentially negative impact on the community or the environment, the IOM Engineering team identified a mitigation plan as well as a tracking table to assist the monitoring and evaluation of the environmental management and mitigation plan\. 84\. OP/BP 4\.09 (Pest Management), because the project supported the scaling up and/or intensification of agricultural and livestock production activities\. Beneficiaries were likely to adopt pest management practices potentially involving an increased use of chemical pesticides with negative environmental and health impacts\. To address OP/BP 4\.09 requirements, the Pest and Pesticide Management Plan (PPMP), developed for the ongoing IDA- funded EAPSP (P126576), was updated for PURCAE\. 85\. During supervision missions, environmental and social compliance was rated Moderately satisfactory\. Considerable efforts were made in the biological control and the use of biofertilizers and bio-pesticides\. There were some minor external effects on the environment of some works\. However, despite compliance with essential health, safety and hygiene standards, some problems were not initially well addressed\. Examples are the failure to secure wells and compost pits, which could have caused incidents; or the delimitation of cultivated areas by using tree trunks, which has been cut down for this purpose\. However, these impacts were minor and after Bank field missions pointed out the problems, they were promptly corrected\. 86\. Public consultations\. Community mobilization was conducted by the three UN agencies\. For example, 44 community mapping exercises were conducted, bringing together a total of 6,972 community members, among whom 3,745 were women\. Among the participants were 190 members of local committees, including representatives of youth or women’s committees, and 274 members of cooperative associations\. These and other forms of beneficiary consultation and participation proved key to promoting ownership and sustainability of activities\. 87\. Grievance redress\. One shortcoming was delays in setting up a consolidated complaint management mechanism despite the fact that cases of disputes had been reported\. IOM did finally set up a system in May 2019 with a hot line operated by a full-time staff member\. Fifteen complaints were received via the hotline\. Most complaints concerned beneficiary selection\. The complaints were investigated and satisfactorily resolved\. Fiduciary 88\. Procurement\. Overall, policies were complied with and the performance of procurement was rated Moderately Satisfactory by the most recent ISR\. Procurement inadequacies were relatively minor, mainly related to business planning and contract management\. Otherwise, all procurement activities were well implemented, and the goods, works and services were delivered on time\. Page 24  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) 89\. Financial management\. Financial management policies were complied with and the performance of financial management was rated Satisfactory in the latest ISR\. Under their agreements with GoC, the three UN service providers used their own financial management procedures\. One hitch was the delay in paying the start-up advance due to the IOM upon signature of the contract, which was not paid until June 2019, after contract signature in February 2019\. The delay was largely due to change in government authority to clear withdrawal applications combined with technical glitch in the payment system\. This affected the disbursement process of the whole portfolio\. However, this did not cause significant delays in implementation as IOM was able to pre-finance start-up activities\. 90\. The PIUs that were supporting the project (EAPSP and subsequently PRAPS) provided needed assistance to the UN agencies on financial management\. Supervision missions addressed fiduciary aspects and also, gave hands on support\. Financial reports were prepared and submitted on time by each of the participating UN agencies\. The PIU submitted these reports to the Bank within 45 days of the end of each quarter\. However, apart from the information provided through Aide-memoires and ISRs, there were no consolidated financial reports\. 91\. GoC contracted the UN agencies directly\. In compliance with the Bank’s guidance regarding FM arrangements for UN organizations, these agencies were considered as direct grant recipients and therefore World Bank audits were not required\. No Designated Account was opened\. C\. BANK PERFORMANCE Quality of Preparation 92\. In 2014, the Bank was already working in partnership with GoC on the emerging refugee crisis and responded with remarkable and commendable alacrity to GoC’s request for an emergency project\. Through this rapid and collaborative response and by closely aligning the Project with the Bank and GoC strategies in the country, the team delivered a project highly relevant to both Bank and GoC priorities\. What was unusual for the Bank in this emergency project was the inclusion, alongside the resilience-building activities, of direct humanitarian support – essentially a twelve-month feeding operation – to be delivered through a UN program already on the ground\. This emergency assistance could not have been foreseen in either GoC or Bank strategies but was a deliberate response to a pressing humanitarian emergency\. 93\. The situation analysis at appraisal and the consequent project design were based on extensive fact-finding and use of background references about the situation of RRHCs and the problems that were to be solved\. The social and gender aspects of design were particularly thoroughly researched\. 94\. The general design of the project reflected strategic choices that proved to be correct, notably the inclusion of host communities among the target beneficiaries as this group proved to be just as vulnerable as the refugees and returnees; and the use of UN agencies, which reflected a pragmatic approach which recognized the weakness of the national institutional setting\. 95\. The implementation arrangements, particularly the use of established UN agencies with strong in-country programs known for their general competency in their areas of work, were well thought through and designed\. 96\. Potential risks were rightly assessed, and appropriate mitigation measures provided for\. Page 25  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) Quality of Supervision 97\. Project supervision was led by a TTL based in N’Djamena\. Implementation support missions were regular and there were monthly meetings with the UN agencies and the GoC focal points\. Field visits were constrained by the security situation\. During a field visit to a refugee camp in the project area, the Bank supervision team was kidnapped temporarily by a group of refugees who claimed they had not received the usual food distribution that was to be provided by a humanitarian agency\. However, this issue was not related to the Bank-supported project, which was concerned in the area with animal vaccination\. Thanks to three armed soldiers provided by the government as part of the WB-UN security arrangement with GoC the Bank team was released unscathed\. The Bank team had regular meetings with officials and decision-makers to assess the socio-political environment and to follow up on implementation arrangements\. 98\. The Bank teams were staffed with required competencies reflecting all technical aspects as well as financial management, procurement and safeguards\. They provided guidance throughout the process, with considerable hands-on support on technical, monitoring, and fiduciary aspects\. Aide memoires and ISRs were clear and complete\. In addition, the Bank team was proactive in identifying and resolving constraints to the achievement of relevant development outcomes (i\.e\., by replacing WFP with IOM), exploring opportunities for project restructuring and early closing, and providing adequate support during technical missions, safeguards, procurement and FM assistance\. 99\. One area where early challenges were corrected was in oversight of and coordination between UN agencies, including overall coordination of the M&E system\. When this concern became apparent, the Bank was highly responsive, involving the Ministry of Planning and the line ministries and organizing monthly coordination meetings amongst the UN agencies and GoC focal points\. The Bank also collaborated with UNHCR which participated in beneficiary selection along with other agencies\. 100\. As the project neared its close, the Bank was responsive to the need to consolidate the agricultural portfolio financed by the World Bank and worked with GoC to bring efficiencies\. The result was the decision to merge PURCAE and PROPAD through a level 2 restructuring of PROPAD and early termination of PURCAE\. The residual financing of PURCAE is to be returned to the Bank and PROPAD has taken over the remaining activities of PURCAE, incorporating the relevant results indicators and targets into its own results frame\. Justification of Overall Rating of Bank Performance 101\. For all the above reasons, Bank performance is rated overall Moderately satisfactory\. Although the Bank was instrumental in the preparation and implementation of a project that achieved its targets, the project evolved into an increasingly development-oriented operation with its focus on strengthening resilience, yet the project ended with little quantitative evidence to allow evaluation of outcomes\. D\. RISK TO DEVELOPMENT OUTCOME 102\. At completion, there is a risk that outcomes will not be maintained over time\. While some important gains were made under the Project, these gains remain fragile because the general security situation in CAR is still volatile (without mentioning the still unknown socio-economic impacts of the COVID-19 pandemic)\. At the end of 2019, Chad was still host to over 465,000 refugees and asylum seekers\. The current INFORM index for Chad is 7\.2 out of 10, Page 26  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) ranking it the third country most at risk of humanitarian crises and natural disasters\. Chad has a vulnerability score of 7\.6 and the lack of adaptation capacity presents a score of 8\.9 illustrating the country's incapacity to overcome crises and successive shocks\. Furthermore, the Global Hunger Index (GHI) ranks Chad in an “alarming situation” and the cost of hunger report shows that 43% of infant mortality is linked to undernutrition\. 103\. Risks to development outcomes arising from social, environmental and economic factors outside the project could threaten food security and agricultural production of the target population\. In the medium term, activities undertaken by a network of public and non-governmental organizations will still be needed to ensure the sustainability of benefits (for activities such as distribution of agricultural inputs and breeding stock)\. Displaced people will require urgent and long-term multisectoral assistance as well as durable solutions for their socio-economic integration\. At the same time, it should be stressed that displacement of people continues to risk affecting the situation of the host communities\. In face of these challenges, GoC capacity to intervene to support refugees, returnees and supporting communities is still limited\. The GoC is providing what support it can but beyond that and the efforts of the UN agencies, service delivery to refugees and host communities is in many cases highly constrained\. V\. LESSONS AND RECOMMENDATIONS 104\. Country ownership was crucial in this project both for implementation success and for sustaining the achievements of the project following its completion\. Emergency projects need to be aligned with national policy and with emergency response strategies and receive the active commitment of government\. 105\. One factor in the comparative success of the project was that its objectives were practical and attainable in the context of a short-term emergency project\. The design of emergency projects should adopt modest development objectives that are compatible with the time and resources allocated to implementing the proposed interventions\. 106\. An advantage of the project was that it was able to finance agencies and activities that were already in place\. Implementation readiness, both on the program and logistical side, is a crucial criterion; and readiness on the fiduciary side is key to mitigating risks which could potentially reduce the impact of such projects\. Wherever possible, emergency projects should be grafted onto existing programs and capacities\. 107\. Reliance on partner development agencies with comparative advantage was an important positive factor for the project\. When preparing and implementing emergency projects, the WBG should rely on partner institutions with proven comparative advantage and experience\. The WB-GoC-UN agencies model of financing and executing this project deserves to be replicated and scaled up though the Humanitarian-Development Nexus\. 108\. An important finding of the ICRR is that there is a strong nexus between emergency situations and socioeconomic development\. Short-term emergency operations which are aimed at improving food security of populations in time of crisis are best accompanied by a long-term plan of activities aimed at strengthening resilience, combatting poverty, improving local livelihoods, creating jobs and generating income\. Page 27  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) \. \. Page 28  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS A\. RESULTS INDICATORS A\.1 PDO Indicators Objective/Outcome: Project's targetted beneficiaries in Chad affected by the conflict in the CAR Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Direct project beneficiaries Number 0 116,200 550,000 592,350 30-Jun-2017 30-Apr-2017 31-Mar-2021 04-Jun-2020 Female beneficiaries Percentage 0 50 52 53 Comments (achievements against targets): PDO level indicator exceeded its end target Objective/Outcome: Beneficiaries of conditional food assistance Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Beneficiaries of conditional Number 0 32,460 152,960 78,710 Page 29  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) food assistance 30-Jun-2017 30-Jun-2017 31-Mar-2021 04-Jun-2020 Comments (achievements against targets): The PDO level indicator was partially reached (51%) because of the late signing of the partnershio with IOM (March 2019) and the early closing of PURCAE\. The remaining number of beneficiaries supported by IOM will be reached under PROPAD Objective/Outcome: Improve availability of and access to food and livestock productive capacity Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Beneficiaries receiving Number 0 45,200 47,038 agriculture input packages in the target areas 30-Jun-2017 30-Sep-2019 04-Jun-2020 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Livestock (cattle) vaccinated Number 0 1,500,000 4,000,000 3,926,263 30-Jun-2017 30-Apr-2017 31-Mar-2021 04-Jun-2020 Comments (achievements against targets): Page 30  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) A\.2 Intermediate Results Indicators Component: Targetted food assistance Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Improved fireplaces Number 0 9,000 13,107 fabricated and distributed 30-Jun-2017 31-Mar-2021 04-Jun-2020 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Drinking water wells Number 0 157 172 rehabilitated 30-Jun-2017 31-Mar-2021 04-Jun-2020 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of beneficiary of Number 32,460 152,960 78,710 conditional food assistance 30-Jun-2017 31-Mar-2021 04-Jun-2020 Page 31  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) Comments (achievements against targets): The actual number of beneficiaries of conditional food assistance does not include the beneficiaries who will be targeted by IOM under PROPAD Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Productive assets Number 0 40 15 rehabilitated 30-Jun-2017 31-Mar-2021 04-Jun-2020 Comments (achievements against targets): 39 assets have been identified and one asset remains to be selected in the community of Danamadja\. The community has proposed the construction of a road\. However, this is not seen to be a sustainable productive asset, as heavy rains in the area will wash the road away with the next rainy season\. IOM has worked with local authorities to try and resolve the issue and is continuously in discussion to reach a compromise\. By the end of project implementation, 15 assets had been completed and officially handed over to communities in three of the four target regions\. Upon completion of the project, 24 assets had yet to be completed\. Of the 24 to be completed, five were ongoing rehabilitation upon project closing\. Assets yet to be completed have been paused and will be resumed under the ProPAD\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion People trained by IOM Number 0 14,000 8,371 24-Oct-2018 31-Mar-2021 04-Jun-2020 Page 32  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) Comments (achievements against targets): The training benefited to both household management and cooperatives\. For the former, 7,817 individuals participated in these trainings, among whom 61% were women and 39% men\. For he later, 554 individuals participated in these trainings, among whom 361 men and 193 women representing 185 cooperative associations, The actual number of people trained does not include the targeted beneficiaries who will be trained by IOM under PROPAD\. Component: Agricultural production and livestock stabilization Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Households receiving Number 1,000 1,000 2,000 3,300 breeding stock 30-Jun-2017 30-Apr-2017 31-Mar-2021 04-Jun-2020 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Animal feed distributed Metric ton 2,346 2,700 3,546 3,746 30-Jun-2017 30-Apr-2017 31-Mar-2021 04-Jun-2020 Comments (achievements against targets): Indicator Name Unit of Measure Baseline Original Target Formally Revised Actual Achieved at Page 33  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) Target Completion People participating in Number 1,156 1,000 1,656 2,433 training sessions on conflict resolution (by FAO) 30-Jun-2017 31-Dec-2016 29-Jul-2019 04-Jun-2020 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Decentralized staff trained Number 60 100 72 (by FAO) 30-Jun-2017 31-Dec-2016 04-Jun-2020 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion People that benefitted from Number 1,456 75 1,956 3,379 other trainings (by FAO) 30-Jun-2017 30-Apr-2017 31-Mar-2021 04-Jun-2020 Comments (achievements against targets): Indicator Name Unit of Measure Baseline Original Target Formally Revised Actual Achieved at Page 34  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) Target Completion Percentage of beneficiary Percentage 0 75 0 satisfied by the project's intervention 30-Jun-2017 31-Mar-2021 04-Jun-2020 Comments (achievements against targets): Due to the early termination of PURCAE, the study to assess beneficiary satisfaction has not been conducted\. This study will be carried out under PROPAD\. Page 35  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) Table 2: Changes in the Results Framework Original project Restructured project PDO indicators Direct beneficiaries: Targeted beneficiaries: Total number of direct project beneficiaries (of ▪ Direct project beneficiaries (number)\. End target: 550,000 which percentage female) (End Target: 116,200 ▪ Direct project beneficiaries (female) (%)\. End target: 52% and 50%) Food assistance Conditional food assistance: Number of direct beneficiaries of vouchers or ▪ Beneficiaries of conditional food assistance (Number)\. End direct food transfers\. Target: 31,200 target: 152,960 Agriculture and livestock Improved availability of and access to food and livestock • Number of agricultural input packages distributed productive capacity to beneficiaries in the target areas: 15,000 ▪ Beneficiaries receiving agriculture input packages in the • target areas (Number)\. End target: 45,200 • Number of livestock (cattle) vaccinated (End ▪ Livestock (cattle) vaccinated (Number)\. End target: Target: 1,5 million) 3,951,460 Intermediate results indicators • Direct Food transfers (metric ton: 6,492) A2\. Conditional food assistance ▪ Number of beneficiaries of conditional food assistance • Blanket supplementary feeding (metric ton: 14) (Number)\. End target: 152,960 ▪ Productive assets rehabilitated (Number)\. End target: 40\. A3\. Sustainable cooking systems and drinking water ▪ Improved cookstoves fabricated and distributed (Number)\. End target: 9,000\. ▪ Drinking water wells rehabilitated (Number)\. End target: 157\. ▪ People trained by IOM (number) New action): End target: 14,000\. • B\. Agricultural production and livestock stabilization • ▪ Households receiving breeding stock (Number)\. End • target: 2,000\. • Households receiving breeding stock (1,000) ▪ Animal feed distributed (Metric ton)\. End target: 3,746 mt • Animal feed distributed (metric ton: 2,700) ▪ Decentralized staff trained (by FAO) (Number)\. End target:100\. ▪ People that benefitted from other trainings (by FAO) (Number) (New)\. End target: 1,956\. ▪ Percentage of beneficiary satisfied by the Project's intervention (Percentage): 75%\. • People trained (of which decentralized): (75) (60) ▪ Decentralized staff trained (by FAO) (Number)\. End target: 100 • People participating in training sessions on conflict ▪ People participating in training sessions on conflict resolution: 1,000 resolution (by FAO) (Number)\. End target: 1,656\. Page 36 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) TABLE 3: PROJECT RESULTS BY OUTCOME 1\. Improved nutritional status and wellbeing Original Revised Activity Actual Percentage Degree of achievement target target Targeted activities Improved cookstoves More than achieved\. 7,533 extended households 9,000 13,107 146% fabricated and distributed benefitted from the 13,107 cookstoves\. Beneficiaries of conditional Partially achieved\. Activity transferred to PROPAD June 152,960 78,710 51% food assistance 2019\. Productive assets Partially achieved\. Further assets ae to be rehabilitated 40 25 62% rehabilitated under PROPAD\. Partially achieved\. Further training of targeted beneficiaries People trained by IOM 14,000 8,371 60% will be undertaken under PROPAD\. Beneficiaries of vouchers or Achieved\. This activity was dropped at the 2019 31,200 32,460 105% direct food transfers restructuring\. Dropped indicators Direct food transfers (MT) 6,492 Was due in PY1 Blanket supplementary Was due in PY1 14 feeding (MT) Other activities Cash-for-work beneficiaries 11,550 Page 37 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) 2\. Enhanced water security Original Revised Activity Actual Percentage Degree of achievement target target Targeted activities Drinking water wells 157 172 110% More than achieved rehabilitated Other activities Water pumps installed 500 Boreholes rehabilitated with 100 handpumps New boreholes drilled and 130 equipped Distribution of buckets-with-tap 9,000 Construction of 70 latrine units 70 Water management committees 170 created and trained Distribution of plastic molds for 60 sanitation activities Preparation and distribution of booklets and guides on handpumps and participatory training Total number of beneficiaries of the UNICEF Water, Sanitation 46,000 and Hygiene (WASH) program 43 Training of facilitators facilitators Page 38 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) 3\. Improved agricultural productivity and local livelihoods Original Revised Activity Actual Percentage Degree of achievement target target Targeted activities Beneficiaries receiving agricultural 45,200 47,038 104% Achieved packages Decentralized staff trained by FAO 60 100 212 212% More than achieved Beneficiaries of other FAO training 75 1,456 3,379 > 200% More than achieved Other activities Construction of seedbanks 10 Distribution of seeds to seed 20 groups multiplication groups Distribution of agricultural inputs and 47,038 beneficiaries vegetable seeds Distribution of dewatering kits for 100 kits irrigation Distribution and erection of mesh fence 20,000 linear meters for the protection of market gardens Distribution of grain mills for groups; 280 mills Distribution of tricycles for transport of 35 tricycles for 35 agricultural products groups Distribution of scales for seed banks 25 scales Strengthening and training of members 1,900 persons (530 of local producer organizations women) Training of seed groups on seed 20 groups legislation Field school training and equipment in 400 producers from 280 pesticide management for horticulture horticulture groups Page 39 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) 4\. Improved livestock productivity Original Revised Activity Actual Percentage Degree of achievement target target Targeted activities Animals vaccinated 3,926,263 3,951,460 101% Achieved Households receiving breeding stock 1,000 4,300 More than achieved Animal feed distributed (MT) 2,700 3,546 6,086 170% More than achieved Other activities Rehabilitation of productive livestock assets20 15 projects 17,500 animals to Distributions of breeding stock 4,300 households Distribution of animal feed 3,746 mt to 1,000 households 6,000 to 1,000 Distribution of small ruminants households Transhumance corridor 250 km Livestock parks 5 Pastoral wells 8 Vaccination parks 10 Training of community para-veterinarians 500 paravets Motorcycles for vaccination technicians 60 motorcycles 20 Including vaccination sites, community markets, cattle markets, slaughterhouses etc\. Page 40 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) 5\. Strengthened social cohesion Intermediate results indicators Original Revised Degree of achievement Actual Percentage target target Facilitators trained to support communities 43 on participatory diagnostics facilitators Community action plans developed 43 plans Groups trained on collective governance and 35 groups resource management Participants in FAO training sessions on 1,000 1,656 2,433 conflict resolution Percentage of beneficiaries satisfied by Not yet due\. The study will be project interventions carried out under PROPAD when 75% n\.a\. all project components are completed\. Page 41  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A\. TASK TEAM MEMBERS Name Role Preparation Bleoue Nicaise Ehoue Task Team Leader(s) Lucienne M\. M'Baipor Social Specialist Emeran Serge M\. Menang Evouna Social Specialist Supervision/ICRR Ziva Razafintsalama Task Team Leader(s) Haoussia Tchaoussala Procurement Specialist(s) Josue Akre Financial Management Specialist Mahamat Seidou Seidou Ahmat Team Member Ndoya-Allah Bantiga Social Specialist Aurelie Marie Simone Monique Rossignol Environmental Specialist Amadou Ba Team Member Timoleon Kossadoum Procurement Team Moussa Fode Sidibe Window Manager Moussa Fode Sidibe Procurement Team Emeran Serge M\. Menang Evouna Environmental Specialist Mohamed Medouar Team Member Ndolassem Christabelle Mbairo Window Manager Benjamin Billard Team Member Paulette C\.E\. Aida Thioune Zoua Window Manager Paulette C\.E\. Aida Thioune Zoua Procurement Team Kristyna Bishop Social Specialist Page 42  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) Jane C\. Hopkins Team Member Tayelim Berthe Ngarbaye Window Manager Tayelim Berthe Ngarbaye Procurement Team Sossena Tassew Team Member Salam Hailou Team Member Fatime Mahamat Adoum Window Manager Bleoue Nicaise Ehoue Team Member Juvenal Nzambimana 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 FY15 40\.257 216,098\.98 FY16 2\.100 10,290\.12 Total 42\.36 226,389\.10 Supervision/ICR FY15 5\.422 24,584\.31 FY16 5\.835 40,672\.42 FY17 16\.027 77,904\.80 FY18 32\.515 177,408\.69 FY19 18\.781 111,016\.68 FY20 21\.567 122,781\.03 Total 100\.15 554,367\.93 Page 43  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) ANNEX 3\. PROJECT COST BY COMPONENT Components Amount at Approval Actual at Project Percentage of Approval (US$M) Closing (US$M) (US$M) Targeted Food Assistance \. 14\.80 12\.1 (1) 82% Agriculture Production and 19\.2 17\.6 (2) 92% Livestock Stabilization Total 34\.00 29\.7 (3) 87% (1) $2\.7 million of IOM transferred to PROPAD, not included (2) $572,184 of FAO to be reimbursed, not included (3) $3\.0 million of IOM and FAO as well as from the exchange rate depreciation XDR to US$ not included Page 44  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) ANNEX 4\. EFFICIENCY ANALYSIS The efficiency of the Project is rated Substantial\. The Project aimed to respond to a crisis and was not designed as a long-term response\. At appraisal, given the nature of the operation (emergency response to crises), an economic analysis was not conducted - estimations of the Net Present Value (NPV) or the Economic Rate of Return (ERR) were not required\. At closure, an economic analysis of the Project as a whole is part of the present ICRR\. Economic analyses of the activities implemented by each of the three UN implementing agencies, within the context of their respective larger programs, would be appropriate\. Moreover, it should be pointed out that an economic analysis of all agriculture and livestock activities will be carried out under the PROPAD project into which remaining activities have been integrated\. In general terms, it should be stressed that while they were not expected to yield a sustained developmental impact, Project activities were meant to improve the conditions for returnees, refugees, and host families in the target areas\. By definition, as an emergency operation, the Project supported, in the very near-term, returnees, refugees, and host families in the target areas\. Tables 4 and 5 provide detailed information about actual costs and related outputs and disbursement rates for each activity and for each UN agency\. Overall, the disbursement rate is 87% (between 100% for activities of sub-Component A1 and A2 and 56% % for activities of sub-Component A2)\. Non disbursed funds of Component B will be transferred to the PROPAD project\. The total expenses by UN agency were the following: TABLE 4: PURCAE II: Project Cost (by component) (US$ million equivalent) (Source: PURCAE) COMPONENT APPRAISAL CLOSING PERCENTAGE (disbursement) Component A: Targeted Food 14,800,000 12,100,000 82% Assistance A1: Food Assistance 7,000,000 7,000,000 100% A2: Conditional food assistance 6,100,000 3,400,000 21 55,73% A2: Improved cookstoves & rehabilitation of water points 1,700,000 1,700,000 22 100% Component B: Agricultural 19,200,000 17,600,000 23 92% Production & Livestock Stabilization TOTAL 34,000,000 29,700,000 87% 21 Activities partially implemented by OIM\. The remaining amount of $2\.7 million equivalent was transferred to PROPAD 22 Activities partially implemented by UNICEF (UNICEF used its own resources pour implement the construction of 15 water points in addition to the 115 planned under PURCAE\. 23 Activities partially implemented by FAO\. Page 45  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) TABLE 5: Project Cost, PURCAE II (by UN agency) (US$ million equivalent) UN Agency APPRAISAL CLOSING PERCENTAGE WFP (Food assistance) 7,000,000 7,000,000 100% IOM (Conditional food 6\.100,000 3,400,000 55,73% assistance) UNICEF (cookstoves & water 1,700,000 1,700,00 100% points) FAO (Agriculture & Livestock) 19\.200,000 17,600,000 92% TOTAL 34,000,000 29,700,000 87% Overall, the Project was an important asset and contributed to help the country deal with the crisis\. Over the years, the influx of refugees and returnees had increased food insecurity and created competition for resources, which, on the medium-term, could have triggered conflicts and social instability\. The Project contributed to reducing food insecurity of households (refugees, returnees and host communities), enhancing resilience and sustainability of local production systems, and improving their livelihoods and productive assets\. The Project’s focus on livestock and agriculture is very relevant to current government strategy, as it was at appraisal\. In Chad, agriculture is the main livelihood source for most of the population in the target areas\. In spite of their vulnerability to weather, agricultural activities have considerable potential and are a major engine of growth, food security and poverty reduction\. A constant in the Government’s agricultural development strategy for decades is the country’s vulnerability to climate related risks\. Moreover, to emphasize the economic importance of livestock activities of the Project, it should be pointed out that: (i) livestock raising is one of the main economic pillars in Chad as a whole with 114 million head of cattle; (ii) livestock sector represents about 40% of the GDP; and (iii) cattle mortality rate are about 10% (for small ruminants, mortality is much higher, estimated at more than 40%)\. According to recent assessments conducted in the country, a lack of vaccination or deworming (especially against scabies) of calves and a lack of treatment against cattle trypanosomiasis are the main factors of mortality\. The most important economic benefits of the Project are the following : (i) increased agricultural, livestock and artisanal production; (ii) improved agricultural yields (as a result of provision of agricultural inputs and training initiatives); (iii) increased share of production generating cash income, increased average producer prices and greater share of benefits for producers; and (iv) creation of additional employment\. The Project has also generated other benefits, that have been significant, contributing to reducing social inequities and community tensions and improving social stability and prosperity in the Project intervention areas\. Given the nature of the emergency project and the characteristics of the M&E system put in place, these economic benefits are not quantifiable\. Eventually, economic analyses of the activities of the UN agencies involved in the project would focus on quantified outcomes\. Other specific socio-economic benefits are the following: longer term multiplier effects of strengthened capacities of smallholders and their organizations; enhanced food and nutrition security for targeted households; reduced vulnerability of households to external shocks; enhanced livelihoods of individual households and communities; and increased equality between men and women (through investments which specifically addressed women’s nee ds and priorities)\. Page 46  The World Bank Emergency Food and Livestock Crisis Response Project (P151215) The relatively simple design of the emergency project and the very short-term contingent emergency response contributed to its efficiency\. By relying on UN agencies, the Project had the most cost-effective means of ensuring the required rapid response: each agency received 7 percent of the respective contract value to cover administrative overhead charges, managed all of the Project’s activities (technical, financial, and procurement) and ensured the delivery of goods and services to the intended beneficiaries\. MoUs were signed with UN agencies, namely, under PURCAE II: with the FAO (for a total amount of US$ 8\.2 million), with the IOM (for an amount of US$ 6\.1 million) and with UNICEF (for a total amount of US$1\.7 million)\. National NGOs were involved to ensure adequate implementation of activities\. It should be pointed out that, given the emergency situation, the characteristics of the operations and the short duration of the Project, the alternative to first create local capacities and then implement the Project, would not have been cost-effective\. Therefore, overall, as Table 7 below indicates, costs seem reasonable in comparison with both the quantitative and qualitative achievements: on one hand, in terms of the number of beneficiaries, vaccinated animals, people trained, and infrastructures rehabilitated; and, on the other hand, in terms of improved and diversified livelihoods and social cohesion\. Moreover, the operational efficiency of the overall cost of delivering the interventions can be assessed by looking at the ratio of indirect to direct cost\. According to the United Nations Central Emergency Response Fund, is cost effective a ratio of indirect to direct cost of 7 or less: this is shown in Table 6 below, by comparing the project with similar emergency projects in CAR and South Sudan\. TABLE 6: Breakdown of overall costs (US$) CAR 24 SOUTH SUDAN 25 CHAD (PURCAE) Direct cost 11,214,953 (93%) 208,906,823 (85%) 13, 720,846 (93%) Indirect cost 785,046 (6%) 14,623,475 (14%) 1,032,751 (7%) Table 7: Costs and outputs (by component) Component A: Targeted food assistance Costs (US$) Outputs (number) Agency A\.1: Improved cookstoves 1,700,000 13,107 UNICEF, NGO fabricated and distributed (Number) A\.2: Drinking water wells 172 UNICEF / NGO rehabilitated (Number A\.2: Beneficiaries of 3,400,000 78,710 IOM, NGO conditional food assistance (Number)\. A\.3: Productive assets 15 IOM NGO rehabilitated (Number)\. A\.4: People trained by 8,371 IOM IOM (number) 24 The Emergency Food Crisis Response and Agriculture Re-Launch Project (P149512)\. 25 The Southern Sudan Emergency Food Crisis Response Project (P113586)\. Page 47 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) TOTAL 5,100,000 Component B: Agricultural production & Livestock stabilization B\.1: Households receiving 3,300 FAO NGO breeding stock (Number)\. 17,600,000 B\.2: Animal feed 3,746 FAO, NGO distributed (Metric ton)\. B\.3: People that 3,379 FAO NGO benefitted from other trainings (by FAO) (number) B\.5: Decentralized staff 72 FAO NGO trained (by FAO) (Number)\. B\.3: People participating 2,433 FAO NGO in training sessions on conflict resolution (by FAO) (number) Beneficiary satisfied by NA FAO NGO the Project's intervention (Percentage) TOTAL 29,700,000 Page 48 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) ANNEX 5\. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS 1\. Abdoulaye Senoussi, Directeur General du Ministère de l’Economie, de la Planification du Développement et de la Coopération Internationale : Appréciation globale du projet par le gouvernement dans son objectif et philosophie ; 2\. Le mécanisme de mise en œuvre doit prendre en compte davantage les structures déconcentrées de l’État pour une meilleure appropriation et continuité 3\. Renforcement du cadre de concertation entre la FAO, la Banque et le Gouvernement\. 2\. FAO : 2\.1\. Monsieur Ndiaye, Mansour, Représentant de la FAO au Tchad - Au regard du contexte volatile entre la frontière RCA – Tchad, une poursuite des activités alliant humanitaire et développement dans les provinces Sud du Tchad permettrait de pérenniser les acquis du projet et préparer méthodiquement une stratégie de sortie\. - Le projet reste pertinent en ce qui concerne la FAO car l’agriculture et l’élevage restent les 2 activités rurales majeures dans les zones ciblées\. Elles demeurent aussi les priorités du gouvernement du Tchad, ainsi que le moyen le plus rapide de redonner aux bénéficiaires les outils et la connaissance nécessaires pour une meilleure appropriation de leurs activités\. - Le rapport cerne bien les résultats et impacts auprès des bénéficiaires\. - Les activités du PURCAE sont en phase avec les exigences de durabilité au regard notamment des infrastructures rurales de base qui ont permis l’amélioration des conditions de vie des bénéficiaires et le bétail\. Les mesures à prendre se situent désormais d’une part dans une bonne maintenance des acquis du projet à travers une meilleure organisation des communautés bénéficiaires et d’autre part un engagement conséquent des Bureaux décentralisés des Ministères de l’Agriculture et de l’Elevage\. Dans les 2 cas il y’a un besoin important de fournir des formations pour renforcer les capacités des acteurs\. La FA dispose d’outils spécifiques (champs écoles agro- pastorales ; caisse de résilience ; club d’écoute ; etc\.) pour travailler dans cette direction\. - La collaboration entre la FAO et les Coordonnateurs nationaux du projet au sein des 2 Ministères était un volet important du projet\. Elle s’est bien déroulée\. Nos consultations régulières ont permis de travailler correctement sur le terrain avec les Bureaux provinciaux des Ministères dans la limite toutefois de notre rôle dans ce projet\. - Les autres types de partenariats avec d’autres institutions y compris celles des Nations Unies ont consisté à l’échange d’information sur les réfugiés et les retournés présents au sud du Tchad, mais également pour ceux qui sont présents dans la même zone d’intervention de rechercher les synergies d’action possibles\. - Malgré son caractère d’urgence, le projet a permis aux bénéficiaires de disposer des bases solides pour une reconstitution de leurs moyens de production à partir des infrastructures de base (banques de semences agricoles, forages maraîchers ; couloirs de transhumance, parcs de Page 49 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) vaccination, etc\.), lesquelles sous réserve d’une bonne maintenance permettront aux communautés bénéficiaires d’être plus résilients et autonomes face aux crises\. - L’aspect sur lequel le projet peut s’améliorer porte sur l’activité de prévention des conflits et de consolidation de la paix\. La FAO dispose de cette expertise et pourrait, en partenariat avec le gouvernement, renforcer cette dimension à travers un processus de médiation (y compris pour l’accès à la terre) et l’utilisation des outils FAO pertinents\. - La zone Sud du Tchad reste le premier niveau de refuge pour les personnes qui cherchent asile et protection depuis le Nord de la RCA\. La situation dans ce dernier pays reste volatile et par conséquent il y’a encore eu récemment des mouvements importants de populations\. Il s’y ajoute que la crise de la COVID- 19 constitue un facteur aggravant de déstructuration des activités en milieu rural, d’où le besoin d’intervenir au moins entre 2021 et 2022 pour préserver le capital productif des acteurs ruraux (y compris réfugiés et retournés) parmi les plus vulnérables\. 2\.2\. Molengar NGOUNDO Ph\. D\. - Il s’agissait avant tout face à une situation de crise d’ampleur de venir en aide aux milliers de réfugiés et retournés qui sont arrivés au Tchad et ont été accueillis en grande partie et dans un premier temps par les populations hôtes, elles-mêmes très pauvres\. Au total nous avions retenu 78 221 ménages soit quelques 469 326 personnes qui ont été touchées parmi lesquelles 35 786 ménages autochtones (45,75%), 19407 ménages réfugiés (24,81%) et 23 028 ménages retournés (29,44%)\. En termes d’impacts, ces bénéficiaires étaient constitués de 36 385 ménages d’agriculteurs et 41 816 ménages d’éleveurs lesquels ont pu durant la phase de mise en œuvre constitués des moyens d’existence et disposer des conditions de sortie d’une dépendance totale\. - Le projet a été conçu initialement pour appuyer en urgence les personnes affectées par la crise centrafricaine\. Cependant, dans sa mise en œuvre, ce projet a mis en relief les jalons d’un développement en appliquant le Nexus-Humanitaire-Développement\. De plus, le schéma de partenariat Banque Mondiale – Gouvernement – Agences des Nations Unies pour la mise en œuvre de ce projet a permis d’atteindre rapidement les vulnérables affectés par la crise\. Ce schéma pourrait être maintenu pour accompagner le gouvernement même dans les projets de développement\. - Il n’y a pas eu de tentative de coordination avec d’autres en RCA car il faut rappeler que les frontières étaient fermées et le Nord de la RCA était contrôlé par des groupes rebelles\. Ce n’était donc pas dans l’esprit du volet du projet conduit par la FAO\. Cependant les acquis du projet PURCAE sont à comptabiliser dans les opportunités récentes qui nous ont permis de mettre en œuvre un projet transfrontalier de consolidation de la paix, (Peace Building Funds) entre le Tchad et la RCA, financé par le Secrétariat des Nations Unies et facilité sur le terrain par la FAO et l’OIM du Tchad et de la RCA\. Ce projet prendra fin en décembre 2020\. En termes de dynamique socio culturelles, les populations de la RCA qui s’étaient réfugiées au Tchad avaient en partage beaucoup de valeurs similaires\. De ce point de vue, leur insertion, tout comme celle des retournés en milieu tchadien s’est faite assez facilement d’où pour les agriculteurs une possibilité d’accéder à la terre pour produire et pour les éleveurs la possibilité de reconstituer leur cheptel et de Page 50 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) reprendre progressivement leurs activités en utilisant, notamment les zones de parcours crées par le projet\. 3\. IOM 3\.1\. Deshields-Williams Kimani • Les 3 catégories de bénéficiaires ont été considérées sans aucune discrimination mais seulement la différence de pourcentage par rapport leur statut (hôte, refugie ou retourne) a été considère pour la composition des équipes des rotations (50% hôte, 30% retourne, 20% refugie)\. • Il y avait une collaboration avec le UNHCR notamment pour identifier les refugies vulnérables qui avaient déjà bénéficié d’un support de HCR ou non afin d’éviter la duplication de fourniture de l’assistance dans les zones de Maro et Moissala en donnant l’occasion à d’autres personnes vulnérables d’être considéré par un projet\. Aussi, dans le document projet, certaines zones n’avaient pas été formellement identifiées et il appartenait à l’OIM de le faire\. Cette identification définitive de certaines zones d’exécution du projet a été fait avec la collaboration du HCR dans les zone sus mentionnées\. • Appréciation sur le projet : Le projet a renforcé la sécurité alimentaire des communautés, selon les témoignages des bénéficiaires\. Dans les zones cibles, les bénéficiaires ont indiqué avoir acheter des animaux, tels que poulets et moutons, des céréales pour créer un stock et ont commencé des activités génératrices de revenus, comme le petit commerce\. En plus, les formations d’ATURAD ont fourni aux bénéficiaires les aptitudes à mieux gérer leurs ressources, par exemple la préparation des repas pour éviter le gaspillage et économiser de leur argent\. Toutes ces activités contribuent à la résilience des ménages pour être mieux capable de combattre les chocs cycliques\. • Appréciation sur les réalisations du projet : L’appréciation sur les réalisations du projet sont nettement positifs et réconfortants jugée par les témoignages des bénéficiaires\. De manière concrète, ce projet a permis à toutes les communautés des zones d’exécution de recevoir des infrastructures relatives à la production agricole qu’elles ont elle-même souhaitées et d’être payées pour le travail accompli sur ces sites à travers l’option du travail contre argent\. Ce salaire après travail a permis aux communautés bénéficiaires de faire face à certaines dépenses ménagères, tels que la nourriture, la scolarisation et les frais médicaux\. La réhabilitation des actifs a également amélioré l’accès aux les activités agriculturales, notamment les marches communautaires, les parcs de vaccination et le piste d’accès aux champs qui tous permettre les membres de la communauté d’avoir un haut niveau d’accès à la nourriture et moins dépendant sur l’aide humanitaire\. Aussi, faut-il le noter, le projet a contribué à renforcer les capacités de 180 groupements agricoles par des formations sur la gestion administrative et financière d’une part et Page 51 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) d’autre par une formation des bénéficiaires sur l’entreprenariat et la comptabilité financière de base\. • Utilité de poursuivre le projet : Assurément oui ce projet mérite de se poursuivre vu les nombreux et riches témoignages\. Pour certains bénéficiaires, l’argent obtenu dans le cadre du travail contre argent leur a permis d’inscrire leurs enfants à l’école, pour d’autres, à assurer les frais de santés familiales, pour d’autres encore à acheter des petits ruminants ou delà volaille en vue de les revendre\. Il en de même pour certains encore d’avoir utilisé ces fonds renforcer leurs maisons qui ont été partiellement détruits par les inondations\. Tous ces résultats soutiennent et rendent plus autonome les ménages pour devenir moins dépendant vis-à-vis de l’assistance humanitaire\. Les communautés ont hautement apprécié qu’elles aient été consultées et impliquées dans toute la phase d’exécution du projet et pour toutes ces communautés cela étaient la première fois\. Aussi, à travers les rotations des équipes mixtes, les bénéficiaires ont créé des nouvelles relations qui a renforcé la relation entre membres de la communauté\. Lorsque des missions du suivi, plusieurs bénéficiaires ont exprimé le sentiment d’avoir nouveaux amis : « J’ai des nouveaux frères », « Si j’ai un besoin ou une urgence, j’ai plus des personnes à qui je peux demander des conseils et des orientations »\. En plus, les actifs réhabilités comme la corridor transhumance contribue à la résolution des conflits entre les éleveurs et les agricultures, à travers la création d’un chemin qui permet les éleveurs de traverse sans disruption aux land agricole pour les communautés hôte, un mécanisme important pour éviter la tension entre les deux parties\. Il faut également note qu’à cause de la situation de COVID-19 et ses effets sur l’économie, il y a un grand besoin de soutenir les ménages vulnérables\. Une étude sur les impacts de COVID-19 réalisé en Aout 2020 a souligné que cette année il y a une augmentation de 59% sur le niveau de « crise » en relation de la sécurité alimentaire\. • A la clôture, le projet est toujours relevant par rapport aux priorités actuelles du gouvernement : - Dans le cadre de lutte continue contre la pauvreté et l’accès des communautés aux ressources disponibles vu que les activités de haute intensité de main d’œuvre ne sont que limité a quelques semaines de travail\. - Dans la cadre de la lutte contre la faim et d’assurer la sécurité alimentaire des communautés\. • Les réalisations physiques en termes d’infrastructures du projet sont bien durables\. Afin de garantir la pérennisation des utilisations et de leurs entretiens, des comités de gestion ont été créé\. Ces comités sont responsables devant les communautés pour garantir l’utilisation juste et transparente mais aussi la gestion générale\. Ces comités ont reçu des formations de l’OIM sur une gestion juste et transparente afin de consolider la cohésion sociale\. Par rapport le transfert du Cash, les formations sur la gestion de ménage qui inclue l’économies, le budget etc\. ont été un mécanisme pour assurer la durabilité du transfert pour permettre les bénéficiaires de mieux gérer leurs paiements dans une Page 52 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) manière responsable pour les permettent des continuer à être moins dépendants sur l’assistance humanitaire\. • Dans le cadre du PURCAE II ; la collaboration convenue était liée aux Minières de l’agriculture et de l’Elevages avec au plafond le Ministère du Plan\. Au niveau de l’exécution elle était faite par la FAO\. La collaboration a été juste parfaite avec les partenaires d’exécution\. Elle a été assurée par des missions conjointes, le partage des informations et des rapports\. • Succès : - La contribution à la résilience des ménages, notamment à travers l’amélioration de la sécurité alimentaire par le transfert d’argent - Ouverture effective entre les différentes communautés vivant ensemble (retournées, hôtes et refugiées) par un dialogue communautaire et une cohésion sociale renforcées\. - Implication effective des communautés dans toutes les phase d’exécution du projet (enrôlement, choix des projets communautaires, formations, suivi d’exécution, réunions communautaires etc\.)\. - Renforcement des capacités des groupements villageois et formation des bénéficiaires sur la gestion des ménages\. - Travail à haute intensité de la main d’œuvre exécutée par les communautés et recevant des salaires après le travail\. - Construction ou réhabilitation des actifs productifs identifies par les communautés\. - La contribution à la cohabitation pacifique entre les éleveurs et les agriculteurs pars la réhabilitation des couloirs de Transhumance\. Aspect à Améliorer - Motivation des Equipes de Gestion de Projets : Les membres des EGPs ont rendu compte que le rôle a beaucoup de responsabilité\. Plusieurs fois les membres des EGPs ont exprimé que c’est nécessaire d’avoir le soutien pour le transport et les frais de communication notamment\. - Plus d’accent sur les formations sur la gestion des ménages, qui inclut la gestion de la santé\. - La fourniture des formations sur l’alphabétisation et opportunités de financement pour des coopératives dirigé par les femmes - Opportunités de « vocational training » pour les jeunes qui participent sur les rotations\. - L’intégration du sujet Transhumance partout les activités du projet pour contribuer à la gestion des conflits et la réconciliation entre les éleveurs et les agriculteurs\. Cette composante peut notamment 1) implique les transhumants dans la réhabilitation des actifs et pour les permettre d’avoir la propriété de l'entretien des actifs 2) renforcer la cohésion sociale entre les communautés hôte et les communautés transhumants\. Page 53 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) 3\.2\. Moussa SORO, International Organization for Migration • UN agencies and the government work together to address the needs that may arise given the context\. As the principal actor in migration, IOM intervenes, when requested\. to provide expertise in this domain, a relationship that remains strong and successful as the Government continues to ask IOM’s intervention in several emergency situations throughout the country to respond to the needs of migrants both in emergency and non-emergency contexts\. • The project maintained the overall guideline that work rotations would be composed of 30 percent returnees, 20 percent refugees and 50 percent Host community members\. The areas of intervention were pre-selected based on where these populations exist that have been affected by crisis\. It should be noted that the launch of IOM’s activities in 2019, it was found that refugee populations had moved in some cases, in which the proportions were adapted to be 60% host and 40% returnee populations\. This guideline applied during the identification and enrollment in Cash for Work rotations and composition of the Project implementation Team\. The impact on the project was definitively positive contributes to social cohesion and increase community dialogue by bringing refugees, returnees and host communities together in one site working together\. This has contributed to create and build relationship among these communities • If we consider the questions of motivation of the PITs members, the emphasis on the beneficiaries training specially the household management training, the link will be to the sustainability of the project\. The role of PIT members is crucial to the project, as the teams identify beneficiaries, support community mobilization, promote social cohesion and ensure the management of the constructed or rehabilitated assets\. Throughout project implementation, PIT members constantly expressed discouragement due to the challenges experienced in selecting beneficiaries, and the overall amount of work the role entails\. In the future, ensuring support to PIT members would aid in ensuring they stay motivated throughout the process to carry out the duties\. • The trainings have given knowledge and skills to beneficiaries that can be duplicated in their day to day life and proved to be an aspect many beneficiaries found extremely useful\. A further emphasis on these training components could further ensure the sustainably of the project, through ensuring individuals have more tools to manage their payment and overall manage their resources to be less dependent on humanitarian aid\. • In regards to the mainstreaming of the Transhumance activities, as aforementioned this is a crucial aspect for the target region\. Through addressing conflict management and reconciliation between the two groups, farmers are able to maintain their land without disruptions and herders are able to move as needed, which ultimately supports the food security for both groups and improves social cohesion\. • There were no attempts to coordinate with CAR, however a cross-border lens would be beneficial considering the nature of Transhumance movements in the target zone\. The importance of these Page 54 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) movements is emphasized by communities who chose to rehabilitee transhumance corridors as one of their productive assets\. Due to the tension between farmer and herders, this is an important topic for the target regions and cross border coordination could have been beneficial in regard to this aspect, notably on the corridors where transhumance movements pose challenges\. • The nuancing refugee/host population, taking into account different needs and sociocultural dynamics of the different groups, could be beneficial as each group has unique needs, especially in terms of support for possible traumas experienced by refugee and returnee populations\. However, it would be important to emphasize that they can still live in peace and work together despite their different culture customs\. Please also note, throughout the project implementation zones, the cohabitation between the mentioned community categories has been extremely positive and no issue has been mentioned\. Page 55 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) ANNEX 6\. SUPPORTING DOCUMENTS (IF ANY) • Project Document Appraisal (PAD) (2014) • Project Restructuring Paper (2017) • World Bank Chad (2019) First Amendment to the Grand Agreement • Environmental and Social Management Framework (ESMF) • Pesticide Management Plan (PMP) • Aide-memoirs of supervision missions o 11-15 December 2017 o March – May 2019 • Implementation Status & Results Report (ISR): o May 2015 o January 2016 o November 2016 o Mars 2017 o September 2017 o December 2018 o June 2019 o December 2019 o June 2020 • IOM Operational Manual (2019) • IOM Interim report (August 2019) • UNICEF Operational Manual (2018) • UNICEF interim reports • UNICEF: Final Report (April 2020) • FAO Operational Manual (2017) • FAO evaluation report (April 2017) • FAO interim report November 2019 • FAO Final Report (July 2020) • Ministère de l’Agriculture (September, 2020) Raport d’Achèvement du projet d’Urgece en réponse à la Crise alimentaire et d’Elevage (PURCAE) (Consultant : Mahamat Ahmat Adberaman)\. (Including minutes of workshops held in August 2020, with the participation of local stakeholders)\. • World Bank (2018) Project Appraisal Document\. Climate Resilient Agriculture and Productivity Enhancement Project • OCHA (2019) Chad\. Country Profile • UNHCR (2018) Tchad\. Plan de Réponse Pays pour les Réfugiés\. 2019-2020 • Marc A\., Verjee N\., and Mogaka S\. (2015) The Challenge of Stability and Security in West Africa (The World Bank) • Watson, C\., Dnalbaye E\., Nan-guer B\. & Zampaglione G\., (2014) Refugee and Host Communities in Chad\. Dynamics of Economic and Social Inclusion (The World Bank) • ICR Second Emergency Food Security Support Project, Guinea-Bissau (March 2016) • ICR South Sudan Emergency Food and Nutrition Security Project (June 2020) Page 56 The World Bank Emergency Food and Livestock Crisis Response Project (P151215) ANNEX 7: MAP OF CHAD Page 57

REVIEW

P057857

 ICRR 14424 Report Number : ICRR14424 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 09/08/2014 Country : Costa Rica Project ID : P057857 Appraisal Actual Project Name : Cr Equity And US$M ): Project Costs (US$M): 50\.0 44\.28 Efficiency Of Education L/C Number : L7284 Loan/ US$M): Loan /Credit (US$M): 30\.0 24\.28 Sector Board : Education Cofinancing (US$M): US$M ): Cofinanciers : Board Approval Date : 03/29/2005 Closing Date : 06/30/2011 12/31/2013 Sector (s): Primary education (50%); Secondary education (30%); Central government administration (20%) Theme (s): Education for all (67% - P); Education for the knowledge economy (33% - S) Prepared by : Reviewed by : ICR Review Group : Coordinator : Pia Schneider Judyth L\. Twigg Lourdes N\. Pagaran IEGPS2 2\. Project Objectives and Components: a\. Objectives: According to the Loan Agreement (2005), the objectives of the project were to : "(a) reduce education quality gaps in the Borrower’s primary and secondary education system in rural areas; and (b) improve the equity and efficiency in the allocation, administration and use of the Borrower ’s education sector resources \." The Project Appraisal Document (p\. 7) provided a slightly different set of objectives : "the project will: (i) reduce existing rural education gaps in primary education quality, equity, and intemal efficiency; (ii) develop cost-effective strategies to increase access to, and improve the quality of, secondary education rural modalities; (iii) improve the impact of equity programs for low -income students; and (iv) enhance the efficiency of the education sector’s institutional and economic resources allocated to the rural sector \." This review will use the project development objectives (PDO) as stated in the Loan Agreement \. The objectives remained unchanged \. However, in June 2011, during a Level-2 Restructuring, four original PDO indicators were replaced by three new indicators (see Section 4)\. The project's scope was changed from originally "municipalities and regions in the four Macro -Regions (Norte, Atlantico, Puntarenas and Guanacaste ) with low socio-economic and education indicators " to "nine rural districts\." Accordingly, this review will use a split rating and assess project performance against the overall objective before and after the June 2011 restructuring, when 36\.6% of the actual loan amount had been disbursed \. 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: The three components supported under the project are presented below, showing IBRD financing plus borrower contribution estimated at appraisal, revised amounts (June 2011 restructuring), and actual project costs, excluding contingencies and IBRD front -end fee\. 1\. Quality and Equity of Rural Education (Appraisal: US$ 34\.24 million; Revised: US$ 23\.60 million; Actual: US$ 20\.50 million)\. This component was to finance Annual Operational (POA) Subprojects to improve rural education attainment and institutional development \. To orient the preparation of the POA Subprojects, strategies and expected results to increase the level, quality and equity of basic (up to 9th grade) rural education were included in a Policy Activity Schedule \. The Rural Education Quality and Equity Subprojects were to improve the targeting, education quality and organizational efficiency of rural education \. The Local Institutional Development Subprojects were to strengthen the institutional capacity of regional departments, schools and Collaborative School Networks to contribute to general institutional efficiency \. The POA Subprojects were to be executed by the technical units of the Ministry of Public Education (MEP), supported by the Project Coordination Unit (PCU)\. The Subprojects were to target municipalities, communities and schools with the lowest education indicators\. 2\. Equity of Education Services (Appraisal: US$ 3\.86 million; Revised: US$ 22\.75 million; Actual: US$ 21\.80 million)\. This component was to increase the capacity of the MEP to reduce equity gaps by supporting activities to identify, reach and monitor the delivery of education services to regions with low education indicators and students from low income households \. It financed technical support, tools and programs (i) to raise the capacity of MEP units managing the MEP’s demand-based equity programs (scholarships, vouchers, transportation and school meals); and (ii) to develop and implement an integrated information system to track education outcomes across municipalities, communities and schools (Sistema de Información de Desarrollo Educativo, SIDE)\. 3\. Improved Institutional Efficiency (Appraisal: US$ 10\.20 million; Revised: US$ 3\.50 million; Actual: US$ 1\.90 million)\. This component was to improve the institutional capacity of the MEP through inter -departmental integration strategies and working alliances across central, regional and school organizations \. It was expected: (i) to strengthen the capacity of the MEP ’s staff (both pedagogical and administration units ) to conduct participatory sector diagnosis, plan strategically, and implement, monitor and evaluate education programs; (ii) to improve the efficiency of edu cation services provided in the rural sector, through the integration and strengthening of the MEP units leading such services; and (iii) to increase capacity of the Project Coordination Unit (PCU) for coordination, fiduciary, monitoring and evaluation activities of externally financed projects \. The PAD lists 13 different units and programs as beneficiaries for this component (including Indigenous Education Unit, Curriculum Development and Multi-grade Education Units, National Teaching Center etc )\. The Indigenous Education and the Multi-grade Education Units at the MEP were responsible to monitor, analyze and evaluate subproject proposals (POA) and other activities to develop a strategy for inter -cultural exchange\. During the June 2011 restructuring, all three components were revised and renamed \. Activities were moved from the first to the other two components, and overlapping activities were dropped \. Accordingly project costs were revised by component (as shown above under Revised Amounts ): Component 1 was renamed “Efficient and Equitable Access to Rural Education \." This revised component was to finance infrastructure investments to improve access to quality education including: (i) renovating existing classrooms and constructing new classrooms, and providing furniture, equipment, computers and software; (ii) enhancing school building facilities, including construction and provision of furniture, and equipment for kitchens, teachers' lounges, student dormitories, and restrooms in schools belonging to rural School Networks; (iii) constr ucting common school network facilities, such as technology centers, cultural, arts and physical education facilities, and energy and connectivity facilities; and (iv) providing furniture and equipment for the Regional Indigenous Education Directorate in Sula, created by Decree in 2012 to represent seven indigenous territories in Limon and six administrative circuits \. Activities related to MEP's institutional strengthening (including support to transform Telesecundarias to Liceos Rurales ) were moved to the second component \. Activities to support quality of rural education were moved to the third component\. Other activities were dropped\. Component 2 was renamed “Improving MEP ’s Institutional Efficiency \." It was to finance: (i) computer equipment and technical assistance to develop and implement an education sector information systems at the school level; (ii) technical assistance to support for MEP ’s Implementing Technical Units that manage the Equity Programs, and resource transfers to school councils to finance operating costs and fund transfers to beneficiaries through the equity program (transportation, school meals, and education vouchers ) ; (iii) training and technical assistance to support implementation of MEP ’s institutional reform; and (iv) support for project management\.  Component 3 was renamed “Quality of Education \." It was to finance: (i) development and implementation of a training program in intercultural education for MEP staff at the central and regional levels; (ii) a rural education quality improvement program adapted to the local and c ultural context, including the development of a strategy to transform (as approved by the Superior Council of Education in July 2009) Telesecundarias with two years of secondary rural education to new Liceos Rurales with four years of quality secondary education preparing for a Bachillerato degree with modern teaching methods including information /communication technology (ICT); (iii) provision of computer equipment and professional development programs for teachers assigned to rural areas; and (iv) improvements in MEP staff and teacher capacity to analyze student learning assessments, including a standard methodology and related training modules \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost, Financing and Borrower Contribution The actual project cost was US$ 44\.28 million, compared to the original appraised project amount of US$ 50 million\. Project funds were revised by component during the June 2011 restructuring as shown above \. Actual costs were lower than appraised because of the can cellation of some project activities, including the procurement of computers and software (see Section 11b) and consultancies to compile information on school performance and design a teacher training strategy \. The project was financed by a US$ 30 million IBRD loan, of which US$ 24\.28 million actually disbursed\. At closure, the undisbursed balance of US$ 5\.72 million of the loan was cancelled\. Activities related to computers and consultancies were cancelled (Section 11\.b)\. The actual borrower contribution was US$ 20 million, as planned at appraisal\. Dates There were four restructurings : August 2007: to modify procurement methods and disbursement percentage \. September 2008: to change disbursement percentage \. June 2011: to eliminate project activities that were overlapping, define target areas as 9 rural administrative territories, replace four original PDO indicators by three indicators to better reflect project objectives and activities, align the project coordination unit with the MEP, update the environmental assessment and Indigenous People Planning Frameworks, align expenditure categories with revised project activities as shown above, and extend the closing date by 18 months to December 31, 2012 to ensure that revised targets were met\. Disbursement at this point was US$ 8\.9 million (36\.6% of the actual loan amount)\. September 2012: to extend the closing date by 12 additional months to December 31, 2013\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: Substantial under original and revised project scope The objectives of reduced quality gaps and improved equity and efficiency in the education system were substantially relevant\. They supported the government's 2003 plan to close the rural-urban education gap, improve educational attainment among low -income groups, and improve the education system \. They were still relevant to the government's 2010-2014 National Development Plan, which guarantees for all the right to education\. The focus on primary and secondary education was appropriate given low coverage and completion rates in secondary education; by 2009, only 40% of youth finished secondary education, which points to structural problems in the education system \. The objectives were also substantially relevant to the country's goal to become a knowledge economy \. The objectives were also in line with the goals of the Bank's 2004 Country Assistance Strategy, which aimed to close the gap in learning quality between regions and social groups, and with two clusters in the current Bank Country Partnership Program (FY2012-2015), namely developing competitiveness and improving efficiency and quality in the social sectors \. However, the objectives of closing the quality gap, increasing equity and increasing efficiency may have been too ambitious given the project's time frame\. b\. Relevance of Design: Original project scope : Modest Revised project scope : Substantial The original design had weaknesses that were partially addressed during the restructuring \. The original design  was too complex and lacked clarity, and needed to be restructured \. The objectives were not realistically aligned with the original project activities, and the design was too ambitious considering the resources available \. The original design could have benefited more from the available analytical work and detailed socio -economic and demographic data by region\. It targeted municipalities with the lowest education indicators in rural, indigenous and low-income communities; however, it was not clear how these areas were be selected \. To carry out the targeting, the MEP was to develop the relevant indicators that were to be provided by an information system to be developed under the project \. Activities in the Policy Activity Schedule (Component 1) were vaguely defined, and some activities were overlapping across components and had to be consolidated or dropped during the restructuring\. The results framework was too detailed and had to be reformulated \. Critical risks were not adequately identified and addressed in the design \. The revised design explicitly targeted 9 administrative rural districts\. The revised activities were more clearly defined and linked to the objectives \. The key indicators were refined and better aligned with the objectives and activities\. The revised results framework became more logical \. 4\. Achievement of Objectives (Efficacy): Objectives : To reduce education quality gaps in the Borrower ’s primary and secondary education system in rural areas; and improve the equity and efficiency in the allocation, administration and use of the Borrower ’s education sector resources \. The project uses 2006 as the baseline year\. However, the project became effective in August 2007 and implementation started in 2008 (see Section 8a)\. Thus, the project did not contribute to changes that happened before 2008\. 2013 : Outputs relevant for all objectives by 2013: 236 classrooms were built or renovated in the school network and provided with equipment, surpassing the target of 186 classrooms\. Classrooms were fully functional except the computer laboratories, for which procurement was cancelled (see Section 11b)\. 81 schools were built and furnished, surpassing the target of 71\. 14 liceos rurales were built and furnished, almost meeting the target of 15\. 164,311 students benefited from scholarships nationwide, surpassing the target of 100,299 students\. 102,623 beneficiaries nationwide received transportation benefits, surpassing the target of 93,423\. 673,129 students received food benefits nationwide, surpassing the target of 656,000\. 451 national/regional advisors were trained in intercultural education, surpassing the target of 179\. 6 studies and workshops were financed under component 2, surpassing the target of 4\. A participatory assessment was implemented to define training needs for secondary education teachers \. 11 education materials were produced with intercultural perspective, surpassing the target of 9\. 15\.5% of schools and liceos were equipped with an education sector information system, not meeting the target of 100%, because of the cancellation of the computer procurement \. 80 MEP technical staff were trained to improve supervision and evaluation of the Equity and Transfer programs, not meeting the target of 600 staff\. Transfers to School Councils increased from 31\.611 million CR colones in 2008 to 81\.076 million CR colones in 2013, not meeting the target of 90\.918 million CR colones\. Funds for scholarships increased from 6\.861 million CR colones in 2008 to 28\.320 million CR colones in 2013, not meeting the target of 38\.883 million CR colones\. 632 staff were trained in MEP institutional reform programs, not meeting the target of 5,170 staff\. 13\.5% of rural secondary teachers (1,697 of 12,854 teachers) were trained in Liceos rurales and intercultural education, not meeting the target of 100%\. Standard methodology to analyze student assessment was not developed and not implemented, and teachers and MEP staff were not trained in this area \. Objective 1: reduce education quality gaps in the Borrower ’s primary and secondary education system in rural areas Original scope : Modest Revised scope : Modest Outcomes Graduation rates in primary education in target areas remained on a similar level from 87\.9% in 2006 to 89\.1% in 2013, compared to a nationwide increase from 93\.5% (2006) to 95\.8% (2013)\. Graduation rates increased in rural areas (which benefited from the project's equity and transfers program ) from 92\.3% in 2006 to 96\.1% in 2013\. The graduation gap between targeted areas and the rest of the country remains  significant at more than 5%\. Enrollment in liceos rurales increased from 3,113 students in 2009 to 9,501 in 2013, following the transfer of 139 telesecundarias into 109 liceos rurales and after the Higher Education Council had approved the new curriculum in 2009\. While infrastructure and equipment financed under the project may have improved the quality of the education setting; the contribution of teacher training to improved learning quality is not clear as teacher training activities did not progress as planned (see above)\. Also, pedagogical material was mainly produced for teachers and less for direct use by students (ICR, p\. 36)\. New standard methodology to analyze student learning assessment was not developed \. The impact on quality as a result of the pedagogical changes in the classroom was not assessed \. Most quality improvements seem to have happened before the project started \. The percentage of students passing secondary education bachillerato exams in the target areas increased from 14\.1% in 2006 to 41\.6% in 2008 before project start (August 2007) and substantially reduced the gap to the national average of 69\.8%\. However, from 2008 until 2013, the rate declined to 40\.5% in target areas, and the gap to the national average increased during selected years (ICR, p\. 48)\. The increase in 24 indigenous territories was from 11\.4% in 2006 to 46\.5% in 2013, and in rural areas from 53% to 60\.3%, not meeting the target of 70%\. The pass rate was 49\.9% in the 14 newly established liceos rurales supported by the project (no target)\. The values for 2008 are not provided for these subgroups \. Objective 2: improve the equity in the allocation, administration and use of the Borrower ’s education sector resources \. Original scope : Modest Revised scope : Substantial Outcomes Enrollment in formal education among 13-17 year old students increased for lowest income groups from 69\.7% (2006) to 77\.1% (2012), which reduced the gap with the students in highest income groups who reported enrollment of 95\.3% (2006) and 92\.7% (2012)\. A disproportionately high number of poor and marginalized populations live in the target areas supported by the project \. This increase went along with government policy to increase the education budget from 5\.2% to 7\.1% of GDP and the number of teachers from 77,446 to 88,548\. The graduation rate in target areas in 11th grade and 7th grade increased from 22% in 2008 to 34\.4% in 2013, surpassing the target of 27\.5% and substantially reducing the gap to the national average of 43\.6%\. The graduation gap was narrowed from 13\.4 to 9\.2 percentage points\. The number of students benefiting from the MEP equity and transfer programs increased substantially (see above)\. 76% of scholarships went to students in the lower two income quintiles, but no information is provided on whether this was a positive or negative change \. Objective : improve the efficiency in the allocation, administration and use of the Borrower ’s education sector resources \. Original scope : Negligible Revised scope : Modest Outcomes No information was provided on changes in internal education efficiency in terms of average percentage of over-age students and dropout rates \. Improved cooperation among rural schools in networks has not been assessed \. No information is provided on the efficiency of transfers and equity programs in reaching low -income students and facilitating their access to education \. The number of students benefiting from the MEP equity and transfer programs increased substantially (see above)\. 76% of scholarships went to students in the lower two income quintiles, but no information is provided on whether this was a positive or negative change\. Administrative cost per beneficiary of the MEP equity and transfer program was reduced from 10,855 CR colones in 2008 to 7,013 CR colones in 2013, not meeting the target of 6,574 CR colones\. 5\. Efficiency: Modest At appraisal the Bank team estimated that the project would reduce the number of repetitions by 105,826, reduce dropouts to 148,353 students, and save US$ 6\.5 million in education demand subsidies \. Primary school graduation was estimated to increase by 4%, with an incremental annual earning of US$ 600 benefiting families  from lowest income quintiles\. Using a discount rate of 10%, it was estimated that the project would yield an internal rate of return (IRR) of 51% over 10 years\. Based on the same assumptions, the ICR conducted a cost-benefit analysis and estimated an IRR of 29% over 8 years\. The ICR does not assess the accuracy of the PAD's estimates on repetitions, dropouts, and savings in education demand subsidies \. Several factors affected the cost -effectiveness of implementation of the project \. Effectiveness was substantially delayed due to the country's approval process \. Collaboration between MEP and PROMECE was not smooth (see Section 9b), impacting the efficient use of project resources \. Lack of clarity in project design also delayed project start and required a restructuring \. 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 51% 100% ICR estimate Yes 29% 100% * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: Project before restructuring : Unsatisfactory Relevance of the project's objectives is rated Substantial and of design Modest \. Achievement of the objective to reduce the education quality gap is Modest, to improve equity in education is Modest, and to improve efficiency in the allocation and use of resources is Negligible \. Efficiency is rated Modest\. Project after restructuring : Moderately Unsatisfactory Relevance of the project's objectives and design are rated Substantial \. Achievement of the objective to reduce the education quality gap is rated Modest, to improve equity in education is Substantial, and to improve efficiency in the allocation and use of resources is Modest \. Efficiency is rated Modest\. According to the harmonized OPCS/IEG guidelines for restructured projects, the final outcome rating is determined according to the percentage of the loan disbursed before and after project restructuring \. The amount disbursed at the restructuring in June 2011 was US$ 8\.9 million (36\.6% of the actual loan amount of US$ 24\.28 million)\. The project is rated Unsatisfactory (value of 2) before restructuring and Moderately Unsatisfactory (value of 3) after restructuring\. The weighted rating is (2 * 0\.36) + (3 * 0\.64)\. The weighted average is the sum of the two: 0\.72 + 1\.92 = 2\.64, which rounds to 3, Moderately Unsatisfactory\. Therefore the final outcome rating is Moderately Unsatisfactory\. a\. Outcome Rating : Moderately Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating: The risk that the quality education gap will increase is moderate given the substantial investment by the government in school improvement in rural areas and increased government funding for education \. The risk to improved equity and efficiency in the allocation of resources is moderate because of the improved targeting mechanisms developed with the support of the project \. Given the strong government commitment to education reforms, the support provided by MEP is expected to sustain reforms \. Computers are expected to be procured by the government\. There is still a need to improve monitoring and control of the use of funds \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: a\. Quality at entry:  The Bank team prepared a project that was not adequately calibrated to the local context and had to be restructured\. The team did not identify the targeted schools and areas during preparation despite the availability of analytical work and detailed socio -economic and demographic data by region \. The Bank team did not clearly identify the project implementation arrangements when preparing the project \. Implementation arrangements were unclear and relied on a bottom -up approach that was too ambitious given the institutional context\. Thus, the Operations Manual was not completed until 2008\. Also, the Bank team initially overestimated the capabilities of local communities and regional technical units \. The M&E framework missed relevant indicators and needed to be revised \. The risk assessment was not realistic and did not consider the political risk that emerged from an earlier political crisis \. The Bank team did not adequately assess the project approval process by the government and did not ensure that the project was included in the 2007 Budget Law, which further delayed approval until August 2007\. at -Entry Rating : Quality -at- Unsatisfactory b\. Quality of supervision: The Bank team was flexible and processed a total of four restructurings \. After project effectiveness in 2007, the team processed two minor restructurings to update procurement and consultant guidelines, but these revisions did not address the design weaknesses \. In 2009, a new task leader took over \. The new team recognized the need for a restructuring, started the process, and selected the Mid -Term Review at the point for finalizing it\. The team did not revise the PDOs, as this would have required Congressional approval and would have prolonged project implementation \. However, the restructuring in 2011 did address most of the targeting and implementation weaknesses and helped speed up project implementation \. The M&E design was revised and improved\. The Bank team worked closely with the team of the Inter -American Development Bank (IDB), which supported secondary education nationwide \. The team also took the necessary steps to identify and address weaknesses in fiduciary management (Section 11)\. Supervision teams struggled with monitoring and evaluation of the project (see Section 10)\. Quality of Supervision Rating : Moderately Satisfactory Overall Bank Performance Rating : Moderately Unsatisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: Project effectiveness was delayed by 21 months due to a government change that delayed Congressional approval of the project\. The change in government caused staff changes in the MEP implementation team \. The high counterpart funding of 40% indicates strong commitment by the government to the reforms supported under the project \. The government decision to transform "telesecundaria" to "liceos rurales" in April 2009 was to promote equity in access to secondary education and supported the project objectives \. The government passed decrees in 2007 and 2009 to introduce institutional reforms at the MEP and eliminate duplication of functions and inefficiencies \. These reforms were implemented by 2011 and changed responsibility for project management, including for infrastructure \. The Ministry of Finance closely monitored the project and worked on resolving controversial issues in project implementation \. The same Education Minister was in charge throughout the project's lifetime, which contributed to continuity \. Government Performance Rating Satisfactory b\. Implementing Agency Performance: PROMECE was the country's project implementation unit that managed all donor funded education projects \. PROMECE was restructured in 2010, along with the MEP restructuring\. PROMECE was in charge of fiduciary, administrative and monitoring activities within the MEP \. The MEP had management and technical responsibility for the project\. However, several responsibilities were not clearly identified until the 2011  restructuring\. This lack of clarity created tension between PROMECE and MEP about project management \. The PROMECE director was dismissed in 2009 and replaced by three successive directors in 2010\. The previously dismissed director was rehired after a legal process \. The MEP did not carry out the targeting as originally planned, which led to restructuring as the process was inconsistent with project investment sequencing\. MEP and PROMECE were never able to reconcile their institutional issues \. Some technical units did not show the necessary commitment to the project \. The Department for Intercultural Education put in place an intercultural education policy \. There were weaknesses in financial management and in procurement that led to contract cancellation (Section 11)\. Monitoring and evaluation was weak \. Implementing Agency Performance Rating : Moderately Unsatisfactory Overall Borrower Performance Rating : Moderately Unsatisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: The original design included four key indicators that were not clearly defined \. They were replaced during the 2011 restructuring that clarified the meaning of indicators \. Some relevant indicators were missing and only provided in the ICR, including an indicator on primary education \. Baseline values were missing for some indicators and only collected in the ICR \. The design does not include other relevant indicators such as the distribution of teachers by education and experience across schools with students of different socioeconomic background, the quality of teacher pre -service training, or the number of classroom hours per day and year encountered by an average student and low -income students\. b\. M&E Implementation: The results framework was not regularly updated, and supervision teams had difficulties with reporting on project implementation in targeted areas\. There was no systematic assessment of the impact on quality as a result of pedagogical changes in the classroom \. c\. M&E Utilization: The M&E design was limited to the project \. Data to assess indicators were provided with delays \. The monitoring and control of the use of funds under the Equity program still needs improvement \. A computerized student record system is used in only about 25% of the education system\. Main statistical data on education are not publicly available\. M&E Quality Rating : Modest 11\. Other Issues a\. Safeguards: Two safeguard policies were triggered by the project : Environme ntal Assessment : School construction caused the project to be classified as Environmental Screening Category B\. An Environmental and Social Management Framework was prepared in 2003 including environmental assessment templates and guidelines for contractors \. The template was updated in 2009\. PROMECE prepared environmental impact files for each project site \. Environmental supervision was carried out\. A Resettlement Framework was prepared \. Land use was screened to ensure it was free of legal issues \. All land usage rights issues were resolved, and school construction took place except in Vesta where the land use was still to be determined (ICR p\. 12)\.  Indigenous Peoples : The project targeted indigenous students, and school construction was in indigenous areas\. In 2003 a Social Assessment and an Indigenous Peoples Planning Framework (IPPF) were prepared in consultation with indigenous and rural education stakeholders \. The IPPF was updated during project restructuring in 2011, and three workshops were held in 2012 with different ethnicities\. b\. Fiduciary Compliance: Financial Management : had several weaknesses \. There were delays in submission of financial reporting and audit reports in 2012\. These delays were fixed by April 2013, and reports were submitted with moderate delays \. Poor contract monitoring and ineligible expenditures were detected before project closure \. This was addressed by additional Bank supervision \. With the exception of two audit reports, all other reports were delivered with substantial delays\. The ICR does not report whether audits were qualified \. The Bank team subsequently confirmed that audit opinions were unqualified \. Procurement : encountered problems that affected implementation and disbursement \. The project's largest procurement contract of US$ 3\.7 million to purchase computer equipment for teachers and students was cancelled because of differences between Bank procurement procedures and the country's procurement rules \. The procurement of 12 consultants was cancelled and triggered an investigation by the MEP audit unit and the Controleria of the government\. MEP requested two ex-post procurement reviews\. The Bank identified mistakes but did not find evidence to declare misprocurement (ICR p\. 13)\. c\. Unintended Impacts (positive or negative): None reported\. d\. Other: 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately The project is rated Unsatisfactory Satisfactory Unsatisfactory before restructuring and Moderately Unsatisfactory after restructuring \. Weighting these ratings by the percentage of the loan disbursed before and after restructuring, the final outcome rating is Moderately Unsatisfactory\. Risk to Development Moderate Moderate Outcome : Bank Performance : Moderately Moderately Major design weaknesses were not Satisfactory Unsatisfactory formally addressed until the 2011 restructuring\. Borrower Performance : Moderately Moderately If the rating for one dimension is in the Satisfactory Unsatisfactory satisfactory range while the rating for the other dimension is in the unsatisfactory range, the rating for overall Borrower performance normally depends on the outcome rating \. In this case, outcome rating is MU, hence overall rating for Borrower is MU following IEG/OPCS harmonized guidelines for Bank and Borrower performance\. 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: Lessons drawn from the ICR (p\. 25) are: Risk assessments are most useful when they are comprehensive and derive mitigation activities \. In this case, during preparation, the political risk of a government change and mitigating measures were not adequately identified\. Insufficient understanding of the government and congressional approval and budgetary process delayed project effectiveness \. Participatory approache s are necessary to adapt curricula and institutions to rural and indigenous areas \. In this project, a better understanding about the capabilities of local communities and regional technical units in the investment design would have been useful to strengthen the institutional context for a participatory approach\. A participatory approach can help by adapting the curriculum to the needs of local populations, including indigenous groups \. 14\. Assessment Recommended? Yes No Why? Some of the results under the project will materialize only after some time, including the sustained impact of targeting low-income students with Equity benefits (scholarships, food, transport ) on their learning outcomes and labor market entrance\. The project had a well-performing Indigenous Peoples element that could be portrayed and lessons learned in a thematic evaluation \. 15\. Comments on Quality of ICR: The ICR is well written and concise\. It is satisfactory in its presentation of evidence \. The ICR is consistent with ICR guidelines\. The author made efforts to collect additional indicators to better interpret progress under the project and enhance information collected under the project \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P094233

Document of The World Bank Report No: ICR00003476 IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF-55569 TF-93210) ON A GLOBAL ENVIRONMENTAL FACILITY TRUST FUND GRANT IN THE AMOUNT OF US$4\.2 MILLION TO THE STATE OF ESPÍRITO SANTO FOR THE ESPÍRITO SANTO BIODIVERSITY AND WATERSHED CONSERVATION AND RESTORATION PROJECT December 23, 2015 Environment and Natural Resources Global Practice Brazil Country Management Unit Latin America and Caribbean Region  CONTENTS Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Project Performance in ISRs H\. Restructuring I\. Disbursement Profile 1\. Project Context, Global Environmental Objectives, and Design\. 1 2\. Key Factors Affecting Implementation and Outcomes \. 5 3\. Assessment of Outcomes \. 11 4\. Assessment of Risk to Development Outcome \. 18 5\. Assessment of Bank and Borrower Performance \. 19 6\. Lessons Learned \. 22 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 23 (a) Borrower/implementing agencies \. 23 Annex 1\. Project Costs and Financing \. 25 Annex 2\. Outputs by Component \. 26 Annex 3\. Economic and Financial Analysis \. 31 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 38 Annex 5\. Summary of Borrower’s ICR and/or Comments on Draft ICR \. 40 Annex 6\. List of Supporting Documents \. 48 Annex 7\. Results Framework Diagram \. 49 Annex 8\. Land Use Planning – Current Land Use and Proposed Conversion \. 54 Annex 9\. Release – State of Espírito Santo Joins the 20x20 Initiative\. 57 Annex 10\. Dynamic Information Framework – PCGAP\. 59 Annex 11\. Map of the area of influence of the project \. 62 Annex 12\. A sampling of communication material developed under the project \. 63 References \. 64 i  CURRENCY EQUIVALENTS Exchange Rate Effective: April 2015 (Last Disbursement) 1 US$ = R$ 2\.32 April 2012 (Midterm Review): US$1 = R$1\.89 December 2014 (Closing Date): US$1 = R$2\.65 FISCAL YEAR (January 1 – December 31) ABBREVIATIONS ALP Aguas Limpas Project ANA National Water Agency (Agência Nacional de Águas) APA Area of Environmental Conservation APP Areas of Permanent Protection (Área de Preservação Permanente) BRL Brazilian real CAS Country Assistance Strategy CESAN Espírito Santo Water Utility (Companhia Espírito Santense de Saneamento) CPS Country Partnership Strategy DIF Dynamic Information Framework EA Environmental Assessment FDP State Forest Development Plan FM Financial Management FMA Financial Management Assessment FpV Florestas para Vida FUNDÁGUA State Water Fund GEF Global Environment Facility GEO Global Environmental Objectives GOES Government of Espírito Santo GVMA Greater Vitória Metropolitan Área ha Hectare IBio Instituto BioAtlantica IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICR Implementation Completion and Results Report INCAPER State Rural Research, Technical Assistance and Extension Institute (Instituto Capixaba de Pesquisa, Assistência Técnica e Extensão Rural) IOIs intermediate outcome indicators IPM integrated pest management IRR internal rate of return ISR Implementation Status and Results Report IUCN International Union for the Conservation of Nature km kilometer km2 square kilometers M&E monitoring and evaluation m3 cubic meters MS Moderately Satisfactory ii MT Management Team MU Moderately Unsatisfactory NGO nongovernmental organization NPV net present value NTU Nephelometric Turbidity Units PA Protected Area PAD Project Appraisal Document PdA ProdutorES de Agua Water Producers project PDO Project Development Objective PES Payment for Environmental Services PIU Project Implementation Unit RPPN Private Natural Heritage Reserves (Reserva Particular do Patrimônio Natural) SEAMA State Secretariat for the Environment and Hydrological Resources (Secretaria de Estado de Meio Ambiente e Recursos Hídricos) SLM Sustainable Land Management SMV Santa Maria da Vitória watershed VALE Companhia Vale do Rio Doce ZEE Ecological and Economic Zoning Vice President: Jorge Familiar Country Director: Martin Raiser Senior Global Practice Director: Paula Caballero Practice Manager: Raúl Alfaro-Pelico Project Team Leader: Gunars Platais ICR Team Leader: Gunars Platais ii A\. Basic Information Espírito Santo Biodiversity and Country: Brazil Project Name: Watershed Conservation and Restoration Project Project ID: P094233 L/C/TF Number(s): TF-55569,TF-93210 ICR Date: 12/23/2015 ICR Type: Core ICR Lending Instrument: Grant Borrower: Espírito Santo State Original Total US$4\.20M1 Disbursed Amount: US$4\.20M Commitment: Revised Amount: US$4\.20M Environmental Category: B Global Focal Area: B Implementing Agencies: State Institute for Environment and Hydrological Resources (IEMA) Cofinanciers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 06/19/2007 Effectiveness: 03/10/2009 06/29/2012 Appraisal: 05/15/2008 Restructuring(s): 12/01/2013 12/31/2014 Approval: 11/18/2008 Midterm Review: 03/14/2012 04/18/2012 Closing: 06/30/2012 12/31/2014 C\. Ratings Summary2 C\.1 Performance Rating by ICR Outcomes: MU Risk to Global Environment Outcome: Moderate Bank Performance: MU Borrower Performance: MS 1 This includes the project preparation grant (TF055569) for $0\.20 million\. 2 Ratings: HS=Highly Satisfactory, S=Satisfactory, MS=Moderately Satisfactory, MU=Moderately Unsatisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory i C\.2 Detailed Ratings of Bank and Borrower Performance Bank Ratings Borrower Ratings Quality at Entry: MS Government: S Implementing Quality of Supervision: MU MS Agency/Agencies: Overall Bank Overall Borrower MU MS Performance: Performance: C\.3 Quality at Entry and Implementation Performance Indicators 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 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) General agriculture, fishing, and forestry sector 72 72 General water, sanitation, and flood protection sector 13 13 Public administration-Agriculture, fishing, and forestry 15 15 Theme Code (as % of total Bank financing) Biodiversity 35 35 Land administration and management 17 17 Other rural development 13 13 Water resource management 35 35 E\. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Pamela Cox Country Director: Martin Raiser John Briscoe Practice Raúl Alfaro-Pelico Laura E\. Tlaiye Manager/Manager: Project Team Leader: Gunars H\. Platais Gunars H\. Platais ii  ICR Team Leader: Gunars H\. Platais ICR Primary Author: Augusto F\. Mendonça F\. Results Framework Analysis Project Development Objective (PDO) and key indicators (as approved and stated in the Project Appraisal Document (PAD)3) The Project Development Objective is to support the adoption of environmentally friendly land use practices on 3,400 hectares in two key Atlantic Forest watersheds in Espírito Santo, thereby contributing to improved biodiversity conservation\. Global Environmental Objectives (GEO) and Key Indicators (as approved and stated in both PAD and Grant Agreement) The Global Environmental Objective is to reduce threats to globally important biodiversity in the Recipient’s territory from agricultural production systems and increase critical habitat for endemic species in two key rainforest watersheds in the Recipient’s territory\. This document assesses the Project’s achievement against the GEO\. Revised Global Environmental Objectives (as approved by original approving authority) and Key Indicators and reasons/justifications (a) PDO/GEO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1: 3,400 ha under environmentally friendly land use practices\. Value (quantitative or 0 3,400 4,031 qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments Achieved\. Through support from the State Rural Research Agency INCAPER to (incl\. % 879 properties, environmentally friendly land use practices cover 4,031 hectares\. achievement) Payment mechanisms for watershed conservation established and Indicator 2 : implemented\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments Achieved\. The state-wide Reflorestar payment for environmental services (PES) (incl\. % program has been implemented since 2012 on a strong legal basis through State achievement) 3 The Grant Agreement does not include PDO\. iii  Law 8995 (issued September 2008; amended by Law 9864 in June 2012), and a permanent funding mechanism FUNDÁGUA, i\.e\. the State Water Fund\. Sustainable Market-based mechanisms to finance Protected Areas (PA) Indicator 3: management implemented\. Value (quantitative or N Y N qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Not achieved\. The GOES did establish the State Water Fund FUNDÁGUA Comments which is partly financed out of the state’s oil and gas royalties and a funding (incl\. % source for PES and for conservation and biodiversity protection activities\. achievement) Establishment and successful operation of FUNDÁGUA eliminated the need for market-based financing mechanisms in the short and medium term\. Indicator 4: 1,000 ha of critical habitat restored and/or protected from encroachment\. Value (quantitative or 0 1,000 0 qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Not Achieved\. The GOES faced numerous implementation challenges in setting up a state-wide roll-out of the PES system causing delays in achieving the target Comments of this indicator\. However, the target is likely to be achieved and surpassed by (incl\. % 2017 according to the current Reflorestar implementation plan4 as there already achievement) are 370 signed contracts with more in the pipeline and a projection of achieving 20,000 has by 2017 and 80,000 has by 2020 (see Annex 9)\. Indicator 5: Conservation of biodiversity in agricultural landscapes adopted on 3,600 ha\. Value (quantitative or N Y N qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Not achieved\. At project completion, 12 private conservation areas5 were created on an area of totaling 246\.7 hectares\. However, with successful Comments implementation of the PES system, more than 4,000 ha of agricultural (incl\. % landscapes Protected Areas will be created as part of the Governors commitment achievement) to the restoration of 80,000 has of native forest as the state’s contribution to the Bonn 2020 challenge (see Annex 9)\. 4 IEMA - FpV Evaluation Report, 2015\. 5 The project supported the creation of 12 Private Natural Heritage Reserves (Reserva Particular do Patrimônio Natural, RPPNs)\. Six are located within the selected watersheds and six are located in the adjoining areas and are equally important as they provide critical habitat continuity through ecological corridors for the endangered Muriqui monkey\. iv (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1: 2 watershed management committees strengthened\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Achieved\. The two plenary committees were established, with board members Comments elected\. Over 10 ordinary sessions occurred during project implementation, and (incl\. % the watershed management plans were concluded in December 2014\. achievement) Indicator 2: Plenary established\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments Achieved\. The two plenary committees were established\. (incl\. % achievement) Indicator 3: Definitive directorate elected\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments Achieved\. Board members elected for the two plenary committees\. (incl\. % achievement) Indicator 4: WSMC ordinary meetings (cumulative)\. Value (quantitative or 0 10 10 qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments Achieved\. Over 10 ordinary sessions occurred during project implementation\. (incl\. % achievement) Indicator 5: Establishment of two technical units to support watershed committees\. Value (quantitative or N Y N qualitative) Date achieved March 10, 2009 December 8, 2011 December 31, 2014 Comments Not Achieved\. The Committees requested and it was agreed that technical (incl\. % studies be carried out in lieu of establishing technical units\. A number of achievement) technical studies were completed under the preparation of the Watershed v  Management Plans and the Dynamic Information Framework (Annex 10) that are of direct relevance to the Watershed Management Committees\. Indicator 6: Ecological and Economic Zoning (ZEE) for watersheds formulated\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 8, 2010 December 31, 2014 Comments (incl\. % Achieved\. The ZEE was concluded\. achievement) Critical biodiversity conservation areas and critical water supply areas Indicator 7: identified\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 8, 2010 December 31, 2014 Achieved\. Preliminary identification was based on the ZEE studies, such as the Comments indication of the Mangarai River as a critical basin for restoration\. The definite (incl\. % identification of critical areas is underway, using the models of the Dynamic achievement) Information Framework (Annex 10), concluded in 2014\. Indicator 8: Water resource monitoring system implemented\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 8, 2010 December 31, 2014 Comments Achieved\. The water resource monitoring system has been instrumental in (incl\. % providing data and information for the modeling and input to the state Integrated achievement) Geospatial Databases (http://www\.geobases\.es\.gov\.br/portal)\. Vegetative cover monitoring system implemented and information available Indicator 9: to the general public\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 8, 2010 December 31, 2014 Achieved\. The GOES acquired high-resolution images of the whole state, and Comments IEMA implemented a vegetation monitoring system to support the Reflorestar (incl\. % Program, including the two watersheds\. The system is operational, and all achievement) information is public (http://www\.meioambiente\.es\.gov\.br)\. Indicator 10: 1,000 ha of degraded areas recovered\. Value (quantitative or 0 1,000 0 qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Not Achieved\. The target was not achieved at project completion due to delays Comments in PES implementation\. Despite delays in PES implementation, the indicator will (incl\. % be achieved in 2016, according to the Reflorestar implementation plan which achievement) already has 370 contracts signed and the state has committed to contributing vi  through the Reflorestar program with 80,000 has of forest restoration as a contribution to the Bonn 2020 challenge (see Annex 9)\. Indicator 11: Management Plan for Pedra Azul State Park under implementation\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments (incl\. % Achieved\. Updated management plan under implementation\. achievement) Indicator 12: Management Council for Pedra Azul State Park established\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 May 19, 2010 December 31, 2014 Comments Achieved\. Council members elected in May 2010 and holding quarterly (incl\. % meetings\. achievement) A new Financial instrument for biodiversity conservation identified and Indicator 13: implemented\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments Achieved\. The GOES created a dedicated sub-account within the State Water (incl\. % Fund FUNDÁGUA to finance biodiversity conservation activities\. achievement) Indicator 14: 8 Private Natural Heritage Reserves (RPPNs) established Value (quantitative or 0 8 12 qualitative) Date achieved March 10, 2009\. December 31, 2014\. December 31, 2014 Achieved\. 12 RPPNs were created\. 6 are located inside the project area, (critical Comments watersheds), and 6 are located in ecological corridors connecting the watersheds (incl\. % to surrounding preserved hotspots, which are critical for the conservation of the achievement) endangered Muriqui monkey\. Indicator 15: 300 landholders receiving Technical Assistance on SLM\. Value (quantitative or 0 300 360 qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments Achieved\. The State Rural Research Agency INCAPER, provided technical (incl\. % assistance on sustainable land use practices to 360 landholders in the period\. achievement) 60 trainers (20 extension officials from municipalities and 40 members of Indicator 16: technical associations and NGOs) trained on SLM\. Value 0 60 100 vii (quantitative or qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments Achieved\. The Project supported the training of 100 extension officials including (incl\. % government, municipal and NGO technical personnel along its implementation achievement) period\. Indicator 17: 4 experimental stations on SLM implemented\. Value (quantitative or 0 4 5 qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments Achieved\. The experimental stations are Biomas Station (Sooretama County), (incl\. % Pilot Forest (Jerônimo Monteiro County), ESALQ/Fibria, Vale Natura Forest achievement) (Linhares County), and INCAPER Experimental Farm (Viar County)\. Indicator 18: Short-term PES plan established for sustainable land use practices\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 June 2012 December 31, 2014 Comments Achieved\. The PES Law amendment, Law 9864/2012, includes both short-term (incl\. % and long-term PES mechanisms\. achievement) Indicator 19: 160 landholders receiving short-term PES\. Value (quantitative or 0 160 31 qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Not achieved\. Despite delays in PES implementation, the indicator will be Comments achieved in 2016\. According to the Reflorestar implementation plan, there were (incl\. % at closing around 270 rural properties ready to sign the contracts for the PES achievement) implementation\. By the end of 2015, 370 contracts had been signed\. Percent increase in the number of properties certified for organic Indicator 20: production or in the process thereof\. Value (quantitative or 0 100 106 qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments Achieved\. There were 68 properties certified for organic production in 2008\. 72 (incl\. % properties received organic certification during the project\. Currently, the state achievement) has 140 properties with certified organic production\. A functioning PES program targeted toward protection of critical areas for Indicator 21 : water service supplies in the Jucu and Santa Maria da Vitória watersheds\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 June 2012 December 31, 2014 viii Comments Achieved\. The Reflorestar PES program instituted by the GOES is functioning (incl\. % state-wide, including priority areas in the Jucu and Santa Maria da Vitoria achievement) watersheds\. Indicator 22: Main water users identified and engaged in the program\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments Achieved\. SEAMA concluded the two watersheds water users’ inventory and (incl\. % cadaster\. The main user is the State Owned Sanitation Company CESAN, achievement) involved in project implementation\. Indicator 23: 160 landholders receiving payments for ecosystem services\. Value (quantitative or 0 160 9 qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments Not achieved\. The indicator was not achieved due to delays in PES (incl\. % implementation, but was achieved in 2015, according to the Reflorestar achievement) implementation plan, which has 370 farmers under contract\. Indicator 24: A project-level M&E Framework established\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Achieved\. The PIU has detailed M&E procedures for the diverse project Comments activities, including the PES implementation\. This provides timely and relevant (incl\. % information to the decision making bodies governing land use of the watersheds achievement) (including Watershed Committees, IEMA, INCAPER, CESAN, ANA) A regional-level Information System covering the Jucu and Santa Maria da Indicator 25: Vitória basins established\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Achieved\. The project funded the development of the “Dynamic Information Comments Framework” (DIF) (Annex 10), as the underlying mechanism for bringing a (incl\. % geospatial portal to the two basins\. The University of Washington developed the achievement) system\. Link: http://pangaea\.ocean\.washington\.edu/ Indicator 26: Project Management Team (MT) set up and working effectively\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Comments Achieved\. In addition to effective project implementation the Project (incl\. % Management team also designed and implemented the follow-on Reflorestar achievement) Program which is providing long term sustainability to project objectives\. ix  Best practices and lessons learned disseminated in the municipalities of the Indicator 27: State and to other states\. Value (quantitative or N Y Y qualitative) Date achieved March 10, 2009 December 31, 2014 December 31, 2014 Achieved\. The project was the basis for the creation of the Reflorestar Program, Comments which promotes PES in the entire state\. Project results were presented at a (incl\. % number of national (Rio de Janeiro, São Paulo, Brasília) and international achievement) (China, Panama, Peru, and US) technical events including the UNFCCC COP 21 in Paris\. G\. Ratings of Project Performance in ISRs Actual Date ISR No\. GEO IP Disbursements Archived (US$ millions) 1 04/04/2013 Satisfactory Moderately Satisfactory 0\.79 Moderately 2 07/09/2013 Satisfactory 0\.79 Unsatisfactory 3 03/10/2014 Satisfactory Moderately Satisfactory 0\.95 4 12/18/2014 Satisfactory Moderately Satisfactory 1\.71 5 01/09/2015 Satisfactory Moderately Satisfactory 1\.71 H\. Restructuring (if any) ISR Ratings Amount Board at Disbursed at Restructuring Approved Reason for Restructuring Restructuring Restructuring Date(s) GEO and Key Changes Made in Change GEO IP US$ millions The first restructuring aimed to (a) extend by 18 months the closing date, from June 30, 2012, to December 31, 2013; and (b) reallocate funds from components 2, 3, and 4 to component 1, without the need for reallocation of funds among disbursement categories\. The extension of the closing date was 547,409 06/29/2012 N S MS justified by the need of additional (13\.7 %) time for the implementation of the Payments for Environmental Services (PES) program under component 3\. That is a requisite for achieving the Project Development Objective (PDO) of improving farmer income and improving biodiversity conservation in the watersheds\. x  ISR Ratings Amount Board at Disbursed at Restructuring Approved Reason for Restructuring Restructuring Restructuring Date(s) GEO and Key Changes Made in Change GEO IP US$ millions The second restructuring was also a level two restructuring, extending the Closing Date from December 31, 2013 to December 31, 2014, adding to a total of 30-months’ extension\. The original extension effectively restored the project to a 5-year originally planned implementation period\. The second extension looked to grant the 594,474 12/01/2013 N S MU state additional time to disburse the (14\.86 %) funds that were either committed or under contract\. At the time of the second restructuring, 50% of the remaining funds had already been committed (under contract)\. The goal was to transfer the remaining 50% to a special forest and biodiversity subaccount within Fundágua, with the particular objective of PES\. The third restructuring, also a level two, entailed the inclusion of the capitalization of FUNDÁGUA as an activity under Component 3 and as a disbursement category of the withdrawal schedule in the legal documents\. This new category allowed the transfer of US$2\.262 million to the 1\.71 million SEAMA-FpV subaccount of 12/30/2014 N S MS (40\.71 %) FUNDÁGUA, set up, by law, for PES\. The restructuring also reallocated US$100,000 in grant funds under "Categories 1, 2b, and 2c to the new Category 3 (Capitalization of FUNDÁGUA)\. The restructuring made possible a single disbursement of US$2\.262 million to FUNDÁGUA during the grace period\. xi I\. Disbursement Profile xii 1\. Project Context, Global Environmental Objectives, and Design 1\.1 Context at Appraisal 1\. The Atlantic Forest biome, due to its exceptional level of species diversity and its vulnerability to continuing threats, is one of the five “hottest biodiversity hotspots” among the world’s top priority conservation areas\. The approximately 508,000 ha of this biome remaining in the Brazilian State of Espírito Santo (11 percent of the state’s surface area) are less than 8 percent of its original extent, and are fragmented, inhibiting the movement, dispersion, and genetic flow of species, making their survival difficult\. 2\. Target areas\. The project focused on two critical, high-biodiversity watersheds in south-central Espírito Santo: the watersheds of the Jucu and the Santa Maria da Vitória Rivers, comprising 401,000 ha\. Of particular interest are the mountainous upper parts of the two watersheds, which were settled more than a century ago by European immigrants and are still primarily held by smallholder agricultural families (Annex 11)\. 3\. These two watersheds are unique in the state, and in the Atlantic Forest biome, because they retain more than 40 percent of their original forest cover\. They represent more than a third of the state’s remaining rainforests\. They also encompass four conservation units (a state park, a biological reserve, and two Areas of Environmental Conservation [APAs])\. Despite human pressure, the area still harbors extremely high levels of biodiversity across all categories, and contains priority areas for biodiversity conservation within the Atlantic Forest’s Central Ecological Corridor\. The two rivers also provide around 95 percent of water supplies for the Greater Vitória Metropolitan Area (GVMA)\. The GVMA is the 14th largest urban center in Brazil, with a population of about 1\.6 million, and produces 62 percent of the state’s GDP\. 4\. Threats\. Land use patterns have resulted in severe degradation in the two watersheds\. Intensive farming6 is causing a reduction of forest cover, fragmentation, encroachment of steep slopes and protected riparian forest, soil erosion, water pollution, silting of rivers, and pasture degradation (see Annex 8 for aerial photography of project sample farms)\. Riparian corridors are particularly threatened due to their suitability for irrigation and their accessibility\. These trends are threatening biodiversity by reducing and degrading the area of natural habitat, and adversely affecting the quality and timing of water supplies\. 5\. In Brazil, environmental problems have traditionally been addressed with command and control instruments\. As in other states and countries, however, implementation and enforcement of environmental legislation have been deficient\. Increasing awareness of the value of environmental services by those benefiting from their effects or suffering from their loss, and of the failure of traditional approaches to conserving them, has led to a search for new approaches, such as the use of Payments for Environmental Services (PES)\. 6 Primarily corn, beans, tubers, horticulture, coffee, bananas, fruit trees, planted forest, cattle, and poultry\. 1  6\. PES are incentives offered to farmers or landowners in exchange for managing their land (behavior change) to provide some sort of ecological service\. PES is a market- based approach to conservation financing based on the twin principles that those who benefit from environmental services (such as users of clean water) should pay for them, and that those who contribute to generating these services (such as upstream land users) should be compensated for providing them\. Many different forms of PES arrangements exist worldwide\. 7\. Setting up these arrangements are not straightforward as they each depend on the idiosyncrasies of the particular location including its legal and institutional arrangements (or the lack thereof)\. Previous attempts at attaining land use change have failed because they did not consider the need to improve the quality of life of the landholders\. Many lessons have been learned over the past two decades of PES implementation and yet one overriding lesson is that each situation is unique making it difficult to apply a generic formula for the establishment of a PES program\. The Florestas para Vida project is a case in point as is described below\. Rationale for Bank involvement 8\. The main objective of the Espírito Santo Biodiversity and Watershed Conservation and Restoration Project (generally known as Florestas para Vida, FpV) was to support the Government of Espírito Santo (GOES) in promoting environmentally friendly land use practices in two key Atlantic Forest watersheds, and adopting PES as an instrument for improving biodiversity conservation\. Thus, it would directly contribute to the Country Partnership Strategy (CPS) for 2008-11, which addressed Protected Areas (PAs) and implementation of PES mechanisms\. 9\. Global Environment Facility (GEF) support was warranted due to the project’s benefits to globally significant biodiversity conservation, enhancement of the Atlantic Forest Biome protection, and creation of long-term financing instruments for biodiversity conservation that could be replicated in other areas of Brazil and elsewhere\. 10\. The World Bank has for many years been the International Financial Institution with the single largest biodiversity and conservation portfolio\. It has supported over 650 projects in 122 countries during the last 25 years\. From fiscal years 2004 to 2013 the Bank was present in 74 countries with 245 biodiversity conservation projects worth US$1\.058 billion\. It has supported the introduction of terrestrial and marine global initiatives and innovative means of internalizing global environmental externalities at the local level in a participatory manner seeking means in which to support the poorest\. 1\.2 Original Global Environmental Objectives (GEO) and Key Indicators (as approved) Project Development Objective and key indicators 11\. The Project Development Objective7 is to support the adoption of environmentally friendly land use practices on 3,400 ha in two key Atlantic Forest watersheds in 7 The PDO is reflected in the PAD and not in the Grant Agreement\. 2  Espírito Santo, thereby contributing to improved biodiversity conservation\. Key indicators include an increase in area (3,400 ha) under sustainable land management (SLM) practices, which will be accomplished in part through the:  Establishment and implementation of institutional arrangements for payment mechanisms for watershed conservation; and  Supporting the adoption of SLM practices through the implementation of PES mechanisms and the participation and capacity building of local actors\. Project Global Environmental Objective and key indicators 12\. The Global Environmental Objective is to reduce threats to globally important biodiversity in the Recipient’s territory from agricultural production systems and increase critical habitat for endemic species in two key rainforest watersheds in the Recipient’s territory\. Key indicators include area of critical habitat restored8 and/or protected from encroachment, which will be accomplished in part through:  Implementation of sustainable market-based mechanisms to finance PA management and conservation of biodiversity in agricultural landscapes\. 13\. This document assesses the Project’s achievement against the GEO, as stated in the PAD and Grant Agreement\. 1\.3 Revised GEO and Key Indicators, and reasons/justification 14\. The project GEO was not revised\. 1\.4 Main Beneficiaries 15\. Biodiversity conservation is a public good that offers benefits across a wide range of temporal and spatial scales both locally and globally\. The project’s primary target group was 160 small farmers in the upper parts of the Jucu and Santa Maria da Vitória (SMV) watersheds\. 9 While the gender dimension, aiming toward active gender equality in Project implementation, was not specifically considered in the FpV project it was internalized in the Reflorestar Program\. In the longer term, the beneficiaries would include the entire population of the GVMA, whose water supplies would be more reliable and of higher quality; the Espírito Santo Sanitation Company (CESAN), which would experience significant reductions in water treatment costs; and other water users\. 16\. Public beneficiaries included the GOES, as well as public institutions in charge of biodiversity protection, environmental management, sustainable rural development, and water resources management, especially the State Institute of the Environment and Water Resources (IEMA), the State Rural Research Institute (INCAPER), the Water Agency (AGERH), and the University of Espírito Santo (UFES)\. 17\. Communities and community associations and civil society associations benefited mainly from Component 3A, which supported adoption of SLM practices\. The 8 Restoration is officially defined by Federal Law 9985 of 18 July 2000 as returning a degraded ecosystem or wildlife population as close as possible to its original condition\. 9 The two watersheds encompass 10 municipalities of varying size, including the GVMA\. 3  Project also aided Watershed Management Committees by funding institutional strengthening and technical studies (such as Ecological and Economic Zoning, ZEE)\. 1\.5 Original Components (as approved) 18\. The FpV Project had four components: 19\. Component 1\. Strengthening Watershed Management\. The main activities of this component included (a) establishing and strengthening watershed management committees, (b) prioritizing intervention areas, (c) preparing economic-ecological zoning plans for both watersheds, and (d) developing a communication strategy\. 20\. Component 2\. Targeted Biodiversity Protection and Protected Area (PA) Management\. The main activities in this component included (a) rehabilitating degraded areas; (b) implementing the management plan for Pedra Azul State Park and establishing a PA management committee; (c) developing and implementing new instruments for biodiversity conservation, such as a conservation trust fund10; and (d) supporting the implementation of two ecological corridors within the watersheds of the project\. 21\. Component 3\. Integrating Biodiversity in Production Landscapes\. The main activities in this component included: (a) removing obstacles to adoption of land use practices that would be beneficial to both landholders and the environment, such as lack of knowledge or non-availability of inputs; and (b) measures to stimulate the adoption of practices that generate positive impacts (e\.g\. conserving biodiversity and protecting water services) but are unattractive to landholders\. This subcomponent sought to remove these barriers and address these tradeoffs by fostering a range of markets11 for biodiversity goods and services, and in particular by developing pilot PES mechanisms in collaboration with water users (such as CESAN and hydroelectric power producers), mechanisms that would also contribute to PA support\. 22\. Component 4\. Monitoring and Evaluation, and Project Management\. Main activities in M&E included establishment of monitoring and evaluation (M&E) mechanisms at two distinct levels: (a) a project-level M&E framework for the project’s activities that tracked progress in implementation, measured intermediate outcomes, and evaluated project impacts; and (b) a regional-level Information System covering the two project watersheds that will allow key variables to be tracked across various institutions\. A communication and strategy was also developed and implemented under this component\. 1\.6 Revised Components 23\. The project components were not revised\. 10 A conservation trust fund is an independent, long-term financial mechanism specialized in providing payments for conservation, leveraging resources from a broad spectrum of donors and institutions\. 11 This range of markets could include water (quality and quantity), biodiversity, scenic beauty, and carbon\. 4 1\.7 Other significant changes 24\. The Project had three “Level Two” restructurings, resulting in a total extension of 30 months and authorization to reallocate funds among different categories, and to do a single disbursement of US$2\.262 million to FUNDÁGUA during the grace period\. 25\. The first restructuring was approved in June 2012, extending the closing date from June 30, 2012 to December 31, 2013, and reallocating funds from components 2, 3, and 4 to component 1 (but without reallocating funds among disbursement categories)\. The 18-month extension restored the original 5-year implementation period, which had been reduced to 3\.5 years due to an oversight in the Grant Agreement which specified a Closing Date different from that in the PAD\. The extension was necessary for implementation of the PES program under Component 3—a requisite for achieving the project’s PDO—and to allow ongoing consultancies and watershed management plan studies to be concluded\. Further details of the three restructurings are presented in Sections 2\.2 (Implementation) and 2\.5 (Post- completion Operation)\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design, and Quality at Entry 26\. The overall thrust of the project was the linkage between PES, land use and biodiversity conservation and to address threats to water supply and critical habitats in a win-win situation for local farmers and nature (see Annex 8)\. The project concept design was initiated in 2006, taking advantage of the ongoing operations in the state, mainly the Water & Coastal Pollution Management (P087711, commonly known as Águas Limpas Project, ALP) and the Ecological Corridors Projects\. The project proposal was presented in 2006 by the BioAtlântica Institute (IBio), with support from three other nongovernmental organizations (NGOs), Instituto de Pesquisas da Mata Atlântica (IPEMA), Conservation International (CI), and the Promar Foundation\. The environmental assessment was concluded in early 2007, and the PIF was submitted to the GEF in December 2007\. The appraisal mission occurred in March 2008\. The project was approved in October 2008, and became effective in March 2009\. 5  27\. The project used the experience of previous projects in Brazil and abroad12, and incorporated best practice derived from PES experience worldwide 13 and conservation strategies recommended by the IUCN\.14 28\. The ALP aimed to secure long-term water supply and water quality in the state’s coastal areas, supporting institutional strengthening of the state environmental agency, among other actions\. FpV preparation assumed that PES could be based on a comprehensive water users’ information system funded by the ALP\. 29\. The project preparation also benefited from the Ecological Corridors Project, 15 which covers the entire state and aims to increase the connectivity among remaining fragments of Atlantic rain forests\. FpV was designed to intensify the Corridor activities in the two selected watersheds, prioritizing areas within the corridors to implement its activities, especially rehabilitation of degraded lands\. 30\. Thus the project was built in coordination with two other World Bank operations, taking advantage of their prior actions, and complementing their efforts to advance on relevant development objectives, such as improving water quality management and implementing ecological corridors\. The PES mechanism developed under FpV would also provide a sustainable long-term mechanism through which the state could meet its objective of improving water supplies\. FpV used the ALP’s implementation arrangements, with a common governance structure and administrative/financial unit\. FpV would also develop and test practices and incentives which, upon demonstrated success, could be more widely applied by Ecological Corridors, such as restoring degraded land and, in particular, developing new financial instruments such as PES\. 31\. Implementation arrangements were simple, sharing the ALP’s management structure\. The Project Implementation Unit (PIU) was placed within the executing agency, IEMA, with support from INCAPER\. The goal was that IEMA staff would carry out most project activities, except for financial management, to be conducted by the ALP PIU\. As project preparation concluded, mid-2008, public entities and important private actors16 were highly committed to its successful implementation\. The GOES made forest and watershed conservation and sustainable natural resources use, including biodiversity conservation, one of its central themes, and earmarked part of the oil and gas royalties to finance forest management and 12 Several WB projects were referenced, including the São Paulo Ecosystem Restoration of Riparian Forests (P088009) and the Rio de Janeiro Sustainable Integrated Ecosystem Management in Productive Landscapes of the North-Northwestern Fluminense (P075379) projects\. International experiences in PES implementation from WB prpojects, such as the Costa Rica Ecomarkets (P052009) and Mainstreaming Market-Based Instruments in Environmental Management (P093384/P098838), the Mexico Environmental Services (P087038/P089171), and Regional Integrated Silvopastoral Ecosystem Management (P072979) projects were also used\. 13 Pagiola, S\., and G\. Platais\. 2007\. Payments for Environmental Services: From Theory to Practice \. Washington, DC: World Bank\. 14 Pirot, J\.-Y\., P\. J\. Meynell, and D\. Elder\. 2000\. Ecosystem Management: Lessons from Around the World\. A Guide for Development and Conservation Practitioners\. Gland and Cambridge: IUCN 15 Part of the Pilot Program to Conserve the Brazilian Rain Forests (PPG7)\. 16 The project received support from large corporations, such as the mining company, Vale\. 6  conservation, through the FUNDÁGUA trust fund\. 17 In addition, project preparation had the effective participation of NGOs with relevant activities in the region\. 32\. The Project’s design and quality at entry met the requirements with sufficient detail to achieve the PDOs and GEOs\. The project had a clear logical framework (Annex 7) and the PDO and GEO remain relevant throughout a 10-year timeframe (see below)\. In 2014 Brazil experienced an important draught which was starkly exemplified by the water crisis of the city of São Paulo\. Espirito Santo fared better than its peers partly due to the implementation of forest restoration efforts like those supported by the project\. 2\.2 Implementation (including any project changes/restructuring, midterm review, Project at Risk status, and actions taken, as applicable) 33\. Project supervision was conducted jointly with the ALP project through September 2011\. Given that the FpV project was blended with ALP, reporting of FpV progress was done under the ALP Implementation Status and Results Report (ISR)\. Due to system design the ALP ISR did not reflect the full set of indicators of the FpV\. Despite this system shortcoming, progress on FpV was detailed in Aide Memoires\. The first ISR addressing exclusively the FpV Project was issued in January 2012\. 34\. Project implementation was slower than expected, mainly due to the executing agency’s limited capacity to implement the project, particularly since it was also tasked with simultaneously developing and implementing another PES program, ProdutorES de Agua (PdA)\. In late 2008, the National Water Agency (ANA) launched the PdA program18 to support the development of local PES mechanisms countrywide\. Motivated in part by the discussions of PES during FpV preparation, the GOES was among the first to join the Federal Program\. With ANA support, it created a second state PES program, PdA, to be developed simultaneously to the FpV\. This occurred after FpV appraisal, but prior to effectiveness\. SEAMA and IEMA were responsible for both projects\. The burden of developing two PES programs concurrently contributed to delaying the development of the FpV’s own PES program for almost three years, since IEMA concentrated its efforts on PdA\. Moreover, PdA proved problematic, with complex contractual requirements that taxed IEMA’s limited personnel (and exacerbated by government-wide restrictions on hiring additional staff), and constrained by certain aspects of Espírito Santo’s PES law (Law 8995)\.19 As a result, PdA enrolled only about 3,000 ha in its first three years\.20 35\. Although PdA was initially separate from FpV, the FpV team provided considerable technical assistance to IEMA on diagnosing and addressing its problems, in the expectation that lessons learned would ease implementation of FpV’s PES 17 FUNDÁGUA’s balance in late 2014 was about US$20 million, with annual income of about US$7 million\. 18 See http://produtordeagua\.ana\.gov\.br\. 19 Among other problems, the PES law limited payments to conservation of existing forest and specified payment levels that were too low to induce restoration of degraded areas\. 20 For comparison, Costa Rica (a country of similar size to Espírito Santo) enrolled over 200,000 ha in its PES program in its first three years\. 7  activities\. Moreover, in 2011 it was decided to use the implementation arrangements developed for PdA to implement FpV’s PES program, rather than developing a separate structure\. The FpV team’s assistance led to the adoption of a revised PES law in 2012 and to the replacement of PdA by a new PES program, Reflorestar, which addressed the problems of the earlier program and incorporated many features that had been planned for FpV, such as complementary short-term and long- term payments to address the different requirements of restoring degraded habitats and conserving intact forests\. Reflorestar projects are prepared by third parties, contracted for this purpose and implemented in the field by each individual rural producer, thus overcoming IEMA’s limited implementation capacity\. 36\. Slow procurement also contributed to project implementation delays\. For example, the delays in contracting the hydrological modeling resulted in the late identification of priority areas for conservation\. The 2012 and 2013 project restructurings aimed to provide additional time for Project development\. 37\. The project, through GEF and counterpart funding, supported a number of activities that complemented PES or contributed to its implementation\. Ecological and Economic Zoning (ZEE) was intended as a planning tool to be used by the state and municipalities to optimize land use decisions\. The lack of good-quality mapping information handicapped its use, however\. This handicap was corrected by contracting for the development of high-resolution maps of the entire state\. The watershed management plans of the Jucu and SMV Rivers are critical tools for the watershed management committees\. Increasing the river monitoring stations has been providing much needed detailed information on water flow dynamics\. Updating the Pedra Azul Park management plan was instrumental in revitalizing the local support and vision for the park and the surrounding community\. Finally, the establishment of a Dynamic Information Framework, while challenging, is starting to pay off, with some well-calibrated models of the state’s hydrology, which will provide critical support to decision making in times of crisis (droughts, floods) and for better planning (Annex 10)\. 38\. In view of IEMA’s institutional capacity weakness, the first restructuring reduced counterpart funding for Component 1 by 11 percent\. This freed resources for field activity implementation (Component 4)\. The achieved goal was for IEMA to hire an NGO that, together with TNC,21 would accelerate preparation of PES contracts\. 39\. The last ISR, issued in December 2014, indicated significant project advances during 2012-14, but also showed that it took two years for IEMA to reinforce the field teams with contracted consultants to expedite the landholders’ technical visits and PES contract preparation\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation, and Utilization M&E Design 40\. The project has two objectives, a PDO and a GEO, which taken together and considering the low institutional capacity, time frame, scope and funding envelope 21 IEMA has a Technical Cooperation Agreement with TNC to support project implementation in the field\. 8  of the project make the project overly ambitious and aspirational\. The outcomes relate to the adoption of land use practices and habitats for species and impacts related to reduction of threats and biodiversity conservation\. Each of the PDO/GEO indicators deal directly or indirectly with conservation and threats to biodiversity\. None of the PDO indicators however, addresses specifically conservation and threats to biodiversity, leaving a gap between PDO outcomes and impacts and measurement of progress towards these\. The Results Framework includes two PDO indicators, three GEO indicators, and a number of IOIs totaling 24 indicators\. 41\. The PDO and GEO influence diagram and table, presented in Annex 7, illustrate how the different outcomes contribute to the PDO and GEO\. Component 1 and 3B IOIs have a direct influence on the PES mechanism establishment\. Component 3A IOIs also add directly to the goal of reaching 3,400 ha under environmentally friendly land use practices\. M&E instruments are a tool for project development, but also improve the effectiveness of the PES contracts\. The project outcomes and IOIs are also directly related to the GEOs\. Component 1 and 3B indicators refer directly to the implementation of the market-based mechanisms\. Component 2 and 3B IOIs add to the goal of habitat restoration\. Some indicators are straightforward, such as recovering severely degraded areas; others are more involved, such as the implementation of short-term PES, since it includes, for example, habitat restoration activities\. Finally, adoption of SLM practices, Component 3A, impacts in a straight line the goal of conservation of biodiversity in agricultural landscapes\. Even though arrangements for results monitoring were described in detail and provided a vehicle for M&E, 24 indicators is considered too many\. M&E Implementation 42\. M&E implementation was compromised by the project’s joint supervision with the ALP through 2011\. The ISRs and aide-memoires issued from 2009 to 2011 focused on the ALP and did not include the FpV IOIs\. The joint supervision missions did not detail the problems related to the overall delays in project implementation\. This is generally the case with many blended GEF projects\. 43\. The first independent ISR addressing the project indicators was issued in January 2012, six months before the original closing date\. After 2012, the M&E system was applied according to the PAD’s guidelines\. The team faced problems in obtaining data from other implementing agencies, notably INCAPER and CESAN, and the large number of IOIs made consolidating information and making decisions difficult\. Despite that, the Bank’s team succeeded in obtaining sufficient evidence of different levels of achievements, and took numerous actions to expedite implementation\. M&E Utilization 44\. As mentioned, the data collected was instrumental in diagnosing and addressing the problems of the first PES law and of the PdA program, and contributed to preparation of a revised PES law and the successful launch of the Reflorestar Program\. 9 2\.4 Safeguard and Fiduciary Compliance 45\. ISRs throughout implementation consistently rated safeguard compliance as Satisfactory, a rating with which this ICR agrees\. The implementation agency is the State Environmental Institute, which is comprised of environmental experts\. Moreover, the project interventions aim to restore degraded ecosystems and promote preservation\. As originally identified during preparation, people that were affected by the project were impacted in a positive way thereby corroborating that there were no negative impacts on livelihoods through activities supported by the project\. 46\. Financial management (FM) and procurement were regularly reviewed and audited\. Procurement compliance was consistently rated as Satisfactory by the ISRs, but FM had a Moderately Satisfactory rating since early 2013, due to minor shortcomings in FM\. The last FM supervision mission listed a series of FM deficiencies, including inconsistencies in the system used to execute the physical and financial monitoring and issuing of the Unaudited Interim Financial Reports, lack of routine bank reconciliation, and delay in updating the Operational Manual with the information on the structure of FUNDÁGUA, among other points\. Nonetheless, given the project’s FM good documentation and recordkeeping, auditors’ clean opinion, and the action plan agreed between the Bank and the project team for adopting corrective actions, the final Fiduciary Compliance rating remained Moderately Satisfactory\. 2\.5 Post-completion Operation/Next Phase 47\. Total disbursement reached 100 percent, including the fund transfer during the grace period\. At closing, disbursement plus commitments was approximately 50 percent\. As discussed, this low disbursement ratio was mainly caused by PES implementation delays\. By late 2014, however, PES implementation was strongly underway, with implementation of Reflorestar and the engagement of contracted consultants to undertake PES implementation in the field\. For that reason, the third restructuring authorized the transfer of US$2\.262 million of undisbursed funds to the biodiversity subaccount of FUNDÁGUA, to be used in future PES payments\. 48\. The fund transfer, upon Project closing, called for specific post-completion arrangements regarding FM and results monitoring, and the Team created new provisions to guarantee that the GEF resources transferred to FUNDÁGUA will be properly invested in PES projects, fulfilling the Bank’s OP10\.20 requirements\. The GOES agreed that FUNDÁGUA’s Annual Report will have a note that details the use of funds from the biodiversity subaccount (a segregated account was opened at the Bank of Brazil under Nr\. 72884-5), and that this note will be audited by SECONT (the GOES’s internal audit agency), which will validate the information and issue an opinion on the proper use of funds\. SECONT’s opinion on the Annual Reports of FUNDÁGUA will be published annually and made available on the SEAMA website\. 49\. The Team also defined post-completion arrangements regarding the follow-up to the GEO indicators, which may bring important lessons for future projects in Brazil and abroad\. The Bank continues to support the GOES and is initiating the Espírito 10  Santo Integrated Sustainable Water Management Project (P130682) with the aim of contributing to the GOES’s goal of advancing its 2025 Development Plan, which aims to improve the population’s wellbeing through environmental preservation and conservation\. That project includes a component that will continue supporting the implementation of PES in the SMV and Jucú basins\. It is worth noting that unlike FpV (which was financed by a GEF grant), the new project is financed entirely by a loan, demonstrating both the GOES’s continued commitment to the FpV’s objectives and the FpV’s success in inducing the state to continue and scale-up its activities\. 50\. The Reflorestar Program22 is scaling up the pilot run under the FpV project and is now applying the PES scheme throughout the state in areas identified as priority for conservation and restoration\. The identification of these critical areas is done in part through the project supported Dynamic Information Framework 23 (Annex 10)\. The state was the first in Brazil to recently join24 the Bonn 2020 initiative25 with a commitment of reforesting 80,000 hectares of native forest in the Atlantic Rainforest (the second most endangered biome on the planet) as announced at the 2015 Global Green Growth Forum meeting held in Santiago, Chile (Annex 9)\. The Bank's and other partner’s support and technical assistance empowered the state to do so\. Forest restoration of 80,000 hectares is a significant undertaking for a small state but it has launched full heartedly into the effort with a projection of 7,500 has in 2015, 5,000 in 2016 and 7,500 in 2017\. Espírito Santo’s forest restoration effort gave it a jumpstart as it was hit earlier in the year with a drought which significantly impacted water availability\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design, and Implementation 3\.1\.1 Relevance of Objectives 51\. Although 10 years passed from the Project’s conception to its closing, and taking into consideration three CAS/CPSs, its main objectives have remained relevant throughout the entire period\. Preparation began in 2005 and continued until appraisal and approval in 2008\. Therefore, all preparation occurred under the umbrella of the CAS 2003-07 and GEF 3 and 4\. Project implementation began in 2009 and closed in late 2014, under GEF replenishments 4, 5, and 6, and CAS/CPS 2008-11 and 2012-15\. 52\. The Project objectives of supporting the adoption of environmentally friendly land use practices, reducing threats to globally important biodiversity from agricultural production systems, and increasing habitats for species continues to be highly relevant The biodiversity conservation and forest restoration activities established in the project were in a sense prescient as they contributed positively to help mitigate 22 http://www\.es\.gov\.br/Noticias/164591/programa-reflorestar-inicia-cadastro-online-nesta-sextafeira-04\.htm 23 http://pangaea\.ocean\.washington\.edu/ 24 http://www\.es\.gov\.br/Noticias/175111/es-anuncia-adesao-a-desafio-internacional-em-prol-das-florestas\.htm 25 http://www\.wri\.org/our-work/project/forest-and-landscape-restoration/bonn-challenge 11  the drought the state encountered earlier in 2014\. Increasing critical forest cover and protecting riparian zones are known watershed management practices with positive impact on water availability\. One of the four strategic objectives of the CPS for 2012-15 is to improve the sustainable management of natural resources, and includes a series of topics consistent with the Project objectives\. The Objective therefore remains Highly relevant\. Higher-level objectives to which the project contributes 53\. The Project was conceived under GEF 3 guidelines, in line with the strategic long- term objectives for biodiversity conservation\. The goal was to catalyze the sustainability of PAs by helping to develop new, sustainable financing sources for PAs and for agricultural activities in PA buffer zones and corridors (Strategic Program 1)\. It also aimed to mainstream biodiversity conservation in production landscapes by strengthening watershed management (Strategic Program 4), removing obstacles to the adoption of SLM practices,26 and fostering new market- based instruments to provide incentives for the conservation of biodiversity of goods and services (Strategic Program 5)\. 54\. By the time the project was completed, GEF 6 had already begun\. The project’s PDO and GEO contributes directly to all four biodiversity goals in the GEF 6 Programming Directions\. The objective of adopting environmentally friendly land use practices also contributes to the goal of reversing current global trends in land degradation by promoting good practices conducive to Sustainable Land Management\. Considering GEF 6’s new program priorities, the GEO remains Highly relevant\. 55\. Regarding national policies, FpV’s objectives are closely aligned to the Sectoral Plan for the Mitigation and Adaptation of Climate Change for a Low Carbon Emission Agriculture (ABC Plan)\. The Plan supports landholders in maintaining forest cover on their farms and restoring degraded areas and adopting more suitable land use technologies\. The Project goals are also consistent with the national Produtor de Agua Program27\. Thus, at the country level, the FpV PDO remains Highly relevant\. 56\. In conclusion, the operation remains relevant to achieving country, Bank, and global development objectives\. Therefore, the relevance of objectives is rated as High\. 3\.1\.2 Relevance of Design 57\. Overall, the Project was well researched and prepared, project components were clearly linked in the theory of change, and proposed activities covered the range of expected outcomes and outputs\. The PDO/GEO were ambitious and aspirational but the project had a logical relationship between supported activities, outputs, and outcomes towards linking PES, watershed management and biodiversity conservation\. 26 Sustainable land use means managing land without damaging ecological processes or reducing biological diversity over the long term\. 27 The Produtor de Água Program supports use of PES to encourage adoption of SLM practices and restoration of degraded land\. 12  58\. The project consisted of four components related, at different levels, with the project’s broad objectives of supporting SLM practices, reducing threats to biodiversity, and increasing habitats for species\. Components 2, 3, and 4 contribute directly to the PDO achievements\. Component 1 focused on the implementation of market-based mechanisms for conservation\. Although it was targeted at water resources management objectives, it also addressed biodiversity conservation by establishing long-term funding and implementation mechanisms for conservation in an area of globally important biodiversity\. 59\. This ICR concludes that the inclusion of institutional arrangements in the Project indicators was necessary, and indicates good design\. PES implementation was key for achieving Project goals\. The Project is based on the assumption that the development of new, sustainable financing sources for the PAs and for agricultural activities in PA buffer zones and corridors are crucial for a long-term conservation strategy\. 60\. Project resources were minimal when compared to the State Budget\.28 The adoption of results indicators reflecting new policy implementation was a valid strategy for motivating the state to implement the PES mechanism and initiate a statewide reforestation program based on environmental services\. The results were mixed\. The state issued five legal instruments to implement the PES, which can be considered a major Project contribution\. However, other policy goals, such as participating municipalities adopting ZEE and the implementation of new mechanisms to finance PAs, were not achieved\. 61\. Overall project design was considered Satisfactory with some shortcomings in the quality of the Results Framework which did not reflect the level of ambition and aspiration of the objectives\. The Results Framework could have been improved by lowering the ambition and focusing on land use practices, habitat quality and water aspects (instead of conservation and threats to biodiversity) in the objectives\. The Relevance of Design has been rated Modest\. 3\.2 Achievement of Project Development Objectives and Global Environmental Objectives 62\. Several significant achievements under the project point to a successful project design and implementation: 1) Increase of forest cover in targeted areas; 2) First state wide implementation of PES and a functioning PES program; 3) Establishment of a dedicated source of funding for PES; 4) Drafting and approval of first state wide PES law - which contributed to triggering the drafting of a national PES law; 5) Improved inter-institutional coordination; 6) Strong up and downstream links with improved water supply to utilities and payment to contracted farmers for change in land-use practices; 7) Implementation of a first of a kind PES portal 29 that has allowed for significant time savings in program management; 8) Increased 28 The amount is also minor when compared with the State Funds assigned to the Reflorestar Project\. 29 The Reflorestar Portal (http://reflorestar\.cargeo\.com\.br/login/?next=/ ) has increased the state’s capacity to process projects fourfold\. It won the 2015 Inoves innovation prize in the category of Use of Information Technology and Communication\. 13  institutional capacity which has allowed SEAMA-IEMA to establish important partnerships with the private sector and the NGO community thus expanding its capacity to deliver on program implementation and its leadership role in the Pact for the Restoration of the Atlantic Rainforest\. 63\. The ICR reviewed and rated separately the Project achievements related to the Project Development Objectives and the Global Environmental Objectives\. Efficacy was rated by taking into account the ratings and relevance of each of the individual outcomes\. 64\. The PDO was to support the adoption of environmentally friendly land use practices on 3,400 hectares in two key Atlantic Forest watersheds in Espírito Santo, with the following outcome indicators: (a) Establishment and implementation of institutional arrangements for payment mechanisms for watershed conservation, and (b) supporting adoption of environmentally friendly land use practices by local farmers\. 65\. The PDO of supporting the adoption of environmentally friendly land use practices by local farmers was achieved\. Its first indicator, implementation of a PES program for watershed conservation, was achieved\. As a result of the work undertaken under FpV and the GOES’ parallel efforts on PdA the statewide Reflorestar PES program was launched in 2012 and is now being implemented state-wide, including in the FpV’s priority areas, having achieved 12,200 hectares by end of 2015 surpassing significantly the 7,500 hectares target\. 66\. The target of 3,400 ha under environmentally sustainable land use practices as a result of Project-supported actions, was attained and surpassed, and addresses the threats of severe degradation identified at the outset\. Numerous activities contributed to the adoption of SLM practices, such as the 360 landholders receiving TA on SLM, the extension officials trained on SLM, the 75 new rural properties certified for organic production, and the five experimental stations implementing new SLM practices for research and demonstration purposes in the state\. As part of the communication strategy adopted by the project the creation of an easily identifiable logo and a series of comic books designed ad honorum by a well-known local artist on the various themes of the project was very popular and a great success among the younger school audience (Annex 12)\. Moreover, the amount of land under SLM will increase significantly in the next few years, as PES implementation proceeds\. Therefore, the achievement of the PDO outcomes has been rated Substantial\. 67\. The Project GEO was to reduce threats to globally important biodiversity (for example, the endangered Muriqui monkey) from agricultural production systems and increase habitat for species in two key rainforest watersheds of the Atlantic Forest\. The outcome indicator was the area of critical habitat restored and/or protected from encroachment, to be accomplished in part through the Implementation of sustainable market-based mechanisms to finance Protected Areas (PA) management and conservation of biodiversity in agricultural landscapes\. PES implementation delays affected significantly this GEO outcome indicator, since numerous planned activities depended on PES-provided funding\. Typically, PES participants would adopt SLM practices (such as silvopastoral practices), conserve additional areas (beyond legal requirements), and undertake restoration 14  activities\. However, with PES implementation now underway, it is possible to expect with a reasonable level of confidence that the remaining outcome indicators will be achieved\. 68\. According to the implementing agency’s final evaluation report, a longer time frame is required to assess the Project’s conservation and restoration results\. At Project closing, 31 properties had already received PES, and another 270 had signed contracts, indicating scalability and achievement of levels of restoration hitherto unseen\. In June 2015, 3166 properties were registered, 200 had received their first payment and 902 properties were under technical preparation for a PES contract\. The 1500 property 2015 target was surpassed with 1840 properties under contract in the state as presented at the UNFCCC COP 21 in Paris\. The potential for significant long-term outcomes is considerable\. 69\. The goal of increasing habitats for species was not achieved, according to the indicators\. Despite the efforts made by client and Bank teams to promote the implementation of this project component, progress was severely limited due to PES implementation delay that jeopardized key targets: A functioning PES program targeted toward protection of critical areas, 160 landholders receiving PES, and 1,000 ha of degraded areas recovered\. The establishment of 12 new private nature reserves (Reservas Particulares do Patrimônio Natural, RPPNs) covering 247 ha did, however, contribute toward increasing habitats for species and protecting areas from encroachment\. Even though small, the area in which these protected areas and corridors were created are considered critical for endemic species such as the endangered Muriqui monkey and, therefore, another important conservation achievement, albeit at a smaller scale than originally planned\. There is anecdotal evidence on these first properties adopting conservation measures that there has been a visible increase in wildlife sightings and overall activity\. Considering the low level of impact achieved by these activities during the Project’s lifetime, the achievement of this GEO has been rated Modest\. 70\. The second global objective, of reducing threats to globally important biodiversity from agriculture, was achieved partially, considering the outcome indicators\. The Project conceived a sustainable market-based mechanism to finance PA management and conservation of biodiversity in agricultural lands\. The goal was to develop a pilot PES mechanism, charging water users, in collaboration with major water users\. 30 The Project succeeded in reinforcing the watershed management committees’ institutional capacity, and engaged main water users in the program\. Motivated by the discussions led by the project, the GOES decided to earmark 2\.5 percent of oil and gas royalties to finance forest management and conservation, through FUNDÁGUA\. This obviated the need for a PES mechanism funded by water fees as originally thought\.31 Other IOIs also contributed to the objective of 30Such as CESAN and hydroelectric power producers\. 31 FUNDAGUA has performed well, with a current balance of about US$20 million\. However, the GOES is aware that political uncertainty and shifting priorities may reduce FUNDAGUA funding and is actively seeking additional ways to capitalize it, with the objective of eventually being able to operate exclusively off the interest generated\. 15  reducing threats to globally important biodiversity\. The conclusion of ZEE for the two watersheds, and the implementation of the new Pedra Azul State Park Management Plan, have direct impacts on local threats to biodiversity\. Finally, the recently concluded state of the art vegetative cover monitoring system and the regional information system developed by the Project are being instrumental in increasing habitats not only in the two watersheds but in the state\. Based on that, the achievement of this portion of the GEO has been rated Modest\. 71\. Even though the quantitative outcome indicator targets related to the restoration of critical habitats and conservation of biodiversity in agricultural landscapes were not fully achieved during the Project’s lifetime they are now on track to being surpassed in the next three years\. The Reflorestar Program is working towards achieving 20,000 hectares of restored forest cover by 2017\. This should be considered as long- term Project outcomes\. In addition, the Project had a number of major achievements, including: implementation of PES with earmarked funds; adoption of environmentally friendly land use practices on 879 properties; creation of 12 private PAs; preparation of ZEE and watershed management plans for the two watersheds; support for the Pedra Azul State Park new management plan; and a state-of-the-art Dynamic Information Framework\. In sum, the Project had major accomplishments, however, it did not succeed to accomplish a key GEO indicator, “critical habitats restored and protected from encroachment”\. The PDO achievement rating was substantial, but the GEO achievement rating prevails, resulting in an overall efficacy rating of Modest\. 3\.3 Efficiency 72\. Degradation in the Jucu and SMV watersheds has caused significant increases in turbidity 32 levels, driving up water treatment costs\. Without intervention, both turbidity and water treatment costs would continue to increase\. Reflorestar’s PES program will help halt or reverse these trends by inducing landholders to conserve remaining forest areas, restore critical degraded areas, and replace current agricultural practices with SLM ones\. The cost of implementing Reflorestar and complementary interventions in critical areas is estimated to be US$9\.7-12\.8 million (over 30 years, at a 10 percent discount rate)\. The estimated benefits, in terms of reduced water treatment and port dredging costs, range from US$13-15\.5 million, if turbidity is stabilized at current levels, to about US$15\.9-18\.4 million if turbidity is reduced to the levels of a decade ago\. Even at the lower estimate, benefits exceed estimated costs, giving a net present value (NPV) of about US$3\.7 million and an internal rate of return (IRR) of 12\.7-14\.1 percent) if turbidity is stabilized, and an NPV of about US$5\.8-6\.5 million and an IRR of 15\.6-16\.8 percent if it is reduced to the levels of a decade ago\. The land use changes that reduce turbidity would also provide important biodiversity co-benefits by preserving forest remnants, increasing vegetation cover, and improving connectivity among PAs\. 32 Turbidity is a measure of water clarity, how much the material suspended in water decreases the passage of light through the water\. Suspended materials include soil particles (clay, silt, and sand), algae, plankton, microbes, and other substances\. 16  73\. The bulk of benefits would be received by landholders participating in PES (US$5\.6-7\.9 million) in the form of higher income from farming activities and by water company CESAN (US$5\.5-$8\.4 million) in the form of reduced treatment costs (thus benefiting its customers, which include most of the state’s population)\. 74\. Efficiency is rated Modest because the estimated net benefits are lower than those estimated in the PAD\. This reduction is due to (a) improved estimates of the relationship between turbidity and water treatment costs, (b) omission of some benefits included in the PAD analysis (primarily benefits to hydroelectric power plants) because of the location of the target sub-watershed (downstream of the hydroelectric power plants), and (c) inclusion of costs not considered in the PAD analysis (interventions such as restoration of rural roads, that complement land use changes)\. 3\.4 Justification of Overall Outcome Rating Rating: Moderately Unsatisfactory\. 75\. The Project’s overall outcome is rated as Moderately Unsatisfactory\. This is justified as follows:  Overall relevance is rated Substantial\. The Project’s objectives were highly relevant to the goals, intentions, and context underlying the initiative and the relevance of design was Modest\.  Efficacy was rated Modest\. Achievement of one PDO outcome was rated Substantial and of the other two aspects of the GEO were Modest\.  Efficiency was rated Modest\.  Due to the substantial relevance, modest efficacy and modest efficiency, the project’s overall outcome is rated Moderately Unsatisfactory\. 76\. Despite the MU overall outcome rating, it is noteworthy that the Project succeeded in helping the State establish the first statewide PES mechanism, which has already surpassed the 2015 goals and will certainly continue to generate long-term benefits\. 3\.5 Overarching Themes, other Outcomes, and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 77\. The PAD concluded that the Project “does not present risks of negative socioeconomic impact\. In adopting SLM practices, landholders may actually achieve higher levels of income through organic farming or silvopastoral practices\.” The ICR preparation mission verified, however, that some organic producers have problems selling their harvests, and may occasionally face financial difficulties\. In addition, there is no production chain approach to support organic producers\. 78\. Information available thus far does not allow a conclusion on whether adoption of SLM practices by landholders are leading to positive social impacts\. This is an important point corroborating the need for follow-up monitoring and an in-depth look at farm economies\. This will allow identifying Project adjustments necessary to support higher and sustained incomes for landholders\. 17 (b) Institutional Change/Strengthening 79\. The Project contributed to strengthening SEAMA’s—and particularly IEMA’s— institutional capacity\. In particular, the preparation of the regional information system using a state-of-the-art Dynamic Information Framework (DIF), as the underlying mechanism for bringing a geospatial portal to Espírito Santo (Annex 10) deserves special attention\. The system can support the development and operation of distributed, landscape/hydrological models that are sensitive to climate and land cover and land use changes from field to watershed to water basin scales\. It provides a secure repository for the georeferenced data required for model development, and facilitates updating and augmenting of datasets, as appropriate\. The new system will be instrumental for the state to advance basin management and provide critical information to manage the ongoing water supply crisis\. (c) Other Unintended Outcomes and Impacts 80\. The implementation of PES in the entire state through the Reflorestar Program is a major unintended outcome, with local and regional positive impacts\. Reflorestar will allow restoration and conservation of Atlantic Rainforest hotspots throughout the state, contributing to conserving local biodiversity while benefiting regional ecological corridors and increasing connectivity among remaining Atlantic Rainforest fragments\. 81\. The need to implement the management and monitoring arrangements agreed with the World Bank led the state to look for new technological management alternatives\. This resulted in a new technical and financial management system considered unprecedented in Brazil\. The Reflorestar Portal won the statewide 2015 Inoves33 prize in the Use of Information Technology and Communication category\. 82\. A sound forest cover monitoring and inspection system was developed and deployed across the entire Espírito Santo state territory\. 83\. The state has also generated interest in the implementation of a PES program receiving delegations from other states in Brazil and also from abroad (Ghana and Mozambique)\. The state was invited to present its successful experience abroad\. It participated in seminars and roundtables in Peru, China, Panama, and United States and recently made 4 presentations at the UNFCCC’s COP 21 in Paris\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 84\. Not Applicable\. 4\. Assessment of Risk to Development Outcome 85\. Rating: Moderate 86\. This Moderate rating is based on a balance among (a) the implementation stage the PES program has reached; (b) the country’s macroeconomic conditions; (c) the executing agency’s institutional capacity and accumulated knowledge; and, (d) the 33 The Inoves prize is a statewide initiative that promotes innovation and entrepreneurship in Public Service (http://www\.inoves\.es\.gov\.br/Premio/Inicio\.aspx)\. 18  strong commitment by the government, at the highest level, to achieving restoration of the Atlantic Rainforest at scale\. 87\. Even though PES implementation is still limited to 301 properties as of this writing, demand has increased significantly, indicating the potential for substantial uptake in the months and years ahead\. Given the early stages of implementation, however, the mid- and long-term PES impact on landowner production systems and revenue, and, as a consequence, acceptance of PES, is understandably still uncertain\. 88\. The GOES continues to demonstrate a high commitment to implementing vegetation restoration and conservation, as initiated by FpV\. The GOES recently adhered to the Bonn 2020 challenge with a commitment to restore 80,000 ha of native forest over the next four years (Annex 9)\. However, PES funding is based on oil and gas royalties, which may be significantly reduced due to the fall in oil prices\. In addition, the current country macroeconomic difficulties are affecting all states, including Espírito Santo\. It is reasonable to expect a reduction in government revenue, tightening of government spending, and increasing competition for state resources, which could compromise the resources currently dedicated to PES\. However, FUNDÁGUA funding and its allocation to PES are set by law, and so legislative changes would be required to reduce it\. In addition, PES is currently still using only a fraction of the FUNDÁGUA funding available, and the establishment of a dedicated subaccount using the remaining FpV funds guarantees a minimum level of funding\. 89\. Although it took some time, the difficulties faced in Project implementation have now been overcome\. The technical capacity of the relevant state agencies has been strengthened, and NGOs and other actors have been contracted to undertake activities in the field, complementing the limited personnel in state agencies\. It is possible that fresh implementation obstacles may arise, but the new Integrated Sustainable Water Management Project will be able to assist in resolving them\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank (a) Bank Performance in Ensuring Quality at Entry 90\. Rating: Moderately Satisfactory 91\. The Bank took advantage of ongoing operations in the region and in the state, mobilizing a team aware of the local political and technical conditions, and well versed in the challenges involved in carrying out the project\. In addition, preparation involved NGOs with deep knowledge of the area’s ecological characteristics, and Bank staff with previous experience in payment for environmental services implementation\. The higher relevance of the PDO, and the higher objectives from Project preparation to its closing, is evidence of the quality at entry\. 92\. The implementation arrangements were as simple as possible, with a small PIU receiving support from another operation’s financial management structure\. The arrangement performed well, since the problems encountered in procurement and fiduciary compliance were minor\. 19  93\. The GOES, with support from the Project team, did a remarkable job in amending the initial PES legislation, establishing criteria suitable for the local conditions\. 94\. Anticipating what the contingencies might be when implementing something new, such as PES, when there is no past experience on which to draw, is challenging\. The Bank team flagged early on that the PIU lacked sufficient personnel to adequately undertake all the activities they were called upon to perform under the FpV project\. Once this was internalized by the state, the team assisted GOES in taking steps to address the problem, by unifying FpV’s PES efforts with those of the initially separate PdA program, and by contracting NGOs to undertake activities in the field\. Considering the above, Bank performance has been rated Moderately Satisfactory\. (b) Quality of Supervision (including of fiduciary and safeguards policies) 95\. Rating: Considering there were shortcomings in the proactive identification of opportunities for a timely revision of the Results Framework, the Bank’s quality of supervision has been rated Moderately Unsatisfactory 96\. The Bank and client teams successfully resolved numerous implementation issues and succeeded in launching the PES program and eventually fully disbursing project funds\. The Bank fulfilled its fiduciary supervisory duties, including regular supervision missions during the implementation stage, technical advice from Bank specialists on highly complex technical issues that required specific expertise, and supervision on financial management and procurement issues\. 97\. Until 2011, project supervision was conducted jointly with the ALP and reported under the ISR of the parent project\. The Bank system did not allow to fully report all findings of the child (blended) project within the structure of the parent ISR\. It is also understandable that the small FpV project did not carry as much weight when compared to the substantial infrastructure investments of the parent project\. When the parent project closed in 2011, the FpV project was separated with considerable difficulty within the system, which contributed to the delays in issuing an independent ISR\. The first independent ISR was issued in early 2012, and duly highlighted the relevant implementation problems\. 98\. The Bank Team explored many alternatives to advance Project implementation, and succeeded in increasing project disbursements only at the end of the project, when conditions were right for full implementation and launching of the PES scheme\. Despite the team being proactive in addressing problems, tight supervision budgets and the need to combine missions with other projects limited their ability to do so\. (c) Justification of Rating for Overall Bank Performance 99\. Rating: Moderately Unsatisfactory 100\. Overall, the implementation of the PES scheme took longer than anticipated\. The Bank was proactive in following up on Project implementation and bringing specialized expertise when needed\. Given local and national level limitations, which were beyond the project’s control, the team was not able to obtain a faster implementation of the PES Program in the state\. Due to this, the Bank’s overall performance has been rated Moderately Unsatisfactory\. 20 5\.2 Borrower (a) Government Performance 101\. Rating: Satisfactory 102\. The recipient of the GEF grant was the GOES\. The Project was overseen by a Steering Committee 34 composed of the heads of numerous state secretariats and CESAN, which fulfilled its responsibilities throughout the project implementation\. Moreover, the GOES demonstrated a strong commitment to Project implementation, passing PES legislation in 2008, allocating state revenues for funding PES, and amending the legislation in 2012\. The ISRs consistently rated government performance as Satisfactory\. The ICR team agrees with that rating, since the project benefited from strong government dedication from its conception to its closing\. (b) Implementing Agency or Agencies Performance 103\. Rating: Moderately Satisfactory 104\. The Project Implementation Unit (PIU) was placed in IEMA, and its technical team was supposed to carry out most project activities, including implementing the M&E system\. This arrangement did not take into consideration that IEMA has a small technical team, and that staff assigned to the PIU were also responsible for managing other state projects, such as the PdA program\. IEMA’s institutional limitations, associated to the long lead time demand for hiring external consultants, affected the implementation of the PES mechanism\. The administrative and financial unit of the Water and Coastal Pollution Project conducted the Project financial management and, overall, it performed well, with a Moderately Satisfactory rating, due to minor issues\. Considering the above-mentioned factors, the implementing agency’s performance is rated as Moderately Satisfactory\. (c) Justification of Rating for Overall Borrower Performance 105\. Rating: Moderately Satisfactory 106\. The GOES demonstrated a strong commitment to the project objectives from conception to closing\. The laws and decrees issued to implement PES in the state, the allocation of part of the oil and gas royalties to fund conservation, and its recent commitment to the 20x20 Bonn Challenge with 80,000 ha of native forest restored in four years (Annex 9) are concrete evidence of GOES’ commitment\. 107\. The PIU’s institutional capacity deficiencies contributed to slow progress throughout project implementation\. Administrative issues, some of them beyond the PIU’s control, prevented the project from fully achieving al l its targets in the expected time\. The ICR team rated the Project’s overall borrower performance as Moderately Satisfactory, based on a balance between the positive and negative points already mentioned\. 34 This committee is identical to the one that oversees the Water and Coastal Pollution Project (P087711)\. 21 6\. Lessons Learned 108\. Albeit with considerable delay, by the end of FpV the GOES had in place a well- functioning PES program, Reflorestar, which is poised to make a major contribution to environmental management in the state\. In the process, many lessons have been learned about implementation of PES in Brazil, for which Espírito Santo has been a pioneer\. These include, among others:  the importance of documenting the expected economic and financial costs of degradation and the corresponding benefits of conservation35;  the need for information allowing critical areas to be identified and the effects of degradation to be estimated, both as an input to the economic analysis and as a means of targeting interventions so as to minimize costs and maximize benefits36;  the need to avoid placing excessive details about PES arrangements in laws, reserving laws for general principles while addressing the details in implementing regulations;  the need to avoid excessively complex contractual requirements;  the need to have specific contract forms, and appropriate payment levels, for restoration and conservation;  the need for simple and effective implementation arrangements, minimizing transaction costs as much as possible, to economize on scarce budgetary and human resources;  the potential for synergies between watershed and biodiversity conservation37;  the need to design dedicated funding mechanisms for PES carefully so to avoid creating disincentives to participation by individual service users38\. 109\. Another important lesson is the need to persevere in the face of the initial stumbles that are inevitable in any pioneering effort\. In this respect, FpV benefited from a strong commitment from the highest levels of the GOES, state agencies such as IEMA and INCAPER, and stakeholders such as CESAN—a commitment matched with a willingness to learn from initial errors and modify plans accordingly\.39 110\. These and other lessons, aside from being incorporated into the design of Reflorestar, are being documented and disseminated so that other interested parties, in Brazil and elsewhere, may learn from them—through publications, 40 presentations in a variety of forums, south-south exchange study tours, and other 35 The economic analysis prepared during appraisal (and updated in Annex 3) was instrumental in convincing the GOES and CESAN to support FpV, and to continue supporting Reflorestar after the end of FpV\. 36 Accordingly, under FpV the state invested in a high resolution mapping exercise that identified past and current land use\. It also invested in building a Dynamic Information Framework that will allow critical decisions about land use to be made based on sophisticated hydrodynamic models (Annex 10)\. 37 Thus, the online system designed for Reflorestar greatly facilitated follow-up with landholders enrolled in the PES program, and consequently facilitated the ability of the executing agency to sign contracts\. 38 The FpV had intended to finance PES with contributions from water users—primarily CESAN\. However, the earmarking of considerable resources for PES in FUNDAGUA—while providing a long-term funding stream for PES—reduced the pressure for CESAN and other water users to make direct contributions to PES\. 39 As demonstrated by the GOES revising the PES law and replacing the initial PES program with a new one\. 40 For example, several chapters on ProdutorES de Agua and FpV in the book: Experiências de Pagamentos por Servicos Ambientais no Brasil (Pagiola and others, 2013)\. 22  means\. São Paulo is incorporating many of these lessons in its own PES programs\. Learning is expected to continue: an impact evaluation of Reflorestar’s impact on land use begun under FpV is being continued under the Integrated Sustainable Water Management Project\. 111\. From the Bank’s perspective, the lessons include:  The need to give special attention to the Risk Assessment Frameworks of projects implementing innovative approaches, such as the FpV\.41  Joint supervision of GEF projects with other projects, while bringing savings, can result in insufficient attention being paid to many activities\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 112\. As the project’s coordinating and executing agencies, the State Secretariat for Environment and Water Resources (SEAMA) and the State Institute for Environment and Water Resources (IEMA) are extremely pleased with its successful completion\. 113\. They assert that the project’s benefits went beyond those initially planned\. In particular, they highlight the implementation of the State PES Program, which extended beyond the initially targeted watersheds to the entire state\. 114\. Other examples of results that exceeded expectations are:  State professionals acquired expertise and management capacity that allowed them to look beyond their original experience and find ways of reaping additional benefits\.  The need to implement the management and monitoring arrangements agreed with the World Bank led the state to look for new technological management alternatives\. This resulted in a new technical and financial management system considered unprecedented in Brazil\.  A sound forest cover monitoring and inspection system was developed and deployed across the entire Espírito Santo state territory\.  The state joined the 2020 Bonn Challenge with the goal of recovering 80,000 ha of native forest by 2020\.  A specific forestry sub-account was created in the States Water Fund (FUNDÁGUA) to provide sustainable financing for forest cover restoration\.  The state's increased institutional capacity has since enabled important partnerships with the private sector and NGOs, increasing the Project's investment power\. 115\. As a consequence of these project supported activities, the state of Espírito Santo is becoming a national reference on environmental issues\. 116\. The state recognizes that the project went through delays, some due to institutional capacity while others were extraneous such as the long and heated national debate 41 In this case, the primary problem the Project faced had been mentioned but perhaps insufficiently emphasized: IEMA’s limited implementation capacity\. This problem was exacerbated by the GOES’s decision—taken after FpV preparation had been completed —to design and implement a second PES program simultaneously with FpV\. 23  over the new Forest Code\. Some of the benefits that this debate eventually brought to the state is not captured in the ICR\. They also point out that many easily verifiable results and benefits, which were not initially expected, were not set up to be measured or documented through project indicators\. As such, the state believes that the ICR does not reflect or capture these benefits even though they are undoubtedly a result from project intervention\. 117\. The state recognizes that implementing a competing federally funded environmental services program (PdA) did not accelerate the implementation of FpV\. However, it laid the groundwork that allowed FpV to flourish once it was launched\. 118\. The state recognizes that it was ambitious beyond its capacity to execute the many activities planned for the FpV project\. 24 Annex 1\. Project Costs and Financing Project Costs and Financing (a) Project Cost by Component (in US$ million equivalent) (Total rows and percentage column will be calculated by the system) Appraisal Percentage of Actual /Latest Estimate Components Estimate Appraisal (US$ million) (US$ million) 1\. Strengthening Watershed 56 2\.5 1\.4 Management 2\. Targeted Biodiversity 60 Protection and Protected Area 4\.2 2\.5 (PA) Management 3\. Integrating Biodiversity in 144 4\.3 6\.2 Production Landscapes 4\. Monitoring and Evaluation, 190 1\.0 1\.9 and Project Management Total Baseline Cost 12\.0 12\.0 100 Physical Contingencies Price Contingencies Total Project Costs Project Preparation Facility 100 0\.2 0\.2 (PPF) Project Development Facility (PDF) Front-end fee (IBRD only) Total Financing Required 12\.2 12\.2 100 (b) Cofinancing (The appraisal estimate will be entered from the Financing data in SAP/AUS; Percentage of Appraisal column will be calculated by the system) Appraisal Actual/Latest Type of Percentage of Source of Funds Estimate Estimate Financing Appraisal (US$ million) (US$ million) [Borrower] 8\.0 8\.0 100 [IBRD/IDA] [GEF] 4\.2 4\.2 100 [Donor A] [World-Bank- administered TF] [Donor B] [Parallel financing] Annex 1 25 Annex 2\. Outputs by Component Component 1\. Strengthening Watershed Management Indicator Output Component 1\. 1\.1 - 2 watershed management The two committees were established, with board members elected\. The Strengthening committees strengthened\. watercourses classification was approved in late 2014\. The watersheds Watershed management plans were prepared, and the first versions were delivered Management December 2014\. IEMA representatives participate in all regular meetings of both committees\. 1\.2 - Establishment of two Not achieved\. technical units to support watershed committees\. 1\.3 - Ecological and Economic The state ZEE was concluded in 2010\. Participating municipalities, however, Zoning (ZEE) for watersheds have not officially adopted the ZEE\. The state is reviewing the ZEE, aiming to formulated\. detail some areas and improve its applicability\. 1\.4 - Critical biodiversity Preliminary identification of critical biodiversity areas was based on the ZEE conservation areas and critical study, such as the indication of the Mangarai River as a critical basin for water supply areas identified\. vegetation restoration\. The definite identification of critical areas is underway, using the Dynamic Information Framework model (Annex 10), which was concluded in 2014\. In addition, IEMA is using aerial photos (2008 and 2014) to assess land use changes and identify conservation priority areas\. 1\.5 - Water resource monitoring The water resources monitoring system is being implemented by IEMA and system implemented\. INCAPER\. The state is implementing weather monitoring radar in partnership with Vale\. The water resource monitoring data have been instrumental in providing inputs to the modeling effort and the state Integrated Geospatial Databases\. This in turn will provide decision makers with resource- (water, land use) and sector- (water, forestry, agriculture) specific information\. 1\.6 - Vegetative cover monitoring The GOES acquired high-resolution images and photos (2008 and 2014) of the system implemented and whole state, and IEMA implemented a vegetation monitoring system to support the Reflorestar Program, including the two watersheds\. Annex 2 26  information available to the The system is operational, and all system information is public\. The image data general public\. bank can be accessed through http://189\.84\.218\.229/aplicmap/geral\.htm?71acf474feee4b58ff80c8a165307849\. The vegetative cover monitoring system was used as an input for the preparation of the Dynamic Information Framework\. Component 2\. Targeted Biodiversity Protection and Protected Area Management Indicator Output Component 2\. 2\.1 - 1,000 ha of degraded areas Not achieved\. Targeted recovered\. Biodiversity Protection and 2\.2 - Management Plan for Pedra Updated management plan under implementation\. Protected Area Azul State Park under Management implementation\. 2\.3 - Management Council for Council members elected in May 2010\. Pedra Azul State Park established\. 2\.4 – A new Financial instrument The GOES created a dedicated fund (FUNDÁGUA) to finance biodiversity for biodiversity conservation conservation activities\. So far, the main fund source is state oil and gas identified and implemented\. royalties, but the GOES is looking for additional funding sources, such as water user fees\. The state is still studying how to charge water users, aiming to compensate for environmental services\. The GOES also prepared a technical and economic feasibility study to implement visits at the Pedra Azul State Park (PEPAZ), aiming at PA economic sustainability\. 2\.5 - 8 Private Natural Heritage 12 RPPNs were created\. 6 are located inside the project area, (critical Reserves (RPPNs) established\. watersheds), and 6 are located in ecological corridors connecting the watersheds to surrounding preserved spots\. The RPPNs located inside the basins are: ï‚ Rancho Chapadão - 28\.6 ha – 2010 - Santa Leopoldina ï‚ RPPN Pau-a-Pique - 30\.5 ha – 2011 - Santa Leopoldina ï‚ RPPN Macaco Barbado - 2\.93 ha – 2011 - Santa Maria de Jetibá ï‚ RPPN Rancho Chapadão II - 21\.53 ha – 2011 - Santa Leopoldina ï‚ RPPN Rio Fundo - 15\.92 ha – 2012 - Marechal Floriano ï‚ RPPN Palmares – 17 ha – 2013 - Santa Maria de Jetibá\. Annex 2 27  6 RPPNs were created in the Santa Teresa County, neighboring Santa Maria de Jetibá and Santa Leopoldina counties\. The area is strategic for biodiversity conservation and protection of the Muriqui monkey (Brachyteles hypoxanthus)\. The RPPNs located in the area are: ï‚ RPPN Linda Laís - 3\.48 ha – 2009 ï‚ RPPN Vale do Sol - 67\.52 ha – 2010 ï‚ RPPN Olho D’Água - 19\.09 ha – 2010 ï‚ RPPN Bei Cantoni - 4\.1 ha – 2011 ï‚ RPPN Meu Cantinho - 2\.72 ha – 2013 ï‚ RPPN Beija-Flor -33\.34 ha – 2013\. The total area of the 12 RPPNs is 260\.20 ha\. Component 3\. Mainstreaming Biodiversity in Production Landscapes Indicator Output Component 3A\. 3\.1 - 300 landholders receiving The State Rural Research Agency (INCAPER) Report informed that the Agency Inducing Adoption Technical Assistance on SLM\. had provided technical assistance on sustainable land management to over 800 of Sustainable Land landholders during 2010 to April 2014\. Use Practices 3\.2 - 60 trainers (20 extension The Incaper 2012 Report informed that 32 extension officials received training officials from municipalities and on sustainable soil management practices\. 40 members of technical The Project supported the training of 100 extension officials along its associations and NGOs) trained on implementation period\. Including a silvopastoral practices event, and a property SLM\. assessment methodology training, by Lerf-Piracicaba\. 3\.3 - 4 experimental stations on The experimental stations are: SLM implemented\. ï‚ Biome Station (Sooretama County) ï‚ Pilot Forest (Jerônimo Monteiro County) ï‚ ESALQ/Fibria ï‚ Vale Natura Forest (Linhares County) ï‚ INCAPER Experimental Farm (Viar County)\. 3\.4 - Short-term PES plan State Law 8995, issued September 8, 2008, created the payment for established for sustainable land environmental services\. The GOES revised the PES legislation, issuing, in June use practices\. 2012, Law 9864, with new criteria for implementing the PES, including short- term mechanisms\. Annex 2 28  3\.5 - 160 landholders receiving Not achieved\. Due to the PES implementation delay, by December 2014, only 9 short-term PES\. landowners had signed the PES contracts and were receiving PES payments\. 3\.6 - Percent increase in the The baseline was 68 properties certified for organic production in 2008\. During project implementation, another 72 properties received organic production number of properties certified for organic production or in the certification\. Currently, the state has 140 properties with certified organic process thereof\. production, for a total of 2,600 ha\. Component 3B\. 3\.7 - A functioning PES program The GOES revised the PES legislation, issuing, in June 2012, Law 9864, with Establishing targeted toward protection of new criteria for implementing the PES\. At the same time, the GOES reviewed Payments for critical areas for water servicethe FUNDÁGUA, Law 9866, setting aside 2\.5% of the state oil and gas Environmental supplies in the Jucu and Santa royalties to fund conservation and biodiversity protection activities\. The Services Maria da Vitória watersheds\. Mangarai watershed was selected as a critical area for vegetation restoration\. Additional areas will be selected with the use of the Dynamic Information Framework, finalized December 2014\. 3\.8 - Main water users identified SEAMA and IEMA concluded the Jucú and Santa Maria da Vitoria watersheds and engaged in the program\. water user inventory and cadaster in 2008\. The activity was funded by the Águas Limpas Project\. The main user is the state-owned sanitation company, CESAN (Espírito Santo Water Utility, Companhia Espírito Santense de Saneamento), besides numerous small irrigation projects\. CESAN has supported water-monitoring activities, mainly in the Mangaraí creek\. 3\.9 - 160 landholders receiving Not achieved\. Due to the PES implementation delay, by December 2014, only payments for ecosystem services\. 31 landowners had signed the PES contracts and were receiving PES payments\. However, the Reflorestar implementation plan indicates that this goal will be achieved in 2015\. Component 4\. Monitoring and Evaluation and Project Management Indicator Output Component 4\. 4\.1 - A project-level M&E The PIU has M&E procedures for the diverse project activities, including the Monitoring and Framework established\. PES implementation\. Its technical and economic component can be accessed at Evaluation and http://reflorestar\.cargeo\.com\.br\. Project Management In addition, the consulting company, Accenture, (contracted by Vale as a counterpart activity), developed numerous management tools, including an investment simulator for the short-term PES implementation\. Annex 2 29  4\.2 - A regional-level Information The project funded the development of the Dynamic Information Framework System covering the Jucu and (DIF), as the underlying mechanism for bringing a geospatial portal (PCGAP) to Santa Maria da Vitória basins the two basins (Annex 10)\. The University of Washington developed the established\. system; see http://pangaea\.ocean\.washington\.edu/\. The DIF encompasses the landscape/hydrological models that are sensitive to climate and land cover and land use changes from field to watershed to water basin scales\. It provides a secure repository for the georeferenced data for Espírito Santos, required for the model development, and to facilitate updating and augmenting of the datasets, as appropriate\. With this framework in place, the GOES agencies address a set of management issues, progressing from how weather affects the land surface, to how changes in land use might alter water flow, and then to how changes in water and land use might impact the mobilization of sediments\. 4\.3 - Project Management Team The team in charge of FpV was also responsible for implementation of the state (MT) set up and working Reflorestar Program\. IEMA staff did not succeed in implementing the project effectively\. without additional support, and hired independent consultants in 2014 to do property assessments and prepare PES contracts, among other activities\. 4\.4 - Best practices and lessons The project was the basis for the creation of the Reflorestar Program, which learned disseminated in the promotes PES in the entire State of Espírito Santo\. IEMA received visitors from municipalities of the state and in other states and countries looking for information on PES implementation\. The other states\. project results were presented at different technical events\. Annex 2 30 Annex 3\. Economic and Financial Analysis 1\. The ecosystem conservation and restoration activities in the Florestas para Vida (FpV) Project were expected to bring significant watershed benefits and important biodiversity conservation benefits\. An economic and financial analysis focusing on the FpV Project’s watershed protection activities was conducted in the PAD\.42 Economic and financial analysis in the PAD 2\. The economic analysis conducted in the FpV PAD considered: (a) Farm-level costs and benefits\. The farm-level analysis took into consideration the costs of switching from current to sustainable land uses, and the opportunity costs of the foregone benefits from land uses replaced by project-supported activities 43 (in some cases, these opportunity costs were negative, since some sustainable land uses are profitable to farmers once established)\. (b) Other costs\. The economic analysis also took into consideration the costs of providing Technical Assistance and other support to participating farmers, and the overhead costs borne by the project\. (c) Benefits\. The downstream benefits of improved watershed management could be estimated only for CESAN, the water utility\.44 CESAN’s water treatment costs have increased substantially due to increased water turbidity resulting from upstream erosion\. Cruder estimates were also made for savings in hydroelectric power reservoir maintenance and port operations\. 3\. Net returns\. The economic analysis used a break-even calculation, since there were no data on the extent to which land use changes would affect water services\. It was estimated that even slowing the continued increase in turbidity levels would result in substantial benefits, primarily in the form of cost savings to CESAN\. The PAD estimated that the project would break even if sedimentation could be reduced by at least 0\.5 percent (relative to the no-project baseline)\. It arrived at a rough estimate of the NPV of benefits resulting from a 1 percent reduction in sedimentation of about US$20 million\. 4\. Financial analysis\. The analysis showed important benefits to all major water users, including CESAN, with a net profit of US$1 million; the Port Authority, with savings close to US$0\.9 million; the hydroelectric plants operators; and CESAN customers, with savings of US$0\.13 million derived from reductions in electricity and water rationing\. The Government, however, would have a negative result given that net payment of taxes will 42 As a GEF project, the FpV was not required to conduct an economic analysis\. Since the water utility, CESAN, and others water users were expected to provide substantial financing for conservation through the PES program, an economic analysis was undertaken to demonstrate the magnitude of the benefits these users would receive\. 43 The analysis was based on data obtained from the background study undertaken during project preparation, expertise from IEMA and INCAPER, technical coefficients, and production costs from the Agribusiness Development Center (Centro de Desenvolvimento do Agronegocio, CEDAGRO)\. 44 The analysis was based on data supplied by CESAN on turbidity and input costs from 2003 to 2007\. Annex 3 31 be reduced due to a decrease in operating costs\. Participating landholders were also expected to receive net benefits, either by adopting new land uses that would be profitable to them once established (for which they would receive short-term support), or by receiving long-term compensation exceeding the opportunity cost of the foregone land uses when they adopted conservation land uses\. These land use changes would be induced through complementary programs of Payments for Environmental Services (PES), which would offer short-term support for the adoption of sustainable production practices and long-term support for the adoption of pure conservation practices\. Updated economic analysis 5\. Because of the various delays noted in this ICR, implementation of the short-term and long-term PES programs called for under FpV’s Component 3 only began in the latter part of the project\. The GOES planned to continue implementing these programs past the end of the FpV project, with support of the new Espírito Santo Integrated Sustainable Water Management Project (P130682), which was approved in 2014 and which became effective in 2015\.45 6\. During implementation of the FpV project, the Mangaraí sub-watershed was identified as one of the primary sources of sediment affecting CESAN’s water intake in the Santa Maria River, which provides 32 percent of the water used in the Vitória metropolitan region\. It was thus decided to focus the watershed conservation efforts in this sub- watershed\. These efforts will be implemented in the field through the state’s Reflorestar program\.46 Reflorestar’s activities will eventually be extended to other parts of the Santa Maria watershed, and to other watersheds\. Like the FpV, Reflorestar offers short-term support for the adoption of sustainable production practices and long-term support for the adoption of pure conservation practices\.47 The economic analysis here focuses solely on the activities in the Mangaraí sub-watershed\. 7\. Sediment loads in the Santa Maria River have increased over the years, causing significant problems to the water sector\. CESAN draws water from an intake at Santa Maria to supply the Carapina and Santa Maria treatment plants, which together produce almost 40 percent of Vitória’s water and serve over 35 percent of its population\. The PAD had relied on data up to 2007; the analysis here uses more recent data, through 2013\. 48 Figure A3\.1 shows how average and maximum turbidity have increased in the last decade\. Average turbidity was about 28 Nephelometric Turbidity Units (NTU) in 2002–03, but almost 50 NTU in 2012–13\. Sediment loads also affect two hydroelectric plants (Rio Bonito and Suíça) along the river, and the Port of Vitória, where the river ends its journey\. 45 In a sense, FpV support to PES continues even though the project is now closed, since the remaining funds have been placed in the FUNDÁGUA trust fund, which will use them to finance PES\. 46 FpV had originally intended to establish its own implementation arrangements for PES in the Jucu and Santa Maria watersheds\. Since the SES had also, in parallel, developed its ProdutorES de Água PES program, it was more efficient to rely on that program for field arrangements\. Reflorestar replaced ProdutorES de Água in 2012\. Both ProdutorES de Água and Reflorestar benefited from technical assistance from the FpV project\. 47 In this, it differs from ProdutorES de Água, which offered payments only for conservation\. This is an example of the lessons of FpV being incorporated into the wider state PES program\. 48 Turbidity varies substantially from year to year, so these new estimates are more reliable than the estimates in the PAD, which were based on only four years of data\. Annex 3 32  Figure A3\.1 Turbidity of water delivered to the Carapina Treatment Plant 8\. Without project\. The turbidity of the water used in the Santa Maria water system has increased substantially over the years (figure A3\.1)\. Average turbidity levels doubled from 2002–03 to 2011–12, increasing water treatment costs\. CESAN invested R$2\.8 million in 2005 to install dissolved air flotation units at the Carapina Treatment Plant to reduce input costs, but as shown in Figure A3\.2, input costs are still strongly affected by average turbidity levels\.49 Filters must also be cleaned much more frequently at times of higher turbidity, further increasing costs\. Furthermore, treatment must be interrupted when turbidity exceeds about 400 NTU, potentially resulting in service interruptions\.50 As can be seen in figure A3\.1, turbidity peaks have become both higher and more frequent, resulting in much more frequent interruptions of treatment\. Treatments were interrupted four times due to excessive turbidity in 2012\. 49 The data in figure A3\.2 are for 2006–13, and thus incorporate the effect of the air flotation units\. 50 The Santa Maria treatment plant, which also draws its water from the same intake, is less vulnerable to interruptions because its newer design allows treatment at turbidity levels up to 1,000 NTU\. Moreover, Santa Maria is much smaller, with less than 10 percent of Carapina’s capacity\. Annex 3 33  Figure A3\.2 Impact of turbidity on water treatment costs at Carapina Source: World Bank calculations based on data from CESAN\. Note: Data from 2006–13, following installation of air flotation units at Carapina 9\. Without improved management in the Santa Maria da Vitória watershed, it is likely that these costs would continue to increase, since they have throughout the last decade\. As figure A3\.1 shows, average turbidity had doubled to just under 50 NTU in the last decade\. As figure A3\.2 shows, this has resulted in average treatment costs increasing by about R$0\.01/m3, even after a R$3 million investment in air flotation units designed to reduce treatment costs (about R$4 million in 2013 prices)\. At current production levels of about 60 million m3, this increase in turbidity has thus increased treatment costs by about R$0\.6 million a year\. 10\. Without intervention, it is assumed that average turbidity would continue to increase according to the trend observed in the last decade, reaching about 80 NTU in a decade and causing average input costs for water treatment to increase by an additional R$0\.01/m3\. At current average annual production levels of about 60 million m3, this would increase annual input costs for water treatment by about R$0\.6 million at Carapina within a decade, and about R$1 million by 2030\.51 Beginning in 2018, CESAN is planning to ramp up annual production at Carapina from 60 million m3 to 115 million m3 by 2030\. Taking this increased production into account, the additional costs will reach almost R$2 million a year in 2030\. Further investments in filtration measures are likely to be required to keep pace with rising average turbidity levels, probably at about 10-year intervals\. Assuming such investments are similar in magnitude to those in air flotation units, the 51 At the time the FpV PAD was being prepared, data were only available for 2002 –07\. This resulted in higher estimates of the cost of degradation because (a) part of the data available were from the period prior to the installation of the air flotation filters, when the unit input costs resulting from a given level of turbidity were higher; and (b) the analysis projected an increase in turbidity based on that observed during 2002 –07, which was distorted by normal variations in turbidity levels\. By using only data from the period following the installation of air flotation filters and using a longer period of observation to project turbidity trends (smoothing out the impact of natural variations), this analysis reduces the impact of these problems\. Annex 3 34 additional cost would come to about R$2\.4 million in present value terms\. The higher peaks of maximum turbidity, and their increased frequency, impose additional costs\. 11\. The Port of Vitória is also likely to suffer from the need for more frequent dredging to maintain the water depth necessary for the safe passage of ships\. Current annual dredging costs average about R$1\.5 million (US$2\.6 million), but are expected to increase to about R$2\.5 million once the ongoing program to deepen and widen the shipping channel is completed\. 12\. With project costs\. (1) Reflorestar supports a mix of productive practices (agroforestry, silvopastoral practices) and pure conservation practices (reforestation of riparian corridors) that would reduce erosion compared to current practices\. Landholders are offered payments ranging from R$2,300/ha (about US$1,150) for natural regeneration to R$7,200/ha (about US$3,600) for adoption of agroforestry, over three years, with pure conservation uses also receiving longer-term payments of US$90/ha/year to US$110/ha/year to maintain forest cover\. We use as an illustrative example a farm adopting agroforestry on 1 ha, silvopastoral practices on 2 ha, and regenerating forest on 1 ha, and which also has 1 ha of standing forest eligible for a conservation payment\. This farm would receive total payments of about R$16,400 (about US$8,200), and conservation payments of R$295/year (US$145/year)\. About 15 to 20 percent (about 2,600 ha to 3,500 ha) of the Mangaraí sub-watershed would need to be conserved or converted to less erosive uses to achieve substantial reductions in erosion, assuming the most erodible areas are targeted\. 52 The total cost of payments would thus be about US$5\.6 million to US$7\.9 million in present value terms over 30 years\. The transaction cost of implementing the program would increase total costs to about US$7\.5 million to US$10\.6 million\.53 13\. (2) In addition, a range of other investments (such as restoration of rural roads and community water and sewage treatment) would be undertaken in the Mangaraí watershed with the aim of reducing erosion and improving water quality downstream, at a total expected cost of about US$4\.1 million\.54 Adding the cost of these measures would further increase the total cost in Mangaraí by about R$4\.11 million, or US$2\.2 million\. The total cost of activities in Mangaraí would thus be about US$9\.7 million to US$12\.8 million\. 14\. With project benefits\. The planned interventions would generate three main benefits: (a) CESAN would benefit from reduced water treatment costs\. There is considerable evidence, from Espírito Santo itself, other sites in Brazil, and elsewhere in the world, that turbidity levels are closely related to erosion in 52 The area that would need to be conserved or converted to improved land uses to have a meaningful impact on sediment loads is not yet known; the hydrological model being developed with FpV support will allow this area to be estimated, but these estimates were not yet ready at time of writing\. Here we use the upper end of the likely range so as to have more conservative estimates of expected project benefits\. 53 Based on current Reflorestar transaction costs of about R$1,000/ha\. It may be possible that average costs would be lower in Mangaraí because of a greater concentration of contracts in a small area\. 54 No such activities were contemplated in the FpV\. However, experience has shown the importance of including a range of erosion-reduction activities in addition to land use changes, so the corresponding costs are included in the present analysis\. Annex 3 35  the watershed\.55 It is difficult to predict how much turbidity might fall with improved watershed management\. If the interventions succeed in stabilizing turbidity at current levels (that is, avoid any further increase in turbidity), they would result in savings in average input costs at Carapina alone of R$8\.2 million (US$4\.3 million) over 30 years\. 56 Stabilizing turbidity at current levels would avoid the need for further investments in new filtering equipment, resulting in additional estimated savings of RS$2\.4 million (US$1\.2 million) in present value terms\. Further savings would come from reductions in the number of interruptions in treatment, in avoiding the higher costs for washing filters, and in reduced need for additional investments in storage capacity\. In the absence of strong data on the magnitude of these costs and how they would have increased, we round up total benefits to US$6 million\. If the measures being undertaken succeed in actually reducing turbidity from current levels, the benefits would be higher\. Returning average turbidity levels to those observed at the beginning of the century would reduce the cost of inputs for water treatment by R$5\.5 million (US$2\.9 million) over 30 years, bringing total benefits to almost US$9 million\. (b) The Port of Vitória would also benefit from reductions in sediment delivery, by avoiding the need for more frequent dredging\. There are no data on which to base predictions of possible sedimentation impact due to watershed degradation in the new, deeper channel\. If dredging costs would have risen by 20 percent over the next 30 years in the absence of watershed conservation, maintaining sediment loads at current levels would avoid about R$3\.6 million (US$1\.9 million) in additional dredging costs\.57 (c) Participating landholders would benefit from increased income, partly from the payments they receive to maintain protective land uses such as forests, but mostly from the higher profitability of land under agroforestry or silvopastoral practices\. 58 IEMA estimates that annual income (including payments) on a typical 15-ha farm would increase from about R$10,000 to about R$12,000 within 3 years and to about R$22,000 in 10 years\. Assuming, conservatively, that net income increases by only 10 percent of these amounts, income would increase by about R$2,900/ha (US$1,500/ha) 55 Teixeira and Senhorelo (2000) find that turbidity is closely correlated to sediment transport in the Jucu watershed\. Similar results were obtained in watersheds in Rio Grande do Sul by Chaves (2010) and Carvalho and others (2004)\. The proportion of sediment eroded that finds its way to river outlets tends to be higher in smaller watersheds such as that of Mangaraí (Walling 1999)\. 56 The benefits of reduced turbidity would have been higher had conservation measures been undertaken prior to the 2005 investments in additional filtration units, since unit water treatment costs were higher then; moreover, the capital cost of the additional filtration units would also have been saved\. 57 The two hydroelectric power plants in the Santa Maria da Vitória watershed are also affected by sedimentation\. However, they are both located higher in the watershed, and so would not benefit from conservation in the Mangaraí micro-watershed\. They might benefit if the program were later expanded to other parts of the watershed\. 58 Although these practices are profitable, they are not adopted because of the high initial investments required; the payments offered by Reflorestar would help overcome this constraint\. Annex 3 36  in present value terms, over 30 years, or a total of about US$6\.8 million over the area covered by the project in Mangaraí\. 15\. Total benefits for PES activities in the Mangaraí sub-watershed are thus estimated to be about US$13 million to US$15\.5 million, assuming that turbidity is stabilized at current levels, or about US$15\.9 million to US$18\.4 million if turbidity is reduced to the levels observed a decade ago\. 59 Even at the lower estimate, these benefits exceed the estimated US$9\.7 million to US$12\.8 million costs for this component’s activities in the sub-watershed, giving an NPV of about US$2\.9 million to US$3\.7 million (with an IRR of 12\.7 to 14\.1 percent) if turbidity is stabilized at current levels and of about US$5\.8 million to US$6\.5 million (and IRR of 15\.6 to 16\.8 percent) if it is reduced to the levels of a decade ago\.60 16\. The bulk of benefits would be received by CESAN (US$5\.5 million to US$8\.4 million) in the form of reduced treatment costs and avoided investments, and by participating landholders (US$5\.6 million to US$7\.9 million) in the form of higher income from farming activities\. The bulk of costs would be borne by the GOES (via FUNDÁGUA), through its support to the Reflorestar program and other investments\.61 The financial burden of long-term conservation payments would fall on FUNDÁGUA, but would be relatively low (less than US$200,000/year) and easily borne, given FUNDÁGUA’s budget of about US$2\.5 million a year\. 17\. Sensitivity\. These results are robust to significant changes in assumptions\. In part, this is due to the costs and benefits of land use changes being tied together: if adoption of sustainable land use practices is lower than forecast, the benefits would decline (since the impact on erosion and the increase in landholder benefits would be lower), but so would the costs (since both payments and transaction costs would decline)\. The component would still be economically beneficial even if both the estimated benefits to CESAN or the benefits of the new practices to landholders were reduced by about a quarter, if turbidity were stabilized to as much as half, and if turbidity were reduced (at the lower end of the range of estimated benefits)\. 59 Although the Mangaraí sub-watershed is only part of the Santa Maria watershed, it has been identified as a principal source of the sediment affecting water turbidity at the Santa Maria intake\. Many of the proposed land use changes would reduce erosion in Mangaraí, thus offsetting possible increases in erosion elsewhere in the watershed\. 60 These estimated net benefits are lower than those estimated in the PAD because of (a) improved estimates of the relationship between turbidity and water treatment costs, (b) omission of some benefits included in the PAD analysis (primarily benefits to hydroelectric power plants) because of the location of the target sub- watershed (downstream of the hydroelectric power plants), and (c) inclusion of costs not considered in the PAD analysis (interventions such a restoration of rural roads, that complement land use changes)\. 61 As noted, FpV will continue to contribute to these costs through its contribution to FUNDÁGUA\. Annex 3 37 Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team Members Lending Name Title Unit Alan Carroll Operations Adviser LCSDE Amanda Schneider Program Assistant LCSSD André Aquino Consultant LCSEN André Guimarães Project Preparation Coordinator IBio Carlos Velez Lead Economist LCSUW Chris Diewald Consultant Daniela Arruda Team Assistant LCSEN Dinesh Aryal Operations Officer LCSEN Erick C\.M\. Fernandes Adviser ARD Gunars Platais Sr\. Environmental Economist, TTL LCSEN Isabella Micali Legal Counsel LEGLA Drossos Luciano Wuerzius Procurement Analyst LCSPT Luis Alberto Andres Infrastructure Economist LCSSD Nelvia Hayme Diaz Language Program Assistant LCSEN Patricia de la Fuente Sr\. Finance Officer LOAFC Hoyes Ricardo Tarifa Sr\. Environmental Specialist, (former LCSEN TTL) Stefano P\. Pagiola Sr\. Environmental Economist ENV Susana Amaral Financial Mgmt Analyst LCSFM Teresa M\. Roncal Sr\. Operations Analyst LCSAR Task Team Members Supervision/ICR Name Title Unit Augusto Ferreira STC Consultant Mendonça Daniela Arruda Operations Analyst LCSEN Gunars Platais Sr\. Environmental Economist, TTL GENDR Luciano Wuerzius Procurement Analyst GGODR Maria João Kaizeler Financial Mgmt Analyst GGODR Patricia Miranda Legal Counsel LEGOP Stefano P\. Pagiola Sr\. Environmental Economist ENV Annex 4 38 (b) Staff Time and Cost Staff Time and Cost (GEF)* Stage of Project Cycle US$ Thousands (including No\. of staff weeks** travel and consultant costs) Lending FY06 2\.38 4\.26 FY07 11\.61 76\.55 FY08 25\.89 133\.66 FY09 6\.76 34\.31 Total: 46\.64 248\.78 Supervision/ICR FY09 6\.35 32\.57 FY10 8\.28 47\.03 FY11 5\.85 59\.75 FY12 9\.06 61\.10 FY13 8\.87 53\.52 FY14 5\.02 39\.11 FY15 5\.89 37\.57 Total: 49\.32 330\.64 * Since project is financed by GEF, costs include GEF funds * Staff weeks corresponding to costs prior to 2000 are no longer available in the World Bank’s accounting systems\. Annex 4 39 Annex 5\. Summary of Borrower’s ICR and/or Comments on Draft ICR Below follows the English translation of the Borrower’s comments\. The original Portuguese version has been archived and can be found in the World Bank’s records\. Annex 5 40 To Mr\.GUNARS H\. PLATAIS Environmental Economist World Bank Ref\. Espírito Santo Biodiversity and Watershed Conservation and Restoration Project (P094233) Dear Mr\. Platais, We received and reviewed the Implementation Completion Report (ICR00003476) of the Espírito Santo Biodiversity and Watershed Conservation and Restoration Project – “Florestas para Vida” (TF 093210), which received a USD 4 million non- reimbursable grant from the Global Environment Fund, having the Espírito Santo State Government as recipient and the World Bank as implementing agent\. As the project’s coordinating and executing agencies, the State Secretariat for Environment and Water Resources (SEAMA) and the State Institute for Environment and Water Resources (IEMA) are extremely pleased with its successful completion\. Its benefits went much beyond those initially desired, particularly concerning the implementation of the State Program for Payment of Environmental Services (PES), which extended beyond the initially targeted watersheds to the entire state of Espírito Santo\. Other findings provide sound evidence that the project’s results far exceeded expectations, as you shown in the following list of those considered most important\. 1) State professionals acquired expertise and management capacity that allowed them to look beyond their original experience and find ways of reaping additional benefits\. An analysis of the local impacts from an economic standpoint shows that the state was able to prepare unexpected outputs like the Strategic Plan for the Forest Value Chain, in addition to assessing forest restoration opportunities and preparing a business case, among other economic approaches\. 2) The need to monitor the Project according to the monitoring arrangements agreed with IBRD led the Project Steering Unit (PSU) to look for novel technological alternatives\. This resulted in a new technical management system for PES projects that might be considered unprecedented in Brazil, producing time savings of up to 400% in certain routine workflows and procedures\. 3) A sound forest cover monitoring and inspection system was developed and deployed across the entire Espírito Santo state territory\. The system allowed close to 300,000 hectares of forest fragments in the initial stages of natural regeneration to advance to subsequent successional states\. This helped to increase the state’s forest cover, with positive impacts on extremely relevant biodiversity-, water-, soil-, and climate-related environmental services\. 4) Strengthened in its ability to take on challenging targets, not just for Annex 5 41 the government’s strategic planning but also with the international community, the SEAMA/IEMA system’s ability to plan and execute large-scale forest cover restoration actions increased, as proved by the state government ’s accession to the 2020 Bonn Challenge of recovering 80,000 hectares by 2020\. 5) A specific fund (FUNDÁGUA) was created to support actions to increase forest cover, providing a long enough flow of financial resources (oil and natural gas royalties) to allow the state to advance in renewable sources\. 6) The SEAMA/IEMA system’s increased institutional capacity has since enabled important partnerships with the private sector and NGOs, which substantially increased the Project ’s investment power\. Particularly important are those with the mining companies Vale and Samarco, Fibria Celulose, the NGOs TNC, IUCN, WRI, Instituto Terra, Instituto BioAtlantica and with the Pacto pela Restauração da Mata Atlántica (Pact to Restore the Atlantic Rainforest), in whose Council the state has held a seat since its creation in 2009\. 7) As a consequence of the above-referred evidence, the state of Espírito Santo is moving to the national forefront and becoming a reference in environmental issues, which can also be considered a benefit achieved through the Project\. Unexpected events during the Project’s implementation also had a great impact on its development, at times creating delays, at others making it necessary to redirect activities\. However, despite their unexpectedness, in the end these situations proved essential for the project to achieve the level of progress and maturity it did\. Many project activities had to be reviewed and adjusted to local realities, which increased local buy-in\. A clear example of this occurred in 2012, when the country was heatedly discussing adjustments to the Forest Code\. At the time, given the uncertainty surrounding the new Code, when many believed that the recovery obligations caused by environmental liabilities might be suspended, a large number of rural producers abandoned the Project thinking their environmental liabilities might be waived with the new Code\. As a result we had to readjust our Project—which had to be attractive in itself, not just because it would enable legal compliance—focusing on profitable practices like agroforestry and silvipastoral systems and productive forests\. In sum, despite delaying the Project ’s implementation this unforeseen event brought unexpected benefits that were unfortunately not captured by the evaluation conducted\. It is important to emphasize this, since many results and benefits that are easy to verify were not initially expected, and could therefore not be measured or documented through project indicators\. As such, we believe that the Project ’s overall evaluation does not reflect or capture the benefits achieved, as you will see by the specific comments and suggestions presented below\. Annex 5 42 Specific comments: Issues that affected the Project’s implementation and results Water Producer Program (Programa Produtor de Água – PPA) – National Water Agency - ANA Aside from the above example about the changes in the Brazilian Forest Code, it is also important to note that another PES scheme was implemented in Espírito Santo simultaneously to the one designed under the FPV Project\. This happened in 2008 with the creation of the Water Producer Program, a simplified PES scheme implemented based on the PES model designed by the National Water Agency (ANA)\. Note that the state started working with PES between 2004 and 2005, when the first efforts were made to prepare the Concept Note of the Espírito Santo Biodiversity and Watershed Conservation and Restoration Project (generally known as Florestas para a Vida or FPV) that later led to the development of a PAD\. The slowness in preparing the PAD and consequently in receiving the GEF funds needed to start implementing the Project—among them the passing of the late IBRD project lead Mr\. Ricardo Tarifa—created much anxiety in the state, which started considering the possibility of implementing the model provided by ANA\. In fact, since ANA’s model proved easy to adapt, the state was able to prepare the legal framework and start the Water Producer Program in less than a year\. However, the legal instruments designed to support the Water Producer Program would later prove to be incompatible with the proposed FPV’s PES mechanism\. Since the former only supported recognition of conserved forests and changing the legal framework was impossible, it would not be feasible to implement the FPV\. This scenario changed only when it was ascertained that the PES mechanism implemented was not stimulating reforestation in new areas, since producers did not find the financial benefits attractive enough\. This would make it impossible for the state to achieve the main goal of its 2025 Development Plan: increasing forest cover from 11% in 2006 to 16% by 2025\. In view of the above, the state decided to review its legal framework, which ended up incorporating the exact directives discussed under the FPV\. Despite having seemed negative for the FPV due to the implementation delays it caused, its cost-benefits ended up being quite positive for many reasons: Annex 5 43 The launch of the Water Producer Program in 2009 allowed the state to try out the PES mechanism and solve issues that would have come up when implementing the FPV, like defining standards for contracts, documents, workflows, etc\. In addition, without the Water Producer Program, the FPV would have had to develop its own legal framework, and considering that its first disbursement only took place in August 2009, it would have taken quite some time to hire a consulting firm to support this activity and enable the start of the first PES pilots\. On the other hand, although the legal norms imposed by the PPA did not allow the FPV to be implemented, its first revision in 2012 not only made it possible to implement the FPV’s PES rules, it also enabled adjustments to avoid errors that would certainly have been made if the state had not experimented with the PPA first\. As such, although the Water Producer Program may initially have seemed responsible for delaying the FPV, a careful chronological analysis of the steps that would have been necessary would doubtless show that the Water Producer Program actually helped to advance the FPV’s design and implementation\. In addition, aside from providing various testing opportunities, for a long time the Water Producer Program alleviated the political pressure that the FPV would certainly have suffered\. Hence, the Project was able to develop its own PES mechanism unrestrained, which came to be implemented in 2012—four years after the GEF funds were approved\. Diversified action fronts\. A brief analysis of the project scope shows clearly that considering the limited staff available for the project’s technical management, it was much too daring in taking on so many action fronts in its four investment components\. Furthermore, some of them did not provide the executing agency with full management capacity, which introduced a great uncertainty in its execution\. Component 1, which includes activities like preparing watershed management plans and strengthening basin committees, exemplifies this quite well\. As it happens, the Project makes the Implementing Agency responsible for an activity that is not just the duty of the state\. The Basin Committee is responsible for approving the Watershed Management Plan (a project output), and the state is responsible for supporting it\. The state fosters the formation of committees and helps to keep them functioning, if the committees allow them to do so\. The state can also support the committees by contracting and preparing watershed management plans, but their approval and consequent implementation depends on a collegial body in which the state merely holds a seat\. As a result, the entire process must be conducted in a way that is participatory enough for any Annex 5 44 documents generated in the future not to be considered invalid\. In this regard, we failed to foresee the difficulties and time it would take to prepare the ToRs, and subsequently monitor the performance of the contract to prepare the watershed management plan, in a highly participatory manner\. The project timeline merely took into account the time needed to obtain the no objections, conduct the competitive bidding process, and sign and perform the contract\. In addition, delays in reaching prior milestones does not warrant a shortening in the execution period to adjust it to the length of the grant agreement\. This would certainly compromise the outputs\. In fact, it will need to be revised\. Other planned project actions also show a bold diversification in its scope considering the limited staff resources, which hinders the project’s implementation capacity\. But as we mentioned before, despite their diversity, all actions are somehow linked to each other\. Which does not mean they are essential to reach the project objectives\. To be direct, and considering that Component 3 is the most important to achieve the project’s objectives, a number of actions in other components can be considered fundamental for its success: • Implementation of a Forest Cover Monitoring System - Component 1 • Water Monitoring System - Component 1 • Definition of Areas for Forest Cover Restoration - Component 1 • Establishment of a Monitoring and Evaluation Methodology - Component 4 • Implementation of a Management System - Component 4 • Strengthened Team - Component 4\. Reduced team This point is directly related to the previous item about the excessively daring execution scope\. If there had been enough professionals available to carry out all planned activities, including administrative personnel from IEMA, as executing agency, to support contracts in execution, the evaluation results might have been different\. Nevertheless, the project contributed to and enabled continuing education for state professionals dedicated specifically to forest recovery activities\. Today they follow the lines of the Reflorestar Program, which has its own team, duly structured and designed to grow\. Annex 5 45 In terms of constructive criticism, it is clear that the size of the team was not appropriately dimensioned to perform all project activities, and insufficient personnel was allocated to make this possible\. The team was spread thin and this created delays\. We also failed to consider that in certain cases (e\.g\., when preparing the watershed management plans), the Implementing Office would depend on the efforts of other segments of society\. As a result, actions that were secondary to achieving the project’s main objectives ended up demanding more time and effort than expected, which on occasion compromised actions of greater priority\. As to the reduced number of full-time technical staff available to implement the Project, one of the lessons we learned is that this type of deficiency can be corrected by recruiting a management unit\. As such, we included one in the new project proposal presented to the Bank, the Water and Landscapes Management Project (Projeto de Gestão de Águas e da Paisagem)\. Likewise, aiming to solve the lack of technical personnel in the field, the Implementing Office opened a competitive bidding process with the Bank’s authorization and recruited a company to prepare technical projects for PES\. Rural producers thus received the assistance they needed and were able to achieve the indicators proposed\. This new action was also incorporated into the new project proposal\. Finally, we question an aspect referred to in Paragraph 95, which evaluates the Bank’s project supervision as moderately unsatisfactory due to the lack of reports on recurrent delays\. It must be noted that during most of the FPV ’s execution, its institutional and implementation arrangements were linked to those of the Águas Limpas Project, which due to the volume of investments and project scope demanded more attention at that point\. However, in view of the above, which clearly shows the reasons and motives that led to the project’s delays, it makes no sense to attribute such a rating in the final version of the evaluation report due to the lack of reports\. Final comments Even though we presented most of the lessons learned during the FPV throughout this document, below are a few that were not mentioned before\. Whenever designing a project and defining its implementation period, account must be taken of the political cycle of the grant recipient\. It must also consider that Annex 5 46 some activities may take longer than planned\. As such, unless there are considerable unjustified delays in the project’s execution, it is not advisable to match the length of the grant agreement to the time needed to conduct a study\. To the contrary, once it is clear that it will take longer to perform a certain activity, the project should be flexible enough to adjust to that situation without compromising the quality of the final output\. The project scope should have been dimensioned using modeling tools to determine the number of people needed to execute it and the professional profiles needed, checking to see whether the grant recipient would truly have access to the necessary professionals, which would allow the project scope to be better dimensioned\. Regardless of the defined project dimension, it should have been possible to hire external personnel (through a management company) to implement the Project so as not to overburden the already overburdened structures of the state\. This was the case of the Ecological Corridors of ES Project, which was supported by a consulting firm throughout its execution, expediting small-scale actions and simplifying project management\. The same approach was applied to the Àguas Limpas Project\. Vitória, June 19, 2015 Marcos Franklin Sossai Florestas para Vida Implementation Manager Reflorestar - Forest Conservation and Recovery Program Manager Annex 5 47 Annex 6\. List of Supporting Documents Project Appraisal Document (Report No\. 40547-BR) – October 23, 2008 Restructuring Paper 1 (Report No\. 70498-BR) – June 27, 2012 Restructuring Paper 2 (Report RES12668) – December 1, 2013 Restructuring Paper 3 (Memo) – December 31, 2014 Country Partnership Strategy 2012–2015 (Report No\. 63731-BR) – September 21, 2011 ISRs - FpV 01 27/01/2012 02 26-Jun-2013 03 18-Feb-2014 04 31-Dec-2014 Aide-Memoires: Joint Supervision Missions: Espírito Santo Water and Coastal Pollution Management Project\.  December 2006  June 2007  March 2008  March 2009  July 2010  December 2010 Financial Management Supervision Reports:  May 2008  October 2014 Annex 6 48 Annex 7\. Results Framework Diagram Annex 7 49  Florestas Para Vida PDO Results Chain Diagram Component 1\. Strengthening Watershed Management 2 watershed management committees strengthened Technical units to support watershed committees Ecological and Economic Zoning (ZEE) Critical biodiversity conservation areas and critical water supply areas identified and some selected for project intervention\. Water resource monitoring system Vegetative cover monitoring system Component 2\. Targeted Biodiversity Protection and Protected Area Management 1,000 ha of degraded areas recovered\. Payment mechanisms for Management Plan for Pedra Azul State Park watershed PDO: Support Management Council for Pedra Azul State Park conservation the adoption of established and environmentally implemented\. friendly land use A new Financial instrument for biodiversity conservation identified and implemented\. practices by local farmers in two 8 RPPNs established key Atlantic Component 3A\. Inducing Adoption of Sustainable Land Use Forest watersheds Practices in Espírito Santo\. 300 landholders receiving TA on SLM\. 60 extension officials trained on SLM 4 experimental stations on SLM implemented\. Short-term PES plan established 160 landholders receiving short-term PES\. Percent increase in the number of properties certified for organic 3,400 ha under production or in the process thereof environmentally Component 3B\. Establishing Payments for Environmental friendly land Services use practices\. Functioning PES program - critical areas - Jucu and SMV watersheds Main water users identified and engaged in the program 160 landholders receiving PES Component 4\. Monitoring and Evaluation and Project Management A project-level M&E Framework established A regional-level Information System covering the Jucu and SMV basins Project Management Team set up and working effectively\. Best practices and lessons learned disseminated Annex 7 50 Component 1\. Strengthening Watershed Management Florestas Para Vida GEO Results Chain Diagram 2 watershed management committees strengthened\. Technical units to support watershed committees Ecological and Economic Zoning (ZEE) Critical biodiversity conservation areas and critical water supply areas identified and some selected for project intervention\. Water resource monitoring system Vegetative cover monitoring system Sustainable Market- Component 2\. Targeted Biodiversity Protection and based mechanisms to Protected Area Management finance Protected Areas (PA) 1,000 ha of degraded areas recovered\. management implemented\. Management Plan for Pedra Azul State Park Management Council for Pedra Azul State Park Financial instrument for biodiversity conservation identified and implemented\. 8 RPPNs established Component 3A\. Inducing Adoption of Sustainable 1,000 ha of critical GEO: Reduced threats Land Use Practices habitat restored to globally important 300 landholders receiving TA on SLM\. and/or protected from biodiversity from encroachment\. agricultural production systems 60 extension officials trained on SLM and increase critical 4 experimental stations on SLM implemented\. habitat for endemic Short-term PES plan established species in two key 160 landholders receiving short-term PES\. rainforest watersheds Conservation of biodiversity in of the Recipient’s Percent increase in the number of properties certified for territory\. organic production or in the process thereof agricultural landscapes adopted Component 3B\. Establishing Payments for on 3,600 ha\. Environmental Services Functioning PES program - critical areas - Jucu and SMV watersheds Main water users identified and engaged in the program 160 landholders recieving PES Component 4\. Monitoring and Evaluation and Project Management A project-level M&E Framework established A regional-level Information System covering the Jucu and SMV basins Project Management Team set up and working effectively\. Best practices and lessons learned disseminated Annex 7 51 PDO: Support the adoption of environmentally friendly land use practices by local farmers\. GEO: Reduced threats to globally important biodiversity from agricultural production systems and increase critical habitat for endemic species in two key rain forest watersheds in the Recipient’s territory\. Activities Outputs Outcomes Short Term Medium Term Long Term Component 1\. 2 watershed management Improve Favors PES and Increase habitats Strengthening committees strengthened institutions Mkt based for species Watershed performance mechanisms Management implementation Ecological and Economic Zoning Improved natural Resources (ZEE) management Critical biodiversity conservation Project Protection of critical biodiversity areas and critical water supply implementation conservation areas\. areas identified and some selected efficiency Increase habitats for species\. for project intervention\. improvement Water resource monitoring Improved Favors PES Increase habitats system scientific implementation for species understanding of problems Vegetative cover monitoring Improved Improved natural system understanding of resources problems management and law enforcement Component 2\. 1,000 ha of degraded areas Critical habitats restored\. Increase habitats for species\. Targeted recovered\. Biodiversity 8 RPPNs established Increase critical habitats protected from encroachment Protection and Management Plan for Pedra Azul Improved natural Resources Increase habitats Protected State Park management for species Area Management Council for Pedra Improve Improved natural Management Azul State Park institutions Resources performance management A new Financial instrument for Allows PES Critical habitats biodiversity conservation implementation restoration and identified and implemented\. preservation financing Component 300 landholders receiving TA on Modify Adoption of Reduce threats 3A\. Inducing SLM\. landholders friendly land use from agriculture Adoption of practices practices\. production\. Sustainable 60 extension officials trained on Increased number Land Use SLM of landholders Practices receiving TA 4 experimental stations on SLM Develop, improve implemented\. and demonstrate SLM practices Short-term PES plan established Prepare PES PES Increase habitats contracts implementation for species 160 landholders receiving short- Habitats restoration and protection term PES\. financed Percent increase in the number of Adoption of friendly land use practices Reduce threats to properties certified for organic biodiversity from production or in the process agriculture thereof production Component Functioning PES program - Habitats restoration and protection Increase habitats 3B\. critical areas - Jucu and SMV financed for species Establishing watersheds Payments for Main water users identified and Favor Mkt based mechanism Environmental engaged in the program implementation to fund the PES\. Services 160 landholders receiving PES Habitats restoration and protection financed Annex 7 52 Component 4\. A project-level M&E Framework Improve project implementation Positive effects on Monitoring established efficacy and efficiency the PDOs and and GEOs Evaluation A regional-level Information Improved Improve natural Increase habitats and Project System covering the Jucu and scientific resources for species Management SMV basins understanding of management problems Project Management Team set up Improve project implementation Positive effects on and working effectively\. efficacy and efficiency the PDOs and GEOs Best practices and lessons learned Allows Increase habitats for species and reduce disseminated successful threats to biodiversity outside the project experiences areas\. “Reflorestar Project encompassing replication the whole State” Annex 7 53 Annex 8\. Land Use Planning – Current Land Use and Proposed Conversion 02/04/2015 Portal Ambiental Municipal Programa Reflorestar Município de Santa Maria de Jetibá ES Mapa de Uso Atual 20°03'S Propriedade 20°03'S Sítio Orgânico Gesund Leewend Proprietário Gerson Berger 20°03'S Legenda Rio 20°03'S Nascente Área com cobertura florestal [8,90 ha] Limite da Propriedade 40°45'O 40°45'O 40°45'O 40°45'O 40°45'O 40°45'O 40°44'O [17,37 ha] Obs: As informações do mapa são autodeclaratórias e não servem para fins de comprovação fundiária\. Edificações KM Escala = 1 : 3386 0 0\.1 0\.2 Datum: WGS84 Afloramento Rochoso Passivo Ambiental [0,45 ha] APP Hídrica [0,75 ha] UCS Estaduais Coordenada de Referência (UTM 24S wgs84) 316781, 7780962 http://reflorestar\.cargeo\.com\.br/precadastro/impressao_mapa_uso/683/a tual/ 1/1 Annex 8 54 02/04/2015 Portal Ambiental Municipal Programa Reflorestar Município de Santa Maria de Jetibá ES Mapa de Uso Proposto 20°03'S Propriedade 20°03'S Sítio Orgânico Gesund Leewend Proprietário Gerson Berger 20°03'S Legenda Rio 20°03'S Nascente Limite da Propriedade [17,37 ha] Edificações 40°45'O 40°45'O 40°45'O 40°45'O 40°45'O 40°45'O 40°44'O Afloramento Rochoso Obs: As informações do mapa são autodeclaratórias e não servem para fins de comprovação fundiária\. KM Floresta em Pé Escala = 1 : 3386 0 0\.1 0\.2 Datum: WGS84 [8,73 ha] Recuperação com Plantio [0,36 ha] Regeneração Natural [3,33 ha] SAF [0,31 ha] Passivo Ambiental [0,45 ha] UCS Estaduais Coordenada de Referência http://reflorestar\.cargeo\.com\.br/precadastro/impessao_mapa_uso/683/proposto/ (UTM 24S wgs84) 316781, 7780962 Annex 8 55 1/1 A property (outlined in yellow) that has been assessed by the Reflorestar team\. Noncompliant areas are marked in red\. Proposed changes are marked in green and blue\. Annex 8 56 Annex 9\. Release – State of Espírito Santo Joins the 20x20 Initiative Released 18 June 2015 by the Governor of Espirito Santo’s Communications Office to local, national and international news outlets\. RELEASE: The Brazilian state of Espírito Santo set to restore 80,000 hectares of forests and join the 20x20 Initiative for the global movement of large-scale restoration launched at the "Bonn Challenge" JUNE 2016\. The state of Espírito Santo announced its new membership of the 20x20 Initiative at the Second Global Forum on Sustainable Growth in Santiago, Chile this week, in leading up to the COP 21 meeting in Paris this December\. The 20x20 Initiative was launched at the Climate Convention’s COP 20 in December 2014 in Peru\. The Initiative is an effort led by countries and organizations in Latin America and the Caribbean (LAC) to restore and prevent deforestation by at least 20 million hectares of degraded land by 2020\. The 20x20 Initiative is aligned with a range of global actions such as the Forests Statement of the New York Climate Summit, the Bonn Challenge to restore 150 million hectares by 2020, and the national Atlantic Forest Restoration Pact\. To date, nine countries and three regional programs have joined the Initiative, with goals that propose actions for forest restoration and conservation, avoided deforestation, and sustainable land use practices\. Espírito Santo’s contribution, established by law in the 2015/2018 Government’s Strategic Plan, aims to recover 80,000 hectares over the next four years\. Actions established in the Forest Conservation and Recovery Program, Reflorestar, will help to achieve this\. The State’s entry into the Initiative emphasizes a consistent and continuous track record of progress made in the last ten years on developing and implementing of forest conservation and recovery policies, which are starting to produce significant results\. In addition to direct benefits such as the preservation and recovery of critical environmental services for quality of life, (water, soil, and biodiversity), Espírito Santo’s ability to plan large-scale actions in the field of forest restoration, allowing it to take on global extent responsibilities, such as the 20x20 Initiative, is especially noteworthy\. A further important benefit concerns the restoration economy, considered a sustainable development pathway for Brazil, which reinforces important links in the forest production chain\. This is aligned to Brazil’s expectations to launch a national restoration plan, PLANAVEG, currently undergoing public consultation and led by the Ministry of the Environment\. Enabling conditions that allowed the State of Espírito Santo to take on the 20x20 Initiative include the State Government prioritizing public policy development focused on forest Annex 9 57 conservation and restoration, and partnership that support the state through knowledge transfer, technology and institutional support\. These have enabled the implementation of major actions for structuring and advancing the Reforestation Program\. Noteworthy partnerships include The Nature Conservancy, the International Union for Conservation of Nature, the World Resources Institute, the World Bank, Instituto Bioatlântica, and the Global Environment Facility, among others\. Additional Information: On the State of Espírito Santo Joining the Initiative Marcos Sossai, Espírito Santo’s Department of the Environment marcos\.sossai@gmail\.com About the 20x20 Initiative Rachel Biderman, WRI Brasil and Walter Vergara, WRI rbiderman@wri\.org and Wvergara@wri\.org About Bonn Challenge Miguel Calmon, IUCN and Carole Saint-Laurent, IUCN and GPFLR miguel\.calmon@iucn\.org and carole\.saint-laurent@iucn\.org About the Atlantic Forest Restoration Pact Aurelio Padovezi, WRI Brasil apadovezi@wri\.org Annex 9 58 Annex 10\. Dynamic Information Framework – PCGAP Portal Capixaba de Gestão das Águas e da Paisagem The project Portal Capaixaba de Gestao das Aguas e da Paisagem 62 (PCGAP) was established as part of FpV to provide a sophisticated Decision Support System (DSS) that would enable scenario analyses for decisions on the resources of Espírito Santo\. The system has time series data sets in state of the art computer models that can be utilized by staff in National Agencies to analyze the resource base and develop predictive scenarios and appropriate interventions, with climatic and ecosystem changes in mind\. The application of modern “landscape/hydrology” models of river basins represents a powerful tool for the analysis of coupled landscape properties, water resources, and future change scenarios (due to climate, or land use practices)\. The process of PCGAP was to first present the overall project Strategy\. The Partners (Parceiros) are led by IEMA, with CESAN, INCAPER, UFES (Jerônimo Monteiro, Vitoria), and the University of Washington\. The Issues and Targets were identified, progressing from how weather impacts the land surface, to how changes in landuse might alter water flow, and then to how changes in water and landuse might impact the mobilization of sediments\. The strategy for PCGAP is to use computer "hydrology/landscape" models to assimilate multi-sector information, within a "dynamic information framework (DIF),” to provide resolutions to the questions of FpV\. The framework is developed for the Jucú and the Santa Maria da Vitória (JSMV) watersheds at a relatively high resolution (using the DHSVM model), to the State of 62 http://pangaea\.ocean\.washington\.edu/ Annex 10 59 Espírito Santos and the Rio Doce (ES), at a more coarse resolution (using the VIC model), taking advantage of the scaling of effort and availability of data required)\. The properties of the River Basins were established, as a means of organizing information for multiple users, within the framework of model requirements for data\. The Region was summarized\. Topography (for relief and flow networks) at multiple scales was derived from the 90-m SRTM (Shuttle Radar Topography Mission)\. The properties of Soils for ES were abstracted from the EMBRAPA 1:5M dataset, and from GEOBASE for the JSMV\. The reference for Landuse for ES was from the MODIS satellite, while the Landsat-derived IEMA2007 product was used for JSMV\. Regional Weather, as daily historical gridded forcings of rain and temperature, was taken primarily from a “re-analysis” product from the UW, with local meteorological information informing JSMV\. The discharge regime was developed from ANA records\. Graphics illustrated the primary patterns in the overall hydrology of the region, and the “sensitivity” of the region to variations in temperature and rain was examined, as the basis for climate scenarios\. Data to Models describes the process by which the information in River Basins is incorporated into the models\. The Dataframe establishes the specific requirements\. The VIC Setup describes how VIC was setup, calibrated, and validated with time series records\. Similarly, the DHSVM description documents setup, calibration, and validation\. Both models performed (surprisingly) well\. With the “toolbox” established by River Basins and Data to Models, PCGAP is ready to analyze the questions motivating the project\. Weather to Rivers describes first how Rainfall is translated into Runoff, and to soil moisture and ET\. Interactive graphics help examine seasonal and interannual patterns\. Future Scenarios look at what might happen under possible future climates\. If the model is maintained in an Operational mode, could the actual conditions of rainfall intensity and soil moisture be monitored, and could extreme events (floods or droughts) be anticipated via the development of a preventive alert system? A major question for PCGAP is, “How do changes in landuse affect the movement of water across the landscape?” This question is examined in Landuse, by evaluating the potential hydrologic responses to different landuse scenarios in the Rio Jucu and Rio Santa Maria da Vitoria river basins\. Landuse Scenarios were developed from the IEMA2007 dataset, by comparing to a more historical dataset (GEOBASE 1997), and by increasing agricultural crops by 25%, eucalyptus by 25% and 50%, and reverting to a vegetation type characteristic of Mata Nativa\. For both the Jucu and SMV basins, increased lowland agriculture caused higher unregulated annual water yields especially during the low-flow seasons\. When existing agriculture was converted to forests, annual water yield decreased but evapotranspiration was increased\. Increasing eucalyptus areas decreased discharge by an average of 25% in the Jucu, However, the difference in discharge between Euc\.+25% and Euc\.+50% was indiscernible\. Based on future scenario analysis, effects of landuse change on seasonal and annual water yields are a net balance of change in basin moisture storage size, vegetation-soil interaction, and flow regulation\. Forest to crop conversation reduces the transfer of precipitation to the ground due to lower evapotranspiration rates, thus increasing discharge\. Agriculture in this region of Brazil has also caused soil compaction, lowering infiltration rates and hydraulic conductivity, causing excess in overland flow\. Annex 10 60  Landuse in SMV results in very high sediment loads, far beyond natural, especially during storms\. Historical data are sparse, and rarely show impacts of major storm events\. Hence a field sampling program was developed with CESAN, focusing on pre- and during- storm sampling, using automated samplers (provided by the UW)\. Detailed measurements of sediment concentration and sediment chemical composition showed that very high sediment loads, bearing pronounced chemical signals of how the land is sued, are mobilized during storm events, likely dominating overall sediment transport\. While not yet well-developed, the sediment module of DHSVM was able to capture the basic dynamics of storm events, suggesting that, with further development, it would be useful in pin-pointing the most sensitive areas\. The overall goal is to be able to support Planning Scenarios\. Results to date show that the PCGAP construct, with its ability to summon and dynamically synthesize information from multiple sources, can provide significant input to regional planning\. The next step is to continue building the Phase 1 PCGAP into a robust Decision Support System (DSS)\. Production of spatial maps of planning scenarios, maps of adaptability, zoning for agricultural activities, and flooding probabilities at short term and longer-term time scales is imminently feasible, as seen in the work to date\. Annex 10 61 Annex 11\. Map of the area of influence of the project Annex 11 62 Annex 12\. A sampling of communication material developed under the project Annex 11 63 References Carvalho, K\. S\. de, R\. M\. Paranhos, and J\. B\. D\. Paiva\. 2004\. “Limitações ao uso da relação entre turbidez e concentração de sedimento em suspensão em duas pequenas bacias em Santa Maria, RS\.” XXI Congresso Latinoamericano de Hidráulica\. Anais\. São Pedro, SP\. Chaves, Henrique Marinho Leite\. 2010\. “Relações de aporte de sedimento e implicações de sua utilização no pagamento por serviço ambiental em bacias hidrográficas\.” Revista Brasileira de Ciência do Solo 34 (4): 67–98\. “IEMA (State Institute for Environment and Hydrological Resources) - FpV Evaluation Report\.” 2015\. State Institute for Environment and Hydrological Resources, Espirito Santo, Brazil\. Pagiola, S\., and G\. Platais\. 2007\. Payments for Environmental Services: From Theory to Practice\. Washington, DC: World Bank\. Pagiola, S\., H\. Carrascosa von Glehn, and D\. Taffarello, eds\. 2013\. Experiências de Pagamentos por Serviços Ambientais no Brasil\. São Paulo: Secretaria de Estado do Meio Ambiente de São Paulo\. Pirot, J\.-Y\., P\. J\. Meynell, and D\. Elder\. 2000\. Ecosystem Management: Lessons from Around the World\. A Guide for Development and Conservation Practitioners\. Gland and Cambridge: International Union for Conservation of Nature\. SMA (Secretaria Estadual de Meio Ambiente)\. 2012\. Experiências de Pagamentos por Servicos Ambientais no Brasil\. Rio de Janeiro: Secretaria Estadual de Meio Ambiente\. Teixeira, E\. C\., and A\. P\. Senhorelo\. 2000\. “Avaliação de correlação entre turbidez e concentração de sólidos suspensos em bacias hidrográficas com uso e ocupação diferenciada\.” Associação Brasileira de Engenharia Sanitária e Ambiental, Rio de Janeiro\. Walling, D\. E\. 1999\. “Linking land use, erosion and sediment yields in river basins\.” Hydrobiologia 410: 223–240\. 64

REVIEW

P009445

 Third flood control and drainage project Report No: ; Type: Report/Evaluation Memorandum ; Country: Bangladesh; Region: South Asia; Sector: Agriculture Adjustment; Major Sector: Agriculture; ProjectID: P009445 Bangladesh: Third Flood Control and Drainage Project (Credit 1591-BD) The Bangladesh Third Flood Control and Drainage project, supported by Credit 1591-BD for US$48 million equivalent, was approved in FY85 and closed on June 30, 1994 after an extension of one year\. US$6\.68 million was canceled\. Cofinancing of US$4\.3 million was provided for technical assistance and training by UNDP and the Government of the Republic of South Korea\. The FAO/World Bank Cooperative Program prepared the Implementation Completion Report (ICR) for the South Asia Regional Office\. The borrower and cofinanciers did not comment on the ICR\. The project's objectives were to protect crops, human life, and property from damage by floods and to induce better agricultural practices by engineering favorable changes in the onset, depth, and duration of the flooding, in an area of 128,000 ha at three sites in different regions of the country\. To achieve these objectives the project included components to (i) construct and rehabilitate embankments, water control structures, drainage channels, irrigation facilities and roads; (ii) support the Bangladesh Water Development Board (BWDB) to improve the planning, design, monitoring and operation and maintenance (O&M) of flood control and drainage (FCD) projects; and (iii) prepare programs for the development of agriculture and fisheries within the project area\. The project was expected to be implemented over seven years, of which the first five would see the completion of construction works and the last two would ensure successful start-up of operation and maintenance activities\. The project achieved most of the physical objectives set at appraisal, with some important modifications identified during detailed design or subsequently agreed\. In particular, the height of the embankments at two sites was raised by one meter over the appraisal's preliminary design, with substantial impact on subproject costs\. Most of the irrigation works planned for one site were later omitted\. Investment costs were higher than expected at all three sites, and, as a consequence of delays in land acquisition, completion of construction was delayed by four years\. Construction continued throughout implementation, and the period planned for O&M activity under project control was lost\. Production increases attributable to better water control were evident in the first full cropping year following completion of works, and are expected to continue to grow\. Nevertheless, the economic rates of return (ERR) from agricultural activities reported in the ICR range from 11 to 14 percent, significantly below appraisal projections of 16 to 28 percent, despite higher economic prices\. Increased costs and construction delays account for most of the shortfall\. The agricultural benefits are further offset by losses to the riverine fisheries, and especially to the communities of poor fishermen who depended on open access to the pools and flood-filled breeding grounds now blocked by the embankments\. This loss was anticipated at appraisal, but no corrective action has yet been taken\. The ICR stresses that the agricultural benefits are also at substantial risk because of the poor O&M performance of BWDB, a long recognized deficiency\. Deterioration of the new works at all three sites is already apparent\. The Operations Evaluation Department (OED) agrees with the unsatisfactory rating for project outcome in the ICR, which reflects the marginal economic returns to the infrastructure investments from cropping, the poor progress in addressing the fishery losses, and the serious deficiencies in O&M that threaten the gains in crop production\. OED also accepts the ICR rating for sustainability as uncertain\. The ICR rating for institutional development has been downgraded from partial to negligible, owing to BWDB's failure to improve its performance on O&M and the absence of any other significant institutional impacts\. The ICR rates Bank performance as unsatisfactory, citing failures at appraisal and again during supervision to anticipate and mitigate external diseconomies, and for errors in design and redesign of embankment heights\. OED accepts the ICR's rating of Bank performance, while noting that the execution and supervision of civil works was satisfactory\. The ICR cites several lessons for operations elsewhere: (i) compensation for land should be fair and based on studies of prevailing market prices; (ii) planning of FCD projects should anticipate environmental consequences, such as reduced fish populations and higher flood water elsewhere, and include specific mitigation measures; (iii) a study of the overall river basin (not just the project area) and the project's effects on basin hydrology including flood levels and frequency, should precede detailed project design; (iv) major changes in design standards should be based on recalculation of the expected ERRs; and (v) agreements with the borrower on how O&M is to be done, how it is to be funded, and the steps necessary to increase borrower O&M skills are essential to ensure the sustainability of water sector investments\. The ICR is satisfactory\. No audit is planned\.

REVIEW

P098639

Document of The World Bank Report No: ICR00002576 IMPLEMENTATION COMPLETION AND RESULTS REPORT (P098639; TF56336 and TF097653) ON GRANTS IN THE AMOUNT OF US$16\.4 MILLION TO GOVERNMENT OF SOUTH SUDAN (GoSS) FOR CORE FIDUCIARY SYSTEMS SUPPORT PROJECT (CFSSP) December 31, 2013 AFTME South Sudan Country Office Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective on March 07, 2008)** ** Please note, date of initial disbursement Currency Unit = SDG (Sudanese Pounds) US$ 1\.00 = SDG2\.02 FISCAL YEAR: Former: January 1 – December 31 Changed to: July 1 – June 30 (as from 2011) ABBREVIATIONS AND ACRONYMS AF Additional Financing CFSSP Core Fiduciary Systems Support Project CPA Comprehensive Peace Agreement DA Designated Account DG Director General DP Development Partner EAA External Audit Agent ESAF Environmental and Social Management Framework FM Financial Management FMS Financial Management Specialist FPP Final Project Paper FY Fiscal (Financial) Year GLA Grant Letter Agreement GoNU Government of National Unity GoSS Government of South Sudan GRSS Government of the Republic of South Sudan IA Implementing Agency ICR Implementation Completion and Results Report IDA International Development Association IFMIS Integrated Financial Management Information System IFR Interim Financial Report INTOSAI International Organization of Supreme Audit Institutions ISN Interim Strategy Note ISR Implementation Status and Results JAM Joint Assessment Mission JDT Joint Donor Team KPI Key Performance Indicator LICUS Low Income Countries Under Stress M&E Monitoring and Evaluation MA Monitoring Agent MDA Ministries, Departments and Agencies MDTF Multi-Donor Trust Fund MDTF-SS Multi-Donor Trust Fund for South Sudan MoFEP Ministry of Finance and Economic Planning MTR Mid-Term Review NAC National Audit Chamber NGOs Non-Governmental Organizations NLA National Legislative Assembly OC Oversight Committee OPCS Operations Policy and Country Services PAA Project Accounting Agent PAC Public Accounts Committee PAD Project Appraisal Document PDO Project Development Objective PFM Public Financial Management PFMU Project Financial Management Unit PIU Project Implementation Unit PMT Project Management Team IPPDAR Interim Public Procurement and Asset Disposal Regulations PPU Procurement Policy Unit PPU, MoFEP Planning and Policy Unit, MoFEP PRTF Procurement Reform Task Force PTF Project Task Force QCBS Quality and Cost-Based Selection RIEP Rapid Impact Emergency Project SAI Supreme Audit Institution SDG Sudanese Pound SDP Strategic Development Plan SPLA Sudan People’s Liberation Army SPLM Sudan People’s Liberation Movement SSP South Sudanese Pounds TA Technical Assistance TF Trust Fund UN United Nations USAID United States Agency for International Development USD United States Dollars VfM Value for Money WA Withdrawal Application WB World Bank Vice President: Makhtar Diop Country Director: Bella Bird Country Manager: Nicola Pontara Sector Director: Edward Olowo-Okere Sector Manager: Patricia Mc Kenzie Project Team Leader: Adenike Sherifat Oyeyiola ICR Team Leader: Adenike Sherifat Oyeyiola ICR Author: Udo Mba Kalu  SOUTH SUDAN Core Fiduciary Systems Support 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 \. ii G\. Ratings of Project Performance in ISRs \. v H\. Restructuring (if any) \. vi 1\. Context, Development Objectives and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes \. 7 3\. Assessment of Outcomes \. 12 4\. Assessment of Risk to Development Outcome \. 15 5\. Assessment of Bank and Borrower Performance \. 16 6\. Lessons Learned \. 19 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 20 Annex 1\. Project Costs and Financing\. 22 Annex 2\. Outputs by Component \. 23 Annex 3\. Economic and Financial Analysis (including assumptions in the analysis) \. 26 Annex 4\. Economy, Efficiency and Effectiveness Related Analysis \. 27 Annex 5\. Bank Lending and Implementation Support/Supervision Processes \. 28 Annex 6\. Beneficiary Survey Results (if any) \. 30 Annex 7\. Stakeholder Workshop Report and Results (if any) \. 31 Annex 8\. Summary of Borrower’s Completion Report\. 32 Annex 9\. Comments of Co-financiers and Other Partners/Stakeholders \. 33 Annex 10\. List of Supporting Documents \. 36 Map A\. Basic Information Core Fiduciary Systems Country: South Sudan Project Name: Support Project (TF056336) Project ID: P098639 L/C/TF Number(s): TF-56336,TF-97653 ICR Date: 07/30/2013 ICR Type: Core ICR GOVT OF SOUTHERN Lending Instrument: ERL Grantee: SUDAN Original Total USD 3\.0M Disbursed Amount: USD 13\.45M Commitment: Revised Amount: USD 13\.45M Environmental Category: C Implementing Agencies: Ministry of Finance and Economic Planning Cofinanciers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 12/05/2005 Effectiveness: 09/06/2006 Appraisal: Restructuring(s): Approval: 02/21/2006 Mid-term Review: Closing: 09/30/2008 03/31/2013 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Grantee Performance: 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 Satisfactory Satisfactory Performance: Performance: i C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Rating Performance any) Potential Problem Project at Yes Quality at Entry (QEA): None any time (Yes/No): Problem Project at any time Quality of Supervision No None (Yes/No): (QSA): DO rating before Satisfactory Closing/Inactive status: D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General public administration sector 100 100 Theme Code (as % of total Bank financing) Other accountability/anti-corruption 50 50 Public expenditure, financial management and procurement 50 50 E\. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Bella Deborah Mary Bird Ishac Diwan Sector Manager: Patricia Mc Kenzie Edward Olowo-Okere Project Team Leader: Adenike Sherifat Oyeyiola Parminder Brar ICR Team Leader: Adenike Sherifat Oyeyiola ICR Primary Author: Udo Mba Kalu F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The project development objective as indicated in the Letter Agreement dated February 21, 2006 is to put in place a robust framework for channeling of MDTF and GoSS counterpart funds to provide reasonable assurance regarding the use of these funds\. Revised Project Development Objectives (as approved by original approving authority) There were no changes to the PDO ii  (a) PDO Indicator(s) Original Target Values Actual Value Achieved at Indicator Baseline Value (from approval Completion or Target documents) Years monthly bank reconciliations conducted (one per MDTF-SS project) conducted Indicator 1 : according to established standards Value quantitative or 0 18 per month 18 per month Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments (incl\. % Target met achievement) Quarterly statements of Sources and Application of Funds prepared according to Indicator 2 : established standards (i\.e\. one per MDTF) Value quantitative or 0 18 per month 18 month Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments (incl\. % Target met achievement) Indicator 3 : Annual project audits completed Value quantitative or 0 18 per year 18 per year Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments (incl\. % Target met achievement) Indicator 4 : Annual audits of GoSS accounts completed Value quantitative or 0 6 6 Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments Target met\. Audits for years 2005 to 2010 completed\. 2005 to 2008 presented to (incl\. % National Legislative Assembly\. achievement) Indicator 5 : MDAs that comply with GoSS' procurement regulations Value quantitative or 0 6 6 Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments Original target was achieved\. 6 MDAs complied with established procurement (incl\. % guidelines and procurement plan\. achievement) iii  (b) Intermediate Outcome Indicator(s) Original Target Values (from Actual Value Achieved at Completion or Indicator Baseline Value approval Target Years documents) Indicator 1 : Project Accounting Agent/Project Financial Management Unit (PFMU) Appointed Value (quantitative No Yes Yes or Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments 100% achieved\. The PAA which was recruited under another project (RIEP) was used as an Interim (incl\. % Project Accounting Agent until 2008\. PFMU with individual consultants used thereafter\. achievement) Indicator 2 : PFMU accounts for MDTF and GoSS counterpart funds Value (quantitative 0 18 per month 18 per month or Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments (incl\. % 100% achieved\. Accounting for all active projects each month\. achievement) Indicator 3 : Preparation of Quarterly Interim Financial Reports Value (quantitative 0 18 per quarter 18 per quarter or Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments (incl\. % 100% achieved\. Quarter IFRs prepared for all active projects\. achievement) Indicator 4 : External audit agent appointed Value (quantitative No Yes Yes or Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments (incl\. % External Audit Agent appointed for all project implementation period\. achievement) Indicator 5 : Draft audit legislation and code of conduct in place Value (quantitative No Yes Yes or Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments (incl\. % Original target achieved\. Audit legislation and code of conduct prepared\. achievement) iv Indicator 6 : Oversight of public procurement by MoFEP; MDAs accountable for procurement Value (quantitative No Yes Yes or Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments Oversight of public procurement backed up by IPPDR\. A draft Procurement law prepared\. six MDAs (incl\. % able to prepare procurement plan\. achievement) Indicator 7 : Procurement agent is providing support to the Procurement Policy Unit in MoFEP Value (quantitative No Yes Yes or Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments Procurement Agent supported until August 2011; then Procurement Advisor under similar Terms of (incl\. % Reference\. achievement) Indicator 8 : Training of key MDAs on contract monitoring and commitment control systems Value (quantitative 0 5 31 or Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments Original target achieved\. 31 MDAs were trained on procurement management including contract monitoring (incl\. % and commitment control systems\. achievement) Indicator 9 : MDAs with up-to-date procurement plans in place and implemented according to plan Value (quantitative 0 6 6 or Qualitative) Date achieved 02/21/2006 03/31/2013 03/31/2013 Comments Original target achieved\. These are Ministries of Health; General Education and Instructions; Agriculture and (incl\. % Forestry; Higher Education, Science and Technology; Water Resources and Irrigation; and Gender, Social achievement) Welfare and Religious Affairs\. G\. Ratings of Project Performance in ISRs Date ISR Actual Disbursements No\. DO IP Archived (USD millions) 1 06/30/2008 Moderately Satisfactory Moderately Satisfactory 1\.30 2 12/31/2008 Moderately Satisfactory Moderately Satisfactory 1\.65 3 06/30/2009 Satisfactory Satisfactory 1\.97 4 12/22/2009 Satisfactory Satisfactory 2\.85 5 06/30/2010 Satisfactory Satisfactory 4\.28 6 01/31/2011 Satisfactory Satisfactory 7\.45 7 10/03/2011 Satisfactory Satisfactory 9\.10 8 04/10/2012 Satisfactory Satisfactory 11\.15 9 11/18/2012 Satisfactory Satisfactory 13\.32 v H\. Restructuring (if any) Not Applicable I\. Disbursement Profile vi  1\. Context, Development Objectives and Design 1\.1 Context at appraisal 1\. The Republic of South Sudan (RoSS), formerly the territory of Southern Sudan, is located on the southern plain of the White Nile and its tributaries, bordering Sudan to the North, Ethiopia and Kenya to the East and South East, respectively, Uganda to the South, and the Democratic Republic of Congo and Central Africa Republic to the West\. It has a population of about 8\.26 million people, of whom 83 percent live in rural areas\. About 51 percent of the population lives below the poverty line\. 1 2\. The twenty year-old civil war with the North ended in January 2005 with the signing of the Comprehensive Peace Agreement (CPA) by the Government of the Republic of the Sudan and the Sudan People’s Liberation Movement (SPLM)\. This was preceded by the signing of the Machakos Protocol in 2002; a Wealth Sharing Agreement in January 2004; a Power Sharing Agreement; and two significant protocols on key disputed areas in June 2004\. The CPA created a basis for lasting peace and economic development, and called for a referendum on the political and economic future of Southern Sudan after a six-year interim period\. During this period, Southern Sudan was governed by a Government of National Unity (GoNU), which included members of SPLM\. A semi- autonomous provisional Government of Southern Sudan (GoSS) was established in October 2005 in parallel to oversee the territory under the control of SPLM, with its capital in Juba\. The RoSS was established as an independent nation on July 9, 2011, following a peaceful referendum in January 2011\. 2 3\. Perhaps uniquely for a post-conflict government, GoSS in 2005 had immediate access to millions of dollars of domestic oil resources with which to fund its budget\. Oil revenues comprised more than 95 percent of total domestic revenues during 2006-2011 and grew rapidly\. 3 When the CPA was signed, the Department of Finance and Economic Development was based in Yei and handled, on average, monthly revenues of around $10,000 per month\. The fund flows increased to about $360 million in 2005, escalating to around $800 million in 2006 and around $1\.5 billion in subsequent years\. It clearly did not have the capacity to handle these\. A Joint Assessment Mission (JAM)4 carried out in March 2005 and comprising World Bank, UNDP, Government of the Republic of Sudan and SPLM, identified that governance systems, including Public Financial Management (PFM) systems, were not in place to make efficient and effective use of these funds\. Such systems that had at one time been in place had become very run down\. The Ministry of Finance and Economic Planning (MoFEP) had very few technical staff, and their skills were not suited to operating modern PFM systems\. Additionally, office infrastructure, IT capacity and communications were poor\. The situation at line ministry level was also poor\. Meanwhile, as also identified by the JAM, Southern Sudan faced huge infrastructure and public service delivery gaps which needed to be addressed urgently\. 1 Information from Statistical Yearbook for Southern Sudan, 2010, prepared by Southern Sudan Centre for Census, Statistics and Evaluation\. The 2011 PEFA assessment of GoSS provides further background statistical information\. 2 The acronym ‘GoSS’ is used in the context of events prior to July 9, 2011\. The acronyms ‘RoSS’ or GRSS are used in the context of events since July 9, 2011\. 3 Table 1 of Section 2 of the Bank-financed PEFA assessment of GoSS conducted in 2011 summarizes the structure of GoSS’ budget and budget performance during 2008-2011\. Also see the subsequent Country Integrated Fiduciary Assessment (completed in 2012)\. 4 This was the only assessment that existed then on the PFM systems 1  4\. The JAM report considered it essential to have core PFM functions as quickly as possible in order to support GoSS’ desire to address Southern Sudan’s urgent needs and to avoid the undesirable situation of donor agencies addressing all these needs directly, outside GoSS’ systems\. The entire public service had to be built up virtually from scratch\. As this would take a number of years, the JAM recommended that responsibility for implementing core PFM functions (accounting, procurement and auditing) should be contracted out to international firms for at least the first two years following the CPA\. Beginning in 2008, the GoSS would start to take over the responsibility for the core PFM functions on the basis of capacity building that would be supported by donor agencies, for example, through the Capacity Building Trust Fund (CBTF), the Bank-funded ‘Low Income Countries Under Stress’ (LICUS), the CFSSP itself, UNDP, ODI and USAID\. 5 5\. The overall context in Southern Sudan was an environment of weak institutional arrangements, poor oversight over public finances and large-scale rent seeking\. The fiduciary arrangements put in place were inadequate to handle the magnitude of financial flows that occurred\. Given all these challenges on accountability, there was therefore, a strong need to have a platform to ensure that MDTF-SS funds would be used for the intended purposes\. 6\. The CPA called for the creation of two multi-donor Trust Funds (MDFT) to finance Sudan’s enormous development needs; the first, the MDTF-N for the GoNU, and the second, the MDTF-SS for the GoSS\. The MDTF-SS was to be administered by the Bank from 2005 with a closing date of December 31, 2011\. This was extended twice to December 2012 and June 30, 2013\. Prior to the approval of the CFSSP, the Rapid Impact Emergency Project (RIEP) effective on March 2, 2006, was the first project to be financed from the MDTF-SS and included Procurement Agent (US$1\.5 million) and Project Accounting firm (US$0\.25 million) as two of its components\. The Procurement Agent component supported the contracting of a consulting firm to establish a Procurement Division in MoFEP and support procurement activities of GoSS for a period of two years; while the Project Accounting Firm component supports the sole source contracting of a consulting firm (KPMG); who was already engaged as the Government Accounting Agent working with the GoSS (MOFEP) to establish the Project Disbursement Unit, for a period of 6 to 12 months until the long term project accounting agent is hired\. The CFSSP became effective on September 6, 2006 and builds on this initial support by RIEP\. It provided funding for recruiting a longer-term Project Accounting Agent (PAA) to support all MDTF-SS projects\. Also, since GoSS did not have audit capacity, the CFSSP was to support in engaging an External Audit Agent (EAA) to work with the Audit Chamber and provide independent audit assurance on the MDTF-SS and GoSS funds\. 7\. The original cost of CFSSP was $6 million, of which $3 million each would be financed by MDTF- SS donors and GoSS\. The total cost had increased to $16\.447 million ($13\.447 million from MDTF Donors and $3 million from GoSS) by project closure through various additional financing\. The CFSSP would address the emergency needs of GoSS for establishing basic fiduciary systems to ensure accountability and transparency in the use of MDTF-SS resources for implementing development projects\. An international accounting firm would be contracted as the PAA\. The weak capacity of the Audit Chamber would be addressed through contracting an EAA, which would support the Audit Chamber in its role as both the external auditor of MDTF-financed projects and of GoSS, and would help to strengthening the capacity of the Audit Chamber\. With the approval of the 5 (i) Framework for Sustained Peace, Development and Poverty Eradication, Joint Assessment Mission, March 2005; and (ii) Davies, F\. (2009), ‘Contracting out Core Government Functions and Services in Southern Sudan’, Chapter 3 in: ‘Partnership for Democratic Governance Contracting Out Government Functions and Services, Emerging Lessons from Post-Conflict and Fragile Situations’, OECD: 2009\. 2  Oversight Committee (OC) of the MDTF, a procurement component was added through additional financing in September 2010\. 8\. The project comprises of two Trust Funds(TF): TF56336 for a total cost of US$11\.147 (including $3 million of GoSS contribution) and funding the Accounting firm and Auditing firm components; and TF97653 for $5\.3 million (all MDTF donor funds) and funding all three components (Accounting firm, Auditing firm and Procurement components)\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators 9\. The original PDO as indicated in the Letter Agreement dated February 21, 2006 is to put in place a robust framework for channeling of MDTF and GoSS counterpart funds to provide reasonable assurance regarding the use of these funds\. The framework would provide reasonable assurance that the funds would be used for their intended purpose and that the provision of core PFM functions would be met\. The framework would be ‘robust’ in the sense that the use of the funds would be fully controlled, accounted for and reported on\. 10\. At approval, the PDO’s key performance indicators (KPI) were: 1\. Accountability and transparency in the use of MDTF-SS and GoSS counterpart funds; 2\. Independent audit would be operational; and 3\. Use of information technology to support the budget execution process would be established, leading to increased efficiency, transparency and accountability\. 1\.3 Revised PDO 11\. There was no change to the PDO\. However, as a result of the introduction of the procurement component in September 2010 and to ensure clearer and more robust indicators, the PDO indicators were revised (Table 1)\. Table 1: SUDAN: Original and Revised PDO and PDO Indicators Original PDO Revised PDO Rationale for Change To put in place a robust framework for channeling MDTF-SS and GoSS counterpart funds to provide reasonable assurance No change No change regarding the use of these funds\. Original PDO indicators Revised PDO indicators November 2005 June 2011 18 monthly bank reconciliations The original indicators were conducted (one per MDTF-SS clarified by breaking them down project) conducted according to and quantifying them\. Accountability and transparency in the use established standards of project funds 18 Quarterly statements of Sources and Application of Funds prepared according to established standards (i\.e\. one per MDTF) 18 Annual project audits Original indicators were clarified Independent audit would be operational completed by breaking them down and 6 Annual audits of GoSS quantifying them\. accounts completed Use of IT to support budget execution would 5 MDAs that comply with GoSS’ Procurement component added to be established leading to increased procurement regulations CFSSP in 2010\. efficiency, transparency and accountability 3 1\.4 Main Beneficiaries 12\. The main beneficiaries of this project were to include the following: a) Staff of the Accounts Directorate, and Procurement Policy Unit of MoFEP; b) Staff of the National Audit Chamber (NAC); c) Ministries, Departments and Agencies (MDAs) that were audited; d) All ten States that were audited; e) Participating MDAs in which MDTF projects were implemented; f) National Legislative Assembly, which used the audited reports as the basis for exercising its legislative oversight responsibilities; and g) The general public through the project’s support of the efficient and accountable use of government resources\. 1\.5 Original Components 6 (as approved) The project had two original components: Component 1: Project Accounting Firm (US$3 million of which $1\.5 million is GoSS contribution) 13\. Provision of consulting services to support the project accounting, internal audit and aid accounting, build up on processes established by the Interim Project Accounting Agent, including (i) establishing a Project Disbursement Unit within MoFEP; (ii) establishing and maintaining financial management systems at national and sub-national levels; (iii) reporting of transactions as per international accounting standards; (iv) providing capacity building for key staff at MoFEP; (v) providing limited internal audit services; and (vi) assuming fiduciary responsibility regarding the use of MDTF funds and counterpart funds for a period of two years\. Component 2: Auditing Firm (US$3 million of which $1\.5 million is GoSS contribution) 14\. Provision of consulting services for providing external auditing services for all MDTF funded projects, and other selected projects, including (i) drafting legislation and regulations; (ii) undertaking external audit of MDTF projects and other selected projects; and (iii) providing capacity building support for a period of two years\. 1\.6 Revised Components Procurement Component 15\. An additional financing of US$ 3 million was approved in September 2010 for a procurement component to strengthen the capacity of the Procurement Policy Unit (PPU) of MoFEP and to enhance the procurement functions of key Ministries, Departments and Agencies (MDAs)\. It involved the recruitment of an international procurement firm with specialization in procurement\. This was previously a component under the Rapid Impact Emergency Project (RIEP) project which funded similar activities for two years and the contract ended in December 2009\. The services were still required to support MDAs; as a result, the Oversight Committee approved that the component be included in the CFSSP\. This did not affect the development objective of the project\. 6 Grant Agreement of February 21, 2006 4 1\.7 Other Significant Changes 16\. Additional Financing: There were five additional financing in the project\. Two were under the original TF56336 while three were approved under a new TF97563\. The details are in table 2 below\. Table 2: Additional financing Date Amount Purpose of Additional financing ($m) December 4, 2\.6 Additional costs on the External Auditing Firm Component under TF56336\. The same 2007 amount was also provided as additional funds by the Recipient\. September 2\.6 Due to fiscal challenges, GoSS counterpart funds requirement (unpaid amounts) was 15, 2009 waived for all MDTF-SS projects and MDTF donors covered this additional cost with the AF\. September 1, 3\.0 This was under a new TF097653 in respect of AF to include the procurement 2010 component in the project to enhance and strengthen GoSS public procurement functions\. March 2, 1\.3 Second AF under TF097653 for extension of the services of the External Audit Agent 2012 by one year\. August 2, Third AF under TF097653 to cover expenditure and other outstanding commitments 2012 1\.0 related to the extension of the MDTF-SS and project closing date 17\. Reallocation: There was a re-allocation between the three components\. The Procurement Component’s allocation was reduced to $2 million while the Accounting and Auditing Components were allocated an additional US$ 1\.5 million and $6\.95 million respectively\. Table 3 shows the revised costs of the Project by Component\. Table 3: Revised Costs Component Original Cumulative Revised Amount at Allocation Reallocation closure (US$m) (US$m) (US$m) MDTF GoSS MDTF GoSS MDTF GoSS Project 1\.5 1\.5 1\.5 - 3\.0 1\.5 Accounting Auditing 1\.5 1\.5 6\.9 - 8\.4 1\.4 Procurement - - 2\.0 - 2\.0 - Total Budget 3\.0 3\.0 10\.4 - 13\.4 2\.9 18\. Amendment to Trust Funds\. There were seven amendments to the Grant Agreements for the project; five amendments to TF56336 and two amendments to TF97653\. These are in tables 4 and 5 below\. 5  Table 4: Amendment to TF56336 (Original Agreement signed on February 21, 2006) Amendment Date Purpose # 1 May 18, To amend disbursement percentages as requested by government to reflect 50% up to March 2007 24, 2007; 100% for May 25 to September 30, 2007; and 50% thereafter 2 Dec 4, AF of $2\.6 million for enhanced project size due to additional costs on the External Audit 2007 Component 3 Oct 28, To extend closing date from November 30, 2008 to June 30, 2011 and introduce additional 2008 procurement method which allows use of individual consultants under the Accounting component 4 Feb 9, Add operating costs in the category of eligible expenditures 2009 5 Sept 15, AF of $2\.6 million to make up for waived GoSS counterpart funding as agreed for all MDTF- 2009 SS projects Table 5: Amendment to TF97653 (Main agreement signed on September 1, 2010) Amendment # Date Purpose 1 March 2, 2012 $1\.3 million AF 2 August 2, 2012 $1 million AF and extension of closing date to March 31, 2013 19\. Change to Project Accounting Firm Component\. Prior to the effectiveness of the CFSSP, a project accounting firm was recruited in December 2005 under MDTF-SS first project, the RIEP, through sole source contracting as an interim arrangement (interim Project Accounting Agent - iPAA), to provide accounting and disbursement services to all MDTF funded projects and provide fiduciary responsibilities for release of GoSS and MDTF donors funds until an international accounting firm could be recruited under the CFSSP as the Project Accounting Agent (PAA)\. The same firm had previously operated as the CBTF Financial Management Agent and was operating as the Government Accounting Agent\. This interim arrangement continued into 2008 as protracted attempts to negotiate a contract with an international accounting firm which started in March 2006 were unsuccessful\. The top ranked firm in the procurement process was under investigation which prolonged decision making; thereafter the next ranked firm who was also the iPAA wanted changes in their proposal due to the prolonged period since the submission\. Because of these difficulties, GoSS decided not to recruit a PAA, but to set up a Project Financial Management Unit (PFMU) within MoFEP, staffed by international and local individual consultants\. The PFMU was approved by the Oversight Committee of the MDTF and took over from iPAA in January 2009\. 7 20\. Substitution of Procurement Agent with a Procurement Advisor\. Until August 2010, procurement fiduciary functions were implemented by a Procurement Agent contracted under the RIEP\. With RIEP due to close, GoSS and MDTF-donors agreed to bring the function under CFSSP\. A procurement firm was recruited in 2010 as a procurement agent under a one-year contract to provide support to GoSS’ procurement system\. This engagement faced several problems from the onset\. First, it took over a year to contract the firm due to government indecision on the process\. Second, the location of the firm’s office away from the Procurement Policy Unit (PPU) limited the required level of interaction with counterpart staff\. The Terms of Reference indicated an on-the-job training but this could not be effectively carried out\. The donor funded projects had contracted the services of 7 The situation regarding the procurement of an Accounting Agent was further complicated by KPMG bidding for the PAA contract when it already held the IPAA contract\. Also, the top ranked firm bidding for the PAA contract was at that time under investigation for suspected fraudulent practices\. 6  procurement specialists who provided support and hands-on training to the counterparts of the respective entities\. At the end of the contract in August 2011, GoSS replaced the firm with the services of an individual consultant who was engaged as a Procurement and was located in the PPU which enhanced a direct support to the staff of the Unit\. 21\. Extension of Closing Date\. The closing date was extended three times: from November 30, 2008 to June 30, 2011; September 30, 2012; and finally to March 31, 2013\. The first extension is related to delays in recruiting of firms for the components as recommended by the JAM\. Subsequently, since CFSSP provides fiduciary services support to all MDTF-SS projects, extensions of the MDTF-SS and the various projects under implementation also impacted on the CFSSP\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design, and Quality at Entry 22\. The conditions in South Sudan prior to the preparation of the CFSSP as noted in the JAM and articulated in the independent evaluation of MDTF-SS included almost complete lack of physical infrastructure and public services, and human development indicators that were among the lowest in the world\. There was insecurity and other physical risks that made employment in the country unattractive to professionals and the likelihood of getting individuals as technical assistants was low\. Given the need to quickly respond to the clients need, the JAM recommended the use of international firms to implement core PFM functions and the project was designed taking this into consideration\. This was similar to the ongoing and established arrangements in government, other donor agencies and RIEP project\. The lessons learnt from the challenges in preparing the RIEP including poor state of infrastructure and living conditions also informed the preparation and design of the CFSSP\. The CFSSP focus on establishing a strong fiduciary system to reasonably assure stakeholders that funds provided by MDTF and GoSS for financing much needed infrastructure and public services would be utilized for the intended purposes with due regard to economy, efficiency and effectiveness\. 23\. Governance Structure for MDTF and CFSSP: The Bank’s role as the MDTF-SS administrator was approved by the Bank’s Executive Directors based on a Board paper on April 7, 2005\. Similar to other MDTF-SS projects, the CFSSP was approved by the Oversight Committee (OC) and the Bank management at Regional Vice President Level\. The OC provided overall strategic guidance and inter-ministerial and donor coordination and was chaired by the Minister of Finance and co-chaired by the Joint Donor Team (representing the EU, Germany and other donors)\. Membership of the OC also included representatives of the UN Office for the Coordination of Humanitarian Affairs (UNOCHA), and concerned implementing ministries/agencies\. The OC was supported by a Technical Secretariat (TS), also administered by the Bank, which would review proposals and make recommendations to the OC regarding selection of projects to be funded by MDTF\. The OC approved the work plan and budgets for the Technical Secretariat, and reviewed audit and quarterly progress reports prepared by it\. The quality at entry was managed by the Technical Secretariat, the Sector and Country Management Units as well as the OC\. 7  2\.2 Implementation 24\. The project was implemented by the GoSS through the Policy and Planning Unit in the MoFEP which had the overall responsibility for financial management, procurement and capacity building at all levels as well as coordinating and tracking project implementation activities\. It was headed by the Project Coordinator with overall implementation responsibility\. The auditing firm component was directly under the National Audit Chamber while the procurement component was under the Procurement Policy Unit (PPU) of MoFEP\. The implementation timeline was initially set for two years, between December 2005 and June 2008, on the assumption that (i) it took about six months to complete the procurement process; and (ii) the firms recruited to provide core accounting and auditing functions would fulfill their contractual obligations over two years\. 25\. However, there were delays in starting project implementation\. The project became effective September 2006; first withdrawal application for the initial deposit to the Designated Account was in March 2007 and the second withdrawal Application was in March 2008, three months to the end of the original closing date\. The time taken for GoSS and its MDAs to become effectively operational after moving to Juba also delayed the start of project implementation\. 26\. The competitive process for recruiting the EAA was launched in March 2006, the same time as the PAA\. However, most of the firms competing for the PAA also submitted proposals for the EAA; there was therefore need to sequence the two selections leading to delay of the EAA in order to finalize the PAA\. Due to reasons explained in paragraph 19 above, the engagement of the PAA was suspended while the iPAA continued to render accounting services, as a result, the selection process for the EAA resumed and the contract was signed in December 2007, while the firm was mobilized in January 2008, almost two years from the launching of the procurement process\. To further compound the delays in the Auditing component, in February 2008, a month after the mobilization of the EAA, the Auditor General and entire senior management of the Audit Chamber were suspended by presidential order while other staff were confined to the audit office\. A new Deputy Auditor General was appointed in November 2008 as acting Auditor General, but with very limited resources to carry out the required functions\. As a result, the EAA’s functions were limited to audits of the MDTF-SS projects until June 2010 when a new Auditor General was appointed\. Despite these delays, the robustness of the TOR of the EAA which included enhanced capacity building elements, training needs assessment, support to recruitment and induction of Audit Chamber personnel played an important role in the success of this component\. As at the time of this ICR, all MDTF-SS audits were fully completed and GoSS audits for years 2005 to 2010 have been completed and four of these (2005 to 2008) already presented to the NLA\. The EAA’s contract was expected to be for three years (2008 to 2010), however, due to extension of the MDTF projects which this component supports; the contract was variously extended and finally ended on March 15, 2013\. 27\. Regarding the Procurement component, an important milestone was supporting MDAs in carrying out procurements in line with GoSS procurement regulations\. The project worked with the PPU to prepare a Procurement Bill which would replace the Interim Public Procurement and Disposal of Assets Regulations (IPPDAR) established as a temporary measure in 2006\. The Bill has been prepared and at the time of this ICR, was with the Council of Ministers for approval\. Following approval, the Bill would be submitted to the NLA and passed to law\. This will support in streamlining of GoSS’ procurement processes\. Additionally, the project supported PPU in reviewing procurement requests and tender processes; and organizing several private sector awareness seminars\. 8  It supported MDAs in preparing Procurement Plans; and both formal and on-the-job training for the PPU and MDA staff\. 2\.3 Achievement of Implementation Targets 28\. All three components were effectively implemented and most of the targets achieved\. At the closing of the first Trust Fund (TF56336) on September 30, 2012, all of the grant funds had been fully disbursed and fully documented; the Additional Grant (TF097653) which closed on March 31, 2013 was also fully disbursed and documented\. 29\. The Accounting and Auditing components achieved their respective targets satisfactorily within the revised time frame, while the Procurement component was rated moderately satisfactory due to the challenges in achieving the PDMIS activity which was dropped\. Specifically, project achieved the key performance indicators as follows: 30\. 18 monthly bank reconciliations conducted (one per MDTF-SS project) and 18 Quarterly statements of Sources and Application of Funds prepared according to established standards (one per MDTF-SS project): The project maintained accountability and transparency in the use of both donor and government funds through preparation of timely and robust monthly bank reconciliations statements, Quarterly statements of Sources and Application of Funds; annual financial statements and withdrawal applications for all eighteen MDTF-SS projects according to established international standards\. In addition, the project maintained necessary designated and bank accounts and had all documents forwarded to both the government and Bank and the relevant donors\. Two government accountants from MoFEP were seconded to the Unit for capacity building and benefitted from various trainings and on-the-job capacity building and are still part of the unit supporting on-going World Bank projects in similar capacity\. 31\. Annual project audits completed and 6 Annual audits of GoSS accounts completed: The project supported NAC to operationalize independent audit\. Annual independent audits of all MDTF-SS projects were supported through each project implementation period and there was no overdue audit in any year and at the closure of all MDTF-SS projects\. This supported in assuring independent opinion on the use of donor and government funds for all projects\. In addition, the NAC was supported to carry out audit for government funds and clear back log for six years with four of these presented to the National Legislative Assembly and published on the public website of NAC\. The project also supported the drafting and passing into law of the Audit Chamber Bill and regulations, code of conduct and strategic development plan to enhance the strengthening of the audit chamber and sustainability of the achievements of the project\. This has promoted accountability and transparency\. The project assisted in the process of recruiting government auditors and training in all seven years of the project implementation\. The EAA complimented the work of the Auditor General who still retained the responsibility for assuring quality of all reports and signed all the reports while the EAA worked jointly with the staff of the NAC to carry out the audit thus enhancing on-the-job training and knowledge transfer\. 32\. Five MDAs that comply with GoSS procurement regulations\. GOSS procurement regulations require the MDAs to carry out procurement functions including preparing procurement plans\. To carry out this function effectively, the PPU needs to support the MDAs with necessary guidelines and training\. The project supported the PPU in drafting the public procurement bill; preparing procurement plans, and various awareness seminars on institutionalizing public procurement\. Six 9  ministries had procurement plans for the GRSS budget for the financial year 2012/2013\. These are Ministries of Health; General Education and Instructions; Agriculture and Forestry; Higher Education, Science and Technology; Water Resources and Irrigation; and Gender, Social Welfare and Religious Affairs\. The project dropped the installation of a Procurement Data Management System (PDMS) activity due to successive failures to hire a qualified expert to support the Procurement Policy Unit in installing the system\. 2\.4 Risks and Mitigation 33\. The project proposal highlighted a number of potential risks that are common to all sectors of the government including delay in the implementation of the peace process; resurgence of civil unrest; longer lead time required for establishing the Government of South Sudan and the emergent ministries; delay in approving 2005 and 2006 budgets from GoSS that may reduce the amount of counterpart funding available; lack of experience in program implementation; time taken for GoSS to become effective after shifting to Juba; and difficulties in identifying qualified external technical assistance\. The risk assessment at appraisal was therefore, adjudged as high\. The high fiduciary risks were addressed by outlining and implementing a series of mitigating measures including (a) recruiting a Monitoring Agent for all MDTF-SS projects to ensure that funds were used only for the intended purposes; (b) establishing the PFMU to ensure that reliable accounting and financial management systems were in place and that expenditures were properly accounted for and reported timely; (c) retaining an External Audit Agent to provide assurance that the financial statements of MDTF and accounts of GoSS were reliable; (d) hiring a Procurement Agent to ensure that procurement was undertaken transparently and in an accountable manner and which would support the Procurement Policy Unit at MoFEP; and (e) establishing a Project Steering Committee, which included the Joint Donor Team\. As at project closure, the fiduciary risk was rated as moderate\. 34\. The project provided a basis for attaining a sustainable system by government\. Given that there was no capacity at the commencement of the project, it sets a framework that government can build on by addressing issues including human resource capacity, financial constraints and infrastructure acquisition which could lead to effective strengthening of the institutions and ensuring continuity and sustainability of the efforts under the project\. On-going Bank programs and support by other development partners to some of these institutions would also ensure sustainability of the gains under the CFSSP\. 2\.5 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 35\. Design\. The Project proposal indicated that the performance of the PAA (which was replaced by the PFMU) will be monitored against key financial variables for each project, and the effectiveness of cash management and accounting including bank reconciliation statements for each bank account; monthly statement of cash position for project funds from all sources, taking into consideration significant reconciling items; monthly statement of expenditure and statement of sources and uses of funds\. For the External Audit Agent, progress was to be monitored against key deliverables such as up to date audit reports for each project; progress in drafting audit law and regulations; and number of persons trained in basic auditing procedures\. The additional financing of August 2010 and addition of the Procurement Component to the project included a results framework and monitoring, which indicated that the output monitoring for this component will be a functional procurement policy unit and an up-to-date and timely implemented procurement plan for MDAs\. 10 36\. Implementation and Utilization\. The PDO indicators were revised in June 2011 as shown in Table 1\. The revised indicators provided a better match for the project activities; were more measureable and attributable to the Project; and captured outputs which were related to the PDOs\. The Monitoring and Evaluation (M&E) for the project was carried out by the Monitoring Agent (MA) engaged by the Technical Secretariat for all MDTF-SS\. The responsibilities of the MA included monitoring the procurement of the goods, services and other items, screening and recommending withdrawal applications for Bank’s approval and payment, monitoring all expenditures financed under the Grant, and screening the financial management capacity of the Recipient so as to ensure that the proceeds of the Grant are disbursed only for the intended purposes and according to applicable Bank procedures\. The MA team reviewed project activities and prepared quarterly reports which were shared with stakeholders including Development Partners, and presented and reviewed at the Oversight Committee meetings\. The MA also carried out a Value for Money Performance review of the project which indicates an overall performance achievement of economy, efficiency and effectiveness parameters (Annex 4)\. Also, there were periodic monitoring and review of the Auditing Component by a Steering Committee which met quarterly and was made up of the MoFEP, NAC, World Bank and the Joint Donor Team\. Quarterly IFRs and annual financial statements were also reviewed by the project financial management specialists and comments followed up with the implementing entities and borrower\. 2\.6 Safeguards and Fiduciary Compliance 37\. Environmental Safeguards\. The project was classified as Category C with no potential impact on the environment\. 38\. Financial Management Arrangements\. The financial management (FM) risk assessment at appraisal was rated as high\. The Financial Management of the Project was carried out first by the interim PAA (KPMG under RIEP) and later by the PFMU\. With the various mitigating measures put in place, all Interim Financial Reports, financial statements and audits were timely prepared\. As at project closing, all funds had been fully disbursed and documented; there were no outstanding reports and no major internal control issues were identified\. The FM risk was moderate and FM performance was rated as satisfactory during supervision\. 39\. Procurement Arrangements\. The procurement activities for the project were supported by the procurement agent and then the procurement advisor under the procurement component of the project\. The procurement process for the Procurement Data Management System (PDMS) could not be completed due to successive failures to hire a qualified expert to do the job\. Otherwise, procurement activities under the project were effectively carried out\. The Project’s overall procurement performance is rated as moderately satisfactory during supervision\. 2\.7 Post-completion Operation/Next Phase 40\. There is still need to support GoSS in various fiduciary aspects of PFM, including in accounting, auditing and procurement in order to sustain the ongoing fiduciary reforms and institutional capacity in MoFEP and NAC\. With respect to the external audit function, the NAC is receiving significant attention from other Development Partners and discussions are ongoing on likely support to the Chamber, particularly in capacity building and institutional strengthening, as a follow up to the support rendered under CFSSP\. With respect to Bank-financed projects, each project is supporting the NAC in financing the engagement of an Audit Agent that will work with the national staff in 11  carrying out the project audits in line with international standards\. Similar support is required in aspects of accounting and procurement\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives and Design – Satisfactory 41\. Objectives\. The relevance of the project’s objective is satisfactory\. The project development objective was relevant to the government, Bank and donor priorities for the country\. The South Sudan Core functions developed in 2011 focuses on having strong systems of accounting, financial control and oversight in place\. Similar to this objective, one of the four pillars of the 2011- 2013 South Sudan Development Plan (SSDP) is governance with emphasis on strengthening the capacity of major accountability institutions to increase accountability and transparency\. The project development objective which focuses on putting in place a robust framework for channeling funds is complementary to these government agenda\. Also, the Bank Interim Strategy Note for FY 2013 – 2014 for the Republic of South Sudan has a strong focus on public financial management and improving accountability as one of its two clusters\. 42\. Design\. The relevance of project design is satisfactory\. The project design sought to establish a fiduciary framework for public financial management for resource flows through the recruitment of various experts who would establish core PFM functions\. Very weak PFM systems and severe capacity constraints in GoSS implied very high fiduciary risk to development partners and GoSS of spending excessive amounts of money on urgently needed infrastructure development and basic services delivery\. Recruitment of the experts, as recommended by the JAM, would mitigate this risk\. The PAA would manage disbursement, accounting and financial reporting\. The EAA would audit projects funded by MDTF and GoSS counterpart funds\. A procurement advisor (which was added later in the project) would support the Procurement Policy Unit in MoFEP and the procurement units of MDAs\. A monitoring agent would ensure that disbursements were for project purposes\. A Project Task Force (PTF) and an Oversight Committee made up of key stakeholders and experts from MDTF and the UN would be formed to monitor closely project implementation and fiduciary compliance\. 43\. An independent evaluation 8 concludes that the MDTF-SS was integrated into the CPA; aligned with the JAM framework; relevant to the goals and aspirations of stakeholders and continued to reflect government’s priority through its operational life\. Similarly, the design of CFSSP was relevant to the government priorities both at the time of project preparation; effectiveness and even at this ICR and post completion stage\. The project design was tailored along the JAM recommendation (which in itself was the basis of establishing the MDTF) that responsibility for implementing PFM functions should be contracted to international firms for at least two years of the CPA\. Establishing a strong fiduciary framework is still very core to strengthening the PFM structure in the country and relevant to building the capacity of the PPU, NAC and the accounting functions\. The project focus on this areas and the recruitment of the various Agents to help develop basic fiduciary systems has resulted in accountability and transparency in the use of MDTF and GoSS funds; independent external audits; and oversight of Procuring Entities (MDAs)\. It has supported development in the use of country systems, particularly with substantial capacity development at the NAC\. The flexibility of the design which enabled a change from use of firms (as recommended by the JAM but which proved very 8 Independent final evaluation of the MDTF-SS; final report 7 July 2013 12  difficult and led to initial delays) to individual consultants was also very useful and relevant to the achievement of the project outcomes\. 3\.2 Achievement of Project Development Objectives - Satisfactory 44\. The development objective of the project was achieved satisfactorily\. Annex 2 provides details of the outputs achieved on each of the three components\. In line with the PDO, the project put in place a robust framework for channeling over US$503 million MDTF-SS funds and US$159 million GoSS counterpart funds that was disbursed to eighteen projects over the seven years of project implementation\. It supported accountability and transparency in use of project funds for all MDTF- SS projects and additionally, for seven World Bank grants through regular preparation of monthly bank reconciliation statements; quarterly statements of sources and application of funds; and annual financial statements\. Also there were operational independent audits for all projects based on international standards of auditing and no back log or outstanding audits as of closure of the MDTF- SS\. In addition, the project supported the audit of GoSS financial statements for six years\. The project provided the framework for country ownership particularly in the auditing arrangements\. 45\. All three components were effectively implemented and targets achieved\. At the closing of the first Trust Fund (TF56336) on September 30, 2012, all of the grant funds had been fully disbursed and fully documented; the Additional Grant (TF097653) which closed on March 31, 2013 was also fully disbursed and documented\. 46\. The project sets a base for putting up basic fiduciary arrangements which is now being built upon\. The PFMU, an important part of the delivery and achievements of the project, is still existing and used for on-going Bank projects\. Because of the success, government is also in the process of setting up similar unit as part of their Aid Coordination Unit to support all Donor projects\. 18 monthly bank reconciliations were conducted monthly and 18 quarterly statements of sources and application of funds for all projects in accordance with established standards\. 47\. With respect to the auditing component, the EAA supported both institutional strengthening and capacity development\. The EAA carried out joint audits with the staff of the Audit Chamber which supported on-the-job learning for these staff; the Auditor General performed his statutory responsibilities by reviewing and signing the audit reports; the Audit Chamber Bill, Code of Ethics, strategic plan and other working papers were developed and is still been used by NAC\. Annual project audits were completed for all 18 projects for all their years of implementation and there are no due audits at the closure of the MDTF-SS\. Additionally, 6 annual audits were completed for the GoSS accounts\. 48\. Additionally, Procurement Adviser worked closely with the staff of the Procurement Policy Unit and carried out on-the-job training which developed their procurement capacity\. More than five MDAs were supported in developing their procurement plans and complying with GoSS procurement Regulations\. These include Ministries of Health; General Education and Instructions; Agriculture and Forestry; Higher Education, Science and Technology; Water Resources and Irrigation; and Gender, Social Welfare and Religious Affairs\. 3\.3 Efficiency - Satisfactory 13  49\. No economic analysis was undertaken for the Project during preparation due to the emergency nature of the operation and dearth of information\. The Monitoring Agent engaged by the Technical Secretariat, conducted a Value for Money Assessment (VFM) of the Project and issued a draft report on October 31, 2012 to determine whether or not disbursements made for Consultants’ Services met the Bank’s basic tenets of economy, efficiency and effectiveness\. The assessment confirmed that (i) the contracts were within the approved budget with payments being consistent with contract provisions, and procurement processes being transparent and competitive; (ii) actual outputs of budgeted activities matched the expected outputs; and (iii) activities contributed to the achievement of the project objective\. Substantial cost savings were achieved through the move to the PFMU arrangement from the PAA arrangement and similarly to the use of individual procurement Advisor instead of the firm of Procurement Agent\. 9 The assessment concluded that the overall VFM for the contracts was fully achieved\. 50\. Additionally, MDTF involvement was aimed at providing accountability regarding use of MDTF and GoSS counterpart funds; help to start building financial management capacity in GoSS; and strengthen the MDTF funds flow mechanism as well as improving government ownership and control over donor resources\. The PFMU, EAA and Procurement consultant worked within the government agencies as core components of the funds flow process and provided reasonable assurance on the use of resources\. The project provided the framework for country ownership particularly in the auditing arrangements\. 51\. Also, the project supported fiduciary arrangements for various projects\. Despite the fact that this is a new country with significant governance issues and high cases of accountability and transparency challenges in government, all the project funds were properly spent and documented with no case of misappropriation of funds\. The project succeeded in building some capacity in the implementing entities it supported and the structure is used for other funding mechanisms\. 3\.4 Justification of Overall Outcome Rating Rating: Satisfactory 52\. The project development objective, design, implementation and outcomes were considered relevant to the building of the critical fiduciary systems of the country\. It was consistent with the requests of the GoSS and the need of the implementing entities\. The PFMU was established resulting in the maintaining of accounting records for all MDTF and Bank projects, and the preparation of unaudited interim financial reports (IFRs) as required by the Financing Agreement\. The audits of all MDTF-SS projects have been finalized and GoSS financial statements for FYs 2005-2010 have been audited\. The audited financial statements for 2005-2008 have been presented to NLA, while those for 2009- 2010 are in the process of being presented\. 53\. The project was effective and achieved its development objectives\. It had major impact and achieved wider effects on the government activities particularly with the audit of government accounts and the accountability issues that were discovered\. The achieved results are sustainable and government could build on the achieved results in the NAC and the PPU\. 9 The paper prepared in 2009 by Fiona Davies, referred to above, also points out the high costs of contracting international companies: costs amounted to $20 million in Southern Sudan over 4 years\. Costs of hiring individuals tend to be much lower as the overhead costs associated with companies are virtually eliminated\. The paper also points out the difficulties in ensuring that the activities implemented by companies are well-aligned with government priorities; these difficulties were prominent in the case of the KPMG iPAA contract under RIEP\. 14 3\.5 Overarching Themes, Other Outcomes and Impacts Poverty Impacts, Gender Aspects, and Social Development 54\. Poverty Impacts\. The Project supported strengthening of governance arrangements; Good governance is a necessary condition for reducing poverty in any country\. 55\. Gender Aspects\. Gender aspects were not reflected in the PDO and the project was not specifically focused on gender requirements\. However, females also benefited in large numbers from the project output, particularly as part of the capacity building under the Auditing component\. 56\. Social Development\. The Project had no specific social issues that needed to be directly addressed, though many social issues need addressing in South Sudan (e\.g\. lack of legally defined rights, continuing conflicts in some areas, and various grievances and inequities in society)\. 3\.6 Institutional Change/Strengthening 57\. The CFSSP, beyond its PDO, helped build institutional capacity in MoFEP and NAC\. 58\. Project Financial Management Unit (PFMU)\. The unit, located in MoFEP, trained three national staff who were seconded to the unit\. However, capacity building in MoFEP is still required, and is being provided through various DP-financed projects (e\.g\. the multi-donor funded Capacity Building Trust Fund administered by the Joint Donor Team, the Bank LICUS, ODI, UNDP, and USAID- funded programs)\. 59\. National Audit Chamber\. The Project helped NAC to be transformed from near obscurity to a recognized Supreme Audit Institution (SAI)\. One hundred auditors were trained in the audit of financial statements and accounts of MDTF and GoSS\. NAC staff carried out joint audits with the EAA and these helped them to develop their skills\. The Project supported the drafting of an Audit Bill, which was enacted in 2011, and prepared an audit manual and strategic development plan\. 60\. MoFEP-PPU\. The Procurement component supported the Procurement Policy Unit (PPU) of MoFEP and the procurement units in MDAs through on-the-job training in terms of understanding of the 2006 IPPDAR\. Beyond its stated PDO, the Project also advised on the drafting of the Procurement Bill, which is awaiting the final endorsement of the Council of Ministers before being presented to NLA for approval\. Thirty one MDAs were trained in procurement management including contract monitoring and commitment controls and six MDAs were trained and have up to date procurement plan\. 61\. These local capacities are still remaining in each of these entities and supporting them in the government functions as well as for on-going World Bank projects\. 4\. Assessment of Risk to Development Outcome Overall Rating: Moderate 62\. The changes in the project which allowed the use of individual consultants instead of firms in the Accounting and Procurement components were very important milestones that helped to address the 15  likely risk to achievement of the development outcome\. Also, the engagement of a very active and versatile Auditor General in June 2010 who took a strong lead in the Auditing component and worked very closely with the External Audit Agent engaged by the project led to a major turn around and achievement of all the agreed milestones in the component\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 63\. The project responded to the recommendations of the JAM carried out in March 2005 by the World Bank, UNDP, Government of Republic of Sudan and the SPLM\. The report identified lack of governance systems, including PFM, to make efficient use of funds\. The project therefore, sought to put in place such systems that are necessary to ensure reasonable assurance regarding the use of MDTF and GoSS counterpart funds\. 64\. The CFSSP builds on the initial support by RIEP, the first MDTF-SS project by funding longer term Project Accounting Agents and Procurement Agents which were previously funded as an interim arrangement under the RIEP project\. The OC recognized the need to continue to fund these two activities under a project that is focused on putting in place a robust fiduciary framework such as the CFSSP\. 65\. Also, given the low capacity of the government staff and country physical condition at preparation stage, lessons learnt from similar countries like Afghanistan in a post conflict situation and with very low capacity informed the design of the project and supports the use of firms as the best scenario during the preparation stage of the project\. 66\. The Bank, as the administrators of the MDTF-SS also provided necessary management support including preparation and prompt approval of the project\. The Bank worked with the government team in MoFEP to prepare the project and consulted with other stakeholders including the National Audit Chamber\. The preparation team also ensured simplicity and clarity of the PDO and its focus on the main issue of importance at that period which was delivery of the MDTF-SS activities as well as ensuring use of the funds for the purpose intended\. Also the flexibility of the project design allowed an additional component to be included without need for a change in PDO and allowed for additional financing as the need arose\. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Satisfactory 67\. The country-based task team provided adequate supervision support to the MDTF projects and GoSS counterpart fund\. The composition (see Annex 5) of the project team was well balanced with a mix of operations, financial management, and procurement specialists and staff\. The government Project Management Team had low capacity and, in response to this condition, the Bank provided direct supervision, advice and guidance in project implementation\. Bank supervision intensity was commensurate with the level of assessed risk\. In addition to supervision missions mounted twice 16  annually, which prepared aide memoires highlighting key implementation issues observed, a continuous hands-on support was provided by the resident Bank Task Team\. Action plans were developed with milestone dates to ensure that the issues were promptly addressed by Implementing Agencies\. 68\. As noted in the review of the MDTF-SS and the ICRs for many MDTF projects, the dedication of Bank field staff to sustain uncommon adversity of living and working conditions and other implementation challenges contributed immensely to the satisfactory outcome of the project\. The staff initially lived and worked in tents without air conditioning in 100+F\. degree heat with minimal office equipment and only graduated to shipping containers after six months in the country and in an insecure environment\. Other challenges facing Bank staff were the severe capacity constraints in GoSS, represented by lack of basic office technology, weak fiduciary systems, lack of government structures (at best, slowly evolving structures and institutional arrangements) all providing opportunities for corruption and likely ineffective use of MDTF and GoSS funds\. 69\. There were initial delays experienced in procuring the PAA and EAA, due to protracted contract negotiations\. The PAA contract arrangements turned out to be unsatisfactory, as indicated elsewhere in this ICR, and, as a result, GoSS established the PFMU in 2008 to implement the responsibilities envisaged for the PAA\. Similarly, the contract negotiations for the EAA took a while to conclude; the vacant position of a substantive Auditor General compounded the delay in providing auditing services to the GoSS 10 and audit was limited to the MDTF projects\. The Bank’s supervision addressed these issues by proactively working with GoSS to change the procurement requirement for the use of firms to individual consultants to ensure effective implementation\. 70\. There were no Bank safeguard policies triggered by the implementation of this project\. (c) Justification of Rating for Overall Bank Performance: Rating: Satisfactory 71\. The overall performance rating for the Bank was Satisfactory due to the hands-on approach used to provide support and services both at entry and supervision during the implementation of this project\. Some of the hands-on approach by the Bank included direct supervision, advice and guidance in project implementation and on-the-job training of some procurement officers in MoFEP\. The support was provided by international staff resident in the country office, responding promptly to project issues and providing timely implementation support\. 5\.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 10 One reason for the delay in recruiting the EAA was that firms bidding for the contract were also bidding for the PAA contract\. A decision was therefore made to delay the tendering for the EAA contract\. After the EAA tendering process started, one of the competing firms complained that its financial proposal had been tampered with, leading to further delays as the complaint was investigated by the Bank\. 17  72\. The Government performance in relation to the Project can be said to be moderately satisfactory\. Specific project objectives and activities have been achieved with the support of the government\. Due to lack of existing fiduciary systems and the urgent need to ensure accountability and transparency, the GoSS devised a strategic objective for this project to establish, at a minimum, a fiduciary structure that would provide assurance to the government and MDTF donors regarding the use of donor and GoSS counterpart funds\. Building of such fiduciary structures, however, had been fraught with challenges posed by lack of institutional capacity in the country\. 73\. Disbursement did not commence until March 2008 when the first Withdrawal Application was prepared\. There were indecision and some disagreement among the decision makers in government which led to delays in procuring the Agents\. For instance, there was disagreement in MoFEP on the need for a Procurement Agent\. The government informed a Bank mission that the hiring of a Procurement Agent was discontinued and subsequently, sent a letter, requesting that procurement agency services were still needed by MOFEP\. Also, there were various changes in government which affected implementation\. The Director General for Procurement who was leading the Procurement Agent selection process was suspended and for a long time, there was no substantive counterpart to champion the completion of the contracting process\. Similarly, the activities on the external audit component were slowed down because there was no Auditor General between February 2008 and June 2010\. In addition, while the project supported in drafting the Procurement Bill, the review process was delayed at various levels of government\. 74\. External Agents were recruited to help establish fiduciary structures\. The Agents were charged with the responsibilities for maintaining adequate financial management systems, producing a Project Implementation Manual; conducting audits of MDTF projects and GoSS financial statements and accounts, strengthening the capacity of the NAC exercising oversight and regulatory responsibilities for the procurement process, and advising MoFEP on complaints received from bidders\. The government worked effectively with these Agents and consultants and this impacted on the success of the project implementation\. (b) Implementing Agencies Performance Rating: Satisfactory 75\. The Implementing Agencies were MoFEP and NAC\. The PFMU took over the financial management responsibilities of the PAA in 2008, with similar terms of reference\. Payments have been made on time and reports produced and submitted to various stakeholders on specified due dates\. At the time of the closure of the Project there were no outstanding financial management issues\. In fact, apart from FM responsibilities for MDTF and GoSS funds, the PFMU also took responsibilities for seven 11 World Bank assisted projects which was outside their TOR\. 76\. The Procurement Agent and subsequently the Advisor that supported the Procurement Policy Unit (PPU) in MoFEP improved the procurement process by providing training on contract management to both PPU and MDA personnel\. The component supported the process of drafting the Procurement Bill which is before the parliament for enactment into law\. Additionally, it supported MDAs in preparing procurement plans, tender documents and forms\. The Advisor worked closely with the PPU 11 GAC Initiatives Development, LICUS PFM, Emergency Food Crisis, Rural Roads, Rapid Health, Private Sector Development and Local Governance and Services Delivery Projects 18  to review procurement request from MDAs, developing a matrix to monitor performance and compliance and compliance of the MDAs with the IPPDAR 2006 and on-the job training for staff of both the PPU and the MDAs\. 77\. The NAC has in general been an effective implementing agency, which has contributed to the relative success of the EAA in terms of performing audits and building capacity\. Despite initial delays in recruiting the EAA and appointing a substantive Auditor General (not firmly in place until 2010) which were addressed partly with the various extensions, the EAA delivered on all the activities under its TOR and under this component\. Also, apart from the audit of MDTF and GoSS accounts which in itself was an expanded scope, the NAC and EAA also audited three 12 Bank Assisted projects for all their years of implementation\. GoSS and State audits have been carried out for six years ended December 31, 2005 to 2010\. Four of these have been presented to the president and the National Legislative Assembly and publicly disclosed\. The Auditor General was very proactive and made significant contributions that led to the success of the component\. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 78\. The overall performance of the Borrower was assessed as Satisfactory due to the factors noted above\. 6\. Lessons Learned 79\. With the benefit of hindsight, there are important lessons to be drawn from the project for the Bank’s engagement in building capacity in post-conflict countries with extremely weak capacity as well as for practitioners in similar situations in the future\. 80\. External agents, particularly for audit and procurement could contribute significantly to institutional strengthening priorities, but this should be accompanied by the transfer of skills in order to facilitate longer term capacity building\. The work of the external agents (Project Accounting Agent/PFMU, External Audit Agent and Procurement Advisor) contributed to the institutional strengthening of the MoFEP, the PPU in MoFEP, procurement units in MDA and the NAC\. The Agents and consultants supported in drafting various laws, guidelines, working documents and some other ad-hoc work that supported the institutional strengthening\. It could be argued that capacity building should have been included in all the External Agents’ terms of reference to allow for proper transfer of the much needed financial management and procurement knowledge to counterpart staff\. This, however, is easier said than done\. The first priority of the External Agents was to get core PFM functions up and running, itself a time-consuming task and the Project was originally supposed to end in 2008\. The severity of the capacity constraints, including the limited skill sets of counterpart staff, meant that transfer of FM and procurement knowledge to these staff would probably be difficult and time consuming\. Moreover, other DP-supported projects/programs specifically focused on PFM capacity development (as referred to above) were being prepared and implemented, including in MoFEP\. 12 GAC Initiatives Development, LICUS PFM and Emergency Food Crisis project\. 19 81\. Implementation efficiency could be enhanced through flexibility on procurement procedures, and by focusing external agents on salient, project-related tasks rather than assisting on broader government functions\. Many of the tasks of the Procurement Advisor were bogged down in government bureaucratic processes which led to unnecessary delays\. It is pertinent that government should separate project work from bureaucratic set up in order to achieve efficiency\. Additionally, the procurement process for the contracting of the firms was ICB/QCBS and this took inordinately long time\. Given the country situation, with limited number of accounting and auditing firms (which is still the case now seven years into project effectiveness), it might have been more efficient to start with a short list for the contracting process\. In fact, an interim sole source contract of the PAA provided essential fiduciary coverage during the time taken to conduct a competitive process which eventually was unsuccessful\. Procurement delays were also experienced in most of the MDTF-SS projects\. As noted in the MDTF-SS evaluation report, procurement policies need to be flexible in response to institutional capacity constraints, local market conditions and other risks\. 82\. Depending on the core function/s involved, individual consultants could provide more efficient and cost-effective services compared to firms, and may result in quicker transfer of knowledge\. The project design took into consideration, the recommendation of the JAM for use of international firms to implement core PFM functions\. However, it was impossible to hire a firm for the Accounting component while a firm was used for the procurement component for only a year\. Subsequently, the Oversight Committee approved the use of individual consultants\. The experience shows that is more cost effective and efficient to hire the services of individual consultants than firms\. Much time was lost in procuring the services of firms\. The PAA was eventually replaced by the PFMU made up of individual consultants, while the Procurement Agent was replaced by an individual Procurement Advisor\. Moreover, it is probably easier for Government personnel to engage with individual consultants than with the staff of a firm and the process of transferring knowledge is quicker\. Also, the difficulties and adjustments in procuring firms and agents suggest the need to review the adequacy of some procurement requirements with respect to similar fragile country situations\. 83\. The timely appointment of Government counterparts is essential for efficient and successful implementation\. A major issue that could determine the success of implementation of a project is availability of government counterparts to actively participate and support implementation\. Substantial delays in implementation were due to the delay in the appointment of the Auditor General and a proactive Director General of procurement to lead the implementation of these components\. Also, the most effective period of implementation of the procurement component was when the Bank had a Technical Assistant sitting with the PPU in MoFEP and working closely with the Director General and the PPU staff\. 84\. At entry, it is important to clarify objectives to stakeholders to avoid unrealistic expectations from the project\. As was the case with the MDTF-SS and as noted in the independent final evaluation report for the MDTF-SS, inflated expectations can leave MDTF and the projects being held accountable for events beyond its scope and create unrealistic benchmark for assessing performance\. While the main focus of the CFSSP was putting in place a framework for channeling MDTF and GoSS funds to provide reasonable assurance regarding the use of funds, many stakeholders believe the project should do more in capacity building for national staff\. Clarity of objectives and goals are very pertinent to avoid similar situation in future\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners 20  Borrower/Implementing Agencies 85\. The draft Bank ICR was sent for review to the PFMU, Project Coordination in MoFEP, PPU, Procurement Advisor, NAC and EAA Team Leader\. Their review shows general agreement on the report particularly the implementation and impact of the project\. Major comments include concerns on continuity and sustainability of the engagements under the three components and the likely gap due to project closure\. There is general agreement on the ratings for the project\. Co-financiers None Other partners and stakeholders None 21  ANNEXES Annex 1\. Project Costs and Financing (a) Project Cost by Component (in US$ million equivalent) Appraisal Estimate Actual Project Percentage of Components (US$ million) Cost Appraisal (US$ million) Accounting Component 3\.0 4\.5 150 Auditing Component 3\.0 9\.8 327 Procurement 0\.0 2\.0 200 Component Total Baseline Cost 6\.0 16\.3 272 Physical Contingencies 0\.0 0\.0 0 Price Contingencies 0\.0 0\.0 0 Total Project Costs 6\.0 16\.3 272 *There was a savings of US$0\.09million on the contract of the External Audit Agent (b) Financing Appraisal Estimate Actual Project Percentage of Source of Funds (US$ million) Cost Appraisal (US$ million) Counterpart Funds - 3\.0 2\.9 97 GoSS Multi-donor Trust Fund 3\.0 13\.4 447 22 Annex 2\. Outputs by Component The outputs achieved by each of the three components are as follows: The Accounting Component 1\. The accounting component provided support to GoSS in project financial management and disbursements for all MDTF and World Bank projects\. It funded the establishment of the Project Financial Management Unit (PFMU) as Accounting Agents\. The component supported eighteen (18) and seven (7) MDTF and Bank projects respectively with a total disbursement of US$718 million as at closing date of March 31, 2013\. In addition to Head of the PFMU, the Deputy Head and the Assistant Accountant who were regional specialists, the PFMU staff included five South Sudanese, two of whom were seconded to the Unit by government for training in Bank financial management and disbursement procedures\. Other outputs of this component are as follows: i\. Preparation of twenty five monthly bank reconciliation statements for each of the eighteen MDTF and seven Bank projects supported for the project duration; ii\. preparation of quarterly unaudited Interim Financial Reports for 16 quarters for each of the twenty five projects for submission to government and the Bank; iii\. preparation of annual financial statements for the twenty five participating projects for the years ended December 31, 2008 to 2012 and facilitating the audit and follow up of management issues identified in the audit; iv\. Preparation and follow up of Withdrawal Application for all MDTF and Bank projects; v\. Maintaining the Designated Accounts, bank accounts and relationship with government and implementing entities; vi\. Processing payments and review of transactions and invoices for all MDTF and Bank projects; vii\. Providing training to staff of implementing entities; and viii\. Computerized financial management systems of the PFMU using the Navision software as a database\. The Auditing component 2\. The component provided support to the National Audit Chamber (NAC) in institutional strengthening and audit of GoSS, MDTF projects’ and World Bank projects’ financial statements\. The outputs of the component includes the following: i\. Audit of GoSS financial statements for six (6) years from 2005 to 2010\. The audit reports for 2005 to 2008 have been presented to the President and the National Legislative Assembly while the reports for 2009 and 2010 are in the process of being printed and presented; ii\. Audit of all fifteen MDTF and seven Bank projects for the years ended December 31, 2008 to 2013; iii\. Support GoSS in preparation and review of the legislation enabling the NAC\.; iv\. Preparation of auditing policies and procedures; v\. Development of audit manual, standardized working paper, Code of Conduct and Ethics, and Strategic Development Plan; vi\. Capacity building of the staff of the NAC, including classroom training for old staff and one hundred (100) newly recruited staff\. 23 The Procurement Component 3\. The Procurement Component which was first managed by a Procurement Agent and subsequently by an individual consultant recruited as a Technical Advisor supported the Procurement Policy Unit in the Ministry of Finance and Economic Planning\. The outputs of the component include the following: i\. Support in drafting the public procurement bill; ii\. Support to MDAs and MDTF projects in preparing Procurement Plans; iii\. Leading and guiding staff of the Procurement Policy Unit in MoFEP to review procurement requests and processes of MDAs/ spending agencies; iv\. Preparation of sample tender documents and forms to guide the spending agencies in conducting tender processes; v\. Developed a monitoring matrix to monitor performance and compliance of spending agencies with the IPPDAR, 2006\. vi\. Private sector awareness seminars on institutionalizing public procurement; vii\. Building capacity of spending agencies through training workshops based on the IPPDAR, 2006 and sample tender documents and forms; viii\. On-the job training for procurement officers in PPU and spending agencies\. MDAs Trained in Procurement Management in 2011/12 S/No ORGANISATION 1 Ministry of Youth & Sports 2 National Legislative Assembly 3 Ministry of Internal Affairs (Fire Brigade) 4 South Sudan Prison Services 5 Ministry of Wildlife Conservation & Tourism 6 Ministry of Animal Resources & Fisheries 7 South Sudan HIV/Aids Commission 8 South Sudan Audit Chamber 9 South Sudan Electricity Corporation 10 Ministry of Roads & Bridges 11 Ministry of Commerce & Industry 12 Ministry of Transport 13 Ministry of Water Resources & Irrigation 14 South Sudan Urban Water Cooperation 15 Office of the President 16 South Sudan Relief & Rehabilitation Commission 17 LOCAL GOVERNMENT BOARD 18 Ministry of Housing & Physical Planning 19 South Sudan Anti-Corruption Commission 20 Ministry of Agriculture & Forestry 21 South Sudan Human Rights Commission\. 22 Ministry of Petroleum & Mining 23 PPU - Ministry of Finance & Economic Planning 24 Ministry of Defence & Veterans Affairs 25 Ministry of Telecommunication & Postal Services 26 Ministry of Environment 27 South Sudan Land Commission 28 Ministry of General Education & Instruction 29 Ministry of Gender, Social Welfare & Religious Affairs 30 Ministry of Health 31 Ministry of Higher Education, Science & Technology 24  MDAs with Procurement Plans (FY 2012/13) # List of MDAs Status of Plans 1\. Ministry of Health GRSS budget 2\. Ministry of Roads & Bridges Limited to donor projects 3 Ministry of General Education & Instruction GRSS budget 4 Ministry of Gender, Social Welfare & Religious Affairs GRSS budget 5 Ministry of Agriculture & Forestry GRSS budget & donor projects 6 Ministry of Higher Education, Science & Technology GRSS budget 7 Ministry of Water Resources & Irrigation GRSS budget & donor projects 25 Annex 3\. Economic and Financial Analysis (including assumptions in the analysis) An Economic and Financial Analysis is not required for this MDTF per OP 8\.50 – Emergency Recovery Assistance\. 26 Annex 4\. Economy, Efficiency and Effectiveness Related Analysis Value for Money Performance of Sampled Project Activities The supply of Consultancy services achieved VfM as presented below: VfM performance rating – Core Fiduciary System Support Project VfM assessment Assessment finding VfM performance parameter rating Economy The Contract signed was within the approved budget 2\.0 for the activity and sampled salary payment requests were consistent with the contract\. The procurement process was in accordance with the selection procedure for individual constants though from the procurement documents reviewed it was not clear how the list of candidates was obtained\. Efficiency Activity included in the procurement plan, budgeted 1\.0 for and actual outputs matched expected outputs\. Effectiveness The procurement consultant was performing envisaged 1\.0 tasks, and has assisted MDAs to prepare, update and implement their procurement plans\. Overall VfM performance 1\.3 1= full achievement, 2= partial achievement, 3=non-achievement Source: Value for Money Assessment Report, October 31, 2012, page 15\. 27 Annex 5\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending (from Task Team in PAD Data Sheet) Parminder Brar TTL, Lead Financial Management AFTME Financial Specialist Management Vivek Srivastava TTL, Sr\. Public Sector Specialist PRMPS Public Sector Supervision (from Task Team Members in all archived ISRs) Vivek Srivastava TTL, Sr\. Public Sector Specialist PRMPS Public Sector Frederick Yankey TTL, Senior Financial Management AFTMW Financial Specialist Management Adenike Sherifat Oyeyiola TTL, Senior Financial Management AFTME Financial Specialist Management Hellen Mbao Chilupe Senior Operations Officer AFMJB Operations Mohamed Yahia Ahmed Financial Management Specialist AFTME Financial Said Abd El Karim Management Rupert Blandon Senior Public Sector Specialist AFTP2 Financial Management Prosper Nindorera Senior Procurement Specialist LCSPT Procurement Pascal Tegwa Senior Procurement Specialist AFTPE Procurement Anjani Kumar Senior Procurement Specialist AFTPE Procurement Diego Garrido Martin Monitoring & Evaluation Specialist AFTDE Monitoring & Evaluation Juvenal Nzambimana Operations Officer AFTAI Operations Oumou Gado Oumarou H D Program Assistant AFTMW Program Assistant Grace Tabu Felix Team Assistant AFMJB Assistant 28 (b) Staff Time and Cost (from SAP) Staff Time and Cost (Bank Budget Only) Stage of Project Cycle Number of US$ Staff Weeks (including travel and consultant costs) Lending FY2006 2\.50 22,823 FY2007 1\.25 17,264 TOTAL 3\.75 40,087 Supervision/ICR FY2007 6\.98 48,743 FY2008 14\.74 76,633 FY2009 9\.94 48,154 FY2010 13\.54 77,114 FY2011 3\.95 25,147 FY2012 1\.70 62,283 FY2013 0\.78 73,506 TOTAL 51\.63 411,580 Note: The project incurred only Trust Fund Costs and no Bank Budget costs\. The costs do not reflect total costs for the project because some of the costs including Bank staff weeks were charged to a general program administration cost for the MDTF\. 29 Annex 6\. Beneficiary Survey Results (if any) Not Applicable 30 Annex 7\. Stakeholder Workshop Report and Results (if any) Not Applicable 31  Annex 8\. Summary of Borrower’s Completion Report February 2013 1\. This report contains findings of an end of project evaluation for the Core Fiduciary Systems Support Project (CFSSP) conducted by a consultant on behalf of the government, as the recipient of the grant\. This evaluation was conducted between 16 January 2013 and 10 February 2013 to assess the impact of the project and its attainment of the development objective, pick lessons to be learnt for future projects of a similar nature and assess the level of sustainability for the activities supported by the project\. 2\. CFSSP was established in February 2006 following approval of a grant from the MDTF-S\. The project development objective was to establish a robust framework for channeling of MDTF-S and government counterpart funds and to provide reasonable assurance regarding the use of those funds\. The project which is due to close on 31 March 2013 has received total funding of US$16\.447m including a government counterpart contribution of US$3\.0m\. The project has supported core fiduciary services of Project Accounting through the Project Accounting Agent (KPMG East Africa) and later the Project Financial Management Unit, External Audit Agents through PKF (UK) LLP as well as procurement function support services to MoFEP\. 3\. With the MDTF-S drawing to closure having disbursed over US$718 million through various projects, overall the CFSSP has strongly delivered on providing a robust framework for disbursing the funds as well as providing assurance, through regular financial and audit reports, on the use of these funds\. There have been implementation challenges such as delayed procurements and slow progress for some activities, switch over from firms to individual consultants for Accounting and Procurement components but these have not derailed the project from achieving the development objective\. 4\. Sustainability of the activities supported by the project remains the biggest challenge\. Whereas, the External Audit Agent has closely worked with the National Audit Chamber in terms of building capacity, there are institutional challenges including human resource capacity, financial constraints and infrastructure acquisition that require to be addressed before effective strengthening of the institution\. The PFMU has largely been resourced by consultants and project staff and there has not been strong evidence of ownership or of attempts by the Treasury/Directorate of Accounts to mainstream the unit’s activities\. Strengthening of the procurement function in government has been significantly affected by the delayed finalization of the procurement bill\. The procurement regulations and the accompanying manuals and forms have to be in line with the procurement law which is currently still in draft form\. 5\. Among the key lessons learned from this project include: i\. The need to have deeper counterpart involvement in the design, execution and supervision of activities to engender ownership\. ii\. The need for capacity development plans to be specific to the operating environment for better capacity/knowledge transfer\. iii\. For sustainability and effectiveness in capacity transfer, technical assistance/support during the life of a project, should be designed in such a way that it gradually reduces from being of an executive nature to being largely advisory\. 6\. Key recommendations include: i\. The need to mainstream project/aid accounting into the Directorate of Accounts for sustainability – possibly with appropriate initial support\. ii\. The government continues to make positive steps towards institutional building and future support in areas of deficiency should have strong emphasis on sustainability of the reforms or of the activities being supported\. 32 Annex 9\. Comments of Co-financiers and Other Partners/Stakeholders Extracts from the Monitoring Agent’s Completion report April 11, 2013 Core Fiduciary System Support Project (CFSSP) Project accounting agent, Procurement agent and External Audit Agent At the start of the MDTF-SS in 2005, the accounting capacity within the MoFEP of the GoSS was weak and it needed substantial strengthening\. The MoFEP engaged an Interim Project Accounting Agent (IPAA) to provide accounting services and fiduciary assurance for projects funded through MDTF-SS resources\. The IPAA formed part of the Project Disbursement Unit of the Treasury of the GoSS, and was responsible for preparing and issuing the Project Implementation Guidelines and accounting for all projects related expenditures\. In addition, the IPAA was responsible for ensuring that all project accounting activities were in strict compliance with: the requirements of the GAs; and the Project Implementation Manuals\. In December 2008, the IPAA was replaced by the Project Financial Management Unit (PFMU) which was also based in the MoFEP\. The MoFEP contracted a Procurement Agent to carry out procurement tasks for programs that were financed by MDTF-SS resources\. The Procurement Agent had the responsibility of building procurement capacity within government and providing the GoSS, donors and the bidding community with assurance that procurement was carried out in a sound (responsible, accountable and transparent) manner\. The Procurement Agent was responsible for supporting all procurement functions for all MDTF-SS projects/programs\. Projects/programs financed through the MDTF-SS were subject to a financial audit on an annual basis\. The MoFEP contracted an External Audit Agent to carry out the functions of an external auditor of the MDTF-SS projects\. Minimum fiduciary systems established in the RSS MDTF-SS ensured that annual MDTF-SS portfolio and RSS audits were completed, MDAs followed procurement guidelines in their procurement processes and the MDTF-SS project were supported to ensure proper financial accounting\. The overall task of CFSSP was to address the emergency needs of the GoSS in establishing minimum fiduciary systems for channeling fund flows from the donors as well as for counterpart funds\. This project supported the recruitment of a Project Accounting Agent (PAA) to provide accounting services as per World Bank Financial Management Guidelines and international standards\. However, in December 2008 the PAA was replaced by PFMU which was based in the MoFEP\. The Project also supported an External Audit Agent (EAA) to provide auditing services in accordance with International Standards on Auditing, and a Procurement Agent to ensure MDAs’ procurement plans were prepared, implemented on time and their capacity in undertaking procurement for the Government was enhanced\. The Project, which was implemented by MoFEP and NAC, achieved the following results\. 33 Summary of CFSSP results Specific MDTF-SS milestones and outputs realized toward the achievement of the minimum fiduciary systems in the RSS are presented in Table 3\.2 below\. Table 3\.2: Results on establishment of minimum fiduciary systems Indicator Baseline Target End of MDTF-SS result • Draft Audit Legislation and Codes of Conduct in No Yes Yes place\. • Financial systems established\. No Yes Yes • Oversight of public procurement by MoFEP; and No Yes Yes MDAs accountable for their procurement\. • MDAs with-up-to-date Procurement Plans in 0 6 6 place and implemented according to plan\. • Procurement legislation and regulation No Yes Yes established\. Impact of MDTF-SS (extract) Culture of accountability in the public service 34 The RIEP and CFSSP supported establishment of minimum fiduciary systems in the MDAs to provide assurance in the use of funds by RSS\. MDTF-SS projects used accounting, auditing and procurement guidelines that promoted a culture of accountability regarding the use of donor and RSS funds\. Considering that Ministries were prime recipients of MDTF-SS funding, their compliance with grant agreement covenants (on fiduciary functions) inculcated a culture of accountability in the public service\. Challenges (extract) a\. Lack of counterpart staff to understudy consultants hired by MDTF-SS projects Consultants working in the MDTF-SS projects were expected to transfer their skills, knowledge and experience in financial management, procurement, and M&E, to local counterpart staff\. However, there was lack of counterpart staff to be attached to the consultants hired by MDTF-SS projects\. As a result, the consultants were not able to build capacity of national staff in financial management, procurement and M&E\. Recommendation: RSS to develop Technical Assistance guidelines, including mandatory twinning of consultants with counterpart staff\. b\. Delay in enacting draft bills and regulations into legislation All the projects had components of developing relevant draft bills and draft policies\. MDTF-SS projects supported the development of relevant draft bills and regulations\. The legislative process was slow and beyond the control of MDTF-SS\. At the end of MDTF-SS, the procurement draft bill and regulations had not been enacted into laws\. Recommendation: RSS to establish a Taskforce on pending Bills and legislation\. 35 Annex 10\. List of Supporting Documents 1\. Auditing Component Steering Committee Meeting Reports Nos\. 1 to 15 2\. Capacity Development for Public Procurement, 2013 – 2016 3\. Case Study on Contracting Out Core Government Functions and Services in Southern Sudan; Prepared for the joint ABD-OECD Conference on contracting out core Government functions and services in post-conflict and fragile situations; Tunis 8-9, 2009 by Fiona Davies 4\. Comprehensive Peace Agreement between Government of Sudan and the Sudan People’s Liberation Movement, January 2005 5\. Final Report of Procurement Advisor March 2013 6\. Final Report of Procurement Agent 7\. Final Report of Project Financial Management Unit March 2013 8\. Government Completion Report Feb 2013 9\. Grant Reporting and Monitoring Reports 10\. Implementation Status and Results, Core Fiduciary Systems Support Project October 2011 11\. Implementation Status and Results, Core Fiduciary Systems Support Project November 2012 12\. Implementation Support Mission Core Fiduciary Systems Support Project Aide Memoire, November 24 to December 8, 2012 13\. Inception Report of Procurement Agent 14\. Joint Assessment Mission (JAM) – Volume I, Synthesis, March 2005 15\. Joint Assessment Mission (JAM) – Volume III, Cluster Reports, March 2005 16\. Joint Implementation Support Mission to Southern Sudan, Draft Aide Memoire, Juba, May 7 – 18, 2007 17\. Memorandum of the President of the International Bank for Reconstruction and Development to the Executive Directors on a proposal for the World Bank to administer two Multi-Donor Trust Funds for Sudan, March 17, 2005 18\. MoFEP-PPU: 2-Year Program of Activities, November 2011 – December 2013 19\. Multi Donor Trust Fund Project Paper – Core Fiduciary Systems Support Project November 27, 2005 20\. Multi Donor Trust Fund Project Paper – Core Fiduciary Systems Support Project August 2010 21\. Multi Donor Trust Fund Project Paper – Core Fiduciary Systems Support Project February 2012 22\. Multi Donor Trust Fund Project Paper – Rapid Impact Emergency Project November 2005 23\. Progress Report of Procurement Agent 24\. Progress Report, December 2012 25\. Value for Money Assessment Report by Monitoring Agent – draft, October 2012 36 37

REVIEW

P058282

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 20725 IMPLEMENTATION COMPLETION REPORT (IDA-3 1410) ON A CREDIT IN THE AMOUNT OF SDR 11 MILLION (US$ 15 MILLION EQUIVALENT) TO BURKINA FASO FOR AN ECONOMIC MANAGEMENT REFORM SUPPORT OPERATION July 19, 2000 This document has a restricted distribution and may be used by recipients only in the perfonnance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective December 1999) Currency Unit = CFA Franc (CFAF) CFAF 590 = US$ 1 US$ 1 = SDR 0\.7372 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CET Common External Tariff EMRSO Economic Management Refonn Support Operation ERC Economic Recovery Credit DGI Direction Generale des Imp6ts GDP Gross Domestic Product HIPC Heavily Indebted Poor Countries ICR Implementation Completion Report IDA International Development Agency IMF International Monetary Fund MIGA Multilateral Investment Guarantee Agency MOF Ministry of Economy and Finance MTEF Medium Term Expenditure Framework PASA Programme d'Ajustement du Sector Agricole PER Public Expenditure Review PFP Policy Framework Paper SAC Structural Adjustment Credit SECAL Sector Adjustment Loan SSA Sub Saharan Africa SYGADE Systeme de Gestion Automatisee de la Dette SYGASPE Systeme Integre de Gestion Administrative et Salariale des Personnels de 1' Etat TF Trust Fund UNDP United Nations Development Program VAT Value Added Tax WAEMU West African Economic and Monetary Union Vice President: Callisto Madavo Country Director: Hasan Tuluy Sector Manager: Charles Humpphreys Task Team Leader/Task Manager: Celestin Monga  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 2 4\. Achievement of Objective and Outputs 4 5\. Major Factors Affecting Implementation and Outcome 8 6\. Sustainability 8 7\. Bank and Borrower Performance 9 8\. Lessons Learned 10 9\. Partner Conmnents 11 10\. Additional Information 19 Annex 1\. Key Performance Indicators/Log Frame Matrix 20 Annex 2\. Project Costs and Financing 21 Annex 3\. Economic Costs and Benefits 22 Annex 4\. Bank Inputs 23 Anex 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\.   ProjectID: P058282 Project Name: ECONOMIC MGMT REFORM Team Leader: Celestin Monga TL Unit: AFTM4 ICR Type: Core ICR Report Date: Julv 19, 2000 1\. Project Data ATame: ECONOMIC MGMT REFORM L/CITFNumber: IDA-31410 Countrv/Department: BURKINA FASO Region: Africa Regional Office Sector/subsector: KN - Macro/Non-Trade KEY DATES Original Revised/Actual PCD: 07/15/1998 Effective: 12/29/98 Appraisal: 00/00/0000 MTR: Approval: 11/05/1998 Closing: 06/30/99 Borrower/lmplementing Agency: BURKINA FASO/THE MINISTRY OF ECONOMY; BURKINA FASO/PLANNING AND FINANCE Other Partners: STAFF Current At Appraisal Vice President: Callisto Madavo Jean-Louis Sarbib Country Manager: Hasan Tuluy Hasan Tuiuy Sector Manager: Charles Humphreys Charles Hurnphreys Teanm Leader at ICR: Celestin Monga Miguel Saponara ICR Primary Author: Jerome F\. Chevallier; Jean-Claude Tchatchouang 2\. Principal Performance Ratings (HS=Highly Satisfactory,S=Satisfactory, U=Unsatisfactory,HL=Highly Likely, L=Likely, UN=Unhkely, HUN=Highly Unlikely, HIU=Highly Unsatisfactory,H=High, SU=Substantial, M=Modest, N--Negligible) Outcome: S Sustainability: L Institutional Development Impact: M BankPerformance: 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: Rationale and Objective of the Economic Management Reform Support Operation (EMRSO)\. The overall objective of the credit was to help Burkina Faso to partially offset the reduction of revenue resulting from the adoption of the new CET regime, while other reforms in revenues and expenditures were to restore relative fiscal stability\. The credit would also provide support to the Govemment's efforts to improve revenue mobilization from resources other than trade taxes, and achieve improved prograrnming and management of public expenditures, in particular, in the social sectors and poverty reduction programs\. Consistent with Bank policy governing adjustment lending (R96-55, R80-122), the credit rationale was to smooth the transitional cost of structural reforms\. It was determined that without extemal financing the revenues lost due to substantial reduction in extemal tariffs and the temporary disruptions associated with the implementation of the WAEMU's new CET would lead to insufficient funding for the social sectors, lower levels of investment, and lower living standards and future growth\. In helping to mitigate these costs, the EMRSO would contribute to the social sustainability of reform programs\. The proposed credit was an integral part of the Bank's strategy to assist Burkina Faso in maintaining macroeconomic stability and financial sustainability, and in gaining competitiveness\. The policy measures supported by the credit were considered essential to the enhancement of Burkina Faso's growth prospects\. The reforms were also necessary to create an environment conducive to private sector-led economic growth while helping to ensure an orderly transition toward greater regional and global integration\. Also, by focusing on revenue mobilization and the reallocation of public resources towards two priority areas, namely education and health, the operation was expected to ensure that these two key sectors would not suffer from budgetary cuts during the transition period and to have a direct and positive impact on poverty alleviation\. Design\. The EMRSO credit was a well-prepared adjustment operation designed on the High Impact Adjustment Lending model of the Africa Region\. It was proposed as both a one-tranche operation and the first of a series of such operations related to up-front policy reforms to be implemented prior to Board presentation\. Specific policy actions supported by the EMRSO included: * lowering the maximum tariff rate from 31 percent to 25 percent; * lowering the statistical tax from 6 percent to 4 percent; * abolishing the special intervention tax; * finalizing the automation of the customs-clearance procedures for imports; issuing the list of public enterprises to be privatized/liquidated; * issuing budget guidelines for the preparation of the 1999 budget, including sectoral targets for health and education; * strengthening public expenditure programming and management, particularly in the social and basic infrastructure sectors; * finalizing the computerization of six additional border customs offices; and * introducing withholding tax at customs and on purchases from wholesalers to be applied against the profit tax\. The use of a single tranche operation was justified by Burkina Faso's good track record in -2 -  implementation and the coherent medium-term program for public finance reform\. The main advantage of single-tranching with ex-ante conditionality was that it enhanced political acceptability of the reform program\. It was expected that, after one or two of such operations, the Govemment would be able to formulate comprehensive medium-term programs in key sectors that could be supported either by ordinary multi-tranche adjustment operations or by a progressive shift to budgetary support\. To guard against the risk of launching a series of one-tranche operations with different focuses, which would eventually lead to a reform process lacking coherence, the EMRSO also provided a clear indication of links with future adjustment operations\. Policy areas to be covered in the follow-up credit (SAC III) were identified, and the progress benchmarks expected to precede it were identified\. A medium-term policy matrix was attached to the Board document\. The four triggers for proceeding with another single tranche adjustment operation were defined as "substantial progress" in the following policy areas: (i) adoption of a medium-term expenditure framework for the six key ministries identified in the 1999 budget guidelines, and completion of a thorough public expenditure review in education and health (according to the agreed steps and timetable defined during negotiations); (ii) implementation of the newly adopted "reform of the state" consistent with the MTEF approach, especially its provisions on the decentralization of the use of a share of public resources, local recruitment for contractual positions in education and health, and merit-based promotion system at the national level (steps and timetable defined during negotiations); (iii) implementation of the rural development strategy currently under preparation (steps and timetable defined during negotiations), (iv) implementation of the privatization program as of December 1998, according to the schedule in the Policy Framework Paper for 1998-2000\. The main risk facing the program was identified as political: the reform agenda proposed for a relatively short period of time could encounter some political resistance heightened by the presidential elections, scheduled for November 1998\. The operation was prepared over a seven-month period\. The borrower's input was substantial, as the Government carried out several studies and public finance management and tax exemption prior to the appraisal mission\. The Bank also provided background analytical work on the budgetary implications of the regional integration process for Burkina Faso\. 3\.2 Revised Objective: Project objectives remained unchanged and project design was not modified\. 3\.3 Original Components: The reform program supported by EMRSO had three major elements: (1) public finance reform, including progress towards the convergence to a Common External Tariff (CET), which was to be introduced on January 1, 2000 by all members of WAEMU; (ii) rationalization of public expenditure management and strengthening of public adrninistration; and (iii) continued implementation of public enterprise reform\. 3\.4 Revised Components: Components were not modified\. -3 -  3\.5 Quality at Enl?y: The quality at entry is rated satisfactory\. EMRSO had a narrow objective, which was directly linked to the post-devaluation country assistance strategy (1994) emphasizing economic stabilization and to the 1996 CAS\. EMRSO was fully justified because without budget support, Burkina Faso would not have been able to reduce its custom duties in preparation for closer regional economic integration, which was an important aspect of its development strategy as stated in the 1998-2000 PFP\. The design of EMRSO took into account the lessons from previous adjustment lending in Burkina Faso\. One of the lessons from the 1991-94 SAC I and ERC experience is that single tranche adjustment operations may be more suited to a country like Burkina Faso, where capacity for implementing reforms is weak, and political opposition to important elements of the reform program lingers\. Unexpected difficulties in specific reform areas slowed down the whole reform process in the case of SAC I, which was a comprehensive and ambitious undertaking\. On the other hand, the success of the ERC, a single tranche operation, was largely due to its simple design\. Accordingly, the Bank opted for a series of single tranche adjustment credits to underpin an expanded structural reform program described in the 1998-2000 PFP\. 4\. Achievement of Objective and Outputs 4\.1 Outcome,/achievement of objective: The program successfully achieved its objectives and has maintained them after the closing date (June 1999)\. This assessment is based on the following factors: * the new CET with lower external tariffs was successfully introduced on January 1, 2000 and all members of WAEMU, including Burkina Faso, have implemented it; * the EMRSO helped offset the loss of revenues resulting from the lowering of custom duties and the financial gap was timely funded; and * the EMRSO has stimulated the Govenmment's commitment to pursue public finance reform; as a result, total Govemment revenue as a percentage of GDP has increased steadily since 1997\. The four triggers for proceeding with another single tranche adjustment operation were met, as described below\. 4\.2 Outputs by components: Public Finance\. The performance of Govemment finance in 1998 was consistent with program targets, especially conceming revenue\. Total revenue amounted to CFAF 199 billion (13\.1 percent of GDP), exceeding the program's objective of 13 percent of GDP\. Government revenue increased to 13\.5 percent of GDP in 1999 (15 percent, including taxes paid by the treasury related to public investment activities), compared with a program target of 14\.3 percent of GDP\. Rating: Achievement of the Public Finance component was fully satisfactory\. - 4 -  Box 1\. Key Fiscal Refomns Under IDA - and Fund-Supported Programis, 1997-2000 Actioni Status Fiscal reforms Introduce WAEMU's product classification Done in April 1999 Eliminate special intervention tax and introduce WAEMUs CET, Done, Rate reduced to 20 percent in January 2000 lowering maximum tariff rate from 37 percent to 25 percent Eliminate special VAT payment procedures for importers of raw Done materials and for enterprises registered under the investment code Eliminate all remaining exeviptions on public coCtracts and enhance Done in June 1999 monitoring of taxation for foreign-financed proAe fes Complete computerization of tax revenue collection, enhance monitoring Done in 1999 of large enterprises, and iniProve recovery from defaulters Introduce a withholding tax at sourcu on imports and purchases from Done in January 2000 wholesalers and producers Introduce a withholding tax at source on ayment for services Done in January 2000 Reduce the business 4rofit tax from 40 percentto 35 percent Done in 2000 Computerize wage and public investment expenditure Ong6ing Conducst review ofpublic invest6\.ent Conducted in 1998-99 Ht3nnonize \.the budgetary systemn within the WAEMU framnework Done Table 1e Burkira Faso: output and Publc Finance Indicators, 1996-2002 1996 1997 1998 1999 2000 2001 Eat\. Prog\. Est\. Prog Est\. porno pRw\.e Proj (Annual pei cetage changed a unless oth\.nrwiie sp12 2f1ed) GDP and pnoces GDP al constalt prnces 6\.0 4 8 6-2 6\.2 5\.3 5\.8 5 7 5\.7 6\.6 GDP deraior 4\.2 2 2 - -32 -\.8 -2 1\.7 -1\.4 - 5 2 0 2\.3 Consumer price(arutual avera3ge) 6\.1 2 3 2\.5 5\.0 2\.3 -1\. 1S l\.S 2\.0 Consumer plnces (ded fipd) 6\.9 -0\.1 2\.5 1\.0 2\.3 0\.7 1-5 2 04 0 Cenrtal govelrimnal fblance3 Reenueall 12\.3 13\.1 13,0 13\.1 14,3 15\.0 137 1414 14\.5 Domestic pnmau y exnenditioreiadanetlanding 10 7 11\.9 12a2 12\.6 14n1 14\.7 139 1;9 1i\. Overall dsca balance, enueding grtnes -9\.0 -1 0\.2 -1s 0 3 -9 S -10\.0 -c12s3 -i 0\.4 -s1 e0 -9 7 overall fuscal balst, including gtoss 2 -0\.6 -3 2 -3fu -2\.9 Au6 -3\.4 -5 1 -3 0 -3\.5 Primary balance (dficit \.)3/ 1 7 1 1 ns 9 s 0 2 0\.t -0 2 0 4 0\.S cuirrent primary balance 31 3\.0 4 0 3 \.S 3\.6 4\.2 4cS 3 9 4 3 4\.9 Nominal GDP (in billimesof CFA ftancs) 1,29S 1,390 I,S1S 1,s22 1,629 1,589 1,74S 1\.713 1\.869 sources: Buddacat,6 authonitiw3; and staffestinate3 and pnj\.etionst 1/ From 1999 on, revenue includes taxes paidby conitractors on fomegnl-firianced public investments rising checks issued by the treaury, for an arn\.unt eq,wvrdent to about l S percent or GDP, 2/ For the pwjection ye\.rr t999-2002, the grans expected to cover the financing gap at not included\. 31 C omnnitment bist, -xcuding grants and boraign-finanecd prolects\. Public Expenditure Management and Public Administration\. Data indicate that efforts have been successful in redirecting domestic resources toward human capital formation\. However, the bias introduced by recent large, foreign-financed, infrastructure projects has limited the increase in the share of social sectors in total expenditure\. In 1999, current expenditures were broadly in line with program targets, despite a wage bill, which was about 6 percent higher than initially expected, mostly due to the wage scale adopted in January 1999 when the new merit-based promotion system was introduced\. Progress was achieved in reallocating spending toward social sectors\. On a commitment basis, excluding common budgetary expenditures,but including foreign-financed capital expenditures, the share of expenditures on primary education in total budget expenditures increased from 9 percent in 1996 to 11\.5 percent in 1998, thereby reaching the program target\. However, the ratio declined to 10\.8 percent in 1999, reflecting the large spending in infrastructure investment for other sectors\. - 5-  Excluding foreign-financed investment, progress was more marked, as the share of expenditures on primary education increased from 14\.5 percent in 1996/97 to 16\.9 percent in 1999\. For health, the share over total expenditures remained stable over the period when foreign-financed investment is included\. The share, excluding foreign-financed investment, increased however from 11\.3 percent in 1996 to 13\.9 percent in 1999\. In confonmity with the action plan presented in the policy matrix of the EMRSO, the authorities have greatly improved their budgeting and expenditure practices over the past years\. A comprehensive public expenditure review in 1995 and a public expenditure incidence analysis in the education, health, and water sectors in 1996 and 1997 contributed to the understanding of equity issues, although not of the rationale and efficiency of expenditures in those sectors\. Following the adoption of the HIPC Decision Point document of the original HIPC Initiative in November 1997 and the EMRSO by the Boards of the Bank and the Fund, the Govermment defined budgetary monitoring indicators; adopted a programn for regular consultations between the Bank and the authorities on all budgetary issues; and established a multi-year program to enhance staff capabilities on PER-related matters\. An interministerial committee was set up to coordinate the subsequent work on public expenditure management\. As a result of these efforts, the 1999, 2000, and 2001 budget guidelines were significantly improved: in conformity with the HIPC social targets, the share of actual public expenditure for health and education in the budget has increased; a shift to performance budgeting was made for six key ministries (Health, Finance, Interior, Defense, Basic Education, and Secondary/Technical education), with outcome indicators to monitor efficiency, and increased accountability for line managers\. A Medium-Tenm Expenditure Framework for 2001-2003 is currently under preparation\. It will be presented to Parliament in October 2000 with the 2001 budget bill\. More work is still needed to analyze the reasons for Burkina Faso 's inefficiency of public spending in relation to comparable poor countries (service quality is low, unit costs high and outcomes disappointing)\. The Government recognizes this weakness and completed in late 1999 and early 2000 a series of PER studies in social sectors\. Findings of these studies should guide Government efforts in the context of the implementation of the Poverty Reduction Strategy Paper (PRSP)\. A Participatory Poverty Assessment (PPA) is also to be designed to shed light on issues of expenditure efficiency from the point of view of beneficiairies\. Implementation of the public administration reform approved in 1998 has progressed well\. The merit-based promotion system is being gradually extended to all ministries\. In the education and health sectors, contractuals are being recruited locally, which should enable the two concemed ministries to extend their reach at a lower unit cost\. A study is underway to explore practical steps for an efficient decentralization of public spending\. Rating: Achievement of the Public Expenditure Management and Public Administration component is rated satisfactory\. Box 2\. Civil Service Reform Approve and implemeni law on civil service end-1998 Approved in April 1998, and entered into force end-1998 Approve and implemeni master plan for institutional refornis and modernization of public administration including: Introduction of merit-based promotion system Done in January 1999 Larger recourse to contractual staff Ongoing since 1999 Approve law on decentralization and deconcertration Done in December 1998\. Implementation ongoing Introduce a single personnel file, encompassing those of the Ministries of Done in March 2000 Finance and of the Civil Service -6 -  Public Enterprise Reform\. Implementation of the public enterprise reform component was slower than expected\. The 1998 tranche of the program was not fully implemented according to the schedule in the policy matrix\. The liquidation of five public enterprises was delayed, as well as the call for bids for the hotel company\. The 1999 tranche was also delayed\. The preparatory work for the telecommunications regulatory framework was not initiated on time, making it impossible to grant cellular telephone licenses before the end of 1999\. A regulatory agency for the telecommunications sector was put in place in October 1999, but the recruitment of the investment bank expected to bring ONATEL, the telecommunications company, to the point of sale was not achieved in 1999\. The liquidation of FASO FANI, a textiles company, was not completed\. The privatization of Air Burkina was further delayed\. Finally, the strategic study on the remaining portfolio was not launched in 1999\. Rating: On the basis of the above, despite progress made in several areas, achievement of the public enterprise component is rated unsatisfactory\. Box 3\. Progress on Public Enterprise Reforms and Privalization Strengthen institutional framework for privatization, so as to speed up Done process Comnplete ongoing privatization of 41 enterprises Privatize 21 enterprises Done Put up for sale or liquidate by Dec\. 1997 8 enterprises Done Put remaining 12 enterprises up for sale by March 1998 Done with some delays Review the strategy for the remaining enterprises in government portfolio Done Select four new companies for privatization in 1998 Done In teleconmmunications, grant two cellular phone licenses, and Done in April 2000 operationalize regulatory agency Done in March 2000 Approve privatization and liberalization of energy sector Done 4\.3 Net Present Value/Economic rate of return: Not applicable 4\.4 Financial rate of return: Not applicable 4\.5 Institutional developmient impact: Implementation of the reform program supported by EMRSO has contributed to a modest development of institutions so far\. However, it has laid the bases for a major overhaul of public administration, which is a prerequisite for a sound development of institutions in the public sector\. Under the ongoing reform of public administration, the stage has been set for linking budget allocations and staff promotions to performance\. Steps have been taken to modernize personnel management in several ministries\. The budget process is becoming more results-oriented with the introduction of a rolling Medium Term Expenditure Framework\. On the decentralisation agenda, a general framework was adopted in the 1998 law, which created some independent local govemments: the province (45) and the city ('commune")\. A first set of urban communes and all provinces have been identified by the law\. Villages, i\.e\. communities that will not be able to become a commune, will be administrative entities within the administrative province, under the - 7 -  direct control of the State representative (High Commissioner)\. The law provides explicitly for the creation of additional communes, in urban and rural zones, if these can present a sustainable budget\. Devolution of powers from the State to local governments has been outlined, but is not effective yet\. The State retains control on these entities, ex-ante or ex-post, depending on the instance, notably on financial matters\. The 1998 law provides that decentralization will be effective in 2003\. As a first major step to make decentralization work, the Government is currently reviewing the necessary changes in budget management and procedures that would allow provinces, and cities to effectively function as autonomous entities\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of governmnent or implementing agency: Besides the usual impact of climatic variations, no particular factor outside the control of Government directly affected implementation of the program or its outcome\. The risk related to a possible decline of exports due to unfavorable commodity prices or short-temi economic evolution in East Asia did not materialize\. 5\.2 Factors generally subject to government control: The political situation in Burkina Faso deteriorated following the death of a joumalist at the end of 1998\. A report by an independent commission implicated people close to the President, including members of presidential security forces\. The Govemment was slow in taking action, which unleashed demonstrations and civil unrest in some urban areas\. Its credibility in implementing reforms, particularly those aimed at improving governance, was somewhat undermined in late 1998 and in early 1999\. In May 1999, the Government issued a major study on the long-term sources of growth and the competitiveness of the Burkinabe economy\. The study was prepared by a local team with help from international consultants\. It showed that serious constraints were hampering development, including a low degree of openness, high input and factor due to inefficient public monopolies, and low labor productivity due to poor education and health indicators\. The study served as the basis of a workshop on competitiveness held in Ouagadougou in May 1999 with the participation of the Government, the Bank, donors, the private sector and civil society\. A very lively and candid discussion ensued at the workshop, which proved to be a very successful forum for all stakeholders to debate issues the country is facing and ways to address them\. Following the workshop, the Minister of Economy and Finance presented the findings at a special full day cabinet meeting convened by the Head of State\. Beyond its policy findings and conclusions, the study has demonstrated the benefit of a participatory process where civil society can play a critical role in defining the development agenda\. Fostering such a process gives all stakeholders the opportunity to develop ownership and commitment to the necessary reforms\. It has led to a much more dynamic and transparent environment in developing the CAS under preparation, a new private sector development strategy and the Government's Poverty Reduction Strategy Paper\. 5\.3 Factors generally subject to implementing agency control: Not applicable 5\.4 Costs and financing: Not applicable 6\. Sustainability 61 Rationale for sustainability rating: -8 -  The sustainability of the reform program supported by EMIIRSO is likely In previous phases of the public finance reform program, ownership was weak, resulting in long delays in the implementation of difficult measures\. The organization and functioning of the civil service remained in large part influenced by Burkina Faso's socialist past\. The EMRSO and the subsequent adjustment operation (SAC III) have contributed to improve the policy dialogue with the Bank\. The influence of reformers in Government has been reinforced by success in the implementation of the WAEMU's CET\. While it is highly unlikely that any future Government would take steps to undo the reforms already in place, implementation of the remaining structural reform agenda will be a test of the country's leadership and willingness to adopt policies needed to sustain growth and significantly reduce poverty, such as adopting education and health policies to raise human capital, improving the business environment, developing infrastructures to decrease input and transaction costs\. Overall, budget management is becoming more results-oriented with the introduction of a rolling three-year MTEF\. However, sustainability of the public finance reform program in Burkina Faso also hinges on the country's capacity to attract foreign aid and to generate increased exports and Government revenues needed to fund the important expenditure program ahead\. 6\.2 Transition arrangement to regular operations: A third structural adjustment operation in an amount of SDR 18 million (US$ 25 million) was approved by the Bank Board in December 1999\. The reform program supported by the new operation had four major elements: (i) establishing a tax-friendly business environment through the further lowering of tax ant tariff rates; (ii) improving the efficiency of public expenditure by extending the MTEF to new sectors; (iii) increasing the transparency of budgetary procedures; and (iv) enhancing competitiveness through an appropriate regulatory framework for utilities, including telecommunications\. These elements are very much in line with the medium-term reform program laid down in the EMRSO policy matrix\. 7\. Bank and Borrower Performance Bank 7\.1 Lending: Bank performance from identification to completion was satisfactory The reform program supported by the EMRSO was formulated through intensive consultations between the Government, the IMF and the Bank\. The Bank team effectively assisted the Borrower in identifying the main policy issues and in designing the reform program to address them\. As described earlier, the team also took into account lessons from previous experience in single tranche operations\. 7\.2 Supervision: During program implementation, the Bank maintained a close dialogue with the Borrower and its main partners\. Bank staff visited Burkina Faso five times in 1999 to supervise program implementation, participate in the public expenditure review and prepare the following adjustment operation\. The Bank helped Government officials realize that in the absence of vigorous reforms, Burkina Faso would not make significant progress in alleviating poverty\. Through its policy dialogue, the Bank also carefully nurtured ownership of the reform program in the country and contributed to raising awareness of the challenges and opportunities of regional integration\. 7\.3 Overall Bank performance: Rating: Based on the above, the Bank's performance is rated satisfactory -9-  Borrower 7\.4 Preparation: Government performance in the preparation of the operation was satisfactor\.y The Ministry of Economy and Finance funded several important background analytical work and study tours in the United States and in Ghana for its core team, This helped prepare the reform program and the key policy measures supported by EMRSO\. 7\.5 Government implementation performance: Overall, the Government has shown strong commitment to the reform program, despite delays in the implementation of the public enterprise component\. The Government performed well on the macroeconomic stabilization front, as well as in the implementation of policy measures to improve public expenditure management and public administration\. The Government also implemented all the reform measures specified in their Letter of Development Policy, albeit with some delays in the privatization program\. There was a strong ownership of reforms supported by EMRSO by the Minister of Economy and Finance and strong support by key sectoral ministries and some other donors (IMF, European Union, Switzerland, and the Netherlands)\. The EMRSO accounts are currently being audited in the framework of the preparation of the 1998 budget execution report\. 7\.6 Imnplementing Agencv: Performance of the implementation units was adequate\. The three major divisions in the Ministry of Economy and Finance in charge of the project (Secretariat Technique pour la Coordination des Programmes de Developpement Economique et Social, the Direction Generale des Imp6ts, and the Direction Generale du Budget) achieved their goals as stated in the program\. 7\. 7 Overall Borrower performance: Rating: Overall, Borrower's performance is rated satisfactory\. 8\. Lessons Learned Two key lessons leamed from the design and implementation of the EMRSO are: (i) the timing for disbursement has to be consistent with the Government budget cycle and its financial plan; and (ii) donor practices that tend to favor project financing outside the Government budget must evolve\. Timing\. External financial assistance is more effective when made at the beginning of Government's fiscal year, so that the support is known in advance to be available and can be used as a basis for making domestic budget management more predictable\. Single-tranche operations are efficient and effective, but should be tied more to the budget cycle as their purpose, in this case, was to provide compensatory financing for a reform program that was well defined in advance\. The EMRSO, approved on November 5, 1998, was for an amount of SDR 11 million (US15 million equivalent)\. It was declared effective immediately and the single tranche was released in December 1998\. The credit was mostly used to finance the end-of the year financial gap\. Adjustment operations would be more effective if the financial resources were made available to the Government at the beginning of their fiscal year and included in budgetary planning\. Project Financing\. Public financial management reform, which was central to the EMRSO, is limited by donor practices of tying their financing to specific projects that are administered outside the usual budgetary system, and which transit through the investment budget\. Such practices tend to delay the move towards performance budgeting, and help eliminate distortions created by the current dual budgeting system, where donor-funded projects drain capacity away from the Government\. - 10-  The decision to channel a larger share of Bank assistance through the budget, coupled with an intensified dialogue on public finance management and the use of public funds, may help improve the budget process substantially\. This approach would require, as a foundation: (i) a set of well prepared program budgets in all key sectors (education, health, rural development, and infrastructures) within a medium-term expenditure framework which is consistent with Government objectives and priorities; (ii) the implementation of public finance reforms aiming at improving accountability, and the auditing and evaluation system; and (iii) Government commitment to delegation of responsibilities, greater decentralization of budgetary procedures while maintaining sound management of public finance\. Such an approach would be consistent with the PRSP and HIPC Initiatives, as it would help achieve poverty-oriented results through prioritization of public expenditure and the use of performance indicators\. Consistent with the CDF, budgetary support operations would provide the instrument to link financial inputs to desired outcomes, and would redirect the Bank's administrative resources towards strategic advice and knowledge-based assistance\. 9\. Partner Comments (a) Borrower/implementing agency: Below is an implementation report received from the Ministry of Economy and Finance in November 1999\. Implementation Report 6\. The second structural adjustment credit (SAC II, known as EMRSO) for SDR 11 million or US$15 million), was adopted on November 5, 1998\. Its primary objective was to support the country's global adjustment program described in the 1998-2000 Policy Framework Paper\. It was intended to support Burkina Faso in its West African regional integration process, with the entry into force on January 1, 2000 of a CET [common external tariff] adopted at the level of the WAEMU, and to improve the daily management of the economy and public finance, in accordance with the medium-term development prospects defined by the Government in the 1998-2000 PFP\. More specifically: (i) the regional integration component involved adoption of the WAEMU's convergence criteria; and (ii) the component having to do with management of the economy and public finance involved mobilization of resources, management of Govemment spending, and improving statistics\. Accomplishment of the Primary Macroeconomic Objectives * Restoring Economic Growth 7\. During the 1994-98 period, the macroeconomic objectives were generally achieved\. Real GDP increased at an average annual pace of 3\.6 percent from 1985 to 1998, rising from CFAF 663\.1 billion to 1,056\.3 billion\. At first, between 1985 and 1990-91, the performance of the GDP was marked by repeated phases of growth followed by recession\. The economy is highly dependent on the primary sector, mainly agriculture\. During that time, weather conditions were irregular, thereby affecting agricultural production, and the performance of that sector largely determined the overall growth in GDP\. 8\. From 1991 to 1994, the average annual growth rate was 1\.3 percent\. Although this situation can be attributed to a gloomy intemational economic environment and unfavorable world prices for raw materials, the causes were more deep-seated\. They include the following: a steady decline in the terms of trade during this period, reflecting the loss of economic competitiveness; poor implementation of the reforms required under the Structural Adjustment Program, which also forced the economic system to" - 11 -  contract"; and most importantly, rumors and expectations of a CFAF devaluation in 1993, which were not conducive to establishing a climate of confidence for investors\. Following the January 1994 devaluation, real GDP declined by 1\.2 percent, reflecting a drop in the secondary sector of 2\.4 percent and in the tertiary sector of 2\.7 percent\. This reduction was mainly attributed to a contraction in domestic demand linked to the lower purchasing power of households and to the wait-and-see attitude adopted by economic operators\. 9\. Since the devaluation, however, trends seem to point to a growing expansion in GDP, with increases of 4\.1 percent in 1995, 6\.2 percent in 1996, 5\.5 percent in 1997, and 5\.7 percent in 1998\. Although the primary sector continues to be the engine of economic growth, the other two sectors are not lagging behind\. Price Trends 10\. After the price increase in 1994 due to the mechanical effect of devaluation, the consumer price index rose at a steady but slackened pace\. Inflation was 6\.1 percent in 1996, 7\.3 percent in 1997, and 4\.9 percent in 1998\. The 1998 rate can be explained by the 1997 harvest, which was smaller than anticipated and thus drove up prices of farm products\. * Public Revenue 11\. Since 1994, Government finance has improved as a result of increased budget revenue and effective Government spending controls\. From 1996 to 1998, current revenue increased by 24 percent, and the share of tax revenue on average accounted for 92 percent\. Despite these promising results, the tax ratio stagnated at 12 percent of GDP, somewhat higher than in 1990, as did the ratio of the Government's own revenue to GDP, which stabilized at 13 percent\. A change in the structure of tax receipts occurred, however, as taxes on goods and services went from CFAF 29\.9 billion to 54\.6 billion between 1996 and 1998, for a 82 percent rise, while taxes on foreign trade increased by only 5\.5 percent in those two years\. The increase was irregular to boot, since that revenue rose by 13\.6 percent from 1996 to 1997, but then declined by 5\.5 percent in the 1997-98 period\. Thus the share of fiscal receipts from international trade dropped from 50\.8 percent to 43\.5 percent of fiscal revenue between 1996 and 1998\. 12\. Although grants have always been at a relatively high level, averaging 27 percent of total revenue between 1985 and 1995, with the exception of 1989, their growth was sharpest in 1996 when they soared by 86\.8 percent in comparison to their 1995 level\. They accounted for 29\.6 percent of total revenue in 1998, as compared to 35\.5 percent in 1996\. The decline recorded was in grants to the Treasury and not in project grants, which were 76 percent of the total in 1998, as compared to 69 percent in 1996\. * Public Expenditures 13\. As for expenditures, a real improvement was not observed until 1994, since between 1990 and 1994, total expenditure rose by 73\.4 percent, current expenditure by 54 percent--despite the fact that the wage bill was brought under control--and capital expenditure climbed by 111 percent\. It was not until 1995 that the budget ratios for Government spending showed an improvement\. By 1998, the wage bill accounted' for only 45\.5 percent of current expenditure, but this is still higher than the convergence criterion of the WAEMU, set at a maximum of 40 percent\. At the same time, current expenditure went from 11\.6 percent of GDP in 1995 to 10\.4 percent in 1998\. 14\. During the 1996-1998 period, a considerable effort was made to increase capital expenditure financed from the Government's own resources, from CFAF 15\.7 billion to 47\.7 billion\. As a share of total - 12 -  investment expenditure, it went from 13 percent to 29 percent between 1996 and 1998, and, expressed as a percentage of GDP, it moved from 1\.3 percent to 3\.1 percent\. This outcome is attributed to considerable progress made in budget savings\. 15\. Budget savings had declined steadily from 1985 to 1994, from CFAF 14\.2 billion, or 2\.1 percent of GDP, to -22\.3 billion, or 2\.2 percent of GDP\. From 1995 to 1998, however, budget savings rose from 0\.6 percent to 2\.7 percent of GDP\. As for the Government deficit on cash basis, the growth from CFAF 15\.1 billion to CFAF 46\.5 billion between 1996 and 1998 is due to the evolution of capital expenditures, which recorded increases of 26\.7 percent in 1997, and 10\.8 percent in 1998, and to constant efforts to reduce payment arrears\. * Public Debt and PavmentArrears 16\. The outstanding debt has increased steadily since 1985, and even though it went down by 2\.5 percent in 1998, it is still at around 52\.4 percent of GDP, that is, CFAF 793\.1 billion, as compared to 178 billion in 1985\. This reflects an average increase in the outstanding debt of more than 12 percent a year\. Burkina Faso, however, has received several large debt cancellations: one involving CFAF 660\.2 billion in 1989 under the Dakar initiative; and another one valued at 70 billion following the devaluation, part of the Dakar II initiative\. Between 1995 and 1998, the average annual growth rate was 4\.1 percent for the external debt and 7\.5 percent for the internal debt\. 17\. Despite fluctuations due to various debt reschedulings, the debt service to GDP ratio increased by an average of 7\.8 percent a year from 1985 to 1998, evolving at a slower pace than the outstanding debt\. Borrowing terms have evolved in the direction of more concessionary loans\. The debt service did not exceed 3 percent of GDP, except in 1995, prior to the Dakar II initiative\. As a percentage of current revenue, the average from 1995 to 1998 was at around 21\.3 percent\. Although these levels are still "acceptable," they need to be carefully monitored, since not only is budget revenue still relatively unstable, but also the debt services weighs heavily on the Government budget\. 18\. Although the external debt service is currently higher than the internal debt service, the gap is not as large as in the previous situation\. More restrictive and less concessionary lending terms on the domestic debt explain this trend\. The ratio of the external debt service to exports, however, has tended to improve since 1995, moving from 21\.2 percent to 15\.5 percent in 1998\. This is an encouraging development, since it has been a steady trend, and even though the 1998 performance is attributed to a boom in exports, (+36\.5 percent), this downward trend is expected to continue\. 19\. Arrears on the extemal debt have been paid up in full since 1996, with the exception of a sum left pending on loans granted by Libya and the former USSR for less than CFAF 5 billion\. As for arrears on the intemal debt, there too the situation has improved, since they have been stabilized at CFAF 16 billion since 1997\. Structural Reforms * Impact of the WAEMU 20\. Burkina Faso is participating in the integration process ihat was initiated in the WAEMU in 1994\. One of the key steps in this process has to do with establishing a customs union in 2000\. With this prospect in mind, a transitional preferential trade regime and a schedule of intermediate steps for introducing the CET have been adopted\. Accordingly, effective July 1, 1996, the Government adopted a 30 percent - 13-  reduction in import duties on industrial products from approved countries, a measure exempting unfinished products and traditional arts and crafts from all taxes and duties applied on entering member states, and a 5 percent reduction in import duties or fees on nonauthorized products\. On July 1, 1997, the reduction on authorized industrial goods was raised to 60 percent\. It was further increased to 80 percent on July 1, 1999, and will be at 100 percent as of July 2000\. 21\. The current fiscal system has four categories of duties and taxes, as follows: a customs duty levied at a uniform rate of 5 percent; an import duty with three rates, corresponding to different categories of products (0 percent for category 1, 4 percent for category 2, and 26 percent for category 3); a special intervention tax of 2 percent; and, a statistics tax of 4 percent\. These last two taxes are applied to all imports, since they are for services rendered\. Initially, the tax and duty base was the CIF value of imports, but the 1998 appropriation law expanded the base to include customs duties for computation of certain taxes\. 22\. With implementation of the CET, the tax system will comprise four categories of products and four customs duty rates, at 0, 5, 10, and 20 percent\. The CET will also apply a 1 percent statistics tax\. In the meantime, Burkina Faso, following the example of all\. the other countries, received special authorization to apply intermediate rates\. Hence, from July 1, 1998, to June 30, 1999, it has applied a maximum customs duty of 30 percent (i\.e\., a 1 percent reduction in customs duties, strictly speaking)\. It has applied the new WAEMU categories since January 1, 1999, and it applies maximum customs taxes of 0, 5, 10, and 25 percent\. This reflects a six-point differential in comparison with the current highest rate in the Union\. 23\. The adoption and implementation of these various measures are expected to result in a decline in fiscal revenue\. Simulations have shown that the lost revenue would account for about 1 percent of GDP for the first two years the CET is in force, and for 2 percent for the third year\. The impact of the new customs tariff could be considerable during the 1999-2002 period, even after reduction of the debt service under the HIPC [heavily indebted poor countries], estimated at 1\.2 percent of GDP\. * HMobilization of Government Resources i) Enlarginzg the tax base 24\. The Government has taken steps to expand the tax base\. To fight tax evasion, it promulgated a law (Law N38/98/ADP of July 30, 1998) to increase collections from that date to the end of December\. It covers withholding at the source, the customs band, [cordon douanier], and purchases from wholesalers, to be applied against profit taxes\. Draft texts have been prepared and are expected to be submitted to the National Assembly in 1999\. The withholding at source is scheduled to be applied in July 2000\. 25\. In addition, with a view to organizing the system of exemptions more effectively to mitigate the distorting effects on the economy, two studies on exemptions have been initiated\. The report on the first study was submitted in September 1998\. It analyzed the legal bases of the different categories of exemptions, evaluated their financial cost, and included proposals to reduce exemptions to a maximum of 10 percent of tax revenue\. The proposals involve simply eliminating special exemptions, reducing exemptions granted under the investment code, and maintaining the exemptions linked to projects financed with external resources and exemptions granted under the system of diplomatic privileges\. The terms of reference of the second study have been approved by the Government, and it should be completed in the course of 1999\. It will focus on an economic analysis of the costs and benefits of exemptions\. 26\. The measure designed to bring an end to exemptions involving indirect taxes and foreign trade - 14 -  taxes under the investment code cannot be implemented until the investment code is harmonized in the WAEMU\. 27\. Finally, as part of the Government's effort to fight fraud, it strengthened the operational capacity of its units in charge of preventing smuggling and fraud by granting additional resources to the National Anti-Fraud Coordination Unit\. (ii) Improvement of the customs and tax administration 28\. DGI [Tax Department]\. In order to ensure effective monitoring of economic operators, the financial agencies must have accurate information on the population of taxpayers\. Moreover, registration of taxpayers is essential to provide the Government offices with information\. The computerization of the DGI, specifically as regards registration and integrated management of taxes (1998-99), is in the process of being completed\. The DGI currently has a software comprising three modules that covers the three main functions of a tax service, namely: identification and monitoring of taxpayers; determination of the tax base; and tax collection\. The software was developed to establish the taxpayer registration system and does not allow a registration number to be automatically assigned, and none of the three modules developed can be used\. This software must be improved and the file of taxpayers must be updated in real time\. To do this, the DGI has developed a project to reform its data processing system, including forecasting\. All the wiring and repairs have been completed\. Training for software users, scheduled to take place by the end of 1999, has been provided for\. With this training, the first part of the DGI's information program, which runs from design of the software to testing, is in its final phase\. The computerization of the two main offices of the DGI (Kadiogo I and Houet I) has been completed\. The necessary equipment and softwares have been purchased and are currently being tested\. 29\. Customs\. To make the customs service more effective and to improve statistics, the Government has been working to computerize the customs offices since 1996, by installation of the SYDONIA system\. The computerization of six additional customs offices, which was supposed to be completed by December 1998 as an extension of this process, was delayed\. The work on two offices (repairs and research on an effective equipment) still has to be completed between now and the end of the year\. The computerization of customs manifests (December 1998) was tested at the airport\. This test was completed in November 1998\. A committee has met to finalize it\. 30\. The measures stipulated by the WAEMU, involving the free circulation of goods, require the system for control of values and origin of goods to be strengthened\. Since 1992, Burkina Faso has used the services of the SGS [Societ6 Generale de Surveillance] to ensure the prior control of imported goods\. This agency has cooperated in the effort to set up a database on values for Customs\. It now has a manual record prepared on the basis of data collected from the SGS and customs offices\. It is updated periodically by an ad hoc committee\. The system will be further developed with the installation of a new computer program for computerized management of the database\. It will be set up with the support of the SGS\. After an initial list of values was made available at the end of 1998, a second list of values was drawn up during the second quarter of 1999 and made available to the customs offices\. The telephone line that was missing during the first quarter was also obtained in the second quarter\. The liaison with the SGS is operational\. The database is set up and supplied with data every week\. 31\. A system to compare the database with value certification statements (SGS) and customs declarations (December 1998) could not be introduced for technical reasons\. What happened was that the offices did not include the inspection notices on the declarations\. It was therefore impossible to determine which products had been inspected and which ones had not\. A final decisran to ensure registration of these -15 -  notices was made during this quarter\. 32\. The computerization of the offices of the Ministry of Finance is being completed\. Priority has been given to the investment expenditure control unit and to payroll management as of December 1998\. As for foreign financing, the basic data have been collected\. Application of the module has been delayed by problems involving: (i) the availability of data from some lenders; and (ii) consistency between the breakdown of project expenditures and the lack of a breakdown of Government budget expenditures\. As for payroll management, the problem of personnel who had to be trained and the delay in ordering computer equipment were the primary reasons for the delay in computerizing payroll management, which was supposed to take place in December 1998\. The software has been operational since August 1999\. 33\. Harmonization of the budget nomenclature in the context of the WAEMU is part of the harmonization of budget procedures in the WAEMU region\. With the adoption of the three remaining guidelines in December 1998, it has been completed\. * Public Expenditure Management 34\. Current expenditures will be maintained at an average of 10\.5 percent of GDP during the 1999-2002 period\. This measure, which is designed to limit Government spending and gradually change its composition in favor of priority sectors, such as health, education, and infrastructure maintenance, has been carried out since the end of 1998\. Current expenditures have in fact been kept at 10\.4 percent of GDP in 1998\. 35\. The Government will prepare a Medium-Term Expenditure Framework (MTEF), to be updated every year, to cover the following: (i) the public investment program; and (ii) recurrent expenses, which must be in line with objectives related to social and infrastructure indicators (1999-2002)\. Like the previous measure, this one is designed to limit Government spending and gradually modify its composition in favor of priority sectors such as health, education, and infrastructure maintenance\. The decision was made to adopt a MTEF approach\. Work to prepare this MTEF is under way\. The Government is committed to preparing program budgets for the six key ministries identified in the April 1999 budget guidelines\. The program budgets presenting a medium-term framework for public expenditures programming in those sectors will be sent to Parliament with the fiscal year 2001 draft budget bill\. 36\. To improve the effectiveness of Government financial management and budget preparation and monitoring, the Government has begun computerizing the Ministry of Finance, giving priority to the investment expenditures control unit and payroll management\. For investments, the expenditure system for investments funded with domestic resources has been in operation since 1996\. Implementation of the second one, which pertains to externally-financed investments (including loans and grants), has been delayed because it has taken longer than expected to enter the data on all the financing agreements due to their complexity\. As for the payroll, the specific expenditure circuit module was included in the "Integrated Administrative and Wage Management System for Government Employees (SYGASPE)\." The system was started up in August 1999\. * Strengthening Statistics 37\. The 1996 national survey work was completed and the results were published in June 1998\. The final 1989-93 accounting series were published in 1998\. The 1994-96 series has not yet been completed\. But the evaluation plan of the Priority II Survey on Households has been issued\. A socioeconomic data bank focusing on priority sectors such as education and health has been created with the preparation of a - 16 -  set of key social indicators\. 38\. An automated system for management of public debt statistics, using the SYGADE software, was implemented in 1998 when all the necessary equipment was purchased and instlled in the network\. A solution must still be found, however, to some problems in the flow of information among the various offices involved, including the Public Debt Department, and theDirecton Generale de la Cooperatton [Cooperation Division], and the Central Bank)\. * Restructuring Public Enterprises 39\. As part of the reorganization of the telecommunications sector, the National Assembly adopted a law authorizing partial privatization of the National Telecommunications Company (ONATEL) in December 1998\. It provides for the partial sale of Government shares in ONATEL, the establishment of a regulatory authority, and the opening of the sector to private investors\. The implemenfing provisions are in the process of being drafted\. The Govermment also approved a law to open the electricity sector to private investment\. ATTACHMENT Table 1: Gross Domestic Product (CFAF billion) 1985 1990 1995 1996 1997 1998 GDP at constant prices 663\.1 752\.1 892\.6 947\.7 999\.5 1056\.3 Growth rate 13\.1% -1\.5% 4\.1% 6\.2% 5\.5% 5\.7% Primary sector - 6\.7/o 03% 7\.3% -1\.5% 11\.1% Secondary sector -2,0% 2\.2% 1\.1% 15\.90/% 1\.4/ Tertiary sector 3\.4% 7\.3% 6\.5% 8\.2% 2\.6% Table 2: Bsudget Ratios 1985 1990 1995 1996 1997 1998 Tax revenue/GDP 7\.7% 9\.8% 11\.2% 12\.1% 12\.2% 12\.1% Govenmment revenue/GDP 9\.5% 11\.8% 12\.1% 13\.1% 13\.2% 13\.2% Current expenditure/GDP 7\.3% 11\.4% 11\.6% 11\.0% 10\.2% 10\.4% Wages/current expenditure 69\.6% 65\.0% 46\.5% 48\.0% 48\.3% 45\.5% Capital expenditure/GDP 0\.9% 0\.9% 0\.9% 1\.3% 2\.4% 3\.1% -17 -  Table 3: Budaet Balances (CFAF billion) 1985 1990 1995 1996 1997 1998 Budget savings 14\.2 3\.1 6\.4 25\.7 41\.7 41\.3 as % of GDP 2\.1% 0\.4% 0\.6% 2\.1% 3\.0% 2\.7% Overall balance (commitment basis) -9\.4 -17\.1 -21\.3 -1\.4 -26\.2 -39\.0 as % of GDP -1\.4% -2\.2% -1\.9% -0\.1% -1\.9% -2\.6% Excluding grants -25\.7 -40\.0 -90\.8 -89\.5 -104\.9 -123\.2 Overall balance (cash basis) -10\.3 -1\.9 -38\.3 -15\.1 -40\.0 -46\.5 as % of GDP -1\.6% -0\.2% -3\.3% -1\.2% -2\.9% -3\.1% Table 4: Outstanding Debt 1985 1990 1995 1996 1997 1998 Public debt (CFAF billion) 178\.0 223\.8 699\.5 728\.7 813\.8 793\.1 as % of GDP 26\.8% 28\.8% 61\.1% 59\.4% 59\.2% 52\.4% External debt (CFAF billion) 165\.5 208\.6 667\.5 692\.6 768\.7 753\.4 as % of total debt 93\.0% 93\.2% 95\.4% 95\.0% 94\.5% 95\.0% Domestic debt (CFAF billion) 12\.5 15\.3 32\.0 36\.1 45\.1 39\.8 Table 5: Debt Service 1985 1990 1995 1996 1997 1998 Public debt service (CFAF billion) 13\.8 20\.8 40\.4 29\.6 35\.1 36\.5 as % of GDP 2\.1% 2\.7% 3\.5% 2\.4% 2\.5% 2\.4% as % of currentrevenue 22\.0% 22\.7% 29\.1% 18\.5% 19\.3% 18\.3% Extemal debt service (CFAF billion) 12\.5 12\.6 29\.2 24\.2 26\.6 28\.4 as % of exports -24\.1% -29\.2% -53\.4% -37\.4% -36\.4% -37\.5% Domestics debt service (CFAF billion) 1\.4 8\.2 1\.2 5\.5 8\.5 8\.1 as % of the total 9\.8% 39\.5% 27\.7% 18\.4% 24\.2% 22\.2% - 18-  (b) Cofinanciers: Not applicable (c) Other partners (NGOs/private sector): Not applicable 10\. Additional Information Not applicable - 19 -  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome/ Ilmact Indicators: -_ _ _ _ GDP/capita over 3% p\.a\. NA 2\.4% estimate for 1999 Double literacy rate from 20% to 40% in NA 18\.4 in 1998 2005 Raise life expectancy to 57 years in 2008 NA 54 Limit inflation to 3% p\.a\. NA 2\.7% estimate for 1999 Reduce current account deficit, excluding NA 13\.3 % estimate for 1999; grants, to 9% of GDP by 2000 14\.8% projected for 2000 Output Indicators: Public Finance: Reduce exemptions, computerize customs NA Tax revenue in 1999 17% higherthan in operations and improve tax administration to 1998, broadly in line with program target offset losses due to phasing in of Common Extemal Tariff (CET) Public Expenditure: Implement the Medium Term Expenditure NA MTEF implemented for six ministries in Framework (MTEF) for education and health 1999, including education and health, and for in 1999, infrastructure sectors in 2000 and all ministries in 2000 all sectors in 2001 Public administration: Initiate civil service reform in Ministry of Civil NA Implementation of merit-based promotion Service, extend to Ministries of Education system; hiring of contractuals in education and Health, and laterto all ministries and health to reduce cost Public enterprise: Implement 1998 tranche of the program, NA 1998 and 1999 tranches were not fully including liquidation of five companies and implemented\. There were delays in the call fbr bid for a hotel privatizabon process of the telecommunications and airline companies, and in the liquidation of a textile company End of project The adjustment credit was approved and its single tranche was released following completion of the 1998 reform program - 20 -  Annex 2\. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Credit Amount 15\.00 15\.00 Total Baseline Cost 15\.00 15\.00 Physical Contingencies 0\.00 0\.00 Total Project Costs 15\.00 15\.00 Total Financing Required 15\.00 15\.00 - 21 -  Annex 3: Economic Costs and Benefits Not applicable - 22 -  Annex 4\. Bank Inputs (a) Missions: ( \. - :-le\.g\.2 Eat M, etc\.) ::: \. i \. Deelp Identification/Preparation 2 Economists 1 Consultant (tax policy expert) Appraisal/Negotiation 2 Economists Supervision I Economist ICR 2 Consutants 3 1 Economist and 2 Peer Reviewers (economists) (b) Staff: -tag- of Project Cycle L- -- \. = \. \. \. X \. \. No , ': ' ' ' \.~~~~~~~~~~~~~~~~~~~~~~\. \. Identification/Preparation 28\.3 141,300 Appraisal/Negotiation __6\.1 ____29,500 S ervision 5\.8 25,160 ICR I_3_5 16,005 Total 40\.3 195,960 - 23 -  Annex 5\. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating \. Macro policies O H *SUOM O N O NA Z Sector Policies O H OSUOM O N * NA L Physical O H O SU O M O N * NA Z Financial OH OSUOM ON O NA X Institutional Development 0 H O SUO M 0 N 0 NA Z Environmental O H O SU O M O N * NA Social ZPoverty Reduction OH OSU OM ON O NA OGender OH OSUOM ON *NA EJ Other (Please specify) O H OSUOM O N O NA Z Private sector development 0 H O SU O M 0 N 0 NA * Public sector management 0 H 0 SU O M 0 N 0 NA LIZ Other (Please specif) OH OSUOM O N O NA - 24 -  Annex 6\. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactoly, U=Unsatisfactory, HU=Highly Unsatisfactory) 6\.1 Bank performance Rating O Lending OHS OS OU OHU Cl Supervision OHS OS OU OHU O Overall OHS OS C U O HU 6\.2 Borrowerperformance Rating LI Preparation OHS OS C U O HU O Government implementation performance O HS 0 s C U C HU El Implementation agency performance O HS 0 s C U C HU FI Overall OHS OS C U O HU - 25 -  Annex 7\. List of Supporting Documents Not applicable - 26 -

REVIEW

P007846

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 27601 IMPLEMENTATION COMPLETION REPORT (CPL-38410 SCL-3841A) ON A LOAN IN THE AMOUNT OF US$25\.0 MILLION TO THE REPUBLIC OF PANAMA FOR A RURAL HEALTH PROJECT May 18, 2004 Human Development Sector Management Unit Central America Country Management Unit Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective December 2003) Currency Unit = Balboa 1\.00 Balboa = US$ 1\.00 US$ 1\.00 = 1\.00 Balboa FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS BHNSP Basic Health and Nutrition Package of Services CAS Country Assistance Strategy CHW Community Health Worker (Promotor de Salud) CWB Community Water Board (Juntas Administradoras de Agua) ERL Economic Recovery Loan FES Panamanian Social Emergency Fund (Fondo de Emergencia Social) FIS Social Investment Fund (Fondo de Inversion Social) GOP Government of Panama HA Health Assistant (Asistentes de Salud) ICB International Competitive Bidding IDB Inter-american Development Bank LCB Local Competitive Bidding LIB Limited International Bidding MIPPE Ministry of Planning and Economic Policy (Ministerio de Planificación y Política Económica) MINSA Ministry of Health (Ministerio de Salud) MTR Mid-term Review NGO Non Governmental Organizations PAU Project Administration Unit PCU Project Coordinating Unit PDO Project Development Objectives PNP-C Pilot Nutrition Project - Chiriqui SOE Statement of Expenditures UNICEF United Nations Children Fund Vice President: David de Ferranti Country Director Jane Armitage Sector Director/Manager Ana-María Arriagada Task Team Leader/Task Manager: Montserrat Meiro-Lorenzo  PANAMA RURAL HEALTH 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 8 5\. Major Factors Affecting Implementation and Outcome 17 6\. Sustainability 19 7\. Bank and Borrower Performance 20 8\. Lessons Learned 22 9\. Partner Comments 24 10\. Additional Information 24 Annex 1\. Key Performance Indicators/Log Frame Matrix 25 Annex 2\. Project Costs and Financing 28 Annex 3\. Economic Costs and Benefits 31 Annex 4\. Bank Inputs 32 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's Contribution 37 Annex 9\. Interventions of the Basic Health and Nutrition Package 47  Project ID: P007846 Project Name: PA RURAL HEALTH Team Leader: Montserrat Meiro-Lorenzo TL Unit: LCSHH ICR Type: Core ICR Report Date: May 18, 2004 1\. Project Data Name: PA RURAL HEALTH L/C/TF Number: CPL-38410; SCL-3841A Country/Department: PANAMA Region: Latin America and the Caribbean Region Sector/subsector: Health (36%); Water supply (30%); Sanitation (28%); Central government administration (6%) Theme: Nutrition and food security (P); Child health (P); Rural services and infrastructure (S); Civic engagement, participation and community driven development (S) KEY DATES Original Revised/Actual PCD: 01/08/1993 Effective: 06/01/1995 10/11/1995 Appraisal: 12/15/1993 MTR: 08/15/1997 12/01/1998 Approval: 02/07/1995 Closing: 06/30/2000 06/30/2003 Borrower/Implementing Agency: Republic of Panama/Ministry of Health Other Partners: FES/FIS, UNICEF, Municipalities, NGOs, private sector, communities STAFF Current At Appraisal Vice President: David de Ferranti S\. Javed Burki Country Manager/Director: Jane Armitage Edilberto Segura Sector Manager: Evangeline Javier Kye Woo Lee Team Leader at ICR: Montserrat Meiro-Lorenzo E\. De Gaiffier ICR Primary Author: Maria R\. Puech Fernandez; Montserrat Meiro-Lorenzo; Kathryn Johns Swartz 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 Project at Risk at Any Time: Yes  3\. Assessment of Development Objective and Design, and of Quality at Entry 3\.1 Original Objective: In the early 1990s, the Government of Panama (GOP) was engaged in an economic and social recovery program to establish conditions for sustained economic growth with support from the World Bank-financed Economic Recovery Loan (ERL; Ln\. 3438-PA, 1992)\. At that time, Panama had very high rates of malnutrition, particularly among young children, and inadequate access to safe potable water and basic sanitation in rural areas\. Based on the background work and issues identified in the ERL, and in response to the GOP's request for support in preparing a pilot nutrition program, the Rural Health Project was prepared and approved by the World Bank in May 1995\. The project design was coordinated with other partners in Panama, including the Inter-American Development Bank (IDB), the Panama Social Investment Fund (Fondo de Inversión Social, FIS, initially the FES, Emergency Social Fund), and UNICEF\. The project was designed to help improve the access of rural populations to basic services and strengthen the country's social safety net\. The main objectives were to: (a) reduce the incidence of malnutrition among children under age five and breast-feeding and pregnant women in the poorest 28 districts; (b) increase the coverage of water supply and basic sanitation in all rural areas; (c) train new or existing Community Water Boards (CWBs) to improve their capacity to operate and maintain systems under their responsibility; and (d) strengthen the institutional capacity of the Ministry of Health (Ministerio de Salud MINSA) to plan, execute, monitor, and evaluate: (i) the nutrition strategies and programs supported by the project; and (ii) its statutory obligations related to provision of basic water supply and sanitation to small rural communities and environmental health regulations\.[1] Assessment The project objectives were important for Panama and consistent with the country's policies and strategies in the social sectors and for poverty alleviation, particularly related to nutrition, and water supply and sanitation subsectors\. Nevertheless, as detailed in the following sections, there were some serious problems with the original project design, including a high degree of complexity, poor sequencing of activities, and weak assessment of implementation capacity\. The original design relied almost exclusively on MINSA as the main implementing agency, which proved to be over ambitious\. At that time, MINSA was responsible for policy formulation, regulation, and program monitoring of public health, including nutrition and water supply and sanitation\. In 1993, MINSA's responsibility for provision of simple rural water supply and sanitation systems was increased from communities of less than 500 to communities of less than 1,500 residents--this project would help MINSA carry out this new responsibility\. The Rural Health Project supported health and nutrition issues and the efficiency of social sector expenditures identified in the ERL and it was the first Bank operation in the social sectors in Panama\. The project was consistent with the World Bank's Country Assistance Strategy (CAS, 1994) and supported the CAS objectives of poverty alleviation, rehabilitation of basic infrastructure, and improving equity in social sector spending\. 3\.2 Revised Objective: The project was radically restructured in 2000, yet the original objectives were not revised since they still applied in the restructured project\. The restructuring fundamentally altered the original implementation - 2 -  arrangements and thereby substantially increased the likelihood of achieving the objectives (see Section 3\.4)\. In the rural water sector, the new activities supported and went beyond reforms initiated by the GOP and in the health sector, the new activities set in motion some structural changes, while also dovetailing with reforms supported by the Health Reform Pilot (Ln\. 4375-PA, 1998)\. 3\.3 Original Components: The project had three components financed with a US$25\.0 million IBRD Loan, GOP counterpart of US$15\.4 million and an estimated beneficiary contribution of US$1\.3 million for a total cost of US$41\.7 million\. Component 1 ­ Nutrition (US$13\.1 million or 31 percent of total project costs, no beneficiary contributions under this component)\. This component would support the GOP's efforts to develop a targeted and nutritionally superior program of food supplementation reaching the most vulnerable members of the household--children under five, and pregnant and lactating women--in the 28 poorest districts (mainly rural areas with dispersed populations)\. This component would be implemented in three phases to test the proposed methodologies in a pilot area and gradually build MINSA's capacity in nutrition services\. There were three subcomponents: a) Training of Community Health/Nutrition Workers (US$2\.6 million or 6 percent of total cost) to provide basic nutrition and health services to about 75,000 rural residents without adequate access to the public health system\. b) Complementary Feeding Program (US$10\.0 million or 24 percent of total baseline costs) for the most vulnerable groups; c) Training and Supervision (US$0\.5 million or 1 percent of total cost) of MINSA staff assigned to outpatient facilities in treatment of malnutrition and supervision of Community Health Workers (CHWs, promotores de salud) and Health Assistants (HAs, asistentes de salud)\. Component 2 ­ Rural Water Supply and Sanitation (US$21\.3 million or 51 percent of total project costs including contingencies)\. This component would support MINSA's efforts to provide water supply and basic sanitation for rural communities of less than 1,500 inhabitants and monitor water quality and environmental health conditions\. There were three subcomponents: a) Construction and/or Rehabilitation of Rural Water Supply and Sanitation Systems (US$19\.1 million or 46 percent of total costs)\. It was expected that MINSA would execute about 75 percent of the systems and FES would execute 25 percent\. Communities were expected to participate in all phases of the subproject cycle and contribute at least 15 percent of the investment costs in the form of land, materials, or unskilled labor\. Upon conclusion of the works, the community would have to establish and operate a Community Water Board (CWB) with legal standing and pay monthly water fees to cover operations and maintenance\. b) Promotion, Training and Support of Community Water Boards (US$1\.4 million or 3 percent of total costs)\. MINSA would support the establishment or legalization of CWBs and provide regular supervision and technical support in operating and maintaining a water supply and basic sanitation system\. c) Development of a Water Quality Control Program (US$0\.8 million or 2 percent of total baseline costs) for establishment of a central water quality laboratory and creation of a computerized information system\. Component 3 ­ Institutional Strengthening (US$7\.3 million or 18 percent of total costs including contingencies)\. This component would strengthen the technical and managerial capacity of MINSA to direct, plan, and supervise implementation of Components 1 and 2\. It would fund studies, poverty monitoring, baseline studies, additional staff, technical assistance, training, equipment, vehicles, and incremental operating budgets in three areas: - 3 -  a) Sub-directorate General of Health Services (US$2\.6 million or 7 percent of total costs); b) Sub-directorate General of Environmental Health (US$2\.8 million or 7 percent of total costs); and c) Project Administration Unit (PAU) (US$1\.9 million or 5 percent of total costs)\. Assessment The project components were linked to the objectives described above and addressed the main challenges facing the GOP in terms of supporting the health sector and poverty alleviation\. However, based on the poor implementation performance from the beginning and the findings of the Mid-term Review in 1998, there were disconnects in several areas (see Sections 3\.4 and 3\.5)\. In retrospect, it seems that the role of the loan was to increase financial resources for new or already existing activities without really analyzing or introducing any improvements or innovations\. Also, the design did not seem to take into account all that was known about overly bureaucratic procedures in the country and the low implementation capacity of public agencies\. 3\.4 Revised Components: First project revision (July 1997) In 1997, the GOP requested and the Bank agreed with the inclusion of Community Farm Subprojects to complement the Bank-financed complementary feeding program\. These subprojects would address the structural problems causing malnutrition in rural areas, thus increasing the sustainability of malnutrition reduction in these areas\. The Loan Agreement was amended to include about 300 Community Farm Subprojects, financing agricultural supplies and materials, and the number of poverty districts (as defined by MIPPE) where the project would concentrate its activities was increased from 28 to 30\. Second project revision - project restructuring (August 2000) By the second half of 1998, implementation of the Rural Water Supply and Sanitation Component was unsatisfactory, the lack of counterpart funding had become a chronic issue, and procurement procedures were extremely lengthy and inflexible\. The MTR in December 1998, identified significant design flaws and noted that either a substantial restructuring or a cancellation of the loan was needed\. The main problems identified were: Coordination and targeting of the Nutrition Component was poor--it overemphasized supplemental feeding versus more sustainable and effective interventions to reduce malnutrition such as counseling and growth promotion; The implementation of the Nutrition Component was based on the deployment of the CHWs, but their training was delayed and the project did not consider adequate incentives to keep them in the system; The implementation arrangements planned for MINSA to be responsible for the design, construction, and maintenance of nearly all of the rural water systems, but MINSA clearly lacked the managerial capacity to carry out this component; Monitoring and supervision of project-supported activities were weak, contributing to low quality implementation; The decentralization reform of MINSA (which was approved just as the loan became effective in October 1995) further diffused accountability for implementation and generated a mismatch between the centralized project management and MINSA's new structure; and The project-financed technical personnel, hired to strengthen MINSA's capacity to implement project activities, mainly carried out the day-to-day work of MINSA and contributed little to improve the implementation pace\. At that time, the country was in the middle of a pre-electoral period so decisions to revise the project - 4 -  fundamentally had to wait until the new administration was in place\. By mid-1999, with only one year left in implementation, the project lagged substantially behind on implementation (only 32 percent of loan disbursed), had a weak PAU and, most worrisome, was very unlikely to achieve its development objectives\. Bank management raised the problems with this project with the new authorities in September 1999 and presented either the need to totally restructure the project or face potential cancellation of the loan\. After much discussion, the GOP and the Bank agreed on a radical restructuring of the project\. Project redefinition was participatory and thus somewhat lengthier than other restructurings (the GOP and Bank teams worked intensively during 1999-2000), but it was worthwhile in the end\. During that period, several studies were carried out to assess the technical, financial and institutional aspects of the project components and possible options to reorient the project\. The restructuring was finalized during a two-day workshop with open discussions to review the problems affecting project performance, the findings from the studies, and the proposed alternatives\. The restructured project affirmed the original objectives, however the means to achieve them were deemed inadequate\. Based on country knowledge and the MTR findings, the restructuring changed how MINSA was to finance, organize, manage and provide project-supported services and modeled what their role would be as a modern ministry\. Specifically, the redesigned project sought to: (i) test third party arrangements for the provision of water and sanitation and basic nutrition and health services to rural poor; (ii) bring services to isolated populations; (iii) foster decentralization to local authorities and community empowerment; (iv) improve coordination among the project components by integrating activities in the same geographical areas; (v) combine health prevention and nutrition interventions, redirecting the latter towards the more cost-effective growth promotion strategy; and, (vi) increase implementation speed and reduce lengthy administrative procedures by contracting UNDP as a procurement agent\. In August 2000, the Loan Agreement was amended to reflect agreed changes with a two-year extension of the Closing Date until June 30, 2002\. There was eventually one additional extension until June 30, 2003\. The total cost of the restructured activities was US$15\.6 million and approximately US$12\.0 million (60 percent) of the undisbursed balance of US$20\.0 million was reallocated to finance 77 percent of these estimated costs, and the GOP would finance the remaining US$3\.7 million\. The main changes in the components are detailed below\. Component 1 ­ Basic Health Care and Nutrition (renamed) This component introduced contracting-out to NGOs, through the National Coordination of Health (Coordinadora Nacional de Salud, CONSALUD),[2] the provision of a basic package of 15 health and nutrition services (BHNSP) to benefit approximately 90,000 residents in 120 rural communities (see Annex 9 for a list of services)\. All communities were located in districts where the incidence of poverty was over 70 percent (as determined by the Borrower's 1997 Poverty Map, published in March 1999)\. The restructured component integrated nutrition and health interventions to address more effectively (from a technical and administrative perspective) the health problems of the beneficiary population\. The nutritional activities focused on growth promotion and parent education to address nutritional deficiencies in infants and toddlers between 6 and 36 months of age\. Basic health services were to be provided to all children under age five and pregnant or lactating mothers of the selected communities\. The NGOs providing the - 5 -  BHNSP were expected to carry out on-the job training and supervision of CHWs and ensure community participation in the process\. Supplementary feeding, as a preventive measure, was removed, but it was maintained as a therapeutic measure targeted to children with retarded growth\. Food supplements purchased from UNICEF were financed through counterpart funding\. The reformulation cancelled the financing for Community Farm Subprojects beyond the 92 that were already completed\. Component 2 ­ Rural Water Supply and Sanitation The reorientation of this component was based on the Executive Decree No\. 2 of Law 26 (1997), which redefined the institutional and legal framework and private sector participation in the provision of water and sanitation services\. The Decree establishes functions for the main institutions in the water and sanitation sector\. Specifically, it defines MINSA's function as the sector's policy maker and the institution responsible for monitoring and evaluating the implementation of sector policies and delivery of services by third parties to rural communities\. The restructured component would support MINSA's efforts to reduce its direct implementation responsibilities related to installing or supplying rural water and sanitation systems, and strengthen its role in terms of policy formulation, regulation and quality monitoring\. The component introduced testing of innovative implementation arrangements for the execution of rural water systems and the supervision of the services delivery\. Detailed activities included contracting-out the design, construction and supervision of water works to: (i) government agencies (such as the Social Investment Fund, FIS), (ii) local authorities i\.e\. municipalities; and (iii) private firms, UNICEF, and NGOs\. The new activities were designed to address the efficiency, implementation speed, and cost bottlenecks identified\. The project would finance the promotion, design, construction, or rehabilitation of approximately 310 rural water systems, serving about 63,000 beneficiaries\. Approximately three-quarters of the beneficiaries were to be in districts with a poverty incidence of 50 percent (as determined by the Poverty Map)\. Priority was to be given to those communities selected under the BHNSP\. The component would also continue to support water quality improvement through: (i) equipping and training staff of six regional laboratories; (ii) setting-up a simple computerized information system on rural water resources to include information on the surveillance of water quality; (iii) contracting NGOs to provide oversight and technical support on a regular basis to Community Water Boards (CWBs); and (iv) piloting a community-based water quality monitoring program\. Component 3 ­ Institutional Strengthening\. This component changed its focus from strengthening MINSA's capacity to design and construct water and sanitation facilities to strengthening the Ministry's capacity to purchase, supervise and evaluate services, not only in the construction of rural water and sanitation systems, but also in the provision of basic health and nutrition services\. Therefore, the new activities supported MINSA's efforts to carry out the responsibilities and functions related to its leadership role in the health and water sectors\. The restructuring also transformed the PAU into a PCU, with a clear mandate and stronger technical capacity\. In the water sector, component activities included: (i) training of MINSA staff on contract management, water quality surveillance, evaluation and protection of water resources, assessment of community water needs and water system evaluation; (ii) carrying-out studies on appropriate technologies and cost-effective methods related to well drilling, - 6 -  water system and latrine design, and water quality detection and maintenance; and (iii) completing a comparative evaluation of implementation arrangements supported by the project\. For basic health and nutrition, activities included training and technical assistance to develop purchasing functions in MINSA, including NGO assessment selection, contract management, monitoring, evaluation, benefit design, and evaluation of services delivered cost and outputs\. The total cost of the restructured project increased to US$42\.5 million due to the increase in counterpart funding for the therapeutic supplemental feeding as mentioned above\. The largest increase was in the Rural Water Supply and Sanitation Component\. Table 1: Original Component Amounts and Restructured Component Amounts Components SAR Estimate Restructured Difference (US$million) Project (US$million) (US$million) 1\. Nutrition (renamed to Basic 13\.1 11\.0 -2\.1 Health Care and Nutrition) 2\. Rural Water Supply and 21\.3 26\.0 +4\.7 Sanitation 3\. Institutional Strengthening 7\.3 5\.5 -1\.8 TOTAL 41\.7 42\.5 The restructured project introduced new operational arrangements that have subsequently been adopted by MINSA and are the basis for the recently-approved IDB-financed project\. In the health sector, by contracting NGOs services through CONSALUD, the restructured project coincided with the most fundamental reform in the sector that is being supported through the Health Reform Pilot (Ln\. 4375-PA)\. In summary, by reducing MINSA's direct implementation of day-to-day activities while strengthening its capacity to manage and oversee sector activities, it demonstrated to both the GOP and the Bank, that it is possible to successfully transform a project to meet new needs and implementing arrangements\. 3\.5 Quality at Entry: The project's quality at entry is considered unsatisfactory\. Although the project was consistent with the country's development priorities and the Bank's CAS, there were several significant shortcomings in project design and assessment of institutional capacity that affected project implementation from early stages\. Most of these issues, as detailed below, were identified in the MTR and addressed in the restructured project\. Project Design The design was overly complex and had inadequate sequencing of activities, which jeopardized the likelihood of achieving targets and objectives from the very beginning\. The traditional operational procedures for construction of rural water systems that had proven to be slow and inefficient were adopted without changes\. The targeting of beneficiary communities was not coordinated between the Nutrition and Rural Water Components--hindering the integration of interventions\. Coordination between the two components was left open, and the lack of technical coordinators further impeded any possible coordination on the ground\. There was inadequate assessment of the difficulties that project implementation would encounter due to the remoteness of the populations to be reached with the proposed nutrition and water activities\. The geographical and ethnic realities of the Panama were not properly factored in at the time of preparation\. - 7 -  Institutional and Management Issues The project relied heavily on MINSA as an implementing agency and the institutional and leadership assessment overestimated its capacity to carry out project activities\. The identified weaknesses were deeper than originally perceived and could not be overcome by the measures envisioned in the project\. Burdensome internal administrative procedures at the government and ministerial levels were seriously underestimated\. Numerous and lengthy approval steps had to be taken before resources could be made available to the project\. The power exerted by central government institutions--in particular the ex-ante and ex-post controls exercised by the General Comptroller's office--and its lack of commitment to the project, affected implementation from the very beginning\. The Project Administrative Unit (PAU) was designed with a very limited technical and coordinating mandate, which made it powerless to address project implementation issues\. There were weak arrangements for monitoring progress and achievements at the time of project approval and there were no baseline indicators that would allow an assessment of future project impact\. The procurement arrangements for the water and sanitation systems were inadequate and fragmented among diverse procurement methods, which resulted in long delays and poor coordination\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective: The project's overall performance is considered satisfactory\. Project restructuring successfully managed to turn around project implementation and transform a poorly designed and implemented project into one that successfully achieved its main development objectives\. The original objectives and the impact indicators were unchanged, although new targets and milestones were agreed upon during restructuring\. The following indicators measure the achievement of project objectives: reduction in malnutrition, particularly by the evolution of the prevalence of malnourished women and children under five years of age; of low birth weight babies, and of growth retardation in children six years old; increased access to basic water supply and sanitation systems; training of Community Water Boards to improve their capacity to operate and maintain systems under their responsibility strengthening of MINSA's institutional capacity\. Reduction in malnutrition\. The country has improved its capacity to reduce malnutrition\. Available data from MINSA on malnutrition of pregnant women has shown positive results, especially in recent years\.[3] In 2002, the prevalence of pregnant women who are malnourished was 9\.5 percent in the whole country (versus 10\.5 percent in 1997)\. MINSA's data do not include data from the Ngobe Bugle and Bocas del Toro regions, which have a large number of indigenous population, showing a lower than real number of malnourished pregnant women at national level\. The percentage of malnourished children under age five has improved as well, going from 3\.7 percent in 1997 to 2\.0 percent in 2001, excluding the same regions mentioned above\. In addition, low birth weight has been reduced from 9\.8 percent in 1997 to 5\.8 percent in 2001\. Growth retardation in six-year-old children shows a dramatic improvement for rural and indigenous population\. According to census data, during 1994 to 2000, the prevalence of chronic malnutrition in children under six years of age went from 9\.9 percent to 8\.0 percent\. For the same period, in the rural population, the prevalence went from 33\.8 percent to 20\.6 percent\. For the indigenous population, the improvement was not as dramatic (from 68\.4 percent to 64\.4 percent)\. An impact evaluation of the Basic Health and Nutrition Component was carried out in the second half of 2003 to assess the impact of project interventions, during the years 2001-2003\. The evaluation supports the - 8 -  perception that, because of the project (although maybe not exclusively), the general health and nutrition status of the target population has improved in recent years\. The impact on reduction of malnutrition in pregnant women and children under 36 months of age was greater in the communities with the project interventions than in the control group\. Data from the evaluation show that populations covered by the itinerant services provided by NGOs had a greater use of basic health services than those that were not covered\. The evaluation also indicates that NGOs reached all the targeted communities, ensured that supplementary feeding reached the beneficiaries when necessary, and that it was correctly prepared and administered (see Annex 1)\. The impact evaluation indicated that over the last two years, the introduction of the BHNSP had a positive impact on the use of preventive health services among the poor rural population\. More specifically, the evaluation findings show that: [4] Over 85 percent of the surveyed population in the intervention areas knew about the services provided by the NGOs' itinerant health teams\. The population reported a high level of satisfaction with the package of services and the work of the NGOs\. Those who know about the services had a very high rate of use, indicating an acceptance of the package\. The evaluation showed evidence of socioeconomic factors (language, cultural heritage, accessibility) have an influence in the use and acceptance of the BHNSP and they should be taken into account when preparing a strategy to successfully reach the diverse communities\. The use of prenatal care was higher for the population targeted by the BHNSP than in the control group (the population serviced by MINSA)\. This confirms that the delivery of health services through itinerant teams successfully reaches beneficiaries and allows for an improvement in the level of use of health services for the poorer rural populations\. The improvement in access to health services was higher for populations with significant numbers of indigenous groups, generally located in more remote geographical areas and with less access to social services\. The use of preventive services, including vaccination and growth monitoring of healthy children, was higher among the beneficiaries of the package\. Once people were sick, the use of itinerant health teams did not affect the use of medical consultations in the targeted population\. This might have been influenced by the extended period (5-6 weeks) in between NGO visits\. Although the targeted group had a higher use of services, there were not significant differences in terms of expenditures on health services between the targeted population and the control group, except for the expenditures in after-delivery care\. This is good news, as an increased use of health services did not imply an additional burden on this poor population\. Increase in access to basic water supply and sanitation systems\. By the end-of-project, the coverage in access to basic water supply among rural populations (excluding indigenous communities) reached 91\.4 percent (over 784,000 inhabitants) (MINSA data, 2002)\. In indigenous areas, coverage reached 42 percent in 2002 (90,626 inhabitants)\. Regarding sanitation, progress was not as dramatic\. Coverage of the total [5] [6] population has increased from 86\.9 percent in 1990 to 93\.2 percent in 2000\. Coverage in urban areas has remained stable (around 98\.7 percent in 2002)\. In rural areas, coverage increased from 73\.2 percent in 1990 to 86\.5 percent in 1996\. Although coverage numbers are acceptable, they hide the enormous differences among rural communities\. The most remote communities, such as in the provinces of Darien and Kuna Yala) still present serious deficiencies due to the difficulties to reach them, bring materials, and actually build the water systems\. - 9 -  Training of Community Water Boards\. The CWBs were successfully trained, the target was met, and it has contributed to improving their capacity to operate and maintain the rural water systems under their responsibility (see targets in Annex 1)\. The training delivered by MINSA evolved during the project and it improved its effectiveness in the last three years and involved a larger number of community members\. The larger number of participants in the training contributed to a cascading effect and to the greater involvement of community members in operating and maintaining the water systems\. Nevertheless, continuity of training and sustained technical support from MINSA will be required to sustain achievements in the proper operation and maintenance of the systems\. Strengthening of MINSA's institutional capacity\. Throughout the project, MINSA's institutional capacity was strengthened by the change in its role from executing to contracting services and supervising and monitoring the delivery\. Thus, the project interventions have had a positive impact on the implementation of sectoral policies\. A significant number of technical experts have been incorporated as MINSA personnel, thereby increasing its capacity to achieve the country's policy goals in the areas covered by the project\. MINSA's personnel have received relevant training in management, contracting, and information areas\. There has been progress towards decentralization of functions, where regional offices have undertaken greater responsibility to monitor and supervise the delivery of services by third parties\. Specialized personnel have been incorporated in the offices (engineers, health educators), but not evenly across the regional offices\. MINSA has strengthened its role as rector of the water sector, although its capacity to enforce the norms related to water aspects systematically and consistently monitor water quality provided by the water systems is insufficient\. MINSA has not yet been able to design and carry out a sectoral strategy that integrates different actors in the sector\. MINSA has progressed in setting up the basic elements to launch a management information system, which will allow systematization of critical information to fulfill its normative and supervisory role\. Nevertheless, the system was not fully functioning by project closing\. Institutional capacity has been strengthened across the system due to the innovative experiences piloted under the project, including through: (i) the capacity built by NGOs and their experiences in the delivery of the BHNSP; (ii) the leadership given to two municipalities (Bugaba and Gualaca) for the process of provision of water services to their communities; and (iii) the capacity gained by the communities from the training provided to the Community Water Boards and to community members to manage the rural water systems\. During the project, MINSA provided significant technical assistance to all of these actors, addressing the weak capacity in municipalities and in NGOs at the early implementation stages of these experiences\. The Staff Appraisal Report (SAR) proposed a baseline study on health and nutrition for the districts covered by the project, but it was never carried out\. The information in the SAR was data for the whole country and as a result, there is no actualized data for the outcome indicators as listed in the SAR\. However, during the ICR mission and through the impact evaluations of Components 1 and 2 (which compared beneficiary to control groups), efforts were made to gather national indicators comparable to those in the SAR, and most importantly indicators that could reflect progress related to the outcomes indicators in the SAR and the poverty alleviation objective in the areas covered by the project\. Poverty Alleviation Objective\. This project was a Program of Targeted Intervention\. However, the SAR did not detail specifically how the project will alleviate poverty\. For the purposes of the ICR, poverty was broadly defined and the strategy used in this project to alleviate poverty was increasing access to quality basic services (nutrition, water and sanitation)\. With this is mind, the poverty alleviation objective was - 10 -  partially achieved\. By the end of the project, about 90,000 people that did not previously have access to basic health and nutrition services, now had access\. Likewise, more than 600 communities had access to a cleaner and more reliable source of water closer to their houses\. The impact evaluations carried out show that the poor in rural areas benefited substantially from the project activities\. However, some more remote areas are still underserved due to difficult logistics\. 4\.2 Outputs by components: Component 1 - Nutrition - renamed Basic Health Care and Nutrition (US$ 11\.0 million)\. Satisfactory\. This component had significant achievements after the restructuring, particularly in terms of reducing malnutrition among vulnerable population groups and increasing the use of preventive health services by communities in the poor, rural areas\. Activities carried out before project restructuring For the first two years of implementation, the component was advancing at a reasonable pace\. However, although MINSA met the targets on paper, in practice, the actions had the wrong sequencing, thus undermining their potential impact and the likelihood of achieving the corresponding objectives\. Moreover, current technical knowledge began to indicate strongly that supplementary feeding was: (i) not very effective at reducing malnutrition in the medium and long term; (ii) costly and used scarce resources inefficiently; and (iii) when it was facility-based (as it was in this case), it rarely reached marginal populations that are the most likely to suffer from malnutrition\. This same information pointed out that the poor nutritional status of children under age two among poor populations in areas lacking food insecurity (as it is the case in Panama) had several root causes, including: (i) poor hygienic conditions and food preparation practices leading to diarrhea; (ii) inadequate breast-feeding, weaning, and toddler feeding knowledge and practices; (iii) inadequate food practices during and after illness; and (iv) upper respiratory infections\. All these issues were better tackled through multisectoral interventions that integrated access to water and sanitation, access to basic health services, and growth monitoring and counseling for behavior change\. Although the original design did not integrate this new knowledge and eventually proved inadequate for its development goals, project implementation advanced and reached the following targets before restructuring: 1\.A Community Health/Nutrition Workers\. Between 1995-2000, out of the US$2\.6 million (or 6 percent of total project cost), around US$1\.02 million was spent in this subcomponent\. This activity was executed, but with considerable delays, which irreversibly undermined its impact\. The manual for training CHWs and HAs was developed only in the second half of 1998, and thus the training of 681 CHWs (47 percent of target) and 141 HAs (117\.5 percent of target) started only after the MTR (December 1998)\. Once the training started, the quality was satisfactory, as evidenced by interviews during the ICR mission\. Additional problems included: (i) due to training delays, the delivery of health care to rural communities and the celebration of health days to examine and weigh the target population did not happen as planned; (ii) once trained, the CHWs who worked on voluntary basis and were not remunerated, tended to leave their practice, undermining the sustainability of project interventions; (iii) the number of vehicles provided to the health posts and centers (puestos and centros de salud) was insufficient to adequately carry out supervision activities and reach the most remote communities to be covered by the project\. 1\.B Complementary Food and Micronutrients\. Out of the US$10\.0 million allocated to this component (24 percent of project cost), about US$6\.44 million was executed before project restructuring\. These funds financed the development of a food supplement made with national products by a local firm (Nutricrema) and its purchase and distribution to approximately 117,540 children aged 6 to 60 months and 34,166 pregnant and breast feeding women (137 percent and 237 percent of targets respectively)\. However, in this case, attaining and even surpassing the targets provides an inaccurate picture of success for this - 11 -  component\. The MTR concluded that the impact of the activities was probably poor, particularly among isolated and marginal populations, because: (i) food storage and distribution was weak, and once the Nutricrema was acquired by MINSA it languished for long periods in the storage facilities and it was irregularly distributed to the health facilities; (ii) contacts between the health facilities that were to provide the services and hand-out supplementary feeding and rural beneficiaries were too intermittent and dependent upon people arriving at the location were these inputs were provided\.; (iii) the exit criteria defined for the project were generally not applied, so the program became a food distribution program; (iv) monitoring and supervision of project-supported activities was deficient; and (v) planned complementary health interventions did not occur because there were no CHWs\. After the first amendment in 1997, this component also financed a total of 92 Community Farm Production subprojects, out of the planned 300\. The project restructuring cancelled these remaining subprojects\. 1\.C MOH Staff Training\. Before the restructuring, about US$0\.78 million was spent under this component (above the US$0\.5 million assigned in the SAR) to train 1,339 MINSA staff from the regional offices, health centers, sub-centers, and posts (out of 950 foreseen in the SAR)\. Training concentrated on: (i) identification, monitoring, and prevention of nutritional problems in the community and at the primary and referral levels of the health system; and (ii) supervision of HAs, CHWs and community organizations\. Under this subcomponent, MINSA recruited nutritionists, auxiliary nutritionists, nurse assistants, health educators, and administrative staff\. Restructured Component As described previously, the sum of implementation problems together with the nature of the health interventions prompted the decision to restructure the project--to change radically what was going to be financed and how MINSA was going to finance, organize, manage and provide project-supported activities\. This entire component was condensed into one subcomponent to finance the delivery of a basic package of 15 nutrition and health services (BHNSP) by NGOs on an itinerant basis to a target population of 90,000 beneficiaries living in 120 rural, isolated mostly indigenous communities that had high levels of poverty and very poor access to basic health services\. All milestones established for this component were met\. This subcomponent was extremely innovative and promoted a strategy to foster demand for health and nutrition services\. The delivery of the BHNSP was contracted out to NGOs, which acted as providers\. After an evaluation of NGOs in the country, six NGOs were invited to participate and five were selected to deliver the BHNSP through contracts signed with CONSALUD (the contract with one NGO was discontinued due to poor performance)\. The delivery of services was finally carried out by four NGOs, after training by MINSA on how to deliver the basic health service package\. A total of fourteen manuals (Guias) for BHNSP implementation were prepared, but there was not a comprehensive operational and organizational manual for the different layers of the subcomponent (BHNSP, Administrative unit of the contract, the basic health team and the community health team) and each NGO presented a different profile of health personnel (yet this did not impact implementation)\. Consultants designed a monitoring and supervision system for the delivery of the BHNSP, which included a steering committee with representatives of MINSA's different levels of authority, both national and regional\. The consultants also identified the procedures and areas of competence but, once implementation started, the monitoring system did not function as planned\. There were difficulties in the creation of the committee, particularly at the central level, due to poor coordination between the MINSA technical personnel and the technical coordination of the BHNSP\. Finally, the monitoring was contracted out to a firm\. Although this decision allowed for close follow-up, it somewhat undermined the possibility of - 12 -  strengthening the monitoring and evaluation capacity at MINSA's regional level\. At national level the situation was different because the PAU/PCU team, which has since been incorporated into MINSA and now works in the new IDB project, accompanied and directed all supervision activities\. The impact evaluation of this component showed significant achievements as summarized in Section 4\.1\. Among other outcomes that are not reflected in the evaluation are all the lessons learned during the implementation of the restructured activities\. Until the introduction of the BHNSP, there was no experience in Panama on itinerant delivery of services through a third party to isolated populations\. This component served as a valuable learning opportunity for MINSA, particularly with respect to improving project implementation and informing the new IDB-financed project\. Among the important themes, it is worth highlighting the following: It is necessary to find a balance between the role of the itinerant basic health team (equipo básico de salud) and the roles of the CHWs\. The manuals need to describe the activities expected from the CHWs\. Given the beneficiaries' demands, it is easier to focus on curative aspects versus education, counseling and behavior change\. Resistance can occur when innovations are introduced, but evidence of results, community acceptance, and dialogue can overcome such bottlenecks\. Initially, NGOs were reluctant to participate in the initiative and the regional and local health authorities felt it was an imposition from the central level\. Although this mistrust lessened, these attitudes somewhat affected implementation and a certain reluctance on the part of MINSA's health staff remained during implementation\. For costing a basic health package, it is necessary to introduce moderators based on remoteness of the areas covered and population dispersion\. Costs monitoring during implementation will provide a greater understanding of these variables and how to take them into account in the contracting process\. This aspect was highlighted in the impact evaluation\. The evaluation also recommends giving the NGOs more leeway to organize the provision of services and encouraging more focus on results\. Administrative procedures, including upfront clarity on payment methods, contract incentives, and maintenance of archives, are an integral part of the whole process and need to be given attention\. The evaluation results on the cost of delivering the BHNSP suggest that at current efficiency levels, the costs of bringing the BHNSP to the beneficiaries is the same as the cost of delivering these services in MINSA's health facilities--a somewhat surprising finding\. While negotiating the package of services to be delivered, certain adjustments may have to be made in terms of flexibility to provide services (number of health teams), frequency of the visits, use of communications, and dissemination of the itinerant services (to make the services appropriate to the particularities of language and specific cultural characteristics of the beneficiary population)\. The introduction of a beneficiary identification system would improve the monitoring and assessment of the impact of the BHNSP\. Component 2\. Rural Water Supply and Sanitation (US$26\.0 million of total project cost)\. Satisfactory\. This component successfully increased access to water supply and basic sanitation systems by rural communities of less than 1,500 inhabitants\. It improved the water quality control system with monitoring of water quality distributed for human consumption and environmental health conditions\. Unlike the first component, the original subcomponents were maintained after the restructuring, however in order to increase the likelihood that the outputs and impacts would be achieved, the implementation arrangements were radically changed\. The MTR highlighted the basic lack of capacity in MINSA to successfully carry out the planned activities\. Thus, this was an issue of how the activities were being carried out, not what type of activities were being financed\. Given this situation, the restructuring focused - 13 -  on reducing the bottlenecks to speed-up design and construction of water systems by contracting those services to third parties\. The restructuring successfully sought to change the way MINSA financed, organized and managed the provision of services to the rural population\. The main achievements by subcomponent are below: 2\.A Rural Water Supply and Sanitation Systems\. The initial amount allocated for this subcomponent was US$19\.1 million (or 46 percent of total project costs)\. In the first few years before restructuring, implementation was irregular, and administrative, organizational and planning errors resulted in poor execution--by the MTR, the achievement of targets was well below the SAR's projections, including: (i) only 156 new rural water supply systems (38 percent of the 425 planned in the SAR) were designed, constructed and supervised, serving about 60,000 people (95,000 target); (ii) about 73 existing water systems (30 percent of target) were rehabilitated, serving about 30,000 people (60,000 target); (iii) approximately 104 shallow-drilled wells (target of 300), and 80 dug wells (target of 150) were installed; and (iv) construction started on 22,450 latrines (target of 30,000), but only 16,000 were finalized\. The remaining 22,450 were only finalized in 2003\. An analysis of investments before the restructuring showed that the criteria used to select the communities to receive the water supply and sanitation services were very different of the ones used to select beneficiary communities for the nutrition component\. At that time, MINSA lacked sufficient qualified personnel in the regional offices to carry out execution of the works and it was relatively inexperienced in training CWBs and organizing communities to responsibility for the new rural water system\. In addition, one specific design mistake that affected project implementation was that the SAR stated that the equipment, including water pipes and pumps, would be purchased in bulk by MINSA and provided to contractors\. This arrangement proved to be inadequate and caused a loss of interest on the part of the contractors\. MINSA's new role in the construction of rural water supply and sanitation systems after restructuring was to contract-out to the private sector or delegate the design, construction, and supervision to third parties, rather than actually execute the works\. After the restructuring, a total of 370 new rural water supply systems and over 22,500 latrines were built, and close to 300 existing water supply systems were renovated in rural communities\. About 50 percent of the civil works were contracted to private sector companies and MINSA entered into inter-institutional agreements with UNICEF, the Social Investment Fund (FIS) and two municipalities (Gualaca and Bugaba) to carry out the works\. The new milestones and targets were surpassed for the construction of rural water systems (a total of 370 were built)\. UNICEF successfully implemented 111 water supply systems (one more than the number agreed with MINSA), focusing on a specific region and working closely with communities\. FIS's performance was poor (they only constructed ten water systems during the project) and the inter-institutional agreement was discontinued\. In a pilot effort to test different models, two municipalities were given the responsibility of creating rural water systems, with support from the Ministry\. MINSA was in charge of supervising all works, guaranteeing adequacy to the norms and the quality of the water system and ensuring that once built, the ownership was given to the community\. The municipalities did not have experience managing construction and thus, implementation was slow\. However, the quality of the works was adequate and near the end, the implementation pace had increased considerably\. Technical staff from all MINSA levels was trained and technical personnel were added to the regional offices during this period\. 2\.B Promotion, Training and Support of Community Water Boards\. (US$1\.4 million or 3 percent of total costs)\. This subcomponent intended to establish or legalize the CWBs and provide them with regular supervision and technical support in operating and maintaining water supply and basic sanitation infrastructure\. As planned in the SAR, training would be targeted to MINSA's sanitary inspectors and social workers; community leaders to organize the CWB (450 new and 1,150 existing); and designated - 14 -  members of the CWBs\. It would also provide on-the-job training and assistance on conflict resolution\. The targets were surpassed for the majority of these activities (see Annex 1)\. Training was provided to those benefiting from project-financed construction, poor communities covered by the Nutrition Component and communities at risk of cholera\. Before the restructuring, training was provided to the presidents and vice-presidents of the CWBs, which resulted in some loss of the technical knowledge as there was a customary rotation in the CWB leadership\. The MINSA personnel in the regional and local offices carried out regular visits to organize the community and supervise the CWBs on a regular basis\. After the restructuring, a pilot program for about 50 Community Water Boards, consisting of technical assistance and training for the CWBs members in the promotion of community participation in the operation and maintenance of rural water supply systems, was introduced\. Some changes were made to improve the sustainability of training by extending training to community members beyond the CWB members who had been traditionally receiving project-financed training\. 2\.C Water Quality Control Program (US$0\.8 million or 2 percent of total project cost)\. This subcomponent supported the establishment of a national system of water quality control with: (i) establishment, equipment, training and operation of a central water quality laboratory and simple water testing laboratories in five regional offices and (ii) creation of a computerized information center to provide up-to-date information on Panama's water resources in rural areas and sector capacities\. Through the project, a central water quality laboratory was established and six of the existing laboratories were upgraded\. This activity supported on-going water quality testing programs that had been stopped due to the lack of funds\. The water quality control program was supposed to cover all rural areas, but it was actually done based on demand from communities and not on a systematic basis\. At the MTR, the mission found that the construction conditions of the laboratories were poor (no security, inadequate environmental conditions and slow implementation ­ in particular in the Veraguas Laboratory)\. In order to address these deficiencies, project restructuring emphasized the achievement of the existing target of improving six laboratories for water quality control and monitoring\. This target was successfully achieved by the end-of-project, with a working central lab and five labs in different places across the country carrying out water quality control activities\. However, during the ICR Mission, it was noted that water testing is not always carried in a systematic way, most likely due to the lack of transport to the water collection points\. This issue will need to be raised in the dialogue with government for preparing a new water project\. Also, the project was not successful in fully creating an information system on rural water resources in order to support water quality surveillance\. Yet, by project closing, the information system was in its early stages of development and its completion will be key in helping MINSA carry out the water quality control function after project closing\. As an innovation, two municipalities are involved in the design and implementation of a pilot program on community-based water quality monitoring\. Component 3\. Institutional Strengthening\. (US$5\.5 million of total project costs)\. Satisfactory\. Initially, this component was designed to support institutional strengthening of MINSA through financing a set of dispersed studies, hiring personnel and creating a project unit\. Before restructuring, this component had executed US$0\.2 million of the US$2\.6 million foreseen in the SAR and had executed several activities including: Carried out studies on: (i) the acceptability of the food supplement to the beneficiaries; (ii) the impact of the nutrition program; (iii) the efficiency of the norms of the Ministry in addressing iron and vitamin A deficiencies in women of child bearing age and infants and children under 5 years of age, within the districts of the nutrition component; (iv) the efficiency and acceptability of the water and sanitation norms applied under the project; (v) the level of tariffs and affordability; (vi) the operations of the CWBs; and - 15 -  (vii) the comparative effectiveness and use of water disinfection techniques for rural water supply systems in use in Panama\. Unfortunately, the quality of the studies was irregular\. Contracted: (i) five engineers who were deployed to the regional offices; (ii) technical personnel with expertise in water systems, many of which remain in MINSA; (iii) technical personnel for nutrition, the majority were dismissed from MINSA; and (iv) the PAU's (later PCU) personnel\. Purchased: (i) equipment, vehicles and technical assistance for all components; and, (ii) office furniture, vehicles and computers and software\. The baseline survey on health and nutrition conditions in the 28 districts to be originally covered by the Nutrition Component was not carried out\. In light of the ineffectiveness of the activities included in the SAR to address institutional capacity issues, this component was completely reoriented during the restructuring\. It was agreed that this component would support, and even help define, MINSA's new role, specifically to encourage the successful implementation of Components 1 and 2 and more generally for MINSA's activities\. The restructured component centered its activities on strengthening MINSA's capacity to contract, manage, and supervise the delivery of services\. The GOP hired UNDP as a procurement agent, which got around by mitigating the majority of problems related to moving procurement documents through the legal and administrative system of the country\. Also, two technical coordinators were hired to lead and monitor progress in each of the components\. Multiple training activities were led by the PCU during this period in areas of contracting and evaluation, and health education, etc\. The SAR anticipated the creation of a system to maintain information on the volume and quality of water sources in rural areas, the location and status of existing water systems and functioning of CWBs\. The design of this information system was initiated after the restructuring and finalized shortly before project closing\. Once the databases are input into the system, it will be ready for implementation\. It should be noted that all of the arrangements introduced by the project are now part of the Ministry's operational procedures and are being used even after the project completion\. 4\.3 Net Present Value/Economic rate of return: N/A 4\.4 Financial rate of return: N/A 4\.5 Institutional development impact: Overall, the project's institutional development was substantial in the following areas: Impact on MINSA l The project contributed to a greater technical and human resource capacity within MINSA in both health/nutrition areas and water management\. Regular MINSA staff members were trained in areas of their expertise and in areas, which were new to the MINSA, such as contracting-out services delivery and management\. A number of local consultants were hired and trained to implement the project and subsequently were incorporated as MINSA staff; l There was progress in the decentralization of responsibilities from the central level to the regional offices\. Today, there are sufficient personnel in the regions to oversee and monitor water and sanitation projects\. l MINSA's capacity as a regulatory institution was improved, but not as much as its managerial capacity\. MINSA has progressed in carrying out its responsibility to oversee the implementation of - 16 -  norms, make policy, supervise and monitor the quality of the national rural water systems\. Nevertheless, it still needs further strengthening to be completely able to fulfill these responsibilities adequately\. Impact on Communities and NGOS l Communities were involved in construction of the rural water supply systems, trained to manage and operate the rural water systems, and have shown a commitment to maintaining the systems\. Generally, communities have been successful in generating resources to pay for maintenance and repairs through contributions and fundraising events\. l Improved capacity of NGOs to deliver health and nutrition services to rural populations and to work with government on the basis of performance-based contracts\. l Improved capacity of two municipalities to manage their own water supply construction projects\. Impact on Sectoral Policies\. l The transformation of MINSA's role as a manager and supervisor of services delivery rather than a direct provider has transformed the health sector policies, as evidenced by the IDB-financed project which uses this concept as its foundation\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of government or implementing agency: Impact of "El Nino"\. This weather phenomenon caused some wells to dry up, compounding problems for the management of the newly-built rural water systems\. Delays in the acquisition of equipment for the nutrition component\. As planned in the SAR, due to more favorable prices, basic medical equipment and provisions were to be purchased through UNICEF\. However, changes in UNICEF's computer system seriously delayed the process\. Thus, at start up, the trained personnel lacked the necessary tools to deliver health services as planned\. Financing for the construction of rural water systems through UNICEF: At the time of project restructuring, UNICEF had a extensive knowledge of areas where it had ongoing work and a good track record of working with rural communities in Panama\. The restructured project envisaged using UNICEF as one of the agencies implementing rural water systems, but because of fiduciary concerns about sole sourcing, the Bank was unable to finance UNICEF activities with the loan proceeds\. Instead it was agreed to recognize the Borrower's financing of UNICEF's rural water systems as counterpart funds\. In fact, UNICEF was the best implementers in the water component\. The impact evaluation gives them the best rating on community mobilization and participation, and in quality of water systems\. Unfortunately, although they could have done more, the lack of additional funding limited the agency's activities to the 100 systems originally contracted by the government\. 5\.2 Factors generally subject to government control: Lack of availability of counterpart funds\. Project execution was disrupted, particularly in the early stages of implementation due to the lack of counterpart funds\. Since both counterpart funds and loan financing had to be simultaneously available to execute activities, the lack of counterpart funds prevented implementation from advancing\. Reorganization and decentralization of MINSA\. MINSA's repeated reorganizations during the life of the project affected the work of the technical teams, which were created to execute project activities\. Moreover, the Ministry was not able to coordinate the technical members of MINSA's team that were dispersed in - 17 -  different departments, neither at design nor at implementation stages\. In recent years, more authority was delegated to the regional offices to execute project activities and MINSA's personnel at central level took a more administrative and normative role\. Modernization of MINSA\. After the promulgation of Decree No\.2, MINSAs's role in the rural water sector changed\. Project restructuring appropriately supported this change and actually advanced it further than even envisioned in the decree\. The BHCNP program had a more fundamental impact on the health sector since it initiated some of the structural reforms that have recently been adopted by MINSA\. MINSA's role in both water and health activities was progressively transformed to one of contracting, supervising, monitoring and providing technical assistance\. MINSA has made significant advances in this regard, but the modernization process is ongoing and will continue to need to be deepened and strengthened\. Complexity of internal processes\. Lengthy bureaucratic processes within the government as a whole and within MINSA in particular, weighed heavily on the pace of implementation\. In particular, the need to go through the Comptroller's Office (Contraloría de la República) to request approval for contracts, even of a small size, significantly hindered speedy project implementation\. The approval time for contracts took months and dragged on, until the Comptroller's office and all related offices reviewed them\. The GOP and the Bank made an effort to identify the main bottlenecks and reduce the number of steps before contract approval, but this obstacle was only overcome by the decision to bypass the bureaucratic barriers and hire UNDP as the procurement agent\. 5\.3 Factors generally subject to implementing agency control: Frequent changes in the PCU\. The PCU (called PAU in the initial period of the project) had five different Directors between 1995-1999\. This significantly affected project implementation, due to the lack of continuity and weakened the PCU leadership\. There were also frequent changes among the technical personnel, undermining project achievements and producing poor continuity and lack of ownership of the project\. Most of these changes were due to changes of the minister and poor implementation\. Degree of involvement of MINSA regional and local offices\. The central office did not seem to involve the regional MINSA authorities in the elaboration of the annual operational plans, which were key to define implementation activities\. Inability to carry out baseline studies and launch MINSA information system\. Since the baselines were not defined immediately after project launch, this affected the possibilities to monitor and evaluate the progress and impact of project activities\. More recently, MINSA established the basic elements of the information system and it is expected to be in place soon\. 5\.4 Costs and financing: The first Amendment to the Loan Agreement in 1997 allocated up to US$0\.5 million to finance Community Farm Subprojects (food production activities) from the food supplements category\. The project was restructured and amended a second time in August 2000\. At that time, approximately US$12\.0 million of the undisbursed balance was reallocated to the restructured activities\. The GOP committed to finance US$3\.6 million of the remaining costs\. Two new disbursement categories in Schedule I were created: (i) BHNSP service contracts; and (ii) a procurement service fee to be paid to UNDP, the procurement agent\. The total project cost was US$42\.5 million\. About US$24\.2 million of the IBRD loan was disbursed and approximately US$0\.8 was cancelled at the end of the project\. The GOP counterpart financing was US$16\.9 million (39 percent), substantially exceeding the amount projected in the SAR, because at restructuring, the GOP agreed to finance the feeding program and the UNICEF rural water supply works - 18 -  (originally expected to be financed under the loan)\. Beneficiary contributions in the Rural Water Supply and Sanitation Component were estimated at US$1\.3 million and totaled slightly higher at US$1\.4 million (see Table 2)\. Table 2 ­ Actual Project Costs by Financing Source Component SAR Total Cost Actual Total Cost % of Actual Total Cost (US$million) (US$million) IBRD 25\.0 24\.2 97 GOP 15\.4 16\.9 110 Beneficiaries 1\.3 1\.4 108 TOTAL 42\.5 6\. Sustainability 6\.1 Rationale for sustainability rating: Overall, the project is likely to be sustainable from both the institutional and technical points of view\. The main challenge will be the medium-term financial sustainability of the activities\. The project activities not only created capacity in MINSA to manage and coordinate programs in a more efficient and expeditious way, but they also tested new operational arrangements that have been now adopted by MINSA as part of their routine procedures\. In fact, the newly launched IDB-financed project incorporated most of these arrangements in its design\. In addition, project activities supported the implementation of a successful model of health services delivery built on demand\. The project financed the definition of the BHNSP, which was delivered over two years prior to closing\. The evaluation of the BHNSP indicates that the targeted communities were reached and that the development objectives in terms of improving nutrition and access to preventive services such as vaccination were achieved\. This package of health services and the number of communities to be covered has been expanded, and included in a new project financed by IDB\. From a technical point of view, the sustainability of these achievements seems very likely\. This implementation of this model strengthened capacity across the health sector and expanded the number of institutions, mainly NGOs, capable of delivering health services to isolated populations\. Finally, training provided during the life of the project to NGOs and MINSA staff will act as a factor to sustain project achievements\. The capacity of MINSA's Water and Sanitation Directorate to manage contracts involving the design and construction of water systems has increased considerably\. Contracting-out has become the main method for the delivery of water and sanitation services to rural areas\. In addition, the Borrower, with Bank support, is currently designing a new water project that is taking these procedures and other lessons learned into consideration\. In Panama, as in other developing countries, there are ongoing issues related to maintenance of new rural water supply systems, whether built by MINSA, UNICEF, FIS, municipalities, or NGOS\. During implementation, training on how to manage the water systems was provided first to the representatives of the CWBs, and as implementation progressed, to more community members in order to help make the capacity building effort more sustainable in the long term\. MINSA is aware of the continuous efforts that will need to be undertaken to strengthen the CWBs and the communities, once they are provided with the elements to manage the water systems\. Actions in the medium- and long-term will need to concentrate on this area\. During the stakeholder workshops (October/November 2003), there were requests for continuous support to the communities already managing their own rural water systems\. - 19 -  The main challenge to sustainability is whether the Borrower will progressively assume financial responsibility for delivering the above-mentioned services through, among other sources, MINSA's budget\. The GOP will need to make a commitment to clearly define priorities and back them up with financial resources\. It is worth noting that the total cost of delivering this package of basic health services amounts to about US$16 per beneficiary a year versus MINSA's per capita health budget of about US$150 a year (and about US$ 300 per beneficiary)\. The demand among communities (and even some health personnel) for services provided by the project increased substantially over the last two years\. Today, isolated populations see itinerant health services and water supply as an acquired right\. It is likely that pressure from beneficiaries, accompanied by a gradual reduction in external financing, would contribute to a progressive reallocation of the Ministry's budget\. Another factor supporting the sustainability of project achievements is the commitment of the communities that benefited from the rural water systems\. These communities participated in the construction of the water systems and have generally been successful in generating resources to pay for maintenance and repairs through the collection of established contributions from community members and fundraising events (dances, raffles, etc\.)\. 6\.2 Transition arrangement to regular operations: Project activities for the Basic Health and Nutrition Component have been incorporated in a new program jointly financed by the Borrower and IDB\. This program started in April 2003 and essentially covers the same group of health interventions that were included in the BHNSP\. The new program seeks to expand coverage to a much larger group of the population\. Regarding the activities included in the Rural Water Supply and Sanitation Component, the GOP is preparing, with Bank support, a new project for the water sector, which would focus on areas still in need of technical and financial support\. 7\. Bank and Borrower Performance Bank 7\.1 Lending: Bank performance in preparing the project is rated as unsatisfactory\. Project preparation started in 1992 and the project was finally approved in 1995\. During preparation, the Bank team provided technical assistance during preparation missions, based its recommendations on Economic and Sector Work available at the time, and worked closely with the Borrower\. Although the project objectives were consistent with the country development priorities and the CAS, as described previously, there were flaws in design, which was too ambitious and complex for the institutional capacity of MINSA\. During preparation, the Bank was aware of some of the challenges that the project would encounter (i\.e\. the weak institutional and managerial capacity in MINSA and the Government as a whole, the status of the CHWs (voluntary non remunerated workers), etc\.)\. However, the Bank did not adequately assess the readiness of the Borrower for implementation--the depth of the weaknesses did not seem to be recognized and the SAR did not introduce necessary steps to remedy the identified risks effectively\. 7\.2 Supervision: The quality of the Bank's supervision performance varied over time, with continuous and notorious improvement, particularly beginning with an effective MTR and development of a bold restructuring proposal, and continuing during the last two years\. As a result, overall, the Bank's supervision performance is rated as satisfactory\. Project supervision started effectively in 1995-96 with close coordination between the Bank and the Borrower to identify and overcome the implementation bottlenecks that appeared shortly after effectiveness\. Quite soon however, the design flaws began to surface, but it was not until the MTR in 1998 that the Bank pro-actively reviewed all the serious implementation issues with the Borrower\. At the MTR, the Bank appropriately assessed the seriousness of the problems and made an appropriate recommendation\. - 20 -  Unfortunately, the second half of 1998 and first quarter of 1999 was a pre-electoral period, so plans to restructure the project had to wait until the new administration was in place in September 1999\. The Bank used that transition period to carry out in-depth diagnoses and studies on the main implementation issues and identification of possible restructuring options\. During 1999-2000, the Bank worked intensely with MINSA counterparts to turn around the project and transform it into a project that could achieve its development objectives\. The Bank team had the bold vision to propose design changes that would transform the way activities were carried out by MINSA\. The Bank also made a concerted effort to have a participatory restructuring process\. The Bank organized a workshop to develop and agree on the main guidelines to orient and redefine the components\. Despite these efforts, there was some tension in the redefinition of the Basic Health and Nutrition Component, which was partially resolved, but still affected the level of cooperation between MINSA personnel and the technical team leading the implementation of the BHNSP\. 7\.3 Overall Bank performance: Overall, the Bank's performance is rated satisfactory\. This rating is justified based on the outstanding supervision effort beginning in 1998-1999 that managed to redesign and turn around the project and that produced good results, some of which have gone beyond the original expectations\. During the MTR, the Bank assessed the problems preventing successful implementation and achievement of the development objectives and made the recommendation to either cancel or totally restructure the project\. During the restructuring process, the Bank provided adequate support to counterparts--focusing on a participatory process and helping the GOP to identify new approaches to the delivery of basic social services\. In coordination with the Borrower, the Bank opted to implement innovative mechanisms for the delivery of health and water services, supporting the dramatic change in MINSA's role\. In general, the Bank team provided timely and sound technical assistance during supervision; encouraged and supported the Borrower in assessing the impact of project activities; and contributed to support the Government's efforts to successfully implement project activities\. Borrower 7\.4 Preparation: The Borrower's performance during preparation is rated as unsatisfactory\. While the Borrower engaged closely with the Bank during preparation and involved its MINSA personnel, it failed to adequately assess the weaknesses in its managerial and institutional capacity\. Government was also too optimistic regarding its readiness to handle implementation and its capacity to execute project activities as designed\. 7\.5 Government implementation performance: The GOP's implementation performance was generally satisfactory, despite some weaknesses\. Over the life of the project, the GOP approved sectoral regulations in line with the project objectives, in particular in the water sector\. The availability of counterpart funding was uneven, particularly in the early years of implementation\. During 1995-1999, the GOP's performance was weaker and its commitment to project implementation seemed to be fading at times\. The project experienced multiple obstacles, ranging from the lack of counterpart funds, to bureaucratic procedures to approve project activities and make resources available, to the lack of adequate technical arrangements in MINSA, and to the leadership changes in the PAU/PCU\. After the 1999 elections, the incoming Government expressed its strong commitment to the project objectives and decided to move forward with a far-reaching restructuring proposal aimed at improving - 21 -  project implementation\. The Government appointed technical coordinators as key staff to strengthen project coordination and implementation\. The GOP opted to hire the UNDP as a procurement agent to more efficiently advance project activities\. 7\.6 Implementing Agency: MINSA's implementation performance was satisfactory despite the differences in implementation progress and achievements before and after the restructuring\. MINSA consistently tried to advance project activities as much as possible and had the flexibility to incorporate necessary changes as they were identified, even in a very difficult operating environment due to the government's internal bureaucratic procedures\. During the first phase of implementation, the turnover in project coordinators and technical personnel undermined the efficiency and accountability of the project activities\. Implementation progress was extremely slow and the PAU was not integrated into the Ministry\. Yet, even at that stage, the project was meeting several targets\. The problem was a poor project design and the wrong targets rather than purely implementation problems\. After project restructuring, the PAU was transformed into a PCU, with a clear mandate and stronger technical capacity\. With this new mandate, the PCU took on a leadership role that, together with a good design, led to substantial progress in achieving project targets and objectives\. Technical coordinators for the project components were appointed to bridge the work between the PCU and MINSA\. Project performance improved with support from these technical coordinators and the incorporation of more adequately trained technical personnel\. The PCU and MINSA provided effective technical assistance that was highly valued by the beneficiaries\. 7\.7 Overall Borrower performance: Overall the Borrower's performance is rated as satisfactory\. The Borrower showed a proven interest in keeping the project alive and overcoming the bureaucratic and financial difficulties that were stalling project implementation\. There was a strong commitment to project objectives and its implementation, although the degree varied at different stages in the project, growing stronger after mid-term review\. The commitment to the project objectives and activities was higher at the regional and local levels\. MINSA successfully fostered the participation of communities in implementation, which had a significant positive effect on the sustainability and ownership of the project achievements\. 8\. Lessons Learned Project Design Assess adequacy of project design to the Borrower's implementation capacity\. As discovered in this project, a thorough assessment of the Borrower's implementation capacity (both at the central administrative and ministerial levels) is crucial to establish a realistic implementation plan\. Failure to do so creates frustrations among project stakeholders and results in delays\. To smooth the way for efficient implementation from early on, it is important to take the actions to simplify government procedures prior to loan approval\. Consider geographical constraints when targeting poorest beneficiaries in remote areas\. It is important to assess the country's geographical and logistical reality, which may produce constraints in implementation\. As noted in this project, the remote location, dispersion, complicated logistics, and higher cost to reach the beneficiary communities were not taken into account while planning how many water systems could be constructed or how much they would cost\. - 22 -  Incorporate a social communication strategy\. In the provision of basic social services, it is essential to include a social communications strategy to reach out to beneficiaries, particularly the remote, rural communities, and explain the benefits and implications of project interventions\. As reflected in the impact evaluations of both components of this project, and specifically in the Basic Health and Nutrition Component, there was increased and better use of the services provided when the potential beneficiaries were aware of them\. Contracting-out services delivery to third parties works, but it must be managed carefully\. The involvement of third party service providers, such as private entities and/or NGOs, contracted by government to deliver social services can be positive, effective, and affordable\. In this project, the participation of key stakeholders in the sector and the use of different management/delivery models helped to ensure quality, efficiency, and more rapid response\. In particular, NGOs were able to successfully reach the very poor rural populations, which previously had been completely excluded from access to basic health and nutrition services\. There were many lessons learned in the impact evaluation of the BHNSP, which are detailed in Section 4\.2, both in terms of the nature and type of services provided to different population groups and contract management/administrative issues\. The experience was also very positive related to contracting municipalities to manage the construction of rural water systems\. Project Implementation Consider the sustainability of project actions\. It is important to consider the sustainability of project investments at the design phase and also to monitor these actions, such as training and capacity building, during implementation to ensure that they are carried out\. All too often, there is too much emphasis place on monitoring physical targets and completing physical investments, while the sustainability initiatives are considered an afterthought or are not fully financed\. Since this project experienced serious implementation delays, most of the emphasis was placed on executing project activities to achieve targets and milestones\. Yet, the restructuring successfully re-focused attention on the important training and capacity building activities, knowing how important they are to enhancing sustainability\. Close coordination among project components to achieve development objectives\. In a project implementing complementary activities in the same areas, it is very important to coordinate among components\. Coordination can, in these cases, increase the impact and effectiveness of the activities and facilitate implementation, particularly at the level of the regional and local offices where physical, human, and financial resources are scarce\. Involving communities in early stages of projects is the key to their success\. The successful completion of the rural water supply projects was due to community understanding and ownership of activities\. The involvement of communities is particularly important during the transition to operations and maintenance of the rural water systems\. Bold project restructuring can produce results\. Although this project suffered from weak quality at entry and poor implementation and supervision early on, the remarkable turnaround resulting from the MTR and restructuring shows that it is possible to carry out a radical restructuring and get good results\. The most important factors in this process are: (i) a strong commitment from the Government to the project objectives; and (ii) close coordination and good communication among all levels of the Government, implementing agency, and the Bank team\. Use of UNDP as Procurement Agent in Panama\. Given the problems encountered in this and other projects, at this time, the use of UNDP as a procurement agency it is a condition sine qua non for successful - 23 -  implementation in Panama\. 9\. Partner Comments (a) Borrower/implementing agency: The Borrower provided an evaluation of the impact of the project\. A summary can be found in Annex 8\. There were not government comments on the ICR\. (b) Cofinanciers: N/A (c) Other partners (NGOs/private sector): N/A 10\. Additional Information N/A Text Notes [1] The institutional capacity objective in the SAR also included support to the Ministry of Planning and Economic Policy (Ministerio de Planificación y Política, MIPPE) for national monitoring of poverty alleviation efforts\. There was no progress on this and it was subsequently dropped\. [2] CONSALUD is an independent institution whose main purpose is to coordinate and contract the provision of health services in the country\. [3] Assessment of the reduction of malnutrition proved to be difficult because of the disparity of existing data within the country\. To assess the evolution of malnutrition in Panama, the ICR mission took data provided by MINSA\. [4] All the findings reflected in the evaluation were statistically significant\. [5] Data source "Perfil y Caracteristicas de los Pobres en Panamá" - MEF [6] Total rural population is 1,074,406 inhabitants or 37\.8 percent of country's total population (total country population is 2,839,177 (2000 data)\. The indigenous population of the country represents 7\.6 percent or 215,777 inhabitants while rural non-indigenous represents 30\.2 percent or (858,629)\. - 24 -  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome/Impact indicators Indicator Target in SAR Actual/Latest Estimate (1999) (20001)* Nutrition Component (Baseline 1994) Prevalence of malnourished women Baseline ­50% 30% 9\.5% Prevalence of malnourished children under 60 months 30% 2\.0% Baseline ­ 50% Prevalence of low birth weight 9% 5\.8% babies Baseline ­ 15% Prevalence of growth retardation 6-8 1994 2000 yrs Urban 9\.9% 8% Rural 33\.8% 20\.6% indigenous 68\.4% 64\.4% Children under 60 months hospitalized for severe malnutrition 15% n\.a\. Baseline - 30% Rate of use of oral rehydration salts under 60 months 50% n\.a\. Baseline ­ 10 Incidence of severe diarrhea during last 15 days for children under 60 3% n\.a\. months Baseline ­ 6% Incidence of acute respiratory infection during last 15 days for 12% n\.a\. children under 60 months Baseline ­ 20% Water and sanitation component (baseline 1994) Population with access to potable water 80% 93\.6% Baseline ­ 62% Rural Population with access to potable water n\.a\. 81\.4% (2002 data) Source MINSA - Rural non indigenous n\.a\. 91\.4% - Indigenous n\.a\. 42 % Population with access to sanitation Baseline ­ 72% 88% 93\.6% Rural areas 81\.4% Rural Areas (without 91\.4% indigenous areas) Indigenous area 42% Rural water systems meeting the 65% n\.a quality norms Baseline ­ 10% *Source: MINSA ­SISVAN\. Data do not include the regions of Ngobe Bugle and Bocas del Toro, where the levels of malnutrition are higher\. - 25 -  Output Indicators: 1995-2000 period Indicator End of Project Target in Actual Output SAR Nutrition Component Communities with Community Health 1,000 communities 1,001 communities had at some Workers and nutrition programs point CHW and nutrition programs\. CHW did not remain in their pots systematically\. Malnourished women receiving 34,166 women 16,600 women supplementary feeding Malnourished children under 5 receiving 85,500 children 117,540 children supplementary feeding\. Women receiving prenatal care n\.a\. 73,729 women Children under-5 growth MINSA Health posts (puestos de salud) 190 posts 953 posts supervised every two months CHW supervised every two months 1,400 1,135 MINSA's Primary Health Care facilities w/ 10 252 nutr\. & growth monitoring Human Resources HAs trained and assigned to health facility 33 120 CHWs trained and assigned to communities 75 1,450 TBAs equipped w/scales 100 550 Haelth facilities w/ nutrition equipment 20 190 MINSA staff trained in nutrition and 80 722 supervision Water and Sanitation Component Coverage: Community Water Boards established With project investment 120 645 Others (reorganized) 900 Rural communities supervised & water monitored: With investment 550 Other 100 900 Population served by new water systems 10,000 95,000 Population served by rehab\. of water systems 7,000 60,000 Population served by wells with hand pumps 22,000 Population served by latrines 15,000 150,000 Water systems constructed 45 447 Water systems rehabilitated/expanded 25 245 Wells dug 15 150 Wells drilled 51 204 Latrines installed 3,000 22,450 - 26 -  Output Indicators: 2000-2003 period Indicator End of Project Target in Actual Output Reformulation Basic Health and Nutrition Provision of Basic Health Service package to 90,000 beneficiaries 90,000 beneficiaries covered targeted population Monitoring of nutritional status - Implementation of programs Interventions successfully to prevent and treat implemented malnutrition - Provision of supplementary feeding - Implementation of a program of preventive and curative basic Training program for the NGOs providers of Implementation of the training Four NGOs trained the BHCN package program to all NGOs providing health services Implementation of community farm Implementation of 92 92 sub-project components sub-project community farm sub-projects Water and Sanitation Component Design, construction and supervision of rural - 273 rural water systems - 675 rural water systems water systems constructed constructed\. Among this: - Expansion and rehab\. Of 111 ­ Unicef existing water systems in rural 10 ­ Municipalities of Gualaca communities and Bugaba 97 ­ By MINSA) Creation and/or reorganization of CWBs - Design and Implementation - pilot program implemented of a pilot program to benefit 500 CWBs - training and technical assistance - Provision of technical provided in promotion of assistance and training for community participation in the CWBs\. operation and maintenance of rural water systems Creation of a national system to control water - Improvement of six existing Achieved quality in rural areas labs - Upgrading the existing Not achieved information systems - Design and implementation of a pilot program to monitor Not achieved the quality of the water Institutional Strengthening Strengthening of the PCU to coordinate and - Hiring of technical Achieved implement the two project components coordinators - Hiring of UNDP - Elaboration of bi-annual reports to monitor and assess the progress of the project - 27 -  Annex 2\. Project Costs and Financing Project Costs by Component (in US$ million equivalent) Component Appraisal Actual/Latest Percentage Estimate Estimate of Appraisal Nutrition Component 13\.1 11\.0 84\.7 (renamed Basic Health) Rural Water Supply 21\.3 26\.0 122\.06 and Sanitation Institutional 7\.3 5\.5 75\.3 strengthening Total Project Costs 41\.7 42\.5 101\.91 Project Financing by Component (in US$ million equivalent) Component Appraisal Estimate Actual/Latest estimate Percentage of Appraisal Bank GOP Benef\. Bank GOP Benef\. Bank GOP Benef\. Basic Health 8\.1 5\.0 6\.3 4\.7 78 94 (Nutrition) Rural Water 13\.9 6\.1 1\.3 15\.7 8\.9 1\.4 113 146 108 Systems Institutional 3\.0 4\.3 2\.0 3\.3 67 77 Strengthening Total 25\.0 15\.4 1\.3 24\.0 16\.9 1\.4 96 110 108 - 28 -  Project Cost by Procurement Arrangement (Appraisal Estimate) (US$ million equivalent) Category ICB LCB Other Non-Bank Total Financed 5\.7 3\.1 0\.5 9\.3 Civil Works (4\.1) (2\.2) (6\.3) Goods and 1\.0 0\.5 5\.2 Equipment (1\.0) (0\.5) (5\.2) Mat\. and 0\.4 0\.3 0\.7 Equipment for (0\.4) (0\.3) (0\.7) subproject executed by Force account FES 2\.2 1\.3 3\.5 Subprojects (1\.6) (1\.0) (2\.6) Medical 1\.0 1\.0 Equipment and (1\.0) (1\.0) Supplies Training 0\.2 1\.1 (0\.2) (1\.1) Consultants and 2\.3 2\.3 Studies, including (2\.3) (2\.3) PAU Complementary 9\.8 9\.8 Food (5\.8) (5\.8) Incremental Salaries 5\.4 5\.4 Incremental 3\.4 3\.4 Operating Costs 3\.7 9\.3 18\.5 10\.2 41\.77 TOTAL (3\.7) (7\.1) (13\.3) (0\.9) (25\.0) - 29 -  Project Cost by Procurement Arrangement (Actual/Latest Estimate) (US$ million equivalent) Category ICB LCB Other Non-Bank Total Financed Civil Works (except those 3\.9 9\.6 13\.5 carried out by (2\.8) (7\.0) (9\.8) UNICEF) Goods (other than for medical 4\.4 0\.6 1\.5 6\.5 equipment and (3\.9) (0\.5) (0\.2) (4\.6) supplies Goods and spare parts for civil works to be carried out by 0\.2 0\.2 force account (0\.2) (0\.1) 0\.4 0\.4 FIS Subprojects (0\.3) (0\.3) Medical Equipment and Supplies 0\.6 0\.6 (UNICEF) (0\.6) (0\.6) 1\.0 1\.0 Training (0\.9) (0\.9) Consultants and 2\.5 2\.5 Studies, including (2\.4) (2\.4) PAU Complementary Food: 3\.4 3\.4 Food supplement (2\.9) (2\.9) Agricultural 0\.2 materials and 0\.2 (0\.2) supplies under (0\.2) Community farm subprojects Basic health and 3\.3 3\.3 nutrition services (1\.9) (1\.9) Procurement Agent 0\.4 0\.4 fees (0\.4) (0\.4) Salaries 6\.5 6\.5 Operational costs 2\.4 2\.4 Beneficiaries 1\.5 1\.5 Contributions 7\.8 4\.9 19\.1 10\.4 42\.5 TOTAL (6\.8) (3\.6) (13\.7) (24\.11) - 30 -  Annex 3\. Economic Costs and Benefits N/A - 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 Oct\. 1992 4 TASK MANAGER (1); WATER/SAN\. ENGINEER (1); NUTRITIONIST (1); RUTA SOC\. OFFICER (1) Jan\. 1993 4 TASK MANAGER (1); WATER/SAN\. ENGINEER (1); NUTRITIONIST (1); RUTA SOC\. OFFICER (1) March 1993 3 TASK MANAGER (1); WATER/SAN\. ENGINEER (1); NUTRITIONIST (1); May 1993 3 TASK MANAGER (1); WATER/SAN\. ENGINEER (1); NUTRITIONIST (1); June 1993 4 TASK MANAGER (1); WATER/SAN\. ENGINEER (1); NUTRITIONIST (1); Appraisal/Negotiation Dec\. 1993 4 TASK MANAGER (1); WATER/SAN\. ENGINEER (1); NUTRITIONIST (1); RUTA SOC\. OFFICER (1) Supervision 08/04/1995 5 WATER/SAN\. ENGINEER (1); S S TASK MANAGER (1); NUTRITIONIST (1); RUTA SOC\. OFFICER (1); ENGINEER/INFORMATION (1) 10/29/1995 4 WATER/SAN\. ENGINEER (1); S S PROJECT OFFICER (1); TASK MANAGER (1); NUTRITIONIST (1) 03/08/1996 1 HUMAN RESOURCES (1) S S 07/10/1996 4 NUTRITIONIST (1); TASK S S MANAGER (1); WATER/SAN\. ENGINEER (1); OPERATIONS SPECIALIST (1) 11/14/1996 2 TASK MANAGER (1); U S OPERATIONS SPECIALIST (1) 05/22/1997 4 PROCUREMENT SPECIALIST S S (1); NUTRITIONIST (1); - 32 -  WATER/SANIT\. ENGINEER (1); TASK MANAGER (1) 11/21/1997 4 TASK MANAGER (1); S S NUTRITION SPECIALIST (1); WATER & SANITATION ENG (1); ASSISTANT (1) 05/21/1998 2 TASK MANAGER (1); S S OPERATIONS SPECIALIST (1) 06/25/1999 2 OPERATIONS SPECIALIST U S (1); HEALTH SPECIALSIT (1) 10/29/1999 2 HEALTH SPECIALIST (1); U U ECONOMIST (1) 03/11/2001 1 TEAM LEADER (1) S S 05/10/2002 2 TEAM LEADER (1); SOCIAL S S SECTOR ECONOMIS (1) 09/2002 2 Task Manager (1), Economist (1) S S ICR 05/2003 1 Task Manager S S 12/09/2003 1 Consultant S S (b) Staff: Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks US$ ('000) Identification/Preparation n\.a\. 147 Appraisal/Negotiation n\.a\. 352 Supervision n\.a 998* ICR 7 30 Total n\.a\. 1,527 * There were about US$63,000 used for supervision from Trust Funds\. - 33 -  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 - 34 -  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 - 35 -  Annex 7\. List of Supporting Documents Bank's Documents l Staff Appraisal Report - 1994 l Legal Agreement 1995 l Amendment to the Legal Agreement ­ 1997 l Amendment to the Legal Agreement - 2000 l Statement of Mission Objectives (1994-2003) l Aides Memoires ­ 1995- 2003 l Project Supervision Reports (1995-2003) l Country Assistance Strategy Borrower's Documents l "Formulación de Estrategias y Lineamientos para la Implementación de Políticas para la Descentralización de los servicios de Suministro de Agua Potable y el Financiamiento de Proyectos para el Sector Agua y Saneamiento"\. ­ Dirección Nacional de Políticas de Salud, Departamento de Políticas de Salud Ambiental, Panamá ­ Marzo 2002\. l Evaluación de los Servicios de Agua Potable y Saneamiento 2000 en las Américas\. ­ Panamá\. OMS, 2000\. l Auditoria Social del PAISS ­ BID, 2002\. l Medicion del Impacto del Componente de Agua y Saneamiento Rural - Borrador del Informe Final\. Diciembre 2003\. MINSA/BM\. The Louis Berger Group INC\. l Evaluacion del Paquete de Servicios Basicos de Salud Integral y Nutricion del Programa de Salud Rural de Panama\. Informe Final\. Diciembre 2003\. Centro de Proyectos para el Desarrollo (CENDEX)\. l Informe de Cierre del Proyecto\. MINSA\. Diciembre 2003\. l Informe Final de cierre del Proyecto - Resumen\. MINSA\. Enero 2004\. l Informe del Seminario-Taller para la Creación del Consenso sobre el ICR y de la medicion de impacto del PSR\. Noviembre 2003 l Informe - Presentación del Paquete Básico SBSIN por ONG y EBS contratados en el 2001 y 2002 a diciembre del 2002 - Panama febrero 2003\. - 36 -  Additional Annex 8\. Borrower's Contribution FINAL REPORT PANAMA RURAL HEALTH PROJECT (Translation of Borrower's Summary Document--full report in Project Files) Loan: 3841-Panama Project Name: Rural Health Project Project Director: Juan Domingo Díaz Report Date: December 2003 I\. Project Data Name: Loan 3841-PN Rural Health Project/MINSA/World Bank Country: Panama Region: Latin America and the Caribbean Region Sector: Central Government Administration KEY DATES Date Event August 1992 The Government of Panama (GP) presented a request to the World Bank to support its efforts to alleviate poverty in the nutrition and environmental health sectors\. July 20, 1995 Signature of Loan Agreement October 1995 Loan started to be executed June 30, 2000 Original Closing Date August 20, 2000 Amendment October 31, 2001 Closing Date according to the Amendment June 30, 2003 Extended Closing Date Borrower/Implementing Agency: Government of Panama (GP) / Ministry of Health (MINSA) Other Partners: 1995 ­ 1999: Emergency Social Fund (FES) 2000 ­ 2003: Social Investment Fund (FIS) UNICEF UNDP Pilot Projects: Gualaca and Bugaba Municipalities II\. Principal Performance Ratings (HS = Highly Satisfactory, S = Satisfactory, U = Unsatisfactory, HL = Highly Likely, L = Likely, UN = Unlikely, HUN = Highly Unlikely, H = High, SU = Substantial, M = Modest, N = Negligible) Outcome: S1 Sustainability: L Institutional Development Impact: H Bank Performance: S Borrower Performance: S Quality at Entry: U Project at Risk at Any Time: Yes2 - 37 -  III\. Assessment of Development Objective and Design, and Quality at Entry 3\.1\. Original Objective: The development objective of the project was to alleviate poverty in the nutrition and environmental health sectors\. The project was relevant for the health sector and for the country, in addition to being consistent with the Bank's Country Assistance Strategy for the country\. Originally, the objectives of the project were to: Reduce the incidence of malnutrition in children less than 5 years old, pregnant and lactating women\. Increase the coverage of basic water supply and sanitation in rural areas\. Train the Juntas Administradoras de Acueductos Rurales (JAARs) (Rural Water Boards) to improve their capacity to operate and maintain the systems under their responsibility\. Strengthen MINSA's capacity to plan, execute, monitor, and evaluate: o Strategic action plans and the technical levels developed for the rural health sector; and o Quality of rural water supply\. It should be noted that some of the initial data collection was not considered\. For example, a baseline was not established before starting the interventions\. In addition, women and children were not specifically indicated in the population that would be covered, which created a distortion in the impact indicators\. The capacity and conditions in MINSA were not appropriately evaluated with respect to its ability to carry out the objectives and goals in the stipulated time\. 3\.2\. Revised Objective: The objectives were revised and the project's components were adjusted as indicated in the following table\. 1995 2000 Components: Components: A\. Nutrition A\. Basic Health Care and Nutrition * B\. Rural Water Supply and B\. Rural Water Supply and Sanitation Sanitation C\. Institutional strengthening C\. Institutional Strengthening *Later known as Basic Health Package In the Basic Health and Nutrition Component, goals were included for the rural indigenous populations and children under 36 months and not less than 5 years of age, control of pregnant women, lactating mothers and women who had recently given birth\. The support for nutrition remained as one of the activities in this component\. In the Water Supply and Sanitation in Rural Areas Component, the drilling of wells was eliminated due to the lack of technical capacity of MINSA, the negative experience with contractors and the rejection of the community\. The evidence gathered and the interviews carried out point to the unsatisfactory performance - 38 -  regarding macro and sectoral policies since the leadership role of MINSA was not achieved and there was a lack of an integrated sectoral strategy\. Regarding the administration of the public sector, the achievements were substantial; there was significant learning from the experience and the speed and efficiency of a new management model was demonstrated\. The inclusion of the National Health Coordinator (CONSALUD) did not provide the expected administrative benefits since this organization was essentially limited to the signature of contracts\. The performance of UNICEF was high based on the indicators it developed, similar to the impact of UNDP in streamlining the procedures for contracting and payments\. 3\.3\. Original Components The loan was estimated at US$25\.0 million, supported by IBRD and the Government of Panama\. Component 1: Nutrition\. This component would finance: a) Training and equipment to provide basic medical attention services to rural communities, b) Nutritional Supplement Program for specific groups of children and women; and c) Training Program for local and regional MINSA staff on topics directly related to nutritional problems, health assistants, health promoters and community organizations, including methodologies for family food production and storage\. Component 2: Rural Water Supply and Health\. This component would finance: a) Design, construction, and supervision of new rural water supply systems, drilling and excavation of wells equipped with manual pumps, latrines, and the renovation or expansion of a number of existing rural water supply systems in rural communities, b) Establishment or regularization of the JAARs and implementation of a system to supervise and assist the JAARs in the operation and maintenance of basic water supply and sanitation infrastructure, and c) Establishment of a national system of water quality control in rural areas, including labs and a center with computerized information on the sources of water for rural areas and the activities of related sectors\. Component 3: Institutional Strengthening\. This component would finance: a) Strengthening the capacity of the General Subdivision of Environmental Health (SDGSA) to plan, monitor, and evaluate the nutrition strategies and programs to be implemented in the project, b) Strengthening the SDGSA to allow MINSA to fulfill its statutory obligations with respect to provision of services for families in small rural areas and to define and fulfill the environmental health regulations to avoid water contamination, c) Operation of the Project Coordination Unit (PCU) and d) Design and implementation of a national system for monitoring poverty alleviation efforts in the social sectors within the Ministry of Planning and Economic Policy\. 3\.4\. Revised Components Component 1: Basic Health Care and Nutrition\. (Health and Nutrition Basic Services Package)\. Includes: a) Provision of integrated basic health and nutrition services for beneficiaries in rural areas in agreement with the Supplemental Letter, b) Design and implementation of a training program for service providers; and c) Execute 92 community farm subprojects\. Component 2: Rural Water Supply and Sanitation\. Includes: a) Carry out subprojects for the - 39 -  promotion, design, construction, and supervision of new rural water supply systems and latrines in rural areas or the renovation/expansion of water supply systems in rural communities, in agreement with the Supplemental Letter, b) Establish or regularize the JAARs and design and implement a pilot program for these committees; and c) Develop a national water quality control system in rural areas with establishment of six regional laboratories for water testing, computerized information systems, and design and implementation of a pilot program to monitoring the quality of community water\. Component 3: Institutional Strengthening\. Includes: a) Strengthening the institutional and technical capacity of MINSA to carry out Components 1 and 2 and carry out environmental health regulations, b) Strengthening the operational capacity of the Project Coordination Unit (PCU) and, c) Contract a Procurement Agent\. During the revision, Bank financing was reassigned among the disbursement categories\. 3\.5\. Quality at Entry UNSATISFACTORY: The capacity of MINSA to execute the project was not considered during preparation\. Based on interviews, it seems that there were dysfunctional conflicts among the components that affected the initial execution\. In addition, the original design was ambitious and underestimated the execution time\. There was some lack of completion by the Borrower which slowed early implementation\. The execution was slowed by: initial disbursements, the Public Contracting Law, budgetary approval, and processes of the Controller General (Contraloría General)\. IV\. Achievement of Objective and Outputs\. Annex of Achievements 4\.1\. Outcome/achievement of objective The performance indicators have been divided into two periods: 1995 to 1999 and 2000 to 2003\. 1995 ­ 1999 UNSATISFACTORY The project's main objective was not achieved during this period\. The poor performance and the lack of inter-institutional coordination affected execution\. Also, the lack of inter-institutional coordination and the administrative and technical capacity of the different actors in the project had an influence\. The specific objectives of the project were ambitious and the outputs were not satisfactory\. The capacity of the Borrower to fulfill the initial requirements was underestimated, which delayed execution\. 2000 ­ 2003 HIGHLY SATISFACTORY The main objective was achieved, even though the strengthening of the leadership role of MINSA was not achieved and the implementation period was extended\. The effectiveness of the new management model was proven\. This evaluation is apparent even though the Impact Evaluation showed that there was an emphasis on curative health care and assistance (rather than preventive care) and participation of the communities was varied\. 4\.2\. Outputs by components\. See Annex 1- Table 1a in full report in files\. 1995 ­ 1999 Component 1: Nutrition UNSATISFACTORY - 40 -  The objectives were not achieved in this component during this time, as supported by information gathered in interviews\. Component 2: Rural Water Supply and Sanitation\. UNSATISFACTORY Of the 450 new systems proposed in the original project, only 182 have been executed (40 percent) as of December 2000 (see details in Table 1d in full report in project files)\. The program to create the computerized information center on the sources of water for rural areas was designed, but not implemented\. Component 3: Institutional Strengthening UNSATISFACTORY There was a lack of coordination among the involved institutions and a divergence in the implementation criteria\. The procedures for contracting and payment took a long time and the administration was very inefficient\. The flow of information was slow from the central level to the regional level\. The programs were not monitored or evaluated, and there was no follow-up on fulfillment of the environmental health regulations\. 2000 ­ 2003 Component 1: Basic Health Care and Nutrition HIGHLY SATISFACTORY The objectives of this component were achieved, as observed in Table 1b of the Annex in the full report in the project files\. There was full coverage in control of pregnant women and infant mortality was significantly reduced\. Component 2: Rural Water and Sanitation Supply HIGHLY SATISFACTORY This objectives of this component were achieved, as indicated in Table 1b of the Annex in the full report in project files\. The component can be considered successful during this time, although community participation was varied\. Component 3: Institutional Strengthening HIGHLY SATISFACTORY The objectives of this component were achieved as observed in Table 1b of the Annex in the full report in the project files\. During this period, the use of UNDP as a Procurement Agent facilitated the administrative procedures and the overall execution\. The change in the mode of contract administration increased the capacity for financial and physical execution\. The development of infrastructure projects improved the percentage of coverage\. I\. Major Factors Affecting Implementation and Outcome 1\.1\. Factors outside the control of GP and MINSA\. There was an elapse of time between the GP's request and the final approval of the loan\. 1\.2\. Factors generally subject to GP control Wide-ranging objectives did not consider the operational capacity of MINSA\. Lack of coordination among the involved institutions\. - 41 -  Initial delays in the supply provisions; there was lack of understanding of the Bank's procedures\. Lack of initial training for MINSA on project administration\. Inefficient contracting and disbursement system\. Lack of follow-up during initial period of execution 1995 ­ 1999\. Changes in the designation of the Project Director by MINSA\. Lack of participation of the community in the selection of alternatives\. Emphasis of the Basic Package in the attention\. 1\.3\. Factors generally subject to Bank control The design did not consider the limitations of MINSA to execute the project execution, nor the requirements for appropriate community participation\. The design did not include a baseline before initial interventions\. Lack of continuity in staff members\. 1\.4\. Costs and Financing The costs did not consider the geography of the country or the dispersion of the population\. Due to the project revision, there were adjustments in the allocations for the different disbursement categories\. The Table that was originally proposed to estimate the percentage of costs by component had to be modified to estimate the costs by category see Table 2a in the full report in the project files\. II\. Sustainability ICR Rating: L (Likely) 2\.1\. Rationale for sustainability rating The government initially considered project sustainability as unlikely, for the following reasons: MINSA did not assimilate within its budget, in its structure, or in its form of management, the experience derived from the Basic Health Services Package Component\. The culture regarding the need for basic health prevention has not been changed\. Many communities are not adequately operating the systems and do not provide maintenance\. Many do not contribute their quota for system maintenance\. The project was managed as an independent unit of MINSA; the institution has not internalized the culture of the new management model\. There is a lack of integration of the learning acquired by the interest groups\. This situation was corrected with financing from the IDB for the continuation of the Basic Health Services component, financing with its own resources the supervision of the JAARs and it is identifying a new project to continue supporting the water system\. For these reasons, subsequently the Government concluded that the project's sustainability is likely\.7 III\. Bank and Borrower Performance Bank 3\.1\. Overall Bank performance - 42 -  SATISFACTORY The Bank provided technical, administrative, and follow-up support to align implementation and develop the capacity of the PCU to administer the project\. There was frequent follow-up on the project activities and the challenges with a contribution to the generation of solutions, and support for the changes required to maintain project execution within the objectives\. Annex 3 to the full report (in project files) shows the mission visits and the results\. See Annex on Bank Performance\. Borrower 3\.2\. Overall Borrower Performance SATISFACTORY In spite of the difficulties during initial execution, the overall borrower performance was satisfactory\. The Borrower learned from the initial experience and, in the reformulation, adjustments were incorporated and the difficulties were reduced\. The project's success is evidence of the good performance\. See Annex on Borrower Performance in the full report in project files\. IV\. Lessons Learned 4\.1\. Project Design Adjustment of the project design to the operational capacity of the Borrower\. This is an important element for project success; in this case, the lack of congruence between the commitments assigned to the Borrower and its capacity to address them was problematic\. Preparation of a strategy to initiate the project\. It is important to establish a training strategy and consider mechanisms to initiate the execution of the project with minimal difficulties and facilitate project execution\. Sustainability\. Three aspects should be considered: a) communities, b) the sector strategies and policies and, c) Institutional Development\. 4\.2\. Implementation Community Participation\. Community participation must be included in the definition of a solution and maintenance\. Social Marketing\. Without social marketing, the communities will not understand their role nor will they understand the benefits and implications of the service\. Social Audit\. Social participation is important for monitoring and proving inputs back to the project in order to make adjustments that will ensure fulfillment of the project objectives\. Sector Participation and Use of New Management Models\. The use of new management models helps foster quality, efficiency and rapid response\. Information System\. The project should have an information system, operational regulation (digital or manual) and an archiving system that allows real control\. Consultancies Carried Out\. Create a library that collects all the consultancies carried out in one place and makes them available\. 4\.3\. Pilot Projects Basic Package\. The use of third parties is an effective instrument to expand coverage of health - 43 -  services and to control the quality and associated costs\. Municipalities\. It is important to consider the reality of the beneficiaries, which are the objects of the pilot project\. Municipalities are developed in a context that transcends the objectives of a project\. An institution should not develop projects that involve the development of other institutions outside of the sector and that depend on corresponding national and regional policies\. This can raise the profile of a project and possibly put its effectiveness in danger\. 4\.4\. Lessons from the Impact Evaluation of the Basic Health Package\. Contracting\. o CONSALUD was considered as the contractor, but in the practice, the contracting and administration were carried out by the Rural Health Project\. o MINSA considered that NGOs had to account for their actions and the resources spent and the initial investment was considered as the property of MINSA--the NGOs considered their payment based on per capita value\. o The terms of reference did not allow for competition among NGOs\. Supervision and Monitoring\. o The supervision model was focused on third parties and did not consider the development of the capacity of MINSA in this area\. o Monitoring and supervision would be facilitated with an information system\. Basic Package Costs\. o The dispersion of the population in the communities must be considered in the costs, including for the promoters\. o A unique source to establish the target population did not exist\. Performance\. o The itinerant teams increased the coverage of services, compared to the non-beneficiary population assisted by MINSA\. o The indigenous groups have better health services\. Ibid o There was not an impact on the improvement of attention to diseases\. Ibid o The use of radio was the most effective mechanism for dissemination of information about the visits of health teams\. o The itinerant teams had an efficiency of about 60 percent, according to the impact evaluation; the stationary teams showed less efficiency\. OBSERVATIONS DURING A SUBSEQUENT MEETING: The impact of the project in physical aspects was categorized as high after its reformulation\. Regarding the impact on the development of the private sector, this is assessed as substantial in the Basic Package Component\. Footnotes 1 At the time this document was written, there was not a consensus about the Draft Report on the Impact Evaluation of Component 2\. - 44 -  Consequently, this information has not been considered in the rating\. 2 The project was at risk during 1995-1999 due to low performance\. 3 At the time this report was compiled, MINSA was trying to obtain the numbers by component from the Bank to be able to evaluate the corresponding costs\. 4 The specific amounts can be found in the Report on the Impact Evaluation of the Basic Package Component\. 5 Ibid\. 6 Ibid\. 7 [See e-mails from M\. Meiro to PCU dated 05/6/2004 and response from PCU dated 5/11/2004 in Project Files]\. - 45 -  Additional Annex 9\. Interventions of Basic Health Care and Nutrition Package Health Promotion Services 1\. Health education 2\. Nutritional education (Healthy lifestyle and prevention of chronic diseases) 3\. Organization, training and support for the Health Committees, Community Water Boards and Community Board for the Farm Sub-projects Health Prevention Services 4\. Immunizations 5\. Growth and Development Control (0-36 months) 6\. Distribution of micronutrients (Vitamin A, iron, etc) 7\. Prenatal control 8\. Afterbirth control Health Interventions 9\. Diarrhea for children under 36 months 10\. Respiratory infections for children under 36 moths 11\. Attention to morbidity 12\. Supplementary feeding for children under 36 months, with severe or acute malnutrition 13\. Assistance at birth delivery 14\. Assistance to deficiencies in micronutrients for children under 5, pregnant women and school-age children 15\. Access to basic medicines - 46 -  - 47 -

REVIEW

P008048

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 22221 IMPLEMENTATION COMPLETION REPORT (CPL-37010; SCL-3701A; SCPD-3701S) ON A LOAN IN THE AMOUNT OF US$ 34\.0 MILLION TO THE REPUBLIC OF PERU FOR THE BASIC HEALTH AND NUTRITION PROJECT 6/26/01 Country Management Unit for Bolivia Ecuador and Peru Human Development Sector Management Unit 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\.  CIJRRENCY EQUIVALENTS (Exchange Rate Effective as of 06/26/2001) Currency Unit = Nuevo Sol 3\.55 Nuevos Soles = US$ 1\.00 US$ 0\.28 = 1\.00 Nuevo Sol FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS ARI Accute Respiratory Infection BHNP Basic Health and Nutrition Project (Proyecto Saludy Nutrici6n Bdsica) CAS Country Assistance Strategy CHW Community Health Worker CLAS Community Managed Health Facilities (Comunidades Locales de Adnainistracio6 de Salud) DGSP General Directorate of Human Health (Direcci6n General de Salud de la Personas) DISA Regional Health Department (Direcciones de Salad) GOP Government of Peru ENSAP National School of Public Health (Escuela Nacional de Salud P\.blica) ESSALUD Peruvian Social Security Institute (formerly known as IPSS) FONCODES Social Development and Compensation Fund (Fondo Nacional de CompensacidJa y Desa U- ,13 Soiai3 HIS Health Information System IADB Inter-American Development Bank iEC Information, Education and Communication INEI National Statistics Institute (Instituto Nacional de Estadistica e Inform dtica) INFES National Infrastructure Institute for Education and Heath (Instituto Nacional de Infraestructura en Educacion y Salud) INS National Health Institute (Instituto Nacional de Salud) KAP Knowledge, Attitudes, and Practices MEF Ministry of Economy and Finance MOH Ministry of Health MOE Ministry of Education NGO Non-Governmental Organization PARSALUD Health Reform Program (Programa de Apoyo para la Reforma de Salud) PECE Strategic Planning for Educational Communications (Planificaci6n Estrategica para Comunicacion Educativa) PROMUDEH Ministry of Women's Promotion and Human Development PSBPT Basic Health For All Program (Programa de Salud Basica para Todos) SAR Staff Appraisal Report SEG Student Health Insurance (Seguro Escolar Gratuito) SICI System for Costs and Income (S)stema de Costos e Ingresos) SMI Mother and Child Health Insurance (Seguro Materno Infantil) SPP System for Programming and Budgeting (Sistema de Presupuesto y Programacion) TB Tuberculosis TBA Traditional Birth Attendants TIPS Tests for Improved Practices USAID United States Agency for International Development UTES Territorial Health Unit (Unidad Territorial de Salad) Vice President: David de Ferranti Country Manager/Director: Isabel Guerrero Sector Manager/Director: Xavier Coll Task Team Leader/Task Manager: Livia Benavides  FOR OFFICIAL USE ONLY Implementation Completion Report Basic Health and Nutrition 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 5 5\. Major Factors Affecting Implementation and Outcome 9 6\. Sustainability 10 7\. Bank and Borrower Performance 1 1 8\. Lessons Leamed 13 9\. Partner Comments 14 10\. Additional Information 17 Annex 1\. Key Performance Indicators/Log Frame Matrix 18 Annex 2\. Project Costs and Financing 22 Annex 3\. Economic Costs and Benefits 24 Annex 4\. Bank Inputs 25 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 26 Annex 6\. Ratings of Bank and Borrower Performance 27 Annex 7\. List of Supporting Documents 28 Annex 8\. Investments developed by the Project 29 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\.l   Project ID: P008048 Project Name: PE-BASIC HLTH/NUTRITION Team Leader: Livia M\. Benavides TL Unit: LCSHE ICR Type: Core ICR Report Date: June 26, 2001 1\. Project Data Name: PE-BASIC HLTH/NUTRITION L/C/TF Number: CPL-37010; SCL-3701A; SCPD-3701 S Country/Department: PERU Region: Latin America and Caribbean Region Sector/subsector: HC - Primary Health, Including Reproductive Health, Chi; HY - Other Population, Health & Nutrition KEY DATES Original Revised/Actual PCD: 02/21/92 Effective: 06/02/94 06/02/94 Appraisal: 01/06/93 MTR: 06/30/97 06/16/97 Approval: 02/03/94 Closing: 06/30/2000 12/31/2000 Borrower/Implementing Agency: GOVERNMENT OF PERU/MINISTRY OF HEALTH Other Partners\. STAFF Current At Appraisal Vice President: David de Ferranti Javed Burki Country Manager: Isabel M\. Guerrero Rainer Steckhan Sector Manager: Charles C\. Griffin Alain Colliu Team Leader at ICR: Livia M\. Benavides Theresa P\. Jones ICR Primary Author: Laura C\. Altobelli 2\. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUNN=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: S Project at Risk at Any Time: Yes  3\. Assessment of Development Objective and Design, and of Quality at Entry 3\.1 Original Objective: Project Objectives\. The project objectives, as stated in the SAR, were to improve the health and nutritional status in the project area, particularly among poor women and children, by: (a) increasing the use of matemal and child health and nutrition services by extending access and improving the quality of services; and (b) promoting better health and nutrition practices, with an emphasis on preventive care and education\. Context\. The design of the Basic Health and Nutrition Project (BHNP) needs to be assessed in the context of the collapsed condition of the Peruvian health sector in 1992 as a result of terrorism and hyperinflation\. At that time, Peru had as few as 2,000 health centers and posts, one-third of health posts had no staff, and 55% of health centers lacked a physician\. Three-fourths of all physicians were based in Lima, and only one-third of Ministry of Health (MOH) personnel worked in primary care\. A focus on vertical programs for child health left other areas such as matemal health uncovered\. Professional midwives were responsible for basic matemal health care in hospitals and were rarely assigned to primary care facilities, while nurses were not allowed to provide prenatal care or attend deliveries\. Acquisition and distribution of medicines and supplies were seriously deficient and wasteful\. The result was low quality and coverage of maternal health services, and fragmented child health services lacking in preventive services and health education\. Matemal mortality was among the highest in the Latin American region\. Infant mortality and chronic child malnutrition were also among the highest in the region, due in large part to poor health and nutrition practices and preventable or easily treated diseases\. Project objectives were oriented to enhancing delivery of health services and education to the poor within the prevailing service delivery and financing mechanisms of the government health sector\. The fragmentation in programming, budgetting, and implementation of vertical health programs was the cause of duplications and inefficiency, even though this was effective for achieving some specific goals such as in immunizations and use of oral rehydration therapy\. Few project components (training, IEC, equipment, and medicines) were planned for a limited project area of provinces in four of 24 departments (Piura, Cajamarca, Cuzco, and one district in North Lima) selected on the basis of poverty classification and non-inclusion of declared emergency zones\. The original target population was estimated in the SAR at 1,668,000, later expanded to 2,590,433 population and 509 facilities, although 365 (87 health centers and 277 health posts) received most project interventions\. 3\.2 Revised Objective: There was no revision of project objective\. 3\.3 Original Components: Component 1: Maternal and Child Health Care Allocation: $20,100,000 (43%) This component sought to improve utilization and quality of maternal and child health care services in the project area, with particular emphasis on prevention, by: a) training professional and community health workers (CHW); and b) provision of medicines, supplies, equipment, and vehicles\. Component 2: Nutrition Allocation: $3,200,000 (15%) The component had two parts\. The first included improvement of nutritional status of children under - 2 -  age three in the project area through community-based growth monitoring and close follow-up of growth problems, and distribution of micro-nutrient supplements and anti-parasite medicine\. The second part included operations research and other studies on growth nmonitoring, nutrition counselling, and replicable cost-effective strategies for strengthening matemal and child nutrition in rural areas\. Local NGOs were to support community education in nutrition and feeding practices\. Component 3: Tuberculosis Treatment Allocation: $100,000 (0\.2%) This component was aimed at solving an urgent need in Peru for improved community detection and treatment practices for tuberculosis by: a) training CHW to detect and refer cases, and b) providing TB testing equipment and medicines for health centers\. Component 4: Information, Education, Communications and Training Allocation: $18,800,000 (38%) This component aimed to implement: a) training for health professionals and CHW to enhance knowledge of health and nutrition practices and improve quality of care; b) educational activities through the use of mass media, community participation and inter-personal communication for matemal and child health; c) community outreach and participation using strategies such as working through NGOs to educate communities and create demand for health services, and working with community-based organizations; and d) an impact study on the activities carried out under the project\. In order to minimize the risk of weak goveniment implementation capacity, original project components focused on strategies for strengthening only the most critical existing MOH programs for the poor, working with NGOs for implementation, working through the central instead of regional health offices, and emphasizing funding for field supervision and monitoring\. The design also took into account lessons leamed regarding: a) the need for simple project design; b) ihe importance of monitoring and evaluation; c) effective strategies for community outreach and participation; and, d) CHl-W and health professional training\. 3\.4 Revised Components: Project design was positively affected by a significant govemment-financed expansion in the health sector during the early project years\. A poverty alleviation program in 1993 financed a social investment fund, FONCODES, and a new health sector project, PSBPT, that eventually tripled the number of staffed and functioning primary health facilities in areas of extreme poverty\. The continuing vertical health program structure eventually resulted in proposals for an integrated health care model that would change the focus from the "presenting complaint" to a focus on preventive care, health education, and reduction of missed opportunities\. Project reorganization occurred in stages beginning in the second project year as a result of changes in the MOH\. The operational plan for 1995 provided a new focus on integrated health care and quality of care\. Tuberculosis was expanded to a communicable diseases component that included malaria\. Two contracts effective in January, 1996, provided training in clinical matemal and child health care and in interpersonal relations, for health personnel in 107 primary health facilities in the project areas\. Due to difficulties in collaboration with the central MOH, the project tamed its full attention to developing and testing a new integrated health care model at the operational level that would also provide a cost-effective package of basic services\. A reorganization and scaling-up of the complexity of project components occurred in 1996\. A new three-year strategic plan was developed, and changes were made in the organizational and budget structure of BHjNP\. - 3 -  By 1997, the project could develop terms of reference (TOR) for mass implementation of the new integrated health model\. The competitive bidding process lasted to mid-1998 due to delays in Bank approval of TOR and mid-bidding changes in TOR based on MOH requests to develop certain products for the health reform\. The MOH requested that Villa El Salvador in South Lima be included as a new project area\. Due to significant institutional weakness, project activities in Chota were reoriented towards supporting community participation in service delivery\. The final project reorganization in late 1998 brought the project in line with the MOH functional programming structure with three lines of action: health services, health promotion, and management and financing\. Overarching strategies were to strengthen health service networks and the health reform\. These actions facilitated the final transfer of the project to the MOH\. Three large contracts were awarded to private firms by the second half of 1998 to design and implement project components on organization of health services, management and quality improvement, and social marketing of health services\. Smaller contracts awarded to local NGOs served to design and implement community health activities with CHW, including a community-based tuberculosis program implemented by a specialized NGO\. Individual consultants developed the nutrition component and gave support to regional IEC commissions\. Final project components were as follow: Revised Component 1: Health Service Provision Revised allocation: $22,250,000 (50%) This revised component was to support the primary level delivery of the new integrated health care for women and children by developing: (a) a model of integrated care procedures for child health and women's health, including written protocols, decision manuals, specific job descriptions, performance evaluation criteria, and in-service training based on protocols and performance evaluations; (b) instruments for organizing the work of health facilities, including expanded clinical history forms, family instead of individual files, filing systems for easy retrieval of clinical histories, patient triaging methods, patient flow systems, organization of extramural community work, and updated organization and fimction manuals for health facilities (MOF); and (c) guidelines for organization of health services networks, including a patient referral system, and laboratory network system\. Financing was provided for rehabilitation of health facilities, medical equipment, and supplies to improve service provision\. Revised Component 2: Health Promotion Revised allocation: $15,575,000 (34%) After several stages of revisions, the component on health promotion maintained the objective of improving health practices (one of the two project objectives), but in fact was primarily oriented to increasing demand for health services (with social marketing) and creating an institutional capability for information, communications, and education (IEC) at the regional level on the assumption that this would be a strategy for sustainability of health promotion activities\. A community-level health promotion component working with CHW was maintained, but greatly reduced in scope compared with the SAR, and activities did not begin until 1999 under contracts with local NGOs\. Promotion of Healthy Practices\. The strategy was to contribute to research and design of sustainable integrated communications interventions in matemal and child health and nutrition\. Also, the plan was to develop IEC Commissions in five regional health departments with the capacity to conduct behavioral diagnosis and integrated IEC planning and design, production and use of educational materials and community communications methods, and utilize techniques for education and counseling to promote healthy behaviors\. A tuberculosis prevention sub-component was incorporated here, as was a nutrition sub-component to improve child feeding practices with a home and community demonstration model that involved active participation of CHW\. Social Marketing of Health Services\. The strategy was to increase demand for health services - 4 -  through implementation of a marketing diploma training program for clinical and management staff to provide them with capabilities for designing and implementing health facility marketing plans, utilizing modem marketing strategies\. Community Health\. NGOs were used to: a) identify existing CHW (including traditional midwives) in communities, b) conduct community health surveys to diagnose needs and develop a local health plan, c) implement a basic and complementary training package for CHW, and d) create a link between CHW and health facilities\. Revised Component 3: Management and Financing Revised allocation: $5,785,000 (13%) Improved management of health service networks was to be promoted by developing: a) a diploma program for health service management training, b) capabilities for designing and implementing quality improvement projects, c) an internal control system, and d) a model for categorizing the complexity of health facilities\. To support financing issues in health sector reform, two sub-components were: (i) Information System for Costs and Incomes (SICI) - criteria for cost estimation of specific health services to improve budgeting, monitoring the efficiency of expenditures, tariff-setting, income monitoring, and other uses; and (ii) Cost-based Programming and Budgetting (SPP) -- designed in 1997 by USAID-funded Project 2000 to insert order into the historically fragmented budgeting process in the Ministry of Health by creating a unique consolidated budget from all sources\. The latter component became a joint effort between Project 2000 and BHNP\. 3\.5 Quality at Entry: A formal review by the Quality Assurance Group was nlot available at the time of project preparation and appraisal\. The quality at entry is rated marginally satisfactory\. The objectives were consistent with the Bank's 1994 Country Assistance Strategy (CAS), oriented to the design and implementation of programs to improve social services, prioritizing deliveiy of services to the poor\. Infrastructure investments, called for by the CAS, were incorporated into the project in 1996\. Two shortcomings can be identified: First, the project design did not focus in any way on the health sector structural and managerial issues, despite the fact that sector reform was implicitly on the government's agenda--and in fact became much more defined only one year after project initiation\. Second, the project was underdesigned in the sense that little specification was made in the SAR of how the components would be implemented\. The underdesign of the SAR created implementation problems from the beginning, since the Project Coordinating Unit (PCU) was inexperienced, baseline study identification and implementation was prolonged, and the initiation of health reform created uncertainties as to the appropriate orientation of interventions\. In both the SAR and project reorganization plans, there was limited specification of monitoring and evaluation indicators that could serve to guide the project\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement ofobjective: The project objectives as stated in the SAR were limited to improved health service provision and health practices oriented to achieving rapid reductions in maternal and infant mortality in targeted project areas\. Achievement of the objectives is rated, overall, as satisfactory, due to the demonstrated impact of the service provision component which comprised the greatest proportion of inputs and outputs in the last two project years with a positive impact on the integration and quality of primary health care services\. The project overcame delays in start-up and serious instability in the health sector, and was able to implement well during the last two years\. -5 -  Health Service Provision\. Achievement of the first sub-objective to extend access and improve quality of services was satisfactory\. A new model of integrated patient care and management improvements was implemented in at least 237 primary care facilities\. Changes were demonstrated by population-based KAP and social marketing surveys conducted in January, 1999 (baseline) and December, 2000 (ex-post in both project and control areas), the period of most intense implementation of organizational changes\. Also conducted were a random sample review of clinical histories, direct observation and exit interviews in a sample of health facilities, and analysis of MOH Health Information System (HIS) data for each of the years 1996-2000\. KAP survey results showed increases in coverage of matemal and child health care services in show-case intervened areas as compared with baseline and control areas\. Key variables showing improvements were: early use of prenatal care, professional birth attendance, and coverage of integrated well-child services, and increase in feeding a child with solid foods first during a meal\. A review of clinical histories comparing intervention and control facilities showed significant improvements in quality of care variables in the average number of activities in the integrated service package provided for well-child care of children under age three, the proportion of pregnant women receiving a hemoglobin test, and the average number of quality standards adhered to during institutional deliveries\. Few differences were found in provision of counselling in child nutrition during consultations\. The proportion of TB and malaria cases that were treated and cured had tendencies equal to or less than similar cases in control areas\. Baseline (early 1999) and ex-post (end of 2000) social marketing surveys showed improvements in client perceptions of health services organization and infrastructure, level of privacy, comprehension of health information received, racial or social discrimination in the provider-client relationship, and general quality of health services\. Baseline (1999) and ex-post (2000) evaluations of personnel performance showed major improvements in the integrality of care, skills in interviewing, physical examination, diagnosis, and counseling, provider-client relationship, cleanliness and order, and recording of information on the clinical history form\. The diploma management training was successful in changing attitudes and motivation toward better management techniques and quality improvement, and facilitated the acceptance of other project interventions such as the SICI\. The latter was shown in selected health facilities to have resulted in improved management decisions for greater efficiency and productivity of health services\. Health Promotion\. Achievement of the second sub-objective on promoting better health and nutrition practices was rated unsatisfactory\. On the positive side, a few important changes did occur in child nutrition, tuberculosis, and malaria attributable to the project, possibly due to their special sub-component status and direct central-level management by BHNP or specialized contractor\. Some specific strategies were shown to be effective in pilot areas, though their implementation was not wide-spread enough to detect population changes\. For example, the anemia prevention model was effective for increasing consumption of iron-rich foods by children 6-23 months of age in the pilot areas in which the model was tested\. Still, there were negative results in health promotion that may outweigh the positive\. For example, there were no important differences between surveyed baseline, control, and intervened mothers in exclusive breastfeeding practices, giving more liquids, breastmilk or solid foods to children with diarrhea or ARI, sterilizing drinking water, or handwashing practices\. The formation of IEC commissions had a level of success in implementing health education activities in communities\. However, there were no behavioral objectives that guided the commissions' work so that each region selected topics which were often not related to BHNP project objectives on basic matemal and child health, and their sustainability was in question due to lack of DISA ownership of the commissions and high turnover of DISA personnel that required continual retraining of IEC Commission members\. There was no policy impact in IEC or health promotion on the central MOH until after project closure when, in fact, health promotion was included in the reorganization of the DGSP\. Also, there was no implementation of a mass media communications -6 -  component that was foreseen in the SAR, a strategy that has been shown to be effective in Peru\. The social marketing intervention was a BHNP innovation in the Peruvian health sector, and served to improve provider behaviors towards clients, though did not contribute to improved health practices\. The pre- and post-social marketing surveys showed an effect of the promotional campaign intervention on use of services by 30% of the population that had knowledge of the promotional campaign, comparing favorably to the 10% effect that would normally be expected from a communications campaign, but costing an estimated US$9\.6 for each person who attended a facility motivated by the campaign\. In terms of improving equity of access, few changes occurred in the distribution of demand by level of poverty\. Explanation of rating\. Community-based and/or mass media approaches for health education to improve health, hygiene, and nutrition practices were not consistently incorporated into the project for several possible reasons\. Most importantly, a major conlract for implementation of the health practices component was signed in January 1998, but dissolved in December 1999 after only one year of effective implementation due to unsatisfactory contractor performance\. Thereafter, it was difficult to reinstate a good focus on behavioral change interventions\. The component was fragmented into several discrete activities and oriented to institutional changes such as formation of regional IEC commissions\. An effective community health promotion model was not developed by the project, nor was there use of a mass media communications component\. The social marketing contract and local NGO contracts for training CHW were focused on increasing demand for health services and/or patient referral rather than changes in health practices\. Also, there were no offices in the MOH responsible for either community health or IEC, representing the low priority attributed to these activities by the Borrower and the lack of project counterpart\. The success achieved on producing behavioral changes in child feeding practices was attributed to careful design of communication interventions by experts, based on in-depth studies of matemal knowledge and beliefs surrounding specific desired practices\. The original TOR for the Jan\. 1998 health practices contract would have provided such baseline research and design of communications interventions for a range of health problems and behaviors, suggesting that full implementation of that strategy may have had more positive impact on improving health practices\. 4\.2 Outputs by components: Component 1: Health Service Provision A new model of integrated health care was developed by the project to improve the quality and efficacy of health service provision, defining parameters and implementing a large number of organizational changes, infrastructure improvements, vehicles, equipment, supplies and medicine distribution in well over 200 health facilities (see Annex 1)\. Clinical training was provided to over 2000 health providers in either women's or child health and nutrition\. A systematized set of 42 reference materials was produced to permit replication of the model for intramural integrated health care in any health care facility or network (see Annex 8)\. Component 2: Health Promotion Promotion of Healthy Practices\. Outputs included production of educational materials, some innovative community-level health promotion activities, and training of health personnel and CHW using the Strategic Planning for Educational Communications (PECE) Methodology\. The major emphasis was on development of IEC commissions that were forned in 15 DISAs\. IEC methodologies were developed and published, including a manual on the PECE methodology and others on how to produce and validate educational materials for matemal and child health and communicable diseases\. Promotion of Nutrition\. The most effective and sustainable output of the health promotion component - 7-  was in nutrition, using qualitative research (a modified TIPS method) to identify specific practices in child feeding that would have an impact on child anemia\. The sub-component on nutrition promotion also worked to strengthen: a) central MOH coordination on nutrition; b) the nutritional component of food assistance programs through other ministries; and c) regional IEC commission work on nutrition\. Promotion in Tuberculosis\. The major products were useful methodologies to apply in any CHW program, including: a) differentiated advocacy methods to generate project support at all levels, b) assessment of CHW learning styles, c) alternative CHW training methods, and d) transference of program and training skills to MOH personnel for CHW program sustainability\. Health personnel were trained as trainers in tuberculosis surveillance, promotion, and referral, who in turn trained and supervised clinical practice for CHW, with significant gains in knowledge and skills\. Social Marketing of Health Services\. The major output was a social marketing training program that prepared DISA and primary health care staff to conduct market analyses, and design and implement marketing plans using modem marketing strategies with monitoring and evaluation indicators\. Participants received a diploma from the National School of Public Health (ENSAP) under an agreement with BHNP\. A set of detailed training modules was developed for replication of the program\. Additionally, workshops on empathetic communications improved provider-client relationships\. Community Health\. Contracted NGOs conducted census surveys in communities, identified existing CHW (health promoters, traditional midwives, and malaria promoters), trained, and provided supplies to CHW\. Experiences of the NGOs were systematized into a final document on the role, training and supervision of CHWs to guide implementation of future MOH community health programs\. CHW and midwife training and reference manuals were produced\. Quechua Language and Andean Culture Training Course\. At the request of the regional health office of Cuzco and under contract with the BHNP, the National University of San Antonio Abad of Cuzco produced a successful distance learning program of manuals and cassette tapes for training health providers in the Quechua language and culture\. This resulted in a replicable intervention to improve provider-client communications in the high risk population that speaks only Quechua\. Component 3: Management and Financine Management Diploma Training\. The major output was a module-based management instructional program for DISA/UTES and primary care personnel, implemented in collaboration with a Peruvian university which awarded a diploma upon successful completion of the program\. A shorter management training program during 1996-97 implemented by another university prepared 88 DISA personnel\. Organization of Health Services Networks and Management Committees\. At the request of the MOH to contribute to health reform, the project organized health services into networks and implemented a network management model with management committees and guidelines\. Systems were designed for internal control, with indicators for supervision, monitoring and evaluation, integrated health information, accreditation, auditing, cost and income analysis, and analysis of management processes\. Implementation was on a pilot basis in parallel with the current system, since public sector norms do not permit the flexibility required for testing new management systems\. Quality Assurance\. BHNP implemented an intemationally-validated methodology on quality assurance to identify local management and service delivery problems, and to design and implement local solutions to those problems\. This was taught to participants enrolled in the Management Diploma Training Program as well as directly to personnel in health facilities\. About 400 quality improvement projects were designed by participants, and 254 were implemented in 107 health facilities\. 4\.3 Net Present Value/Economic rate of return: N/A -8 -  4\.4 Financial rate of return: N/A 4\.5 Institutional development impact: The project's institutional development was substantial in the last two project years\. Significant improvements were made in organizational culture and project acceptance in the central level MOH, and significant inroads were made in providing technical assistance to key MOH technical offices in charge of planning, provision of human health services, and statistics and information\. Project collaboration with the National Institute of Health in strengthening the national laboratory network made a sustainable contribution to that institution\. At the regional level, training received by regional and territorial health office personnel in health services management and social marketing of health services contributed to developing human resource capacities\. Additionally, project assistance to organize EEC and training commissions at the regional level created the possibility of a permanent institutional capacity in those areas\. The impact of these efforts is weakened due to the lack to date of central level MOH policy or technical offices for IEC and training or human resources development that would support the regional level commissions\. In at least 238 government primary health facilities, significant permanent improvements were made in the organization of health services\. The new organizational model can be replicated by regional health offices, or through passive diffusion of the model by health personnel transfers between facilities, which is made possible by the manuals and other documents produced by the project\. In infrastructure development, institutional experience was gained in developing architectural requirements for integrated primary care facilities, and links were made with other government agencies (INFES, FONCODES, CTARs, and municipal governments), as well as NGOs, to fund health infrastructure improvements based on MOH (BHNP) architectural guidelines\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of government or implementing agency: The main factor outside the control of the GOP or implementing agency that affected project implementation and outcome was the El Nifio Phenomenon in 1998, that destroyed or damaged a significant amount of infrastructure and caused a break-out of endemic diseases, particularly in the northem part of Peru where one of the five project sites, Piura, is located\. Malaria interventions under the project were likely to have contributed to the reduction of cases in Piura from 12,823 in 1995 to only 2,919 in 1996, but were annulled by the effects of the El Nifo which caused a significant increase in malaria in the region\. Project efforts to improve maternal health were reversed in upper Piura, where several matemal deaths were reported as due to road blockages from bridges destroyed by El Nifio flooding\. 5\.2 Factors generally subject to government control: Government delays in deciding on the objectives and design of health reform created tension for the project to contribute to this effort\. Government reticence to commit to a health reform model was consistent with a general political climate to maintain the status quo in government services and a freeze on hiring public sector personnel, while implementing vertically-managed poverty alleviation and targeting strategies such as FONCODES and PSBPT\. At the same time, the latter two programs had a very positive effect on project implementation by placing health infrastructure and MOH staff in isolated rural -9-  areas, greatly facilitating improvements in the coverage of services in project areas\. 5\.3 Factors generally subject to implementing agency control: A highly unfavorable climate in the MOH during the first four project years was a critical factor that delayed project advancement and nearly resulted in early project termination (see Section 7\.5)\. A Bank supervision mission in February of 1998 assessed the possibility of closing the project due to the barriers to institutional coordination with the project on the part of the Borrower\. A secondary factor putting the project at risk was implementation delay created by a combination of Borrower and Bank issues\. BHNP took a long time to get off the ground due to: a) delays in baseline studies to support project design, b) a lack of experience in the Borrower project coordinating team, c) a limited local market of qualified technical consultants and consulting firms, d) Bank preference for outsourcing versus Borrower preference for individual consultants, e) delays in Bank approvals of TORs, and f) non-compliance of Borrower commitment to fully use the Project Steering Committee to provide guidance to the project team\. Change in a key MOH director (DGSP) in 1998 signaled an immediate improvement in project coordination with the MOH\. Technical assistance needs for health reform were so new that TOR development required extensive base line studies and pilots\. Also, time was a great limiting factor since there was pressure to implement\. 5\.4 Costs and financing: The total project cost is currently estimated at US$44,297,000\. This is over 99% of the US$44,500,000 estimated in the SAR\. An amendment dated October 11, 1996 changed budget categories to rectify ambiguities identified in the original project expense components\. Thus, categories as listed in the SAR for equipment and vehicles, instructional materials, drugs and supplies, and fumiture were combined into one category of equipment and vehicles\. The original categories of training, communications services, and technical assistance were combined into a second category of technical assistance\. A new category was added for civil works, while incremental operating costs remained unchanged\. At appraisal, project components were valued as: Matemal-Child Health (43%), Nutrition (15%), Tuberculosis (0\.2%), Information and Education (38%), and Project Management and Evaluation (4\.7%)\. Changes in components over the life of the project resulted in increasing the Service Provision and Management components and decreasing the Health Promotion component, with the resulting distribution: Health Services Provision (50%), Health Promotion (34%), Management and Finance (13%), and Project Management (4%/6) (see Annex 2)\. 6\. Sustainability 6\.1 Rationale for sustainability rating: Project sustainability is rated as likely\. In regards to institutional sustainability, BHNP worked in a limited geographic area, but in the last two years, design of project outputs carefully followed developments in the policy discourse for health reform in the organization and management of health services, thus contributing to the likelihood of political and institutional ownership\. The level of incorporation of BHNP project staff and outputs into normative offices of the central level MOH has resulted in the institutionalization of some of the reforrns required to integrate health programs, programming, and budgeting processes, many of which were developed and tested under the project\. Improvements in organizational culture in govemment health services over the past several years, according to in-depth interviews in project areas, are due in large part to interventions both early and late in the project that were effective in creating sustained improvements in health personnel attitudes and increasing the likelihood of their adoption of new roles and methodologies\. As to technical sustainability, several technical documents produced by BHNP have been accepted for general use by the MOH under formal - 10 -  Ministerial Resolutions\. These are the two-volume set of clinical protocols for maternal health and child health and the PECE methodology manual\. The systematization of nearly all project outputs into manual-type documents on CD-ROM will facilitate their disemination\. Financial sustainability is enhanced by a follow-on Bank-funded project (PARSALUD) that will finance full expansion of health reform measures to half the country, providing the channel for mass implementation of project outputs\. Sustainability of certain outputs of the health promotion component is more likely now that a new office of Health Promotion has been included in the reorganization of the Directorate of Human Health in the MOH\. The sustainability of all project components may depend on decisions made by the new government entering in July, 2001\. 6\.2 Transition arrangement to regular operations: The integrated health service organization model and training programs developed by the project are being adopted for expansion in the new PARSALUD project (Program to Support Health Reform) to be financed by the Bank\. The transitional status of the current government implies a risk that decisions made at this time may not necessarily be adopted by the new government to be sworn in on July 28, 2001\. 7\. Bank and Borrower Performance Bank 7\.1 Lending: The Bank's performance in project lending was marginally satisfactory\. Given the prevailing adverse conditions as described in Section 3, the project design ficused on supporting existing vertical health programs to improve services to the poorest populations\. Project identification was consistent with a government focus on restoring services to the very poor, and with the Bank's CAS\. An important shortcoming was that, although the Bank could not have anticipated the specific institutional and policy development needs for health reform, there lacked a recognition of needs for structural and/or managerial strengthening in the project design that could have contributed to delay in the project start-up period\. The underdesign of the SAR was also a shortcoming that created delays and implementation problems\. 7\.2 Supervision: The Bank's performance in supervision was rated as satisfactory, based on a two satisfactory QAG assessments in FY 98 and FY00, which determined that the quality of the work of the supervision team and the fact that the project was managed from the field made a significant difference in project implementation performance\. The project had three consecutive task managers, one for preparation and two for supervision\. There was continuity in that the third was parl of the supervision team for two years before taking over as task manager\. Supervision missions were important for providing technical input into project management at key points in time, and played a role in facilitating the incorporation of BHNP into central level MOH policy processes\. The supervision team had a good skill mix, although some discontinuity occurred due to scheduling problems with consultants\. One shortcoming of the supervision was lack of attention given early on to providing special training and technical assistance required by the Borrower who lacked in experience with respect to procurement and disbursement guidelines\. A second shortcoming involved delays in Bank approval of TOR during a period in which BHNP had a large number of TOR to process, resulting in project implementation delays\. In hindsight, the Bank could have pushed harder on the issue of MOH ownership of the project\. 7\.3 Overall Bankperformance: - 11 -  The Bank's overall performance was satisfactory\. Borrower 7\.4 Preparation: The Borrower was fully cooperative and engaged in project preparation, bringing together qualified personnel from regional health offices to assist with project design, rated as satisfactory\. 7\.5 Government implementation performance: The Government's implementation performance is assessed as unsatisfactory due lack of project commitment through most of the project\. On one level, an untimely provision of counterpart funds delayed payment to contractors and subsequently delayed project outputs\. On another level, overall policy guidance from the Ministry of Health was weak\. BHNP was implemented during a challenging decade for the health sector and the country\. The inertia of fragmented vertical health programs and traditional organizational culture, and a work force lacking incentives, was confronted by a proposed philosophy of efficacy, efficiency, quality, and equity for health sector reform\. Civil servants felt their jobs threatened by a potential health sector restructuring, and a new type of short-term contract created difficulties from high turn-over rates in primary care facilities and production requirements that altered quality of care\. Vertical maternal or child health programs, the targeted poverty alleviation health program (PSBPT), and other types of health activities including externally-funded projects existed independently of each other within a fragmented programming and budgeting system\. The organizational culture of the central MOH was appropriately described as "feudal", with little cooperation between internal offices\. The lack of leadership over several changes of health ministers resulted in failure to mandate institutional collaboration with externally-financed projects, with no arbiter to coordinate the different strategies developing in parallel form\. Policy guidance to BHNP was especially weak in the areas of community health and communications for behavioral change, contributing to the less than favorable results in those project activities\. 7\.6 Implementing Agency: The performance of the Ministry of Health of Peru as the project implementing agency is generally assessed as satisfactory due to the advances made in the final two project years\. Performance during the first several years was hampered by the weaknesses in overall policy direction that exacerbated the challenge of dealing with several large externally-financed projects\. The Project Steering Committee as required in the Loan Agreement was initially formed, but was not fully used to provide guidance to the project team\. Central MOH offices generally did not participate in supervision, monitoring and evaluation of externally-funded projects\. Inter-project coordination commissions suffered from a tendency for the MOH to discourage them\. The result was a patchwork variety of health reform and difficulties for BHNP to achieve objectives until the final two project years\. Regional MOH offices in project areas had varying levels of implementation performance, given the lack of policy direction or mandates from the central MOH\. Some regional offices saw the value of the project early on, and worked well in implementation, while other regions had their own agendas and chose not to collaborate fully with BHNP until later on in the project when they could more easily identify the benefits they would accrue\. Continuity of the Project Coordinating Unit (PCU) team from 1996 to the end of project contributed to - 12 -  efficient and effective project management, as inexperience in Bank procedures in early project years was overcome\. The PCU was cited by the Bank (in October '98) as exemplary in financial- management and procurement procedures\. International procurement of equipment, supplies, and medicines, although well-implemented by the PCU, suffered important delays generated by contracted agents (UNICEF/UNOPS), creating difficulties in carrying out operational plans\. Problems in reaching the objective of better health and nutrition practices was mainly due to incompletion of a contract, despite adequate PCU supervision (see Section 4\.1), although there may have also been an element of losing sight of the health practices objective\. There were certain deficiencies in project monitoring and evaluation, though some of these were attributable to project reorganization over time\. A multiple-focus evaluation effort at the end of project produced adequate data for final project assessment\. 7\.7 Overall Borrower performance: Borrower performance is rated overall as satisfactory due to major improvements in project implementation in the final two project years during which time significant advances were made at operational levels of the health system, even though performance was mostly unsatisfactory during the first years of the project\. In the last few years, BHNP became an active participant in health reform discussions in the central MOH\. 8\. Lessons Learned 8\.1 Technical approach: Integrated health services model represents a major contribution to health reform\. 3 For operationalization of prevention-oriented integrated care that breaks the inefficient system of curative care-oriented vertical health programs, MOH should ensure the strengthening of central and regional level planning capability, compatible programming and budgeting frameworks, and integrated supervision, monitoring, evaluation, information, and logistics (including pharnacy) systems that support integrated care\. i With integrated care approaches, MOH must maintain sight on morbidity and mortality reduction goals\. Do not lose sight of priority health needs in the country, and incorporate community-based strategies, ensuring that attention is not deviated from solving more complex problems such as matemal mortality and chronic child malnutrition\. Promotion of health and nutrition practices requires substantial further development\. * Project design for health promotion should specify behavioral goals on desired practices in addition to indicators for process evaluation and goals for health and nutrition impact\. * Research for design of appropriate IEC messages and production of educational materials should be contracted to appropriately skilled third parties, such as universities, NGOs, or individual experts\. * Mass media should be more fully exploited in addition to other community-based IEC strategies with CHWs, organized community groups, schools, and others\. Social marketing of health services has a role within a larger IEC and community health program\. * Social marketing strategies should have clear objectives, whether to increase a demand for services, or to promote better health and nutrition practices\. Social marketing should have as a main goal better equity of access\. Community health work requires an organized system for support\. * Community health strategies should link extramural health sector work and CHWs with community leadership structures and intersectoral collaboration with local governments and other sectors\. CHWs should be trained and supervised to play an important role in health education as well as case identification and referral\. - 13-  * Sustainability of community health requires specific policies, including mandates and guidance to regional and local levels, recognition of the work of CHW and of health personnel with CHW by considering it within "production" requirements, provision of parameters for planning, supervision, monitoring and evaluation of CHW within local health plans, and commitment of minimal financial resources to support community health work\. Local NGOs can play a supporting role to the health sector for strengthening community health\. * Local NGOs can train volunteer and professional health personnel, but their contracting, work planning, and supervision should be done with or by the health sector to facilitate transference of community health systems to public sector management\. Management training should be relevant to public sector management at various levels of the system\. * TOR for management training should be in step with other aspects of health system organization being concurrently developed by a project, or with the evolving govemment system\. Waivers of prevailing norms may be necessary to facilitate testing and application of new management models\. Equipment and infrastructure investments can be potentiated, but require maintenance commitment\. * Project infrastructure investments can be potentiated by other government investment funds, while project funds are utilized for preparation of engineering plans appropriate to delivery of integrated primary care\. Ensure MOH budget commitment to maintenance of infrastructure and equipment investments to strengthen their sustainability\. 8\.2 Implementation: Planning for sustainability should be strengthened\. o Opportunities should not be missed to enhance sustainability of project contributions, such as: a) more regional decision-making in project design and control, b) more focus on strengthening regional management capacity, c) legal approvals for operating under a pilot project framework in certain zones, when different from current legal dispositions, d) project responsibility given to central and regional MOH functionaries (besides the PCU), including funding of their travel expenses for project supervision, monitoring and evaluation\. Technical assistance from the Bank should be available\. * Early in projects, the Bank should anticipate technical assistance needs of the Borrower in relation to developing terms of reference, and procurement and disbursement guidelines\. Third-party contracting for implementation was effective, but rigid TOR caused pitfalls\. * LOI specifications are too rigid to allow for necessary project "rework", the latter being an issue that QAG has recommended as a normal part of business\. To anticipate evolving project needs, a core team of specialists could be contracted at a set price, with specific products negotiated as needed\. * Contracts for design and implementation should be separate\. International partnerships should be considered to support future projects\. * Projects should have an element of collaboration with international partners for sharing best practices policy research and other types of assistance\. 9\. Partner Comments (a) Borrower/implementing agency: Apreciaci6n Global: * El Informe hace un enfasis muy marcado en las debilidades sectoriales en el pais\. Considerando el calificativo de satisfactorio para uno de los dos objetivos (incremento del uso de servicios de salud) el atribuir ello exclusivamente al proyecto, resulta poco convincente el argumentar y relativizar los - 14 -  aportes locales\. * Existe una implicita contradicci6n pues el disefio original fue cambiado hasta en tres oportunidades y ha sido el Ministerio de Salud con sus limitaciones quien fue ayudando realmente a defmir los ajustes necesarios para adecuar el proyecto a las circunstancias\. * En consecuencia y considerando que la escala de calificaci6n del desempefio del prestatario contempla tres categorias, corresponderia la intermedia (satisfactorio, no altamente satisfactorio ni insatisfactorio)\. Apreciaci6n por Segmentos: En 3\.4 respecto a la Provisi6n de Servicios de Salud * Tomando en consideraci6n el limitado enfasis preventivo en la atenci6n de los servicios de salud, es preciso destacar la incorporaci6n de nutrici6n tanto en las acciones intramurales como extramurales de los servicios de salud\. En lo que respecta a lo intramural, es necesario destacar la evaluaci6n alimentaria, la consejeria nutricional, el uso de suplementos preventivamente, el diagn6stico de anemia\. En lo extramural, es preciso destacar el desarrollo de actividades educativas (preparaci6n de alimentos) con sostenida participaci6n de personal de salud, no nutricionista necesariamente\. * El PSNB contribuy6 al desarrollo de las Normas para la prevenci6n de la deficiencia de micronutrientes (PREDEMI), que han constituido un instrumento tecnico indispensable para las intervenciones de prevenci6n de anemia y vitamina A\. 3 Con respecto a la vitamina A, el proyecto contribuy6 en la definici6n de los procedimientos para el manejo de suplementos de vitamina A en el pais, con el apoyo de especialistas intemacionales (Dra\. Barbara Underwood)\. 3 Asimismo, se realizaron actividades extramurales de seguimiento domiciliario, que permitieron reforzar acciones de consejeria intramural, como parte de la atenci6n integral\. Se desarroll6 un modulo de capacitaci6n para personal de salud para el manejo nutricional intramural, asi como un m6dulo de pautas de consejeria en alimentacion y nutrici6n\. En 3\.4 sobre Promocion de la Salud: 3 Con relaci6n al segundo subcomponente nutrici6n, es preciso destacar la importancia del disefno de la intervenci6n educativa comunicacional, tomando en cuenta estudios de diagn6stico (Estudio de Micronutrientes, y estudios KAP y estudios cualitativos)\. La intervenci6n tomo en cuenta resultados de indicadores biol6gicos, dieteticos, de disponibilidad de alimentos, los cuales complementados con el KAP, orientaron la definici6n de comportamientos esperados en alimentacion y nutrici6n en la poblaci6n intervenida del ambito del proyecto\. * En este sentido, con el diagnostico alimentario y nutricional se disefaron las intervenciones educativo comunicacionales en nutrici6n, precisandose comportamientos esperados, factibles de ser llevados a cabo por las madres / tutores en las localidades donde se implementaron\. Esta estrategia promovi6 el uso de alimentos locales y de bajo costo y contindose con un mecanismo piloto de monitoreo de cambios de comportamiento Ilevado a cabo por el PSNB y de supervisi6n por el personal de salud, en ambitos seleccionados\. * En la pagina 8 se dice, que en el subcomponente de nutricion\. "resulting in a community demostration model that could be implemented by CHW"\. Sera necesario precisar que como parte de este modelo los agentes comunitarios participaron activamente en el mismo, la cual tiene una gran relevancia para con la sostenibilidad de las acciones a nivel comunitario\. * En el componente de Promoci6n de la Salud no se ha incluido el Curso de Quechua y Cultura Andina desarrollado en el Cusco, y que en opini6n de la propia DISA y la UNSAAC ha tenido resultados exitosos, resultando en una intervenci6n sostenible\. - 15 -  En 4\.1 respecto a Promoci6n de la Salud * El componente de promoci6n de la salud muestra resultados importantes en sus subcomponentes (IEC, mercadeo de servicios, actividades en comunidad, curso de quechua y cultura andina), los que son reconocidos en diferentes partes del documento\. No se puede evaluar promoci6n de la salud en funci6n de practicas saludables, (auin mAs alla del corto tiempo de intervenci6n) pues sus objetivos incluyen aspectos diferentes\. No nos parece consistente una evaluaci6n insatisfactoria (mas aun cuando se lleva a concluir sobre un componente que representa el 34% del monto del prestamo)\. De otro lado, el CAP no fue pensado para evaluar el componente de promoci6n\. * Es necesario seiialar que si bien los comportamientos esperados sefialados en la secci6n 4\.1, formaron parte de los resultados del CAP, en el caso de nutrici6n, se dio prioridad a los comportamientos inadecuados con relaci6n a la problematica de anemia entre los 6 y 24 meses\. * De esta manera no se di6 prioridad al "uso de aceite o grasa en la alimentaci6n del nifio" o "dar alimentos proteicos 5 o mAs veces a la semana", como se sugiere en la seccion 4\.1, por no ser considerados de prioridad frente a la problematica sanitaria diagnosticada y frente al limitado accionar detectado del personal de salud a partir de los 6 meses en lo que respecta a alimentaci6n y nutricion\. * Por otro lado, comportamientos como "uso de sal yodada", no fueron intervenidos directamente por el Proyecto dado que el Ministerio de Salud cuenta con un programa sostenido y tecnicamente solvente en el control de la deficiencia de yodo\. Por ello la estrategia del proyecto consisti6 en aunar esfuerzos con el mencionado programa, como puede ilustrarse con los cambios en la concentraci6n de yodo urinario de escolares y mujeres en la sierra sur, documentada por el PREDEMI (se adjunta grafico)\. * Las practicas que figuran en el punto 4\.1 respecto a Promoci6n de la Salud, difieren de las de la matriz del anexo 1\. * En la pagina 12 se menciona al HIS como fuente respecto a consultas de nifios menores con diarrea o EDA\. La fuente fue historias clinicas\. * De la informaci6n obtenida por la encuesta en poblaci6n aplicada respecto a uso de los servicios, no se puede sostener la afirmaci6n de que en los ambitos del proyecto se ha producido una disminucion de la demanda de la poblaci6n en extrema pobreza en todos los anmbitos, a excepci6n de Villa El Salvador\. * En el parrafo sobre el contexto, se pone en comillas la observacion del pais sobre gerencia insatisfactoria del subproyecto cuestionandola en sus efectos mas no explicando porque es que no se resolvi6 esta necesidad\. Aqui nuevamente se transfiere excesivamente la responsabilidad al pais aun cuando se acepta que el enfoque inicial fue malo y los t6rminos de referencia formulados inadecuados\. Se asigna el mayor peso de responsabilidad a la "falta de contraparte"\. En el punto 4\.5 respecto al impacto en el desarrollo institucional: * Debe incluirse un punto sobre la organizaci6n de redes de laboratorio efectuada conjuntamente con el Instituto Nacional de Saluc\. * En el mismo punto, respecto a infraestructura, debe incluirse a otras instancias como los Municipios, CTAR y ONG's\. El el item 5\.2 hace por unica vez un reconocimiento al aporte nacional del PSBPT pero lo disminuye por la critica inicial a la resistencia a las reformas\. En el item 5\.3 se hace referencia a un clima hostil los 4 primeros afios, sin embargo luego especifica que se debi6 a problemas en ambas partes que casi generan el cierre temprano del proyecto\. En el item 6\. 1: * Se plantea un excesivo enfasis en el papel del ex coordinador regional del PSNB en la institucionalizacion de los aportes del proyecto, relativizando el valor de la decisi6n institucional\. * La escasa sostenibilidad de los componentes de promoci6n que se seniala, dista de las evaluaciones - 16 -  realizadas\. Es mas, los desarrollos efectuados por el PSNB han servido de base para proyectar la Direcci6n Ejecutiva de Promoci6n de la Salud, en la estructura organica de la DGSP\.- En la Secci6n 7, las contemplaciones y explicaciones por las cuales se considera la performance del banco satisfactoria no son igualmente comprensivas cuando se analiza el desempenio del prestamista\. Respecto al punto 8 de Lecciones Aprendidas: * Cuando se refiere al poco compromiso o deterrninaci6n del nivel central para acciones de IEC, esta desdeflando las numerosas acciones en esta area emprendidas por la DGSP y el PSBPT, a lo largo de los ultimos 4-5 afnos\. * El problema de sostenibilidad parece deberse debido a que no se logro realmente institucionalizar a nivel regional o local a pesar que existian condiciones para ello, aceptando que a nivel central habian muchas limitaciones\. * El mercadeo social de servicios ha sido un importante aporte, pero es preocupante la aceptaci6n que en realidad no ha sido significativo el aporte de mayor acceso a la poblaci6n de extrema pobreza\. En el Anexo 1: Se insiste en colocar 5 indicadores del SAR (los 5 primeros de la matriz), incluyendo aspectos de mortalidad matema e infantil, indicando que el proyecto proporcionari los datos\. Este tema fue abordado varias veces con el Banco, concluyendo que por los alcances de la intervenci6n, s6lo se ofreceria informaci6n sobre lactancia matema exclusiva\. Respecto de la evoluci6n del proyecto, recuerdese la ayuda memoria de febrero de 1998, en la que se respalda la reorientaci6n del proyecto hacia el desarrollo de redes de servicios de salud\. Siendo asi de claro el acuerdo con el Banco sobre el enfoque del proyecto, los criterios de evaluaci6n del mismo, deben incorporar principalmente variables relacionadas al mejoramiento de los servicios\. Otro - Se han omitido algunas incorporaciones importantes: * Destacar la gesti6n administrativo-financiera y de control del PSNB, reconocida oficialmente por el propio Banco Mundial (12-19 octubre de 1998)\. * La gesti6n, control y supervisi6n continua del proyecto permitieron la toma de decisiones de manera oportuna y eficaz en relaci6n al seguimiento de los contratos y a la sanci6n respecto de irregularidades posibles\. * Las menciones anteriores son oportunas de resaltar, maxime si se analizan los resultados finales de la gesti6n gubemamental anterior y los continuos esfuerzos del Banco por propiciar los mecanismos de control anticorrupci6n y la gesti6n transparente de los proyectos\. * Existe un balance de retrasos importantes en las licitaciones intemacionales de equipos, insumos y medicamentos generados por los agentes de compra contratados (UNICEF/UNOPS), que a su vez originaron dificultades en la implementaci6n global del plan operativo, asi como diversas observaciones a los items de medicamentos adquiridos\. (b) Cofinanciers: N/A (c) Other partners (NGOs/private sector): N/A 10\. Additional Information The Implementation Completion Report (ICR) Team consisted of: - 17 -  - Laura C\. Altobelli (ICR Author) - Livia Benavides (Task Team Leader) - Ana Maria Arteaga (Program Assistant, LCSHD) - Patricia Bemedo (Program Assistant, LCSHD) The ICR was reviewed by: - Charles Griffin (Sector Manager, LCSHD) - Evangeline Javier (Sector Leader, LCC6C) - Ruth Levine (Senior Health Economist, LCSHH) - Isabella Danel (Public Health Specialist, LCSHH) - Jerker Liljestrand (Lead Health Specialist, HDNHE) - The Borrower (MOH and BHNP) -1 8 -  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome /Impact Indicators: Indicator for Projected in last PSR1 Actual __________ I Estimate Health Outcomes and Practices 1996** 1999* 2001* Child Health Percent of children 0-5 mo\. exclusively breastfed*** 52% 57% Percent of children 6-9 mo\. who receive breast milk 59% 70% plus solid food Control 49%/ Percent of children 6-23 mo\. who receive solid foods 40% 63%+ first during their main meal Control 49% Percent of children 6-23 mo\. who consume animal 69% 76% protein more than 3 times a week Control 77% Percent of children 6-23 mo\. who receive a daily iron 6% 16% supplement _ _ Contol 15% Percent of children 0-23 mo\. with complete well-child 00/ 77% + services**** 0 Control 64% Prevalence of diarrhea in children 0-23 mo\. (sa12% 18% Contol 15% - < 5years old)Cotl 5 No\. of children 0-23 months N=2366 N=2510 N=280 - < 4 o\.2ld) Control N=2S1 No\. of children 0-5 months N=445 Control N=94 Maternal Health Percent of women with first trimester prenatal care 67% 59% Contol 61% Percent of women who sought care for problems in 66% 74% + pregnancy Control 58% Percent of women who took iron daily during 82% 94% pregnancy _ Control 900/0 Percent of women with birth attended by health 64% 72% 90% + personnel _ Control 66% Percent of women who received vitamin A following 14%/o 43% delivery _ _ Control 47% Percent of women attended by health personnel for 91% danger signs following a delivery _ Control 78% No\. of women pregnant in the last 3 years N-2300 N=280 I i (in lot 5 yrs, N=2years Control N=251 * Data sources: Baseline KAP survey, Academy for Educational Development, 1999\. Ex-post KAP survey, Universidad Peruana Cayetano Heredia, 2001\. ** Data source: 1996 Demographic and Health Survey with oversampling in BHNP project areas\. *** Ex-post evaluation of SAR impact indicators on infant-child mortality and prevalence of malnutrition in children under age 3 was not completed since financin for oversampling in project areas of the national DHS survey was to have come from a follow-on Bank project that was not effective in time for the survey\. *** Includes four well-child visits, full immunizations series, and iron and vitamin A supplements\. + Significantly different results (p<\.05) as compared to baseline and/or control values Control=comparison population in matched non-project control areas, January 2001 - 19-  Control Area BHNP-Intervened Indicators for Health Facilities Health Facilities Quality of Care* \. - Lul CC N N\. S\. Average number of activities in the basic package of services for a well-child under 5\.8 12\.1 9\.7 10\.8 9\.8+ 10\.2 11\.3+ 11\.1 age 3 (standard = 9 activities) Percent of child (< age 5) visits that 43 52 47 50 56+ 57 51 21 included nutritional counseling 4 Average number of activities in the basic package of services for a pregnant woman 5\.6 6\.8 6\.1 6\.4 6\.5+ 6\.0+ 6\.7+ 6\.8+ (standard = 9 activities) Average number of quality standards implemented during deliveries (standard 9 9 8 tO 9 12+ 12+ 10 13 quality standards) _ _I_ Percent of pregnant women who received a 56 50+ 81 hemoglobin test _1 57 76 0 55 78+ * Data based on review of approximately 6000 clinical histories of children under age 5 and pregnant women in intervention and control facilities (approximately 1500 in each category)\. + Significantly different results (p<\.05) as compared to baseline and/or control values Control=comparison health facilities in matched non-project control areas\. - 20 -  Output Indicators: Projected in Actual/Latest Selected Indicators last PSR1 Estimate HEALTH SERVICES DELIVERY Integrated Health Care Delivery Strengthening No\. of micronetworks with functioning Management Committees 51 50 No\. of facilities with redistribution of rooms and equipment 267 288 No\. of facilities with implemented organizational model of consulting rooms 255 290 No\. of facilities with organized integrated admissions procedures 241 237 No\. of facilities with implemented laboratory model 252 204 No\. of facilities with decision manuals and integrated health procedures in women and child consulting rooms 300 446 No\. of personnel trained in womens' health 1194 1223 No\. of personnel trained in child health 1236 1372 No\. of personnel trained in promotion of nutrition in pregnancy 773 962 No\. of personnel trained in promotion of child nutrition 954 1035 No\. of tutors and trainers trained in flexible adult education 137 138 Information Systems No\. of facilities with processing centers organized 38 35 Equipment No\. of facilities equipped with truck 54 53 No\. of facilities equipped with motorcycle 208 208 No\. of DISAs and network centers with computers installed 9 13 No\. of facilities with computers installed 65 58 No\. of facilities with communication equipment installed 121 43 No\. of facilities with basic medical equipment installed 329 425 No\. of facilities with medicines and supplies distributed 332 357 Rehabilitation of Infrastructure No\. of facilities with legally registered property rights 260 230 No\. of facilities with infrastructure improvements 226 184 PROMOTION OF HEALTH PRACTICES IEC Capacity Strengthening No\. of IEC commissions formed 19 15 No\. of personnel trained in use of IEC techniques and materials 226 322 No\. of facilities with personnel trained in IEC 81 79 No\. of CHW trained in use of IEC techniques and materials 426 506 Promotion of Nutrition Practices No\. of personnel trained in counselling, educational techniques and demostrative sessions in nutrition 772 743 No\. of facilities with personnel trained in counselling, educational techniques and demostrative sessions in nutrition 233 235 No\. of CHW trained in counselling, educational techniques and demostrative sessions in nutrition 612 749 No\. of facilities receiving nutrition demonstration kits 259 290 No\. of demostrative sessions in nutrition 996 1185 No\. of mothers of children < 2 trained to prepare iron-rich foods 5679 8952 Promotion of Health Practices in Tuberculosis No\. of personnel trained in strategic planning and management of IEC interventions in TB 90 77 -21 -  SOCIAL MARKETING OF HEALTH SERVICES No\. of personnel trained in empathic communications and interpersonal relations 721 993 No\. of facilities with work plans to improve interpersonal relations 75 71 No\. of personnel trained in diploma program for Social Marketing of Health Services 130 125 No\. of facilities with material for social marketing 126 127 No\. of CHW trained in promotion of health services 556 501 COMMUNITY HEALTH Population Censes No\. of communities with census completed 861 795 No\. of facilities with lists of pregnant women, children under age 5, women of fertile age, and families 132 127 Community Health Workers No\. of CHW with supply kit 834 788 No\. of CHW trained in maternal-child health promotion 892 1073 No\. of CHW working effectively in mat-child health promotion 554 664 No\. of CHW trained in surveillance and control of malaria 177 269 No\. of traditional midwife manuals distributed 460 985 No\. of traditional midwives trained 228 204 No\. of trained traditional midwives effectively working in child health and womens' health 132 145 No\. of facilities with community referral system installed 141 132 No\. of CHW with formats for population follow-up 817 787 Deparasitization of Children No\. of children 2-7 years of age given anti-parasite medication 45,019 89,897 Quechua and Andean Culture No\. of personnel trained in Quechua and Andean culture 120 94 No\. of tutors trained in educational methodology for Quechua and Andean culture for health personnel 30 31 MANAGEMENT AND FINANCING Health Service Network Formation No\. of personnel trained in delimitation of networks 206 212 Quality Assurance No\. of personnel trained in quality standards and indicators 342 490 No\. of personnel trained in quality improvement projects 367 615 No\. of quality improvement projects implemented 394 254 No\. of facilities with quality improvement projects implemented 97 107 Health Services Management No\. of personnel trained in diploma program for health services management 305 289 No\. of personnel trained in health management 89 88 Programming and Budgeting No\. of personnel trained in programming and budgeting 233 312 No\. of regional health departments (DISAs) with completed budgets using SPP 7 6 Costing System No\. of personnel trained in use of costing system II 11 No\. of facilities with costing system installed 7 7 - 22 -  Annex 2\. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal ActuallLatest Percentage of Esthnate Estimate Appraisal Project Cost By Component US$ million US$ million Components at Appraisal 1\. Mother Child Health 19\.00 2\. Nutrition 6\.50 3\. Tuberculosis 1\.00 4\. IEC 16\.90 5\. Project Management 2\.10 Final Components 1\. Health Services Provision 22\.10 2\. Health Promotion 14\.90 3\. Management and Financing 5\.60 4\. Project Management 1\.70 Total Baseline Cost 45\.50 44\.30 Total Project Costs 45\.50 44\.30 Total Financing Required 45\.50 44\.30 -23 -  Project Costs by Procuremen Arrangements (ActuallLatest Estimate) (US$ million equival nt) ''4t^!rv boo WM0e~NSw N\.8P TotalCst 1\. Works 0\.00 0\.36 1\.47 0\.00 1\.83 (0\.00) (0\.32) (1\.28) (0\.00) (1\.60) 2\. Goods 8\.09 1\.04 2\.80 0\.00 11\.93 (5\.27) (0\.68) (1\.82) (0\.00) (7\.77) 3\. Services 10\.27 2\.58 13\.09 0\.00 25\.94 (8\.64) (2\.17) (11\.02) (0\.00) (21\.83) 4\. Miscellaneous 0\.00 0\.00 4\.60 0\.00 4\.60 (0\.00) (0\.00) (2\.39) (0\.00) (2\.39) 5\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) 6\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) Total 18\.36 3\.98 21\.96 0\.00 44\.30 (13\.91) (3\.17) (16\.51) (0\.00) (33\.59) 4 (Miscellaneous) refer to incremental operations costs\. Figures in parenthesis are the amounts to be financed by the Bank Loan\. All costs include contingencies\. 21Includes 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 Financin by Cor ponent (in US$ million equivalent) Components at Appraisal 1\. Mother Child Health 15\.36 4\.74 0\.0 0\.0 2\. Nutrition 2\.44 0\.76 0\.0 0\.0 3\. Tuberculosis 0\.08 0\.02 0\.0 0\.0 4\. IEC 14\.36 4\.44 0\.0 0\.0 5\. Project Management 1\.76 0\.54 0\.0 0\.0 Final Components 1\. Health Services 16\.78 5\.35 Provision 2\. Health Promotion 11\.48 3\.42 3\. Management and 4\.24 1\.32 Financing 4\. Project Management 1\.29 0\.41 - 24 -  Annex 3: Economic Costs and Benefits N/A - 25 -  Annex 4\. Bank Inputs (a) Missions: Stagc 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 1/93 4 TM, SPHS, HS, C, Appraisal/Negotiation 3/94 3 TM, HS, C Supervision 6/95 3 TM, ES, C, 12/95 2 TM, ES, 3/96 4 TM, HS, E, C, 8/96 6 TM, PS, HE, HS, C,SSS, NGOS, 12/96 4 TM, HS, E, SSS, 4/97 4 TM, E, SSS, FMS, 6/97 7 TM, HS, PS, SSS, 2/98 7 TM, HS, C, PHC, 10/98 5 TM, PS, HC,PHC, 4/99 4 TM,HNS,HS, PS, 11-12/99 3 TM,HNS,C, 5/00 6 TM, HNS, PA, C, FMS, 7/00 4 DS, 11/00 2 TM,HND,PA,C, PS,PA, ICR 12/00 2 TM, HNS SPHS Senior Population Health Specialist TM: Task Manager HP: Health Specialist C: Consultant EC: Education Consultant HE: Health Economist E: Economist PS: Procurement Specialist SSS: Social Sector Specialist NGOS: NGO Specialist FMS: Financial Mgmt\. Specialist DS: Disbursement Specialist PHC: Public Health Consultant HNS: Health & Nutrition Specialist PA: Project Assistant (b) Staff Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks u1$ ('003) Identification/Preparation 45\.9 108,561 Appraisal/Negotiation 88\.2 193,548 Supervision 361\.36 1,564,611 ICR 6\.75 24,546 Total 502\.21 1,891,266 - 26 -  Annex 5\. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating El Macro policies OH OSUOM O N * NA O Sector Policies O H C) SU O M O N * NA O Physical OH *SUOM ON O NA -I Financial * H C) SU O M O N O NA O Institutional Development 0 H 0 SU O M 0 N 0 NA O Environmental 0 H C) SU 0 M 0 N 0 NA Social 0 Poverty Reduction 0 H C) SU 0 M 0 N 0 NA Ii Gender O H *SUOM O N O NA E Other (Please specify) O H C) SU O M O N * NA 0 Private sector development 0 H C) SU 0 M 0 N 0 NA 1 Public sector management 0 H C) SU 0 M 0 N * NA L Other (Please specify) O H C)SUOM ON * NA - 27 -  Annex 6\. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6\.1 Bankperformance Rating O Lending OHS*S OLu OHU El Supervision OHS *S OLU OHU O Overall OHS OS O u O HU 6\.2 Borrowerperformance Rating Ol Preparation OHS OS O u O HU OI Government implementation performance O HS O S 0 U 0 HU L Implementation agency performance OHS OS O u O HU L Overall OHS OS O U O HU - 28 -  Annex 7\. List of Supporting Documents 1\. World Bank, "Peru, Basic Health and Nutrition Project", Staff Appraisal Report, Report No\. 11801-PE, January 7, 1994\. 2\. Basic Health and Nutrition Project, "Plan Estrategico Trienal", October, 1996\. 3\. SASE, "Evaluaci6n Internedia del Programa de Capacitaci6n del PSNB," October, 1997\. 4\. Basic Health and Nutrition, "Misi6n de Supervisi6n del Proyecto de Salud y Nutrici6n Basica y Analisis Estrategico del Sector Salud -- Ayuda Memoria 17-27 de febrero de 1998", February 1998\. 5\. SASE, "Evaluaci6n Intermedia del Proyecto de Salud y Nutrici6n Basica - Informe Final," March, 1998\. 6\. APROPO, "Mercadeo de los Servicios de Salud y Promoci6n de Deberes y Derechos Ciudadanos en Salud y Nutrici6n - Informe de Resultados, Linea de Base-Linea de Salida," December, 2000\. 7\. PRISMA\. "Analisis de Indicadores Referidos al Modelo de Atencion Integral en Establecimientos PSNB y Establecimientos Control: Informe Final," Enero, 2001\. 8\. Basic Health and Nutrition Project, "Informe Final de Indicadores de Implementaci6n del PSNB", March, 2001\. 9\. Basic Health and Nutrition Project, "Resumen de Ejecuci6n y Resultados," May 16, 2001\. 10\. Perez F\., T\. L6pez and J\.L\. Quintana, "Informe Final de la Evaluaci6n de los Resultados Sanitarios de Tuberculosis y Malaria en Establecimientos de Salud, PSNB y Control 1996-2000," April, 2001\. 11\. Altobelli L\., "Lessons Learned: Basic Health and Nutrition Project 1994-2000," May, 2001\. 12\. Universidad Peruana Cayetano Heredia, "Estudio Final de Conocimientos, Actitudes y Practicas CAP-2000", May, 2001\. 13\. Basic Health and Nutrition Project, "Analisis de Indicadores de Cobertura para Establecimientos PSNB y Control," May, 2001\. 14\. Basic Health and Nutrition Project, "Matriz General de Instrumentos Desarrollados por el PSNB (annotated)," May, 2001\. (See sunmmary list in Annex 8)\. - 29 -  Additional Annex 8\. Instruments Developed by the Project 1\. DEFINICION DEL a) Definici6n del marco conceptual y Modelo de Atenci6n (en colaboracion MODELO DE metodol6gico de referencia para la operaci6n con equipo tecnico de la DGSP) ATENCION de los servicios de salud Guia metodol6gica para la implementaci6n del Modelo de Atenci6n 2\. DELIMITACION Y a) Delimitaci6n de redes y microredes Lineamientos para la conformaci6n de CONSTITUCION redes de salud DE REDES DE (en colaboraci6n con un grupo tecnico SERVICIOS institucional) b) Redefinici6n del nivel de complejidad de los Normas sobre niveles de complejidad de establecimientos servicios de los EE\.SS\. del primer y segundo nivel de atenci6n (en colaboraci6n con equipo tecnico de la DGSP) Estandares de actividades, de infraestructura y equipamiento del primer nivel de atenci6n c) Acreditaci6n de servicios de las redes y Manual de calificaci6n de microredes establecimientos y servicios del primer nivel de atenci6n\. 3\. ORGANIZACION a) Conformaci6n de la estructura de gesti6n de Modelo de gesti6n de redes DE LA GESTION redes y microredes DE REDES Y MICROREDES Reglamento de organizaci6n y funciones de la erencia de red Lineamientos generales para la or anizaci6n de microredes b) Capacitaci6n de funcionarios jefes y Curso (diploma) de capacitaci6n a personal con cargo directivo en gesti6n de distancia para el fortalecimiento de las servicios de salud capacidades gerenciales Manual para la elaboraci6n de proyectos de mejoramiento de la calidad Metodologia de implementacion del trabajo intramural Manual de organizaci6n del trabajo extramural 4\. a) Implementaci6n de sistemas de planificaci6n Formatos para planificaci6n, IMPLEMENTACIO en red programaci6n y elaboraci6n de N DE SISTEMAS presupuestos en servicios DE GESTION EN RED b) Implementaci6n de sistemas de control Manual para la construcci6n de interno de la gesti6n estandares e indicadores de calidad - 30 -  Manual de supervisi6n, monitoreo y evaluaci6n para el mejoramiento de la calidad y eficiencia de los servicios de salud Procedimientos de auditoria medica y a los servicios de salud con enfoque de calidad\. c) Implementaci6n del Sistema de Gesti6n Guia metodol6gica para la Financiera implementaci6n del Sistema de Informaci6n de Costos e Ingresos para redes de servicios de salud (SICI) Software del Sistema de Informacion de Costos e Ingresos para redes de servicios de salud (SICI) Analisis Comparativo de Costos Observados y Costos Estandares Guia metodol6gica para la determinaci6n de tarifas d) Desarrollo del sistema de informaci6n de Prototipo del Sistema de Informaci6n de salud local Salud Local (en elaboraci6n conjunta con la OEI) 5\. a) Organizaci6n del sistema de gesti6n de la Lineamientos del sistema de IMPLEMENTACIO capacitaci6n capacitaci6n (en elaboraci6n conjunta N DE SISTEMAS con equipo tecnico DGSP y proyectos) DE OPERACION EN RED Manual de Operaciones del Sistema de Capacitaci6n Guia para la definici6n de responsabilidades del sistema de capacitaci6n Manual para la selecci6n y acreditaci6n de tutores y/o docentes Estandar de equipos y materiales de Centros de Recursos de Aprendizaje \.__ __ _ _ __ _ _ __ _ _ __ _ (CRAs) Guia para el diagn6stico de necesidades de capacitaci6n Guia para la formulaci6n de Planes de Capacitaci6n Guia para el disefio e implementaci6n del sistema de monitoreo/ evaluaci6n y sistema de informnaci6n de la cap ac itaci 6n Guia de Modalidades de Capacitaci6n Instructivo para la elaboraci6n de materiales educativos b) Organizaci6n de la red de laboratorios Modelo de organizaci6n de la red de laboratorios Manual de organizaci6n y funciones de la red de laboratorios Manual de procedimientos de la red de laboratorios - 31 -  Manual de procedimientos de control de calidad de la red de laboratorios M6dulos de capacitaci6n de laboratorio c) Organizaci6n del sistema de referencia y Lineamientos de organizaci6n del contrareferencia sistema de referencia y contrareferencia (en colaboraci6n con el grupo tecnico de la DGSP) Manual de organizaci6n y funciones del sistema de referencia y contrarefrencia Manual de operaciones del sistema de referencia y contrareferencia Manual de procedimientos del sistema de referencia y contrareferencia d) Organizaci6n de la gesti6n de intervenciones Documento sobre el rol y funciones de educativo comunicacionales las Comisiones IEC Guia de planeamiento estrategico de la comunicaci6n educativa en salud (PECE) Disefio metodol6gico de Talleres PECE Manual de validaci6n de materiales educativo comunicacionales Guia para el autodiagn6stico local de recursos comunicacionales y elaboraci6n de mapa comunicacional Recopilaci6n y analisis de materiales educativo comunicacionales en temas de salud mujer, salud del niho y enfermedades transmisibles Set de instrumentos modelo para monitoreo y evaluaci6n de intervenciones IEC 6\. OBRAS DE a) Saneamiento fisico legal de terrenos Guia para el saneamiento legal de los INFRAESTRUC-TU terrenos de los EE\.SS RA b) Elaboraci6n de expedientes tecnicos Esquema de contenido de expedientes tecnicos para la ejecuci6n de obras de salud c) Realizaci6n de obras de infraestructura Prototipos de Centro de Salud y Puesto de Salud M6dulos de arquitectura y equipamiento por unidades de servicios para el primer nivel de atenci6n Guia para la rehabilitaci6n y adecuaci6n de establecimientos de salud el primer nivel Flujo de procedimientos para pagos de ejecuci6n de obras d) Sefializaci6n interna y extema de Guia para la ambientaci6n y establecimientos sehializaci6n de EE\.SS e) Gesti6n de la infraestructura Flujo metodol6gico de las acciones de infraestructura de los EE\.SS - 32 -  Guia para el mantenimiento de la infraestructura fisica de los EE\.SS\. 7\. EQUIPAMIENTO Y a) Equipamiento y dotaci6n de medicamentos e Sistema informatico de adquisiciones DOTACION DE insumos (incorporado en el sistema general de MEDICAMENTOS gestion administrativa) Guia para personal de salud sobre el uso, operaci6n y conservaci6n de equipos y mobiliario m6dico Banco de especificaciones t6cnicas para equipos medicos y de laboratorio y para medicamentos Expedientes tecnicos para licitaciones 8\. ORGANIZACION a) Sensibilizaci6n e incorporaci6n de la yisi6n Video Modelo de Atenci6n Integral DE LOS del nuevo modelo de atenci6n SERVICIOS Curso de Relaciones Interpersonales para personal de salud b) Diagnostico de la situaci6n de los servicios Paquete metodol6gico instrumental para el diagn6stico de la situaci6n de los servicios c) Adecuaci6n de flujos y procedimientos de Manual de admisi6n integral atenci6n intramural M6dulo de capacitaci6n en admisi6n Manual de procedimientos de Salud de _____________________ la M ujer Manual de decisiones de Salud de la Mujer Manual simplificado de Salud de la Mujer M6dulos de capacitaci6n en Salud de la Mujer Manual de procedimientos de Salud del Ninio para profesionales Manual de procedimientos de Salud del Niiio para tIcnicos Manual de decisiones de Salud del Ninio Manual simplificado de Salud del Nifno M6dulos de capacitaci6n en Salud del Nifno Manual de procedimientos de Salud del Adulto Manual de gesti6n de farmacia Guia de informaci6n frrmaco-terapeutica para la atenci6n del nifio y la mujer Manual de procedimientos de laboratorio M6dulo de capacitaci6n de _ procedimientos de laboratorios M6dulo para la adecuaci6n cultural del \._________________ _____parto - 33 -  M6dulo de capacitaci6n para la orientaci6n y manejo alimentario nutricional en los servicios de salud Guia de pautas basicas para la consejeria en alimentaci6n infantil en los servicios de salud Documental de Nutrici6n: "Haciendo Camino al Andar" Video educativo de nutrici6n: "Mujeres de Hierro": d) Capacitaci6n de prestadores de salud en Curso de quechua y cultura andina para quechua y cultura andina prestadores de salud (Cusco) e) Organizaci6n de procedimientos de trabajo Manual de procedimientos del trabajo extramural extramural f) Empadronamiento de bogares M6dulo para el empadronamiento de hogares Software de empadronamiento e identificaci6n de usuarios (SEMIU) 9\. PROMOCION DE a) Fortalecimiento tecnico conceptual del Guia metodol6gica IEC para la PRACTICAS personal de salud y agentes comunitarios en formaci6n de personal de salud y SALUDABLES uso de material y tecnicas educativas agentes comunitarios comunitarias de IEC Guia metodol6gica de formaci6n flexible de personal de salud y ACS Guia metodol6gica para el sondeo bAsico de necesidades y caracteristicas de aprendizaje del agente comunitario\. b) Intervenciones educativo comunicacionales Guia de sesi6n demostrativa de en Nutrici6n preparaci6n de alimentos para nifnos y mujeres en edad fertil Paquete de materiales educativo comunicacionales en nutrici6n c) Intervenciones educativo comunicacionales Paquete de materiales educativo en Salud matema comunicacionales Planes modelo intervenciones educativo comunicacionales en salud matema con enfogue integral d) Intervenciones educativo comunicacionales Paquete de materiales educativo en IRA comunicacionales en IRA e) Intervenciones educativo comunicacionales Paquete de materiales educativo en EDA comunicacionales en EDA f) Intervenciones educativo comunicacionales Paquete de materiales educativo en Tuberculosis comunicacionales en TBC Planes modelo de intervenciones educativo comunicacionales en TBC - Cusco- San Juan de Lurigancho y Villa El Salvador g) Intervenciones educativo comunicacionales Paquete de materiales educativo en Malaria comunicacionales 10\. ACTIVIDADES EN a) Organizaci6n de sistemas de vigilancia y Metodologia de implementaci6n del COMUNIDAD referencia comunal sistema de referencia comunal - 34 -  Metodologia de implementaci6n del trabajo con agentes comunitarios de salud b) Capacitaci6n de agentes comunitarios en Guia e instructivo para entrevista de salud mujer y salud nino autopercepci6n de personal de salud Guia e instructivo para entrevista a usuarios Ficha de entrevistas para promotores y parteras\. Registro/padr6n de ACS\. Guia de grupos focales con ACS M6duIo de capacitaci6n sobre el rol y funciones de los ACS M6dulos de capacitaci6n de ACS en salud mujer M6dulos de capacitaci6n de ACS en salud infantil M6dulos de capacitaci6n de ACS en enfermedades transmisibles Manual de parteras/os (costa/sierra) Manuales de promotores Paquete de material educativo comunicacional para ACS Guia y formatos para la observaci6n de desempefio del ACS Cuademo de seguimiento poblacional 11\. MERCADEO a) Fortalecimiento tecnico-conceptual de M6dulo de autoaprendizaje en SOCIAL DE funcionarios y personal de salud en Mercadeo Social de los Servicios de SERVICIOS DE mercadeo social de servicios Salud SALUD b) Apoyo a la formulaci6n y ejecuci6n de Planes modelo de mercadeo social de los planes de mercadeo social de servicios a servicios de salud mujer y salud del nifio nivel de redes y microredes: Cusco, Piura y Lima M6dulo de comunicaci6n empatica para prestadores de salud Guia metodol6gica de capacitaci6n de ACS con enfogue de mercadeo social Paquete de materiales de promoci6n de los servicios de salud c) Promoci6n de deberes y derechos ciudadanos Plan modelo de Promoci6n de Deberes y en salud Derechos Ciudadanos en Salud 12\. APOYO AL a) Definici6n de prioridades sanitarias y Metodologia para la elaboraci6n de DESARROLLO programaci6n a nivel nacional y regional Analisis de Situaci6n de Salud (ASIS) INSTITUCIONAL Metodologia para la definici6n de prioridades sanitarias\. Documento "Las prioridades sanitarias del Peru para el periodo 2001- 2005" (Elaborado con participaci6n ministerial y equipo tecnico de la DGSP) - 35-  b) Implementaci6n del sistema de Metodologia SPP programaci6n presupuestal (SPP) a nivel de (en elaboraci6n conjunta con el Proyecto direcciones de salud y otras unidades 2000, la OGP y OPS) ejecutoras M6dulos de capacitaci6n del SPP (en elaboraci6n conjunta con el Proyecto 2000) Criterios de Programaci6n de Metas para la Estructura Funcional Programatica Pagina Web SPP Propuesta de seguimiento, evaluaci6n presupuestal y acuerdos de gesti6n M6dulo infonnitico para seguimiento y evaluaci6n presupuestal c) Asistencia tecnica para la formulaci6n del Analisis estrat6gico de la DGSP plan estrategico y el reordenamiento organico de la DGSP Reforma de la Direcci6n General de Salud de las Personas - Nuevo disefio organizacional y nuevas funciones Plan de implementaci6n de Reforma de la Direcci6n General de Salud de las Personas Plan de implementaci6n del Programa Mujer Nifio de la Reforma de la Direcci6n General de Salud de las Personas Plan de desarrollo institucional de la DGSP (documento de trabajo) - 36 -  MAP SECTION   IBRD 31476 _OD H0 780 76 -, 740 720 70' O\. ECUADOR i COLOMBIA -20 )/ 2s'0S TUMBE "A0 - ~ ~ ~ ~J 4 \ \ ~~~~~~B R A Z I L| \.8& aU]tTAD t \. t\. 0-ao' 80- EANCXSHj * HUAR)\Z Hp UC* PA CAC\.-J\. (H ICUCAYAL ( tC *DE- PASCO J - 0' \.1 P A C I F I C Et ,\._>>rROa\. LIMAE Jj O C E A N < ~ cf e t_,1 MADRE DE DIOS 12- LIMAs\ \\.t \. *AISdAr 120- JJ-HUANCAVEL)t ACUC v > N -|---' PERU ANC Y0 BASIC HEALTHAND A( IMAC - \ O NUTRITION PROJECT PN YAYACUCHO PuNO TQ PROJEc AREAS PAVED ROADS _ \._i \ - OTHER ALWEATHER ROAMS - | | RAILROADS NO - T00 -16*- \. RAILFERRY 6- @ DEPARtENT CAPrrIA PA ' * NATlOtA CAPI1AL 0 50 Q 150 200 5 I I I I I O U ~ RIVERS KIERS -* - DEPARTMENt BOUNDARIES T o MoD*^ U - - INTERNATIONAL BOUNDARIES TAon sf J*\.4amI 800§ e a \. \. \.wwwx*a; , 187- 80, 70\. 76° 7At 7 ASr CHILE'l JUNE 2001

REVIEW

P002101

 Telecommunications Report No: ; Type: Report/Evaluation Memorandum ; Country: Nigeria; Region: Africa; Sector: Telecommunications & Informatics; Major Sector: Telecommunications & Informatics; ProjectID: P002101 The Nigeria Telecommunications Project, supported by Loan 3236-UNI for US$225\.0 million equivalent, was approved in FY90\. The loan was closed in FY96, as scheduled\. Only US$19\.8 million (9 percent of the loan amount) was disbursed and the balance was canceled at the Bank’s initiative (primarily for lack of due diligence on the Borrower’s part)\. The Implementation Completion Report (ICR) was prepared by the Africa Regional Office\. No contribution was received from the Borrower\. The project's objectives were to: (i) support and strengthen the sector’s institutional and policy framework and to facilitate the commercialization of NITEL (Nigerian Telecommunications Plc\.), the state-owned monopolistic utility; (ii) improve the access to and quality of telecommunications services; and (iii) improve NITEL’s financial performance\. To this end, the project comprised: (i) a time-slice (1990-1994) of NITEL’s investment plan encompassing, inter alia, the rehabilitation of existing switching facilities, the expansion of its transmission network, and the addition of 200,000 new lines in Lagos and other major cities; and (ii) a broad institutional development program encompassing technical assistance and studies in the area of network planning and organizational development, human resource management, accounting and financial control systems, material and project management, and tariff policy\. Most of the project’s physical, institutional and policy objectives were not met as project implementation suffered from procurement delays caused by NITEL’s weak implementation capacity, excessive Government interference, rapid management turnover and unforeseen events (pull out of key consultants)\. What little was actually implemented on the institutional front under Bank financing (e\.g\. studies of accounting and billing systems) had hardly any impact on NITEL’s operations for lack of adequate follow-up\. And although NITEL’s finances have improved somewhat as a result of a 1992 Government equity infusion and tariff increases, they have continued to suffer from large Government arrears and a lack of financial autonomy\. In contrast with many other countries, the Nigerian Government has to date not taken any serious step towards sector liberalization and some form of private sector involvement, which would be the prerequisite to removing current supply bottlenecks and improving efficiency and quality of service\. The Operations Evaluation Department (OED) rates project outcome as highly unsatisfactory, institutional development impact as negligible and sustainability as unlikely (as in the ICR)\. The Bank’s performance is rated as satisfactory (as in the ICR) —albeit marginally so— mainly on account of the decisiveness it showed in ultimately canceling the project when it was clear that the absence of basic Borrower commitment would thwart any restructuring attempt\. Nonetheless, the Bank clearly overestimated at appraisal NITEL’s capacity to implement such a large project and its performance during supervision suffered from excessive staff turnover and the absence of a full-fledged mid-term review\. Two important lessons can be drawn from this project: (i) corporatization on paper of a state-owned utility is no assurance of real autonomy and the Bank should review carefully the details and implications of any proposal on day-to- day managerial autonomy; and (ii) implementation problems of a systemic nature such as those evidenced in this project are best treated in the context of an overall country portfolio restructuring effort, rather than on a stand-alone (project) basis\. OED rates the ICR as exemplary, as it presents a thorough, candid and perceptive assessment of the experience and lessons of the project\. No audit is planned\.

REVIEW

P070086

 ICRR 12414 Report Number : ICRR12414 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 05/08/2006 PROJ ID :P070086 Appraisal Actual Project Name :Trade & Transport Project Costs 12\.70 12\.66 Facilitation In South East US$M ) (US$M) Europe Country :Bulgaria Loan/ US$M ) Loan /Credit (US$M) 7\.5 8\.41 Sector (s):Board: ): TR - Central US$M) Cofinancing (US$M ) 1\.5 0\.0 government administration (100%) L/C Number :L4553 FY ) Board Approval (FY) 00 Partners involved : USA Closing Date 12/31/2003 09/30/2005 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 non-tariff costs to trade and transport, and ii\. To reduce smuggling and corruption at border crossings \. b\. Components (or Key Conditions in the case of Adjustment Loans ): 1\. Customs Administration Institutional Reform (US$ 0\.90 million at appraisal, nil actual/latest estimate): (i) technical services to monitor Bulgarian Customs Administration's (BCA) performance; (ii) technical services to streamline operations at two border posts and one inland terminal on a pilot basis, and (iii) training for inter-agency awareness and cooperation \. 2\. Trade Facilitation Development (US$ 0\.40 million at appraisal, nil actual/latest estimate): (i) provision of technical assistance and advisory services to trade and international transport participants through the Chamber of Commerce; (ii) improvement of cooperation between public and private parties using a virtual forum, and (iii) provision of equipment to support information availability \. 3\. Improvement of Bulgaria Integrated Customs Information System (US$ 0\.1 million at appraisal and actual/latest estimate) including a regional experience -sharing program on integrated systems for border agencies \. 4\. Improvement of border crossing facilities (US$8\.9 million at appraisal and US$12\.12 million actual/latest estimate) comprising civil works and improvement of utilities,exit and entry processing lanes, new buildings, booths and canopies, heating, sanitary, and electrical systems, and truck terminal areas at Gyueshevo, Vidin, Rousse, Kapitan, Andreevo, Kulata, and Bourgas \. 5\. Program and project implementation (US $ 0\.60 at appraisal and US$0\.44 million actual/latest estimate)\. c\. Comments on Project Cost, Financing, Borrower Contribution, and Dates The project cost US$12\.66 million financed by an IBRD loan for US$8\.41 million and the borrower's contribution of US$4\.25 million (Annex 2 of the ICR shows a government contribution of US$ 4\.83 million)\. The Bank's loan was made in Euros and valued at 7\.73 million Euros, or US$7\.5 million at the time of commitment, the difference being due to exchange rate fluctuations \. The project was appraised in February, 2000, approved by the Board on May 25, 2000, made effective on November 29, 2000, and closed on September 30, 2005, 21 months behind schedule to allow for delays in constructing facilities at border crossing, especially at Gyueshevo, and delays in obtaining a grant to finance some project facilities at Vidin \. 3\. Relevance of Objectives & Design : The objectives and design of the project were fully relevant to Bulgaria's needs and priorities \. The Country Assistance Strategy (CAS) for Bulgaria discussed by the Board in 1998 (which supported the strategy set out in the Government of Bulgaria's strategy document for 1997-2001) identified promoting structural reform and private sector development, as well as strengthening and rationalizing the role of the state as two key priorities \. This project is fully consistent with that strategy and its design facilitated achieving these objectives \. Further, the regional program for Trade and Transport Facilitation in Southeast Europe (TTFSE) provided the substantive, regional, and country context for this operation\. The project was the result of collaborative efforts among the Government of Bulgaria, the World Bank and the United States of America (USA), and there was collaboration with the EU during project implementation\. 4\. Achievement of Objectives (Efficacy) : 1\. Reduce the non-tariff costs to trade and transport - substantial achievement\. The ICR provides data on 3 pilot sites\. The Plovdiv inland terminal showed substantial and unambiguous improvements over time, with import clearance time reduced from more than 190 minutes in 2000 and 2001 to 42 minutes in 2003 but then increased to about 1 hour in 2004 and in June, 2005\. The Rousse border crossing showed uneven but distinct improvements in exit times and some improvement in average entry times \. The Gyueshevo border crossing showed improvement in border exit and entry times from 2000 to 2002 but then experienced sustained increases from 2003 to 2005\. This deterioration after 2002 may have been caused by increases in traffic volumes as stated in the ICR \. Traffic volumes for Bulgaria certainly increased substantially, as the nominal value of imports and exports more than doubled during this period\. The ICR could have reduced uncertainty about this situation by reporting on traffic volumes at the pilot sites, and, in addition, reporting on processing times at non -pilot sites\. However, the PSRs indicate continuing and successful implementation of the reforms and investments supported by the project, so increased traffic volumes appear to be the most likely cause for this deterioration \. Additional circumstantial evidence on this point is that the improved procedures at these sites are being replicated at 3 customs offices at seaports and 12 inland customs offices\. 2\. Reduce smuggling and corruption at border crossings - substantial achievement\. Concerning corruption, the BEEPs survey shows that the percent of firms saying that bribery (unofficial payments) to deal with customs/imports is frequent has declined from 26% in 2002 to 16% in 2005\. However, this 16% in 2005 is still higher than the average for the other countries in Southeast Europe \. Concerning smuggling, new inspection facilities financed by the project led to seized goods valued in the range of US$ 300,000 to US$400,000 per annum\. Penalties for bribery have been made more severe\. 5\. Efficiency : The ICR estimates the project's rate of return more than 50%, compared to the estimate of 31% at appraisal, on account of greater increases in traffic than anticipated in the PAD \. The ICR uses an estimate of the daily unit costs of US$300 based on information from the Bulgarian Road Transport Association, lower than estimates of US$ 350 used in some other TTFSE countries\. In addition to the direct cost reduction benefits of the project, the ICR also 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, considered by the ICR to be a conservative estimate\. However, this estimate is based on a model which uses a large number of assumptions, so that the estimate must be regarded as speculative \. 6\. M&E Design, Implementation, & Utilization: Monitoring and evaluation aspects of the project concerning reduction of non -tariff costs to trade and transport were built into the structure of the project, although it would have been more useful had the ICR reported on traffic volumes at all of the pilot sites, and the rationale for monitoring outcomes in only 3 of the 7 project cites is not clear\. In addition, had monitoring and evaluation been conducted at non -project cites, this would have provided "without" project data which could have been used to evaluate the benefits of the project \. Concerning smuggling and corruption, M&E does not appear to have been built into the structure of the project \. While evidence cited by the ICR is sufficient to evaluate progress, future projects should have M&E aspects incorporated into the structure of the project\. 7\. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative): Safeguards and Fiduciary aspects of the project have been addressed in the PSRs and raise no special issues \. There appear to have been no unintended impacts \. 8\. Ratings : ICR ICR 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 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\. Systemic reforms in processing imports and exports can be as important as improvements in physical infrastructure\. Therefore, policy dialogues regarding these reforms should be started early enough to ensure that they can be fully incorporated in project formulation and implementation, as was this case with this project \. 2\. A high degree of ownership by a champion, in this case, the Deputy Finance Minister, is important in leading to the coordination needed in projects such as this where a number of agencies are involved \. 10\. Assessment Recommended? Yes No 11\. Comments on Quality of ICR: The ICR is rated satisfactory and provides a clear picture of project implementation, presents a thoughtful evaluation of the rate of return, and draws on indicators to show progress in reducing corruption and smuggling \. However, the ICR presents a somewhat confusing picture of costs \. The tables in annex II are inconsistent among themselves and with section 3\.3 of the ICR which appears to give only cost data at appraisal, rather than actuals \. The ICR should have explained how some of the project components were implemented at "nil cost" as suggested by the tables in Annex 2\. Data on financing to be provided by the USA is given in the PAD (US$1\.5 million toward the total project of US12\.5 million) and the PAD cost estimate is consistent with the Annex 2 data on cost of the project at appraisal \. Yet, the contribution of the US is only reflected as cofinancing in the table on "Project Financing by Component" in Annex 2 (which appears to contain typographical errors )\. The Borrower's contribution is unusually complete and quite thoughtful, thereby giving credence to the Borrower's intention to continue to implement the reforms \.

REVIEW

P050439

Document of The World Bank Report No: 92996-UG (Supplement) SUPPLEMENTAL IMPLEMENTATION COMPLETION AND RESULTS REPORT (Credit Number 3411-UG) ON A CONTINGENT CREDIT IN THE AMOUNT OF SDR 5\.48 MILLION (US$ 8\.27 MILLION EQUIVALENT) TO REPUBLIC OF UGANDA FOR A COMPONENT E UNDER PRIVATIZATION AND UTILITY SECTOR REFORM PROJECT, SUPPORT TO UMEME LIMITED December 5, 2014 Eastern Africa Country Cluster 1 (AFCE1) Energy and Extractive Practice Group Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective May 28, 2014) Currency Unit=Shilling (Uganda) US$ 1\.00 =Shilling 2,550 FISCAL YEAR 2015 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy EDP Enterprise Development Project ERA Electricity Regulatory Agency FDI Foreign Direct Investment GDP Gross Domestic Product GoU Government of Uganda IDA International Development Association MFPED Ministry of Finance, Planning and Economic Development PCU Project Coordinating Unit PE Public Enterprise PPI Private Participation in Infrastructure PU Privatization Unit PUSRP Privatization and Utility Sector Reform Project SPP Special Provision Period UEB Uganda Electricity Board UEDCL Uganda Electricity Distribution Company Ltd UEGCL Uganda Electricity Generation Company Ltd\. UJAS Uganda Joint Assistance Strategy Vice President: Makhtar Diop Country Director: Philippe Dongier Global Practice Senior Director: Anita Marangoly George Practice Manager: Lucio Monari Practice Manger (Guarantee): Pankaj Gupta Project Team Leader and ICR Team Leader: Robert Schlotterer ICR Primary Author: Ada Karina Izaguirre Bradley  UGANDA COMPONENT E UNDER PRIVATIZATION & UTILITY SECTOR REFORM 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 \. ii G\. Ratings of Project Performance in ISRs \.iv H\. Restructuring (if any) \.vi I\. Disbursement Profile \. vii 1\. Project Context, Development Objectives and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes \. 7 3\. Assessment of Outcomes \. 13 4\. Assessment of Risk to Development Outcome \. 21 5\. Assessment of the Guarantee in support of the Project \. 22 6\. Assessment of Bank and Borrower Performance \. 24 7\. Lessons Learned\. 27 8\. Comments on Issues Raised by Implementation Entity/Implementing Agencies/Partners \. 29 Annex 1: Project Costs and Financing \. 31 Annex 2: Outputs by Component \. 32 Annex 3: Economic and Financial Analysis \. 37 Annex 4: Bank Guarantee and Implementation Support/Supervision Processes \. 39 Annex 5: List of Supporting Documents \. 41 Map \. 43  A\. Basic Information Privatization & Utility Country: Uganda Project Name: Sector Reform IDA-34110,IDA- Project ID: P050439 L/C/TF Number(s): 3411A,IDA-B0070 ICR Date: 09/03/2014 ICR Type: Core ICR REPUBLIC OF Lending Instrument: SIL Borrower: UGANDA Original Total XDR 4\.48 Disbursed Amount: XDR 0\.0 Commitment: Environmental Category: B Implementing Agencies: Ministry of Finance, Planning and Economic Development Cofinanciers and Other External Partners: B\. Key Dates Revised / Process Date Process Original Date Actual Date(s) Concept Review: Effectiveness: 02/27/2005 03/02/2005 Appraisal: 10/15/2004 Restructuring(s): 11/27/2006 Approval: 12/14/2004 Mid-term Review: Closing: 02/28/2015 03/30/2014 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Modest 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: Highly 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 No None at any time (Yes/No): (QEA): i  Problem Project at any Quality of Supervision No None time (Yes/No): (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 52 55 Other social services 48 45 Theme Code (as % of total Bank financing) Regulation and competition policy 50 50 State-owned enterprise restructuring and privatization 50 50 E\. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Gobind Nankani Country Director: Philippe Dongier Judy M\. O’Connor Practice Manager: Lucio Monari Demba Ba Project Team Leader: Robert Schlotterer Lucy Fye ICR Team Leader: Robert Schlotterer ICR Primary Author: Ada Karina Izaguirre Bradley F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The project's development objective is to improve the quality, coverage and economic efficiency of commercial and utility services, through privatization, private participation in infrastructure (PPI) and an improved regulatory framework\. Component E was fully in-line with the Development Objective of the umbrella operation (P050439 and IDA-34110) as it was designed to help finalize the concessioning of the electricity distribution services\. But as it was transaction specific, its development objective was limited to electricity distribution services\. Revised Project Development Objectives (as approved by original approving authority) The PDO was not revised\. ii  (a) PDO Indicator(s) related to Component E of the Project Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Coverage Rate (% of population with grid-based connections) in Electricity Value quantitative or 3\.8 % (1999) 7 % (2005) 15% (2013) Qualitative) Date achieved Comments (incl\. % achievement) Indicator 2 : Losses in power sector (units billed as % of units produced) Value 25 % (June quantitative or 34 % (1999) 24\.3 % (2013) 2005) Qualitative) Date achieved Comments Actual losses were higher than initially reported at the onset of the operation\. The (incl\. % operation was successful at reducing losses\. achievement) (b) Intermediate Outcome Indicator(s) related to Component E of the project Formally Actual Value Original Target Revised Achieved at Indicator Baseline Value Values (from Target Completion or approval documents) Values Target Years The privatization of distribution assets being finalized and remaining in place throughout Indicator 1 : the life of the operation\. IDA support to the Arranging the IDA IDA support Privatization distribution Concession support to meet the was extended completed in March was a condition of contractually agreed until the end of 2005\. Value effectiveness under the transferred date set for the SPP period, (quantitative Privatization Agreements the distribution assets; but no later or Qualitative) signed on May 17, 2004\. December 2004\. than February 2014\. Umeme investors were Privatization remained Privatization willing to enter into the in place by the end of remained in place distribution business for IDA support (March by end of the an 18 month “trail” 2012)\. operation\. period at the end of which they would decide to stay or terminate the Concession\. Date achieved Comments The Special Provision Period (SPP) was set up to take into account the impact of the power iii (incl\. % supply crisis on Umeme\. achievement) Indicators were fully achieved\. It should be noted that the concession survived a challenging environment due to a power supply crisis, and was delivering solid operational and financial results by the Project closing\. Little risk of cancellation by end of IDA support period\. Indicator 2 : ERA approving tariff adjustments according to the tariff methodology\. Tariff adjustments between 2005 and To keep tariffs in line 2012 followed the In 2006, with market conditions agreed methodology tariffs started and cost reflective, ERA Tariffs to be adjusted and parameters set at to be adjusted was responsible for between 2005 and 2012 the onset of the Value quarterly to making annual according to Concession\. (quantitative take into adjustments using the methodology approved or Qualitative) account the tariff methodology at the onset of the By end of 2012, impact of (including key Concession\. ERA was also able to power supply parameters) set at the set methodology and crisis\. onset of the Concession\. operational targets for a new tariff period (2013-2018)\. Date achieved Indicator was successfully achieved\. ERA adjusted tariffs between 2005 and 2012 in a Comments professional and technical manner for the most part; following the methodology agreed at (incl\. % the onset of the concession\. ERA followed similar approach for setting values of key achievement) parameters the new tariff period 2013-2018\. G\. Ratings of Project Performance in ISRs Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 02/12/2001 Satisfactory Satisfactory 0\.00 2 05/22/2001 Satisfactory Satisfactory 0\.76 3 06/28/2001 Satisfactory Satisfactory 0\.97 4 12/18/2001 Satisfactory Satisfactory 1\.44 5 05/16/2002 Satisfactory Satisfactory 2\.77 6 12/20/2002 Satisfactory Satisfactory 10\.43 7 05/30/2003 Satisfactory Satisfactory 12\.61 8 10/24/2003 Satisfactory Satisfactory 15\.45 9 05/27/2004 Satisfactory Satisfactory 18\.18 10 11/19/2004 Satisfactory Satisfactory 20\.32 11 06/24/2005 Satisfactory Moderately Satisfactory 22\.77 12 12/28/2005 Satisfactory Satisfactory 24\.50 13 06/26/2006 Satisfactory Satisfactory 31\.16 14 01/23/2007 Satisfactory Satisfactory 31\.28 15 06/28/2007 Satisfactory Moderately Satisfactory 31\.28 16 12/20/2007 Satisfactory Satisfactory 31\.28 iv 17 06/02/2008 Satisfactory Satisfactory 31\.28 18 12/17/2008 Satisfactory Satisfactory 31\.28 19 05/04/2009 Satisfactory Satisfactory 31\.28 20 12/17/2009 Moderately Satisfactory Satisfactory 31\.28 21 06/08/2010 Moderately Satisfactory Moderately Satisfactory 31\.28 22 03/28/2011 Moderately Satisfactory Moderately Satisfactory 31\.28 23 12/04/2011 Moderately Satisfactory Moderately Satisfactory 31\.28 24 06/30/2012 Moderately Satisfactory Moderately Satisfactory 31\.28 25 03/17/2013 Moderately Satisfactory Moderately Satisfactory 31\.28 26 09/17/2013 Moderately Satisfactory Moderately Satisfactory 31\.28 27 04/01/2014 Moderately Satisfactory Moderately Satisfactory 31\.28 v  H\. Restructuring (if any) ISR Ratings at Amount Board Restructuring Restructuring Disbursed at Reason for Restructuring & Key Approved Date(s) Restructuring in Changes Made PDO Change DO IP USD millions To incorporate a guarantee support for Umeme concession\. Credit 3411- UG was at the end of its implementation and had undisbursed funds\. It was an innovative way to use an IDA allocation to structure a support that had the same PDO of an existing operation\. More importantly the decision was responsive to the 12/14/2004 N S S 20\.53 needs of the GoU to expedite the approval of the IDA support\. GoU up to nine months to put place IDA support, which was a condition of effectiveness for the Transfer of the Umeme Concession\. The decision was cost-effective as the preparation cost of a restructuring was more commensurable to the amount of guarantee support (US$5\.5 million)\. To expand and extend the IDA guarantee support to Umeme in a manner deemed necessary to maintain the viability of Umeme 11/27/2006 N S S 31\.28 Concession after Uganda started facing a major power supply crisis\. Section 2\.2 explains the crisis and its impact on the project\. vi I\. Disbursement Profile vii 1\. Project Context, Development Objectives and Design 1\.1\. Context at Appraisal Country background 1\. At the time of appraisal in 2005, Uganda had transformed from a nearly failed state to a country achieving consistently high economic growth rates and significant reductions in poverty\. The country’s GDP grew at an average annual rate of 6\.9% in the 1990s and 5\.5% in early 2000s\. The proportion of the population living below the poverty line declined from 56% in 1992 to 34% in 2000\. Such progress was the result of the Government of Uganda (GoU) reform policies that pursued macroeconomic stability and promoted economic liberalization and private sector-based, export-led growth\. 2\. Prospects of further growth and poverty reduction, however, were hampered by the poor performance of public enterprises and their high dependency on subsidies\. The power sector was one of the worst performers, suffering from a number of problems: Extensive and increasing load shedding, inadequate investment to maintain and expand the power network and supply, collection rate of less than 50% of power generated, losses varying between 30% and 40%, high account receivables driven by non-payment of government entities, low productive, and a national access rate of 5%\. Power losses in Uganda were the highest in Africa while the access rate was the lowest\. By 2000, the power sector was close to insolvency\. Sector Background 3\. In this context, the Government viewed the public enterprise sector reform and privatization program as a central piece of its long-term growth strategy\. The program aimed to (i) reduce the role of the State in the economy; (ii) improve the quantity, quality, and efficiency of public services; and, (iii) reduce the financing burden that public enterprises posed on public finances\. In the power sector, the GoU approved a reform strategy in June 1999 that called for developing Uganda’s hydro power resources through Independent Power Producers, and adopting a commercially-oriented approach to increase power access and improve performance\. The main function of Government became to create an enabling environment for private investment by levelling the playing field for private sector participants, creating a regulatory framework that supported private investment, setting cost recovery tariffs, and establishing transparent subsidy transfer and financing mechanism\. To implement this strategy, the GoU passed a new power act in November 1999; established the Electricity Regulatory Authority (ERA) as independent sector regulator in April 2000; unbundled the national utility Uganda Power Board (UEB) into generation, transmission, and distribution in March 2001, and, took measures to correct government agencies’ billing arrears in late 2001\. ERA raised and rebalanced power tariffs in line with long run marginal cost effective in June 2001\. 1 4\. In the new sector strategy, the concessioning of the distribution assets was considered fundamental to the underpinning of the commercial viability of the power sector, and to support future new generation investment, including Bujagali Hydropower Plant\. The primary objectives of the distribution concession were to improve the commercial power distribution operations and increase electrification\. 5\. The GoU launched international tender processes to select strategic investors for its generation and distribution assets in 2001\. Eskom Uganda Ltd, a whole-owned subsidiary of South African Eskom Enterprises, was selected as the concessionaire for the existing generating assets\. The state-owned holding company for generation assets (UEGCL) signed a 20 year concession with Eskom Uganda Ltd in November 2002\. The handover of generation assets was completed in April 2003\. Project Context and Design 6\. The concessioning of distribution assets, which was the first one for an unbundled distribution network in Sub-Saharan Africa, proved to be more challenging\. Developments in the international market reduced the risk appetite of potential investors\. At the beginning of the tender process, about 5 to 6 companies showed interest in Uganda’s power distribution assets, but the interest later declined due to the collapse of US Enron and the re-assessment of the potential for profit in small markets such as the Ugandan\. By the end of the tender process, the Government received only one bid from Umeme, a joint venture between Eskom Enterprises (44%) and Globeleq Ltd of Bermuda (56%), a wholly-owned subsidiary of UK based Globeleq Ltd\. Eskom provided technical expertise to manage a distribution business, while Globeleq brought commercial and financial expertise\. 7\. While Umeme recognized that GoU had made remarkable progress in reforming the power sector, it still perceived power distribution services as prone to political intervention\. The sector regulator, ERA, had yet to build a track record of independent and technical decision making relative to tariffs; public entities had yet to prove that they would pay their bills in a timely manner; and, the government had yet to build a record of honouring its payment obligations in a timely manner\. After a year of protracted negotiations, it was clear to the GoU that IDA support was required to secure the Umeme’s commitment\. 8\. The IDA team opted for helping GoU structure a security package to mitigate the perceived political and regulatory risks by including in it an IDA Guarantee to backstop key government payment obligations\. The Privatization Agreements between GoU and Umeme were concluded on May 17, 2004 and made IDA support a condition of effectiveness for the Transfer Date of the Concession\. The IDA Guarantee became effective on March 3, 2005\. 9\. The IDA team opted for designing the guarantee support as an additional component (Component E) to the Privatization and Utility Sector Reform Project (P050439 and Credit 3411- 2 UG), which was towards the end of its implementation period\. The IDA contingent credit for Umeme was a natural fit to Credit 3411-UG, which had been supporting the privatization of public enterprises and sector reforms in infrastructure services since 2000 (Section 2\.1)\. The four other components of Credit 3411-UG closed in January 2006 and their respective Implementation Completion Report was submitted to the Board in July 2006\. 10\. Therefore, this is a supplemental Implementation Completion Report that covers Component E (US$5\.5 million contingent IDA credit to support Umeme concession) as indicated in the credit restructuring paper approved in December 2004\. For the evaluation of the other Project components, please see the ICR dated July 31, 2006 Report No: ICR-000041\. Rationale for Bank Assistance 11\. The IDA contingent credit support was fully in line with the Country Assistance Strategy (CAS) at the time of appraisal and aimed to contribute to two CAS objectives: (i) reduce poverty through broad-base economic growth led by the private sector; and (ii) improve the welfare of the entire population by improving the quality of, and access to infrastructure services\. By facilitating the concessioning of distribution assets, the IDA contingent credit was helping to secure private participation in distribution, which aimed to improve service provision, and channel at least US$65 million in private investment in the first five years of the concession\. 12\. MIGA also supported Umeme Concession by providing an insurance coverage for up to US$45 million for equity and shareholder loans to cover termination payments in 2005\. The combination of IDA guarantee support and MIGA coverage gave enough comfort to Umeme investors to undertake the 20-year distribution Concession\. 1\.2\. Original Project Development Objectives (PDO) and Key Indicators 13\. According to the Development Credit Agreement, the original objectives of the Credit were “to support the Borrower in carrying out of its policy to improve the quality, coverage and economic efficiency of commercial and utility service through: (a) the divestiture and restructuring of the remaining Public Enterprises; (b) increased private sector participation in the provision of infrastructure in sectors such as telecommunications, energy, water and rail transport; and (c) the strengthening of the regulatory framework and institutions required to carry out the said policy”\. The PDO remained unchanged when Component E was introduced as this component was designed to complete an outcome under Component B of the umbrella operation (P050439 and IDA-34110) as indicated in the Project Design Summary of the original PAD\. Component E was to help finalize the concessioning of the electricity distribution services\. As the component was transaction specific, the development objective was limited to electricity distribution services\. 14\. The two performance indicators set for the power sector in the original PAD were also 3 kept as those indicators were a good proxy for measuring the achievement of the PDO\. The two indicators were: (i) To increase access rate to grid connection from a baseline of 3\.8% of population in 1999 to 7% in 2005; and (ii) To reduce power losses (units billed as % of units produced) from a baseline 34% in 1999 to 25% in 2005\. 15\. The target values of those indicators were not revised because of the lack of reliability of available data, and the understanding that the concession agreement would supersede any revision of the baselines and targets (see paragraph 34)\. 16\. During the implementation support phase, the project team added two intermediate indicators to the monitoring and evaluation arrangements to better assess the performance of the operation\. The new indicators were: (i) The privatization of distribution assets being finalized, and remaining in place; and (ii) ERA approving tariff adjustments according to the tariff methodology\. 17\. These two intermediate indicators became highly relevant to guide the implementation support of the IDA contingent credit as Umeme concession faced challenging circumstances during its first years due to a major power supply crisis in the country as explained sections 2\.2 and 6\.1\.b\. 1\.3\. Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification\. 18\. There were no revisions\. 1\.4\. Main Beneficiaries 19\. The beneficiaries of Component E were similar to those of the Original project\. The original PAD of 2000 identified three broad target groups as main beneficiaries for the original Project\. When applied to the power distribution business, the expected beneficiaries were: (i) The Private Sector: the business community was expected to enjoy investment opportunities through privatization\. It was also to benefit from better quality of utility services and reduced costs of production factors which would lead to increased competitiveness\. (ii) Local Population: In the short run, the workforce of a privatized company was expected to be downsized as a result of retrenchment of excess staff\. However, in the medium term, the Project would lead to reduction in unemployment through more rapid growth of concessioned distribution business, and its indirect effect on the creation of more employment opportunities in 4  the private sector\. The population with access to the grids was also to gain from improved access as well as more quantity and better quality of services resulting from improvements in operational efficiency and network extension\. (iii) Government: By helping the GoU implement its privatization and sector reform program, the Project was to lead to lower fiscal and administrative burden of power distribution on the GoU\. 20\. In addition, the Amendment to Credit 3411-UG stated that the principal benefits of the new component were to: (i) help secure a private investor for the concessioning of the country’s power distribution assets; (ii) lead to a more effective delivery of power services through agreed operational performance milestones; and, (iii) catalyze at least US$65 million of investments in the first five years of the concession for the expansion of services\. 1\.5\. Original Components (as approved) 21\. As mentioned under Section 1\.1, this report only evaluates Component E of the Project that availed of the US$5\.5 million contingent IDA credit to support the Umeme concession\. 22\. Through the credit restructuring approved in December 2004 and the subsequent amendment of Credit 3411-UG in November 2006, Component E was added to the Project and consisted of a US$5\.5 million IDA contingent credit to support a liquidity facility for the benefit of the private power distribution concessionaire, Umeme Ltd\. The IDA contingent credit behaved like a Guarantee with no expected disbursement until the closure of the Project\. Such IDA support was a critical element of the Security Package requested by Umeme Ltd\. to undertake the power distribution business in Uganda\. 23\. The Security Package aimed to mitigate important political and regulatory risks regarding the ability of the government to fulfil its contractual obligations and government interference in sector operations; the regulator’s ability to follow the new regulatory framework particularly regarding tariff adjustments; and the ability of government entities to pay their power bills in a timely manner\. Under the Privatization Agreements, GoU and Umeme agreed to the Security Package that would give Umeme the right to access funds to be compensated for losses of revenue that occurred under the following six events: (i) Failure by ERA to approve tariff adjustments according to the Tariff Methodology in the Distribution and Supply License\. (ii) Non-payment by GoU entities of their Power bills\. (iii) Early Termination of the Concession by Umeme resulting from a breach of the Privatization Agreements by GoU or its entities during the first 18 months of the Concession\. 5  (iv) Early Termination of the Concession by Umeme for reasons related to the company during the first 18 months which would entitle Umeme to a US$2\.5 million compensation for the initial investment of US$5 million\. (v) Refunds made by Umeme of the Concession Fee and Security Deposit provided by customers of UEDCL prior to the transfer date\. (vi) Termination of the Concession due to UEDCL or GoU Events of Default, and political or other force majeure events\. 24\. The Security Package consisted of the following support measures: (i) monthly lease rents, (ii) an Escrow Account, (iii) a Letter of Credit (L/C) Facility; and (iv) IDA Contingent Credit that backstopped the L/C Facility\. The L/C Facility and the IDA Contingent Credit were accessible to Umeme only for the first three events listed above, and after preceding mitigation measures were exhausted from monthly lease rents and the Escrow Account\. Each component of the Security Package was structured as follows: • Monthly Lease Rents: Umeme had to pay a monthly lease rent to UEDCL calculated based on an agreed methodology\. The monthly lease rent was paid into the Escrow Account\. • Escrow Account: UEDCL provided an initial funding of US$2\.5 million and, the monthly lease rent payments provided additional funding up to a cap of US$20 million\. The Escrow account was in place for the duration of the Concession\. • L/C Facility: UEDCL issued a Standby Letter of Credit (L/C) from a local bank in favor of Umeme with initial value of US$2\.5 million and US$5 million after the first year\. UEDCL agreed to maintain the L/C effective for seven years following the privatization\. If needed, the L/C would be replenished through either a claw-back from lease fee payments deposited in the Escrow Account or direct payments by GoU or UEDCL during the twelve months of L/C Repayment Period\. UEDCL would have to pay to the L/C bank any balance after the Repayment Period\. • IDA Contingent Credit for the L/C Facility: In the event that UEDCL failed to make the required repayment by the end of the L/C Repayment Period, the L/C issuing bank was entitled to claim from IDA the repayment\. The IDA support was made available for 8 years and 25 days to cover the L/C period plus the repayment and cure periods\. 6 1\.6\. Revised Components 25\. There were no revisions\. 1\.7\. Other significant changes 26\. In November 2006, the IDA credit was amended to (i) extend the maximum end date of IDA support to the L/C Facility from March 2013 to February 2015; (ii) include IDA coverage for termination payments as a first loss, to MIGA’s cover for GoU breach of its commitments relating to minimum energy supply and payments related to losses; and (iii) backstop the risk of timely tariff on a quarterly basis per sector requirements instead of annual adjustments as initially agreed\. 27\. Those changes were deemed necessary to maintain the viability of Umeme Concession after Uganda started facing a major power supply crisis\. Section 2\.2 explains the crisis and its impact on the project\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1\. Project Preparation, Design and Quality at Entry 28\. Soundness of Background Analysis: There was an extensive project preparation work done before the design and approval of Component E\. IDA was involved since the inception of power sector reform in Uganda\. The groundwork was put by three operations implemented in the late 1990s and the first years of the 2000s\. Enterprise Development Project (Credit 2315-UG), closed in June 2000, carried out an assessment of power sector structure options\. The Power III Project (Credit 2268-UG), closed in December 2001, financed the Transaction Advisor and Investment Banker for the privatization of power assets\. Power IV Project (Credit 35450-UG and IDA 35454A-UG), closed in March 2008, and assisted the Ministry of Energy and Mining Development and ERA to develop their capacity to manage sector reform and privatization\. 29\. The Privatization and Utility Sector Reform Project (Credit 3411-UG), as initially approved, provided in-depth preparation\. Its four initial components were designed to support Uganda’s policy reforms regarding: (i) the privatization of public enterprises and related labour retrenchment; (ii) competition, legal and regulatory reforms in power and other public utilities; and (iii) the financial context for public utilities such as tariff and subsidies policies\. Except for the Security Package discussed in this ICR, the support to design and implement power distribution concession was undertaken under the first four components of Credit Number 3411- UG; for which the ICR was approved in July 2006\. Such ICR rated the overall project and the Bank and Borrower performances as satisfactory\. The ICR concluded that the project had a significant positive impact on the economy; the Bank project was adequately designed and supervised to engender major benefits to Uganda; the implementing agencies performed well; and, the GoU was committed to the reform agenda despite its interference in some transactions\. 7 30\. Under the distribution Concession, the Concessionaire was contractually obligated to invest minimum of US$65 million by the end of fifth year\. With that, the company was expected to provide up to 60,000 new connections, reduce total losses from 33\.0% to 28%, and improve collection rates from 75% to 92\.5%\. Umeme, however, could request ERA to revise those targets within two years of the Transfer Date because there was not reliable data to set baseline values for those indicators when Concession was signed\. The only reliable information at that time was that the revenues collected represented only 50% of the electricity generated\. Umeme was also required to agree with ERA on an investment plan to ensure that it was cost effective\. Power was supplied to the Concessionaire by UETCL, which in turn purchased power from UEGCL and other private providers\. The bulk supply price was determined on a quarterly basis and was allowed as a pass-through for the calculation of retail tariffs\. The distribution component of the tariff included: (i) O&M cost, (ii) allowance for technical and non-technical losses, and (iii) a return on investment of 20% in US dollars during the 20-year Concession\. The Concessionaire’s lease rent payments to UEDCL were considered a pass-through cost for the calculation of retail tariffs\. 31\. The GoU and Umeme agreed to an 18-month preliminary operating and investing period in which Umeme’s investment obligation was limited to US$5 million of the total US$65 million\. Umeme would have the right to withdraw from the Concession during this preliminary period under the terms and conditions agreed in the Government Support Agreement\. 32\. Assessment of Project Design: Component E was appropriately designed and innovative\. IDA designed an operation that specifically helped to mitigate the key political and regulatory risks for a private Concessionaire who committed to improve power distribution services (section 1\.5)\. Structuring IDA support as a guarantee enabled IDA to be engaged in monitoring the Government performance and the regulatory regime during the first years of the Concession when it was most susceptible to political interference\. The investors believed that this latter role of IDA was essential for them to proceed with the concessioning of Umeme and invest substantial long term resources in Uganda’s power distribution\. 33\. The design of the Project had one shortcoming: The lack of indicators that could assess the actual performance of the Contingent Credit\. Such gap was addressed by the team by adding two intermediate indicators: (i) the privatization of distribution assets being finalized and remaining in place; and (ii) ERA approving tariff adjustments according to the approved methodology\. 34\. This operation was a pioneer in the World Bank, and among IFIs, by being the first one to backstop regulatory risk\. Romania’s Banat & Dobrogea Electricity Distribution Privatization Partial Risk Guarantee, which also pioneered the backstopping of regulatory risk, was approved by the Board of Executive Directors in the same month as the Contingent Credit for Umeme, December 2004\. 8 35\. Restructuring an existing IDA operation (Credit 3411-UG) by adding a guarantee component was an innovative way to use an IDA allocation to structure a support that had the same PDO of an existing operation\. Credit 3411-UG was at the end of its implementation period and had undisbursed funds for US$8\.27 million equivalent\. The decision was also cost-effective as the preparation cost of a restructuring was more commensurable to the amount of guarantee support (US$5\.5 million)\. More importantly, the decision was responsive to the needs of the GoU to expedite the approval and implementation of the IDA support\. The Privatization Agreements signed on May 17, 2004, gave GoU up to nine months to put place IDA support, which was a condition of effectiveness for the Transfer of the Concession\. The IDA Guarantee was added to Credit 3411-UG through a restructuring approved in December 2004 and became effective on March 3, 2005\. 36\. The Project was undertaken in close coordination with MIGA, which also supported Umeme’s Concession from the outset, to ensure that support from both entities complemented each other and the WBG support was optimized\. MIGA signed four contracts to cover up to US$45 million of equity and shareholder loans from Eskom and Globeleq against the standard political risks (transfer restriction, expropriation, war and civil disturbance and breach of contract) in March 2005\. MIGA later adjusted its coverage to support the Concession renegotiation in 2007 (see section 5\.1)\. 37\. The availability of the Security Package gave Umeme the comfort that its cash flow would be protected against GoU interference and lack of regulatory compliance with tariff adjustments\. Such comfort also facilitated Umeme access to debt financing from new sources and on more competitive terms\. For instance, Umeme obtained a US$25 million loan from IFC with a longer tenor\. Umeme expanded its shareholder base through a successful initial public offering (IPO) on Uganda Securities Exchange in 2012 (see section 3\.5\.c)\. Umeme raised long term finance to support its medium term investment plans in 2013 (see section 4\.1)\. IFC actively participated in the IPO and long term finance\. 38\. Adequacy of Risk Assessment\. The project team identified two key risks (operational and a call on the guarantee) and appropriately mitigated them\. The operational risk (Umeme is unable to improve distribution performance and decides to exit at the end of the 18 months) was mitigated by the Government’s continued support and commitment to the power sector reform and improving sector efficiency\. The risk of a call on the guarantee was mitigated through the design of the Security Package by providing minimal IDA support and as last resort\. The amount of IDA support (a US$5\.5 million contingent credit) was a fraction of the estimated amount of annual lease rent (over US$12 million) and the cap on the Escrow Account (US$20 million)\. In addition, the L/C Facility provided a twelve month repayment period which allowed sufficient time for IDA to work with UEDCL and GoU to resolve any issues and ensure that UEDCL would be in a position to make any required repayment\. 9 39\. As indicated in the Proposed Amendment to the Legal Agreements of December 2004, this operation did not address the supply risk (insufficient power supply) because such risk was being addressed by other IDA interventions at that time such as Power IV Project (Credit 3545- UG)\. Uganda ended up facing a major power supply crisis soon after Umeme Concession began\. 40\. Adequacy of Government’s Commitment, Stakeholder Involvement and Participatory Processes: The GOU demonstrated its strong commitment to the Project and its objective (see Section 6\.2\.a)\. The key stakeholders (GoU and Umeme) were closely involved in the design and preparation of the Project as described above\. Given the preparatory work done under the sector reform and targeted and specific nature of this operation, no further stakeholder consultation was required for Component E\. 2\.2\. Implementation 41\. The first four years of Umeme were characterized by limited improvements in a context of a major power crisis\. When Umeme took over the concession in May 2005, Uganda had tariffs close to cost reflective levels and stable power supply\. However, the situation started to change a few months later due to a drought; and a year later the power supply was reduced by more than 25%\. The consequent power shortages were further aggravated by a rapidly growing demand and major delays in adding new generation capacity, primarily from Bujagali Hydropower Plant\. By 2006 Uganda entered into an unprecedented power crisis and faced persistent rolling blackouts during peak demand hours\. The GoU took measures to reduce power shortages, including importing power from Kenya and contracting out emergency supply from rental plants\. While these measures reduced load shedding, they raised the cost to unsustainable levels\. The cost and tariff of bulk supply rose by more than 300% in 2006\. Retail tariffs were raised by 140% between April 2005 and November 2006\. The GoU provided subsidies (US$50 million a year) to avoid further tariff increases due to competitiveness and political concerns\. 42\. Despite the challenging environment, Umeme stabilized the distribution business in the first twelve months of operation\. It reportedly reduced losses from a high of 40% to around 34%, improved the revenue collection from 80% to 84%, and invested US$11 million in distribution network improvement\. 43\. The timing of the power crisis, however, placed Umeme and GoU in a complicated situation\. While performance improvements were a prerequisite to reduce the impact of the power crisis and the success of the power sector reform, Umeme’s shareholders started to reassess their investment in Uganda\. In March 2006, the Boards of Globeleq and Eskom decided not to invest further in Umeme\. They had until July of that year to exercise their exit option\. Under these circumstances, the GoU decided to renegotiate key concession terms to prevent Umeme from exercising its exit option\. In the renegotiation, Umeme sought contractual reassurance that it would be protected from operational losses caused by the crisis, and that such protection would be backed by a risk mitigation measure from the WBG\. 10 44\. Under the restructuring, GoU agreed, during the Electricity Sector Stabilization Period (ESSP), to compensate Umeme for: (i) energy supply shortages leading to a shortfall in revenues; and (ii) revenues shortfalls resulting from an increase in losses due to sharp and more frequent tariff increases\. The ESSP started on January 1, 2007 and continued until the earliest of: • two years from the end of the Special Provision Period (SPP); or • 270 days after the commercial operation date of new generation capacity of at least 150 MW at a weighted average price of no more than US$0\.12 kWh; or • seven years from the ESSP Effective Date\. The SPP began on the ESSP Effective Date and ending on the earlier of (a) the date on which the Company, at its sole discretion, terminated the SPP, and (b) the date on which defined tariff and supply conditions were satisfied\. IDA, as provider of the contingent credit, reviewed the concession amendment and, once considered it reasonable, provided its consent for the amendment and extended the term of its guarantee support as well as risk coverage to include power supply risk\. 45\. The concession amendment was signed in November 2006\. Nevertheless, Eskom decided to exit while Globeleq opted to continue and purchased Eskom’s equity stake\. To support the restructuring, MIGA adjusted its termination coverage for Globeleq to include the risk of lack of power supply and support the Security Package in 2007\. 46\. Umeme continued to invest, expanded access and improved collection rates, but had less success with power losses\. Umeme invested US$46 million and increased its customer base by 7% to 313,000 by the first half of 2009\. 1 The collection rate improved from 85% in 2005 to 92% in the first half of 2009\. Conversely, total losses oscillated between 31% and 35% without a discernible pattern\. Despite lack of progress on loss reduction, Umeme was never in breach of its performance targets as the 2006 amendment gave it the right to have temporary spikes (increases) in total loss levels during the SPP\. 2\.3\. Monitoring and Evaluation (M&E) Design, Implementation and Utilization 47\. When Component E was introduced in 2004, the Results Framework of the original Project was adopted and remained unchanged\. The ICR for the Original Components A to D, prepared and approved in 2007, assessed the design of the M&E arrangements as “relatively well-designed, detailed key performance indicators of output and outcome were identified at the beginning of the project and were regularly updated by the Project Coordinating Unit (PCU)\. 1 This customer growth reflects the adjustments made by Umeme after correcting its customer database from dormant, duplicated or inexistent customers in the first half of 2008\. 11 The project was exceptionally good in terms of the quality and quantity of tracked indicators, which assisted in monitoring progress\.” 48\. At the partial closure of the Project in 2007, when the implementation of all the Project’s components except for Component E was accomplished, most of the Project’s PDO and Intermediate Outcome Indicators were achieved or became irrelevant for monitoring purposes, when they related to the then already closed Project Components A-D\. Consequently the team continued monitoring only the outcome indicators relevant to the Component E supported electricity distribution concession activities\. 49\. Taking into account the specific risks covered by the contingent credit structure under Component E, the team added couple of intermediate indicators (privatization of distribution assets being finalized and remaining in place; and ERA approving tariff adjustments according to the tariff methodology) to better measure the distribution concession’s outcomes during the supervision phase\. 50\. Umeme collected Quality data for Component E throughout implementation\. Data reporting was also done effectively and comprehensively by Umeme and was satisfactory overall\. 2\.4\. Safeguard and Fiduciary Compliance Safeguards: 51\. The Component E was introduced to the Project in 2004 without invoking any of the Bank’s Safeguards Policies\. For the duration of the lease, Umeme was obliged to carry out any investments into the distribution network in compliance with Uganda's environmental policies, laws, regulatory and administrative frameworks\. In addition, at the onset of the Concession and during the Bank’s supervision of the Project’s Component E, Umeme developed and subsequently implemented an environmental management plan for the distribution network that was consistent with Ugandan Law and that was also reviewed and cleared by the Bank\. During the implementation of Component E, the Bank team further carried out an audit of Umeme’s compliance with the Ugandan Environmental Laws as well as its compliance with the Environmental Management Plan\. The assessment concluded that the arrangements established by Umeme were satisfactory and compliant with the relevant laws\. No major environmental or social issues were reported during the implementation of this project component\. Fiduciary: 52\. The nature of the Project’s Component E, a contingent credit, implied that no disbursements occurred under this component as long as no payment had to be made to the L/C bank as a result of UECDL repayment default\. Since the Component E supported L/C was never triggered during Project implementation no disbursements under this Component occurred 12 during implementation\. The FM arrangements therefore were restricted to the supervision of the Project’s annual external audit reporting arrangements\. Financial management aspects of this Component E were continuously rated Satisfactory or Moderately Satisfactory throughout project implementation\. 53\. There was no procurement for Component E as it did not entail any IDA financing for investments\. 2\.5\. Post-completion Operation/Next Phase 54\. Uganda had been able to significantly improve performance of its grid power distribution services through Umeme Concession (see section 3\.2)\. The performance improvements are expected to continue as Umeme agreed to aggressive but realistic targets on loss reduction and collection rates for the 2013-2018 tariff review period\. Such targets will (i) push Umeme to continue obtaining efficiency gains to remain profitable; and, (ii) allow transferring part of the efficiency gains to consumers through lower power distribution charges\. 55\. Going forward Uganda has the challenge to speed up its grid expansion rate to increase the national electrification rate, which at 15% in 2013 remained below the average for Sub- Saharan Africa overall (32%)\. Expanding access through private financing alone would be constrained by affordability issues due to higher cost of private financing\. However, combining private sector efficiencies in network rollout and operation with the lower cost of donor financing could accelerate access expansion\. 3\. Assessment of Outcomes 3\.1\. Relevance of Objectives, Design and Implementation (at the ICR time) Rating: High 56\. The operation was highly relevant and reflected a proper diagnosis of a developmental priority for Uganda\. At the time of appraisal, the project’s objective was critical for Uganda, as indicated in the Joint Assistance Strategy (JAS) of FY05-FY09\. The bottlenecks in the power sector had become major constraints for economic growth\. Only 7% of the population had access to power in 2005 and those with access had very unreliable services\. Ugandan firms perceived the lack of reliable power as the greatest threat to their competitiveness with 45% of them reporting insufficient and unreliable electricity supply as major or very severe\. By supporting the improvement of power supply, IDA and other development partners helped to reduce the cost of doing business and linked isolated populations or areas of the country to the broader economy\. The project’s objective remained relevant under the CAS of FY11-15, which had as one of its goals to improve the reliability of power services to sustain economic growth\. The IDA continued to support projects that expand generation capacity and increase access in Uganda\. 13 57\. The Project was designed to mitigate the political and regulatory risks for a private concessionaire that committed to improve the performance of power distribution business and increase investment\. The implementation of the project consisted of closely monitoring the risks covered by IDA to prevent a call on the guarantee, and thereby sustain the Concession\. Such monitoring was critical to identify emerging disagreements between the Concessionaire and the GoU and support their timely resolution by playing an honest broker role\. In that regard the Project indicators were appropriate to support the implementation phase and flexible enough to adapt to changes\. 3\.2\. Achievement of Project Development Objectives Rating: High 58\. The PDO of improving the quality, coverage and economic efficiency of utility services, through privatization, private participation in infrastructure (PPI) and an improved regulatory framework was successfully achieved\. By structuring and supporting a Security Package for the Umeme Concession, Component E helped to secure private concessionaires for Uganda power distribution assets\. The private operation of power distribution assets led to a more efficient delivery of services and brought in levels of private investments much higher than initially anticipated\. 59\. Before the Project, electricity losses were 34%, collection rate was 80%, and national access rate 7%\. By the end of the IDA operation, Umeme reported a declining trend on power losses, reaching the level of 21\.6% in June 2014 (figure 1), collection rate reached 100\.3% in 2013 and 96\.6% in 2014 (figure 2) 2, and the national access rate was 15% in 2013\. Umeme has more than doubled its customer base that it had at the onset of the Concession, reaching 613,000 connections in June 2014 (figure 3)\. Umeme invested US$224 million in the distribution network during the life of the operation (Figure 4)\. The Concessionaire also reported a solid financial position with a healthy operating profit margin 3 of over 10% and strong sales growth (figure 5)\. 2 The collection rate of 100\.3% in 2013 includes drawdowns from the Escrow Account to clear GoU arrears (unpaid bills from the army, police, prisons, and health sector and education institutions)\. 3 It is equal to operating income divided by net sales\. The operating margin measures what proportion of a company's revenue is left after paying for O&M costs\. 14  Figure 1 Umeme's energy losses Figure 2 Umeme's collection rate % US$ million 50 110 99 100\.3 95 96\.6 100 94 94 38 90 90 40 35 35 34 34 90 84 30 80 30 27 26 80 24\.3 21\.6 70 20 60 10 50 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* 60\. Many factors contributed to the performance turnaround\. First, the stabilization of power supply and the end of the SPP in October 2009 created the conditions to move from a crisis management to a performance improvement approach\. Improvements in power supply was achieved through committed interventions by GoU and its sector entities such as undertaking an emergency thermal program and implementing Bujagali Hydropower Project as a private independent power producer\. Second, Umeme hired a Chief Operating Officer from the Electricity Supply Board of Ireland and filled other managerial positions with experienced personnel to reinforce its management team\. Third, the end of the SPP implied that: (i) Umeme and ERA had to agree on new loss reduction and collection targets, and (ii) the downside protection to Umeme for not being able to meet its contractual targets ended\. Fourth, after extensive negotiations ERA succeeded at making Umeme commit to ambitious but realistic regulatory targets under the 2012 tariff review (table 1)\. As part of this tariff review, ERA increased the average retail tariff by 52% in January 2012 to bring it to cost recovery level\. Fifth, although ERA and UMEME had contentious relations, they showed the willingness to tackle difficult issues through a collaborative approach, while negotiating at arm’s length\. For instance, they had monthly meetings to discuss the progress of the loss reduction plans and define the government actions required\. They also set up a Special Tariff Committee to discuss the different components of the tariff methodology\. The Committee was informed by independent advisory firms that guided the discussions and negotiations of both parties\. 15  Figure 3 Umeme's number of customers Figure 4 Umeme's annual investment '000 US$ million 700 70 613 58 574 60 600 47 513 50 500 458 36 40 405 28 28 355 30 23 22 400 303 305 18 292 298 20 300 6 10 5 200 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* * As of June \. Source: Umeme's Investors reports\. Figure 5 Umeme's sales and profit GWh % 2,500 18 2,000 15 12 1,500 9 1,000 6 500 3 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 Sales (GWh) Operating profit (%) 61\. Other key factors to achieve the turnaround were the GoU’s commitment to sector improvement, IDA’s honest broker role, and IFC’s financial support\. Due to the poor payment records of GoU’s entities, Umeme often offset GoU entities’ payment arrears against lease payments and drawdowns from the Escrow Account\. Despite disagreements over arrears offsetting, GoU ensured that resources, as stipulated in the Security Package, were available until 2012\. The GoU’s decision to ease the path to cost reflective tariffs through subsidies during the crisis also helped Umeme by preventing even higher commercial loss spikes than those experienced during this period\. The financial discipline introduced to the sector allowed the GoU to gradually phase out its subsidy program, which was eliminated in 2012 after Bujagali Hydropower plant was commissioned\. Through its guarantee support, IDA was able to engage with GoU and Umeme on sector policy dialogue and played an honest broker role when disagreements arose to ensure that both parties remained engaged in negotiations to resolve issues (section 6\.1\.b)\. Given that IFC and MIGA also provided support to Umeme, the WBG coordinated its engagement when and as required\. 16  Table 1: Umeme’s Agreed Regulatory Targets Indicator 2013 2014 2015 2016 2017 2018 Energy Losses (%) 23\.5 20\.5 18\.6 17\.1 15\.9 14\.9 Revenue collection (%) 97\.3 97\.5 97\.7 97\.9 98\.2 98\.5 Source: Umeme 2013 report to shareholders\. 62\. The Project helped to set a successful example of a Public Private Partnership that improved operational performance of a power distribution company in a country perceived as risky and with no track record on private investment in the sector\. The project has also highlighted the challenges of improving performance in poorly maintained distribution systems and the importance of an appropriate incentive structure to do so\. Aside from the power supply crisis, Umeme was faced with unreliable information on customers and the real status of the distribution network as well as a dilapidated distribution network which needed an almost complete overhaul to reduce technical losses to international standards and to minimize electricity theft\. Designing and implementing a business solution to those problems and building the required capacity within the company and with local suppliers took much longer than anticipated at the inception of the Project\. Subsequently, Umeme was able to significantly improve its operational performance\. In this context, the two years given by the Concession Agreement to revise the performance targets facilitated the negotiations between ERA and Umeme on that topic as both entities understood that major work was required before being able to set realistic targets as it was done in the 2012-2018 tariff review\. 3\.3\. Efficiency Rating: Satisfactory 63\. Detailed economic and financial analysis of the project was not carried out at the appraisal stage of Component E as the component was designed to finalize a reform program supported by the umbrella operation (Credit Number 3411-UG)\. The economic and financial rational of the umbrella operation was undertaken during its appraisal and Board approval in 2000\. The substantial improvement in operational performance and solid financial situation of Umeme confirmed that the financial and economic benefits achieved by Component E have been substantial\. 64\. Financial performance of Umeme: The utility has had positive operating income and cash flows since the beginning of the Concession\. It has also reported operating profitability with a growing EBITDA 4 and solid EBITDA ratio 5 (figure 6)\. The current projections indicate EBITDA will continue to grow while EBITDA ratio will stabilize around 13% to 14% between 4 EBITDA stands for Earning Before Interests, Taxes, Depreciation, and Amortization\. 5 EBITDA ratio is EBITDA divided by total revenue\. 17 2014 and 2018\. The main drivers of this financial performance have been operational improvements, capital investments, and sales growth\. Such performance has allowed Umeme to access to the financing it requires to undertake its investment program\. 65\. Economic analysis: The main economic benefit was the incremental power supplied to consumers as a result of power system investments, specifically in access expansion and reduction in power losses\. The ultimate benefits thus derive from end-user (household, commercial or industrial) consumption on account of new connections or on account of greater electricity being available due to loss reduction\. The costs included were the investment and operating costs incurred by Umeme and the cost of additional power generation required to supply to the additional demand\. These costs were subtracted from the delivered benefits to derive the net economic gains associated with the project\. Figure 6 Umeme EBITDA UShs Bn % 400 25 20 300 15 200 10 100 5 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Forecasted Amount Margin (%) Source: Umeme 2013 Annual Report and Burbidge Capital 66\. Even using very conservative valuation of benefits and costs, the project is found to have been economically viable with an NPR of US$ 108 million and economic rate of return (EIRR) of 21%\. The table below shows the main assumptions and results for the IRR and NPV\. Assumptions 0\.17 Average price of electricity * $/kWh kWh/mont Average Consumption 315* h Generation cost of electricity 0\.12 $/kWh Discount Rate 12 Per cent Baseline Results EIRR 21% NPV (M US$) 108 Note: *Calculated as the weighted average across all consumer types – using 2012 consumption figures and 2014 tariff structure\. 18 3\.4\. Justification of Overall Outcome Rating Rating: Satisfactory 67\. Based on sections 3\.1-3\.3, the overall outcome is rated as Satisfactory\. The Project was relevant to the Government’s National Development Strategy, and the last three Country Assistance Strategies\. The Project successfully met its development objective, has set up a replicable and successful example of a Public-Private Partnership in the power distribution sector, and was well justified based on reasonable economic and financial performance\. 68\. The ICR team acknowledges the mismatch between the Satisfactory rating given to the Overall Outcome in this ICR and the “Moderately Satisfactory” Development Outcome rating of the ISRs from 2010 until the Project’s closing\. The mismatch reflects the fact that the Task Team used the ISR ratings as a tool to strengthen the ongoing sector dialog and bring into the GoU’s attention Umeme’s sector issues\. This approach helped to influence the Bank’s sector dialogue and long term sustainability of the operation; a wider sense than the one foreseen by the rating mechanism in the ISR template\. In the absence of a “Risk to Development Outcome” rating category in the ISR, Task Team expressed an opinion on the long-term sustainability of the Concession, rather than just focusing on the achievement of immediate development objectives of the contingent credit operation\. The main issues causing the moderately satisfactory rating relate to legal amendments to the Concession approved by ERA and changes to the funding mechanism of the Escrow Account in the Security Package as they posed a threat to the long term sustainability of the Concession (see Section 4 below)\. The Task Team used the ISR rating tool to signal ongoing issues to Bank management and the Government of Uganda\. The proposed evaluation and rating assessment as provided in this ICR is more adequate to reflect the full achievement of the Project’s objectives\. 3\.5\. Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 69\. No direct analysis provided under this operation due to its targeted nature and limited scope (b) Institutional Change/Strengthening 70\. The component helped ERA to establish a track record as a regulatory agency that for the most part applied tariff methodologies in a technical and timely manner\. While Component E did not include capacity building measures, it also supported indirectly a key institutional change in Uganda\. The activities supported by this project component facilitated the GoU’s buy-in of the need of having the power sector on a commercial sound footing to operate and develop efficient\. ERA has recognized the need to have a profit making power sector while public entities such as UETCL and UEDCL run their operations with a commercial view\. Such commercial mind set in 19 the public entities should encourage further efficiency improvements and ameliorate potential political interference in the sector\. (c) Other Unintended Outcomes and Impacts (positive or negative) 71\. In 2005, when Umeme took over the Ugandan distribution business, it was not certain that Umeme would be a profit making enterprise with a diversified shareholder base and an ambitious investment plan\. Umeme listed its shares in the Uganda Securities Exchange (USE) through an Initial Public Offering (IPO) in 2012\. The IPO was declared overwhelmingly successful, with over 35% over-subscription by investors in Uganda, East Africa, and internationally\. There were thousands of retail applications in total, which was a good indicator that the IPO was well received by the general public in the three-week offer period\. Umeme listed 622 million shares on the markets with more than 6,000 Ugandans buying the firms stock as well as African institutional investors, foreign equity funds, and venture capital funds\. 72\. The IPO was the first step of a new development and investment phase for Umeme under which it expects to substantially expand access and improve service quality\. Funds raised from the IPO were used to reduce the company's interest-bearing debt and enable Umeme to secure additional commercial debt over the next few years to help finance its expansion strategy\. The IPO was voted the Deal of the Year 2012 at the African Banker Awards and was nominated for the Africa Investor Awards\. 73\. Umeme’s shares were cross-listed at the Nairobi Securities Exchange (NSE) in 2013\. The strategic investor Actis, previously known as Globeleq, became a minority shareholder by reducing its equity participation to 14% in May 2014\. Given the progress made in building a capable and motivated management team and workforce as well as a well-run distribution company, Umeme did not expect that Actis’ reduced stake would impact its day-to-day operations\. Listing a utility company whose shares are actively traded in African stock exchanges also contributed to the deepening of the financial market in the region\. By May 2014, the top shareholders of Umeme were Investec Asset management, Actis (previous known as Globeleq), National Social Security Fund, Farallon Capital, Coronation Funds, Allan Gray Africa Funds, IFC, Utilico Emerging Markets, Patrick Bitature, and Everest Capital\. 74\. The Project also helped to set up a successful example of how to facilitate sustainable private sector participation in power distribution business in Sub-Saharan Africa\. Until now most attempts to bring private sector efficiencies into power distribution business in the region have proven to be difficult to sustain\. Of the 33 contracts to bring the private sector into power distribution business in Sub-Saharan African signed between 1990 and 2013, only 11 remained operational by end of 2013\. Of these, only two other contracts were for stand-alone distribution services: Reho serving Rehoboth in Namibia and PN Energy Services serving Kayelitisha Township in South Africa\. 20 3\.6\. Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 75\. There was no beneficiary survey or stakeholder workshop undertaken by the project\. 4\. Assessment of Risk to Development Outcome Rating: Modest 76\. The cost-reflective tariff levels have naturally led to some controversies between Umeme and the GoU as well as the general public\. The GoU had the perception that electricity tariffs in Uganda were significantly higher than those of neighbouring countries\. Umeme challenged that perception by showing tariff data on a cost reflective basis\. That is excluding subsidies, which continued to be significant in some neighbouring countries\. By that measure, Uganda’s tariffs were in line with those of its neighbours\. Umeme also demonstrated that the share of the distribution margin in the tariff revenue requirements decreased over the years; while other cost drivers, like generation costs, fluctuated frequently\. Despite these, Umeme was still facing some criticism on tariff levels by the time this ICR was written\. It will take time for Umeme and the GoU to convince the public that the sector and the country are better-off with cost reflective retail tariffs in the medium and long term\. 77\. Uganda has good prospects to be able to reduce tariff levels in the medium to long term without the need of subsidizing the sector\. Umeme has agreed to lower distribution charges by committing to significant improvements in loss reduction and collection rate within the next 5 years\. Towards that aim, Umeme has developed a network refurbishing plan to tackle all issues in a district by district approach to minimize power losses\. Following the GoU’s request, Umeme has also opted for installing only pre-paid meters from October 2014 onwards, thereby phasing out post-paid billing systems 6\. If those improvements are combined with a least cost investment in generation, the overall cost of the power sector will diminish, and, therefore, the required tariffs at cost reflective levels will also be lower\. 78\. Umeme is well-positioned to ramp up its electrification efforts as the constraints that prevented it from fully focusing on network expansion had been eliminated\. Until 2012, Umeme focused on developing an effective business plan to tackle all operational issues, and becoming a credible operator with access to medium and long term finance\. In addition, Umeme operated in an environment of major power supply shortfalls so additions of new customers had to be managed to deliver what the network could serve\. After the power supply crisis ended, Umeme announced plans to invest US$382 million in revamping its network and expanding it with 50,000 new connections a year\. The funding for that investment was secured through an IPO and commercial loans\. During the ICR mission in May 2014, Umeme indicated its willingness and ability to increase its customer base at a faster rate than currently planned if ERA include the required capital expenditure in the tariff formula\. 6 Pre-paid metering had proved to be highly successful with Umeme’s customers\. 21 79\. Successfully increasing the electrification rate, however, will also depend on timely additions of new generation capacities to be contracted by UETCL\. Such addition will be critical in helping Umeme to further improve its brand and perceived service reliability\. Another generation crisis would be a major set-back for Umeme as experience shows\. Despite major improvement in grid reliability over the last couple of years, customers continue to perceive grid power as unreliable and firms continue to indicate that the greatest threat to competitiveness was the shortage of reliable power supply\. The number of power outages in a typical month fell from 38\.6 in 2003 to 6 in 2013 while the share of firms reporting electricity constraints as major or very severe fell from 44\.5% in 2003 to 24% in 2013\. The reactions from Umeme’s consumers show the sensitive environment in which Umeme operates and the need for a strong partnership with the GoU and UETCL to avoid future power supply crises\. 80\. Finally, it would be important that the GOU honours its contractual obligations by reinstating the elements of the Security Package that it legally agreed to maintain for the life of the Concession\. GoU started to unilaterally and progressively undo the Security Package by the time the IDA Guarantee expired, and the associated L/C Facility was closed\. First, ERA disallowed the lease rent from the 2012 tariff review\. Then UEDCL didn’t replenish the balance of the Escrow account even though it has been zero since October 2013\. The GoU’s view that the Uganda’s track record on power sector reform permits it to unilaterally dismantle the Security Package is at the core of the politically and regulatory risks from which investors look to protect themselves\. 81\. The issues regarding additional generation capacity and GoU’ reinstating obligations, however, do not compromise the development outcomes achieved under the Project\. The operational and financial improvement of Umeme was achieved through structural changes in the way that power distribution services are managed in Uganda\. The structural changes included revamping business practices on customer management and network refurbishing, creating a motivated workforce, and building a reliable network of local providers\. 82\. Through its energy sector dialogue in Uganda, the Bank continues to discuss those pending issues with the Concession’s stakeholders and aims to facilitate their resolution as well as the resolution of any other issue that may emerge\. The Bank also continues to support the sustainability of what was achieved through this innovative contingent credit by supporting the sector with investment operations in power generation and access expansion\. Given the still active involvement of IFC and MIGA in the Concession, it is also recommendable to envisage a well-coordinated World Bank Group approach on the issues at hand to ensure that the remarkable results of the Concession achieved throughout the years remain valid and sustainable in the long term 5\. Assessment of the Guarantee in support of the Project 5\.1\. Impact of the guarantee in mobilizing private sector financing\. 22 83\. The fact that IDA support was a condition of effectiveness for the Concession showed that Umeme would have not invested in Uganda’s distribution services without political and regulatory risk cover\. The impact of the guarantee on Umeme’s ability to mobilize private capital can be broken down as follows: (i) Umeme had the confidence to invest over US$65 million in the distribution network in the first five years of the Concession and US$224 million by the time the guarantee expired\. (ii) Umeme was able to raise financing for its investment program even during the power supply crisis\. IFC provided a badly needed US$25 million loan to Umeme in 2009\. (iii) Umeme was able to expand its funding sources by increasing its shareholder base through an IPO (see section 3\.5\.c\.) and obtaining longer term debt financing\. In 2013, Umeme secured a US$190 million (Ushs 485 billion) commercial loan to support its investment program\. The commercial debt was the largest-private sector corporate financing in Uganda to that date and comprised of: • A US$170 million term loan priced at LIBOR (London Interbank Offered Rate) plus 5%, with IFC and Standard Chartered Bank each providing USD$70 million, and Stanbic Bank providing US$30 million; and • A US$20 million revolving credit facility with Standard Chartered Bank providing US$15 million and Stanbic Bank providing US$5 million\. 5\.2\. Role and value of the guarantee in addressing critical risks and improving the overall sustainability of the transaction\. 84\. IDA helped investors to make the Concession sustainable by underpinning its cash flow through a regulatory risk guarantee\. Thus, the guarantee improved the overall sustainability of the Umeme Concession\. The guarantee support also facilitated IDA’s ongoing involvement in the sector, through regular supervision and mediation, at critical moments ensured the sustainability of the distribution Concession (see section 6\.1\.b)\. 85\. The highly targeted nature of IDA support resulted in US$5\.5 million of contingent credit, supporting investments of US$224 million between 2005 and 2013 and facilitating additional investment plans of US$382 million between 2014 and 2018\. Those numbers imply leverage ratios of over 40 times by 2013 and 110 times by 2018\. 5\.3\. Key issues or events that may arise in the future that could lead to a potential call on the guarantee\. 86\. None\. The guarantee expired in 2012\. 23 6\. Assessment of Bank and Borrower Performance 6\.1\. Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 87\. IDA’s performance in ensuring quality at entry was satisfactory\. Prior to this operation, IDA undertook the preparatory work for supporting the power sector reform, including the concessioning of the distribution business in Uganda\. The IDA team focused on identifying and guaranteeing the key issues that discouraged private investors to undertake the distribution Concession in a context of the ongoing power sector reform in Uganda\. The WBG support was closely coordinated to achieve a complementary risk mitigation package\. IDA, because of its close involvement with the sector and its monitoring ability through regular supervision, backstopped the policy and ongoing revenue-related risks critical to project sustainability\. MIGA mitigated the political risk for equity investment\. (b) Quality of Supervision Rating: Highly satisfactory 88\. IDA’s supervision was highly satisfactory\. Sufficient budget and staff resources were allocated, and the project was adequately supervised with the right skills mix\. The project team followed up the project implementation progress and results achievement through regular missions, teleconferences with relevant entities, and with the support of staff based in Kampala\. There were also joint missions with MIGA, and IFC and close coordination to define a WBG position when required\. 89\. IDA support to Umeme was managed within the overall IDA engagement in the Uganda’s power sector which also included support for expanding power generation and ensuring financial sustainability of the sector\. When the power supply crisis emerged, IDA worked with GoU to reduce short-term power shortages and financial imbalances, and facilitate orderly longer-run expansion of electricity service\. The Power Sector Development Operation (IDA-42970), which provided fiscal support, and Bujagali Private Power Generation Project (Guarantee No\. B0130-UG), which supported generation expansion, were the main IDA interventions to attenuate the impact of the crisis\. The IDA interventions in the sector complemented each other and were designed to benefit from each other achievements\. 90\. The IDA team provided timely support GoU to help overcome several crises, including: • 2006: By the end of the initial 18-months “trial” period, Umeme’s shareholders were ready to exercise their termination rights due to the power supply crisis\. IDA strongly encouraged both parties to renegotiate the Concession, and extended its guarantee in support of the Concession restructuring\. The 24  Concession was amended to adjust it to the circumstances created by the power crisis\. IDA undertook the corresponding due diligence of the proposed amendments, found them reasonable and provided its consent as required per the Guarantee Agreement\. IDA also provided financial support to help Uganda to finance emergency power to mitigate power supply shortages\. • 2008: Umeme and GoU entered into a dispute concerning the compliance by both parties with contractual obligations\. While GoU acknowledged that it could have been more supportive of Umeme’s efforts to reduce non-technical losses, its perception was that Umeme’s management was not doing enough in accelerating its efforts in other areas\. IDA, through its supervision and its honest broker role, monitored the situation and convinced both parties to agree on a detailed action plan with shared responsibilities\. Those actions led to renewed efforts on both sides to resolve outstanding issues\. Umeme also brought on board a new management team in early 2009\. • 2009: A new Minister of Energy and some Parliamentarians tried to unilaterally terminate the Umeme Concession on allegations of non-performance\. IDA joined forces with MIGA and IFC to prepare a report that showed the progress and situation of Uganda’s distribution network since the onset of the Concession\. The highest level of GoU acknowledged that despite certain “mixed” performances, Umeme improved distribution services and a new Minister of Energy was appointed\. • 2011/2012: There was a deadlock in the negotiations of the performance targets for the 2013-2018 regulatory period\. IDA supported ERA and GoU on hiring an independent advisor to help ERA overcome its initial difficulties to engage in meaningful negotiations with Umeme\. In addition, IDA in coordination with IFC and MIGA (though fully respecting potential conflict of interest situations) liaised between ERA and Umeme to help them resolve disagreements throughout the negotiations\. 91\. In summary, the IDA risk mitigation support and related honest broker role as well as the Bank’s overall strong engagement in Ugandan power sector through several operation and strong policy dialogue, gave IDA the critical leverage for helping to resolve each crisis\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 92\. Based on IDA’s performance during the appraisal and supervision phases as discussed above, the overall IDA Performance is rated as Satisfactory\. 6\.2\. Implementation Entity Performance (a) Implementation Entity Performance in implementing the project 25 Rating: Satisfactory: 93\. Umeme made limited progress on operational performance during the first four years of the Concession, but since then it has improved significantly\. Umeme built a strong local management team and developed a good business process to reduce technical losses, improve distribution network reliability, as well as enhance service quality and customer management in a sustainable manner\. It also showed the ability to raise the required funding to expand its operations and the willingness and ability to invest in network expansion\. 6\.3\. Government Performance (a) Government Performance Rating: Satisfactory 94\. The government through the Ministry of Finance and Ministry of Energy generally fulfilled its obligations and created the environment for the private concessionaire to operate efficiency\. When issues emerged, the corresponding government entity was, at the end, willing to discuss and find a workable solution with the private concessionaires\. However, since the Contingent Credit expired, the government has showed less willingness in finding solutions to outstanding issues such as government payment arrears and honouring the Security Package\. (b) Implementing Agency or Agencies Performance Rating: Satisfactory 95\. For most part, ERA demonstrated its competence in doing professional and technical work on setting the tariffs\. After the Contingent Credit expired, however, ERA has showed more susceptible to the political pressures relating to tariff adjustments\. Removing the lease payment from the tariff methodology and modifying the growth factor has been perceived by Umeme as politically motivated\. At the time the ICR was written, it was unclear the course that these disputes would take\. 96\. Generally GoU fulfilled its obligation to maintain the Security Package created to deal with arrears of GoU entities during the life of the guarantee\. After the expiration of the guarantee, however, it unilaterally started to dismantle the elements of the Security Package that were agreed to maintain during the life of the Concession (Lease Fees and Escrow Account)\. (c) Justification of Rating for Overall Government Performance Rating: Satisfactory: 97\. Based on GoU and associated entities’ discussed above, the Overall Government Performance is rated as Satisfactory\. 26 7\. Lessons Learned 98\. There are a number of lessons learned from this Project: (i) If properly structured, it is possible to successfully implement a private sector project that brings private capital, private sector efficiencies, and first rated investors into an underdeveloped power distribution subsector such as that of Uganda in 2004 and reap substantial economic benefits for the country and the sector\. Given that GoU was undertaking a power sector reform and showed strong commitment to sector reform, the guarantee support focused on the remaining political and regulatory risks\. The guarantee helped to underpin the cash flow of the Concession by backstopping critical risks\. Such support gave investors the incentive to conclude the Concession and undertake investments much larger than initially envisioned\. As a result, there had been substantial benefits for the sector and the country\. (ii) Loss reduction in chronically poorly managed utilities is very challenging and takes significant time and effort to tackle it, particularly in countries with limited capacity\. In these countries, strategic investors have to focus on identifying the real status of the network, designing an effective overhauling plan, revamping the customer database, creating a motivated and well-trained workforce, and ensuring that there is an adequate network of local suppliers before being able to show sustainable performance improvements\. It is also critical to set ambitious but realistic targets for strategic investors to perform\. In this context, a transitional period to allow for creating reliable baselines for performance improvements —such as the 18-month initial period given to Umeme—is beneficial for then setting realistic targets that can create the right incentives to improve performance\. (iii) PPP/Concessions are long-term arrangements that need flexibility and commitment from all involved parties to be able to adjust to unforeseen circumstances, remain in place, and being successful\. The Government's long term commitment to sector reform made it possible for the Project and the Concession, to weather major challenges (e\.g\. power supply crisis)\. Government commitment to stay its course on sector reform ultimately led to the longer term benefits to the sector, once the power crisis was over\. Long term commitment and competence of the private sector were a pre-requisite to develop the local workforce's capabilities at all levels\. In addition a sound approach to sustained performance improvements and a solid financial performance were equally important attributes\. Identifying private partners that have a long-term view and can weather significant challenges throughout the implementation phase are particularly attractive in such projects, which could help guide the criteria for procuring private sector concessionaires in future\. The Bank's involvement in such an operation is not limited to the provision of a financial instrument (guarantee), but it also offers the Bank's convening power, which can make a tangible difference during a crisis\. 27 (iv) There is a fine balance to be struck between reducing the perceived risks for the private sector and creating the incentives to tackle sector issues\. In the case of Uganda, the risk of non-payment by GoU’s entities illustrates the case\. The historic poor payment record was perceived as a risk that needed to be fully mitigated at the time the Concession was granted\. While that risk is still relevant for some public entities (such as security forces, police, and prisons), it may no longer be the case of other public entities\. GoU’s view is that Umeme did not do all that it could to minimize the arrears of GoU’s entities because it could offset GoU’s arrears with the resources from the Security Package\. Umeme always contested this view by GoU as it should be GoU’s responsibility to ensure that Government entities pay their bills\. (v) Low income countries may need donor funding to facilitate faster increase in access than private financing can bring\. In those countries, expanding access through private financing alone is usually constrained by affordability issues due to higher cost of private financing\. Combining private sector efficiencies in network rollout and operation with the lower cost of donor financing could accelerate access expansion\. (vi) The commercial mindset of the public entities is critical to ensure the long- term sustainability of the sector performance improvement\. Such commercial mindset was instilled in Ugandan public entities through the GoU’s long-term commitment with the sector reform\. To the extent that such commercial mindset is absent in another operation, there is value in providing capacity building support to help develop a commercial attitude when engaging with the private sector\. (vii) Projects supporting Public Private Partnerships in power distribution required active supervision to ensure timely resolution of emerging issues before they start to negatively affect the project\. Continued engagement by the Bank was critical for the success of Uganda’s distribution Concession\. By virtue of the IDA guarantee, on-going supervision helped the Bank team to play an effective honest broker role at key moments (contract amendment, disputes over performance and tariff review) which prevented disputes from escalating and facilitated mutually agreed resolutions\. In the case of guarantees, projects should allow for adequate monitoring and supervision during the life of the guarantee to ensure risks covered are appropriately managed\. (viii) Designing the IDA support as a credit restructuring was innovative, cost- effective, and, more importantly, responsive to GoU’s needs\. By adding the guarantee support as a restructuring in an almost complete operation that had the same PDO and outcome but for a broader set of companies, the IDA team was able to expedite the approval of the guarantee support and deliver the support needed by GoU in a timely manner\. Under the Privatization Agreements for its power distribution services, GoU had nine months to put in place an IDA support to backstop its obligations\. Such approach also reduced the transaction cost of a small operation (US$5\.5 million)\. 28  (ix) The innovative approach, however, became a burden during supervision as the Bank’s processes and systems were not prepared to handle the innovative aspects of it\. The nature of the operation (a contingent credit with no planned disbursement, if successful and with an end date defined based on reaching certain market conditions) implied that the project team had to (i) work with processes and systems that were unable to adequately reflect the operation’s performance and status; and, (ii) periodically write ad-hoc reports to explain that the operation was not underperforming\. 8\. Comments on Issues Raised by Implementation Entity/Implementing Agencies/Partners (a) Implementation Entity 99\. Umeme Ltd, the project sponsor in its own ICR has raised several issues: (i) There is a risk of insufficient power supply\. The challenge in the sector is that demand for electricity has to be matched with power generation growth\. It is important that Government plans to increase power generation, involving construction of new power hydro plants, like Karuma, are kept on track\. (ii) The Escrow Account is currently not funded\. The lease payments to UEDCL, which were formerly used to fund the Escrow Account from time to time, have been excluded from the retail tariff by ERA\. Notwithstanding the removal of the lease payments from the tariff, UEDCL is nevertheless obliged to fund the Escrow Account to the required minimum balance, in accordance with UEDCL’s obligations under the Lease and Assignment Agreement\. (iii) The Electricity Regulatory Authority (ERA) passed and implemented Amendments No\. 2 (disallowing rapid depreciation) and No\.4 (adjusting the growth factor in the tariff methodology) to the Umeme Electricity Supply Licence\. The Legality of these amendments has been challenged by Umeme through an appeal filed with the Electricity Dispute Tribunal (EDT), which is awaiting resolution\. (iv) The Parliamentary Ad-hoc Committee on Energy established in July 2011 undertook a review of Umeme’s activities and tabled its final report for parliamentary debate in March 2013\. The report made a number of recommendations including termination of the Company’s concession\. Umeme disputed the Committee’s findings and the Government of Uganda is not bound by the Parliamentary resolutions\. Government has reassured Umeme that it is fully committed to encouraging private sector investment in Uganda and will be highly unlikely to initiate any actions that deter investment in Uganda’s energy sector\. 100\. The Bank shares Umeme’s concerns and has duly noted them in the Assessment of Risk 29 to Development Outcome (section 4)\. The Bank also continues the dialogue on these issues with Government as part of its sector dialogue\. (a) Government/Implementing Agencies: 101\. The GoU in its inputs has expressed appreciation for the success achieved by Umeme and the role played by the IDA and its Contingent Credit\. (b) Lenders, Co-financiers and/or Co-Guarantors: Lender’s comment not received\. (c) Other partners and stakeholders 102\. None 30  Annex 1: Project Costs and Financing Financing plan (US$) and IDA Contingent Credit Source Local Foreign Total Borrower 0 0 0 Umeme 65 65 International (5\.5) (5\.5) Development Association (Contingent Credit) Total 0 65 65 31  Annex 2: Outputs by Component 103\. As indicated as section 1\.5, the Project had one component: A Security Package to compensate Umeme for losses caused by defined political and regulatory risks\. This annex provides a detailed description of the Security Package and the IDA backed risks\. 104\. Under the Privatization Agreements, the GoU provided a Security Package consisting of the Escrow Account and the L/C Facility to be in place for seven years following the privatization\. The Security Package was designed to provide compensation to Umeme for any loss of revenues resulting from non-compliance of certain UEDCL/GoU undertakings specified in the Privatization Agreements\. Any loss of revenues would be recovered by UMEME in the following order: (a) a rent offset; (b) a draw-down from the Escrow Account; and (c) a draw- down from the L/C Facility\. In addition to providing funds for Umeme’s loss of revenue, the Escrow Account was available to pay any Buy Out Amounts due to Umeme which were not paid by the GoU\. The L/C Facility was only accessible for up to US$2\.5 million to cover a Buy Out Amount during the initial eighteen month period if termination resulted from a breach of the Privatization Agreements by the GOU and its entities\. 105\. Escrow Account: UEDCL deposited an initial US$2\.5 million in the Escrow Account at the Transfer Date which was supplemented by monthly deposits of rent payable by UMEME, estimated at the equivalent of US$1\.35 million\. Any time the amounts in deposit in the Escrow Account plus the balance in the L/C Facility exceeded the “Required Amount” (an amount equal to US$5 million or its equivalent at the Transfer Date, increasing to US$8 million 12 months after the Transfer Date and rising to a cap of US$20 million or its equivalent), then any surplus became payable to UEDCL each month by the Escrow Agent\. The Escrow Account was agreed to be in operation for the duration of the Concession\. 106\. IDA Backed L/C Facility: To supplement the cash deposit in the Escrow Account, UEDCL was required to establish a Standby Letter of Credit for an initial amount of US$2\.5 million at the Transfer Date, increasing to US$5 million at the first anniversary thereof, and then remaining at that amount (unless reduced by a drawing which is not replenished)\. The L/C was required to be in effect for seven years following the privatization\. Because of certain Ugandan regulatory requirements, the initial term of the L/C was three years to be renewed twice for two year periods for the balance of the seven year term\. In the event the L/C was not renewed or replaced beyond its initial term, such that the L/C ceases to be in effect for the full seven year period, the GOU has agreed that UMEME could draw from the Credit, for deposit into the Escrow Account, an amount equal to the amount that would have been available for draw under the L/C prior to its expiration\. 107\. UMEME was entitled to draw any revenue shortfall amounts from the L/C upon the occurrence of the “IDA-Backed Events” covering loss of revenues, if there were insufficient funds in the Escrow Account to satisfy the amounts claimed after rent offset\. As part of the L/C 32 arrangements, the L/C issuing bank entered into a L/C Reimbursement and Credit Agreement with UEDCL\. Under this agreement, UEDCL agreed to repay the L/C issuing bank the amounts drawn, plus accrued interest, within a period of up to 12 months (the L/C Repayment Period)\. First, however, the L/C was to be replenished during the L/C Repayment Period through a claw- back from rent payments deposited in the Escrow Account by UMEME\. Alternatively, the GOU or UEDCL could choose to replenish the L/C from its own resources\. If by the end of the L/C Repayment Period, however, the amount of the drawing was still outstanding, then UEDCL would be obligated to make the necessary repayment to the L/C issuing bank, in US dollars, to the designated account stipulated in the Reimbursement and Credit Agreement\. Repayment would normally be required to be made to the L/C issuing bank’s account in Uganda\. If because of Ugandan restrictions, UEDCL were unable to make payments in US dollars to such account, or UEDCL were unable to transfer payments made to such account outside Uganda, UEDCL was required to make payment to the designated account of the L/C issuing bank outside of Uganda\. Following a repayment from any of the above sources, the L/C would be reinstated by the amount of the repayments\. 108\. In the event UEDCL failed to make the required repayment by the end of the L/C Repayment Period, the L/C issuing bank would be entitled to claim from IDA the repayment of the due amounts plus accrued interest\. Following a submission of a valid claim to IDA for payment, IDA would repay the L/C issuing bank through a disbursement from Credit 3411-UG up to an amount not exceeding US$5\.5 million\. Following a repayment by IDA to the L/C issuing bank, on behalf of UEDCL, neither the L/C nor the amount of IDA’s support would be reinstated for such amounts\. The figure on the next page shows how the Escrow and IDA backed L/C worked to compensated Umeme if the covered risks materialize\. 33  UMEME Escrow and IDA-Backed L/C Security Structure IDA GOU LC LC L/C Issuing Bank LC Repaym ent Rent LC draw UMEME Ren Escrow Account UEDCL Escrow Escrow over 1 In case Escrow Account balance is higher than required\. Risks Underpinned by the Security Package 109\. Undertakings under the Privatization Agreements, seven events in the UEDCL/GOU contractual gave UMEME the right to offset rent payments and draw from the Escrow Account to compensate revenue losses and satisfy GOU’s obligation for the Buy Out Amount in the event of termination of the Concession\. Of these events, only the first three ((a ), (b) and (c) below) were “IDA-backed Events” that entitled UMEME to access the IDA-backed L/C Facility following a rent offset and a draw from the Escrow Account\. (i) Failure by the ERA to approve tariff adjustments according to the pre-agreed Tariff Methodology set forth in the Distribution and Supply License\. (ii) Non-payment by GOU entities of their Electricity Bills\. (iii) Early Termination of the Concession by UMEME resulting from a breach of the Privatization Agreements by GOU and its entities during the initial 18 month period\. In this case, UMEME would be entitled to receive compensation of US$2\.5 million (the “Early Termination Amount”) if other funds available to UMEME (cash and unutilized investment funds in the Company Escrow Account) were insufficient to recover the full Early Termination Amount\. (iv) Early Termination of the Concession by UMEME for reasons relating to the company, within the initial eighteen month period, which would entitle UMEME to a compensation of US$2\.5 million for the initial investment of US$5 million\. 34  (v) Refunds made by UMEME of Connection Fee and Security Deposits provided by customers of UEDCL prior to the Transfer Date\. (vi) Indemnification obligations to third parties and property damage resulting from the condition of the Distribution System, within the first eighteen months of the Transfer Date\. (vii) Termination of the Concession due to UEDCL or GOU Events of Default, and Political or Other Force Majeure Events\. Description of the “IDA-backed” Risks The “IDA-backed Events” were\. 110\. Non-Compliance by ERA of the Regulatory Framework: This covered the failure of the ERA to adjust retail tariffs in accordance with the Distribution and Supply Licenses within 45 days of a legitimate claim from UMEME, in accordance with the pre-agreed Tariff Methodology (contained in Annex A of the Supply License), which resulted in a corresponding loss of revenue to UMEME, including interest on any overdue amounts\. Under the Licenses, UMEME would be required to make an annual tariff submission to the ERA at least 30 days prior to the effectiveness of the tariff\. Tariffs might be adjusted quarterly on an automatic basis to reflect changes in bulk tariff supply costs, inflation and exchange rate movements\. 111\. The retail tariff, as calculated in accordance with the agreed Tariff Methodology consisted of two elements: (a) the Power Supply Price determined on a quarterly basis for each twelve month period beginning on the Transfer Date; and (b) the Distribution Price determined annually for each Tariff Year\. The Distribution Price consisted of the following components: (a) operation and maintenance costs which will be fixed at the bid cost plus indexation for inflation; (b) the Return on Investment fixed in accordance with the bid proposal; and (c) Lease Rent payable to UEDCL\. The US dollar components of the Distribution Price were identified in the Distribution License and were provided in the tariff at prevailing USh/US$ exchange rates\. Since the components in the tariff were generally pre-determined in terms of either being fixed or outlined in a contract such as the Lease and Assignment and Power Sales Agreements, the probability of risk of disputes on interpretation to appear fairly limited\. In the event that interpretation disputes between UMEME and the ERA, the License and Privatization Agreements provided for a dispute resolution mechanism through recourse to an expert’s determination on an expedited basis\. If either party were to disagree with the expert’s determination, it could resort to binding arbitration\. The GOU and UEDCL recognize that if UMEME draws on the L/C Facility for an IDA-backed Event, pending a dispute, UEDCL was not be relieved of its obligation under the L/C Reimbursement and Credit Agreement to repay the L/C issuing bank after the 12-month Repayment Period\. If arbitration was ongoing at the end of that period and an L/C draw should result in a claim to IDA, any disbursements under the 35 Credit will have remained a GOU obligation even should a later arbitral award be issued in favor of UEDCL/GOU\. In this case, UEDCL/GOU’s recourse would be to seek reimbursement from UMEME under its contractual obligations if the Concession is continuing, through refunds into the Escrow Account; and under the award and at law if the Privatization Agreements were terminated and an improper Buy Out Amount (or early Termination Amount) had been paid prior to the award having been rendered\. 112\. Non-Payment by GOU Entities of Electricity Bills: This dealt with the failure of Government entities to pay their electricity bills within 60 days from the due date, which results in a loss of revenue for UMEME including interest on the overdue amounts\. In the event that the relevant GOU entity made a payment of the due amounts following a drawing of the amounts by UMEME from the Escrow Account or L/C Facility, UMEME had to repay all such amounts into the Escrow Account plus interest equivalent to the prevailing LIBOR rate plus 3 percent\. The amounts deposited in the Escrow Account had first to be applied first to replenish the L/C Facility to the extent it had been drawn\. 113\. The largest single UMEME customer at the time the concession was granted was the Government and its entities, whose monthly electricity bills of around US$800,000 accounted for about 10% of sector revenues\. Assuming that no payments were received from the Government and its entities, such monthly electricity bills would be offset by the monthly rental payments and the Bulk Supply Tariff payments, before any recourse to the security package could be made\. 114\. Payment of Early Termination Amount Resulting from a Breach of the Privatization Agreements by GOU and its Entities: UMEME was entitled to access the L/C Facility in the event of a termination within the initial eighteen months of the Concession for a breach of the undertakings provided by the GOU, UEDCL, or UETCL, under the Privatization Agreements\. For this event, the Early Termination Amount was capped at US$2\.5 million\. 115\. Failure of L/C Facility to Remain in Effect for Seven Years after Privatization because of Non-Renewal or Inability to Replace: Under Uganda regulations, the maximum initial term of the L/C Facility could exceed three years\. Hence, there was a risk (although low) that the L/C Facility might not be renewed or be capable of being replaced through a substitute bank up to the full seven year period\. If this risk were to materialize, UMEME was able to draw directly under the IDA Credit in an amount equal to the amount available under the L/C Facility, immediately prior to its expiration, for the purpose of placing such amounts in the Escrow Account\. 36  Annex 3: Economic and Financial Analysis 116\. The economic analysis of the project follows a standard cost-benefit approach\. The stream of costs and benefits are compared to determine the net economic value in present value terms and the internal rate of return\. The primary beneficiaries are the customers in Umeme’s area of operation\. Households gain from electricity in the form of increased productivity, the lengthening of working/studying hours, reduced ill health, and increased connectivity (cell phone, TV and radio) and entertainment\. Commercial and industrial entities gain from electricity though better lighting, storage and productivity enhancing electrification of processes\. 117\. The project component being analyzed provides a risk guarantee to Umeme, to enable it to raise capital to invest in improved operations and maintenance targeted towards reducing energy losses and enhancing connection capacity\. The main benefits delivered by the project are thus in the form of reduction in electricity losses and greater connection of new households by Umeme\. The ultimate benefits thus derive from end-user (household, commercial or industrial) consumption on account of new connections or on account of greater electricity being available due to a reduction in losses\. The latter implies that economic benefit will only derive from a reduction in technical losses and not commercial loss reduction which is merely a transfer of resources\. 118\. The costs included are the investment and operating costs incurred by Umeme and the cost of additional power generation required to supply to the excess demand\. These costs are subtracted from the delivered benefits to derive the net economic gains associated with the project\. 119\. The benefit from reduced technical losses is derived from the additional electricity available in the system which is ultimately consumed by the customers\. The consumed electricity is valued at the consumption-weighted average of the price paid by Umeme customers (domestic, commercial and industrial)\. The underlying assumption is that the customer mix has remained the same through the period\. Valuing energy consumed at the marginal tariff paid by customers can be regarded a lower bound for the economic benefits delivered to customers and thus a conservative valuation of benefits\. 37  45\.0 40\.0 35\.0 30\.0 25\.0 Technical losses 20\.0 Energy Losses 15\.0 10\.0 5\.0 0\.0 2000 2005 2010 2015 2020 Note: The diagram shows that energy losses fell rapidly and are projected to do so in the medium-term\. Technical losses have fallen at a much slower rate and are expected to remain stable around 17 percent in the near future\. Thus implying that most of the loss reduction is on account of reduced commercial losses\. 120\. The benefit from additional connections, similarly, is valued at the consumption- weighted average tariff\. The assumed consumption per customer is the average consumption across all Umeme customers in 2012\. 121\. Even using very conservative valuation of benefits and costs, the project is found to have been economically viable with an NPR of US$ 108M and economic rate of return (EIRR) of 21 percent\. The table below shows the main assumptions and results for the IRR and NPV\. Assumptions Average price of electricity 0\.17* $/kWh Average Consumption 315* kWh/month Generation cost of electricity 0\.12 $/kWh Discount Rate 12 Per cent Baseline Results EIRR 21% NPV (M US$) 108 Note: *Calculated as the weighted average across all consumer types – using 2012 consumption figures and 2014 tariff structure\. 38 Annex 4: Bank Guarantee and Implementation Support/Supervision Processes (a) Task Team members Names Title Lending Karen Rasmussen Co-TTL Lucy M\. Fye Co-TTL Farida Mazhar Lead Financial Specialist Pascal Tegwa Sr\. Procurement Specialist Patrick Piker Umah Tete Sr\. Financial Management Specialist Serigne Omar Fye Sr\. Environmental Specialist Suman Babbar Consultant Atsuko Okubo Counsel Susan Maslen Counsel Supervision Robert Schlotterer TTL Suman Babbar Consultant Gulam H\. Dhalla Consultant Ju-Sung Park Financial Analyst Paul Baringanire Power Engineer Somin Mukherji Senior Energy Specialist Farida Mazhar Lead Financial Officer Janine A\. Speakman Operation Analyst Teuta Kacaniku Consultant 39  (b) Staff Time and Cost (from SAP) Staff Time and Cost (Bank Budget Only) Stage of Project Cycle No\. of Staff US$ Thousands Weeks (including travel and consultant costs) Lending FY2004 15 160,610* FY2005 17 171,558* TOTAL: Supervision/ICR FY2006 23 144,380* FY2007 13 32,587 FY2008 6 29,730 FY2009 8 22,552 FY2010 10 43,085 FY2011 7 43,888 FY2012 5 45,384 FY2013 3 31,811 TOTAL 725,586 * Data include budget spent on the four other components of the Privatization and Utility Sector Reform Project (P050439 and Credit 3411-UG)\. 40  Annex 5: List of Supporting Documents 1\. IFC (2009) Umeme Limited Project No\. 25788 The Republic of Uganda 2\. Umeme (2012) Initial Public Offering Prospectus, Incorporates in the Republic of Uganda 3\. Electricity Regulatory Authority (2012) Amendments of Umeme Ltd License No\. 48 for the supply of electricity Amendments 2 and 3\. 4\. Electricity Regulatory Authority (2009) Measures to Reduce the Electricity Tariffs in Uganda Electricty Sector\. Mimeo\. 5\. Electricity Regulatory Authority (2011) Uganda Study on Distribution System Losses and Collection Rates by Umeme Ltd\. Final Report\. 2010, 2011, 2012, and 2013\. 6\. Electricity Regulatory Authority (2012 and 2013) Correspondence of Amendments of Umeme Ltd License No\. 48 for the supply of electricity Amendments 2 and 3\. 7\. Umeme Ltd Correspondence of Amendments of Umeme Ltd License No\. 48 for the supply of electricity Amendments 2 and 3 from 2011 to 2013\. 8\. Electricity Regulatory Authority Correspondence of Amendments of Umeme Ltd License No\. 48 for the supply of electricity Amendments 2 and 3 from 2011 to 2013\. 9\. IDA, Aide Memoires of October 2007, February 2008, March 2009, November 2009, April 2010, December 2012, and May 2014\. 10\. IDA, Implementation Status Reports of July 2007, December 2007, July 2008, December 2008, April 2009, December 2009, April 2010, December 2010, November 2011, May 2012, February 2013, and August 2013 11\. Umeme Ltd Annual Reports 2010, 2011, 2012, 2013 and Interim Report 2014 first half\. 12\. Umeme Project Agreements\. 13\. IDA (2006) First Amendment to Support to Umeme Ltd including related legal agreements\. 14\. IDA (2007) Program Document for US$300 million Power Sector Development Operation, Report No: 36644-UG\. 15\. IDA (2012) Implementation Completion Report on a US$300 million Power Sector Development Operation, Report No: ICR2159 41 16\. IDA and IFC (2000) Country Assistance Strategy of The World Bank Group for the Republic of Uganda\. 17\. IDA (2004) Memorandum and Recommendation of the President on the proposed amendments to the legal agreements of the Privatization and Utility Sector Reform Project (Credit 3411-UG) in the Republic of Uganda\. 18\. IDA (2000) Project Appraisal Document of a Proposed Credit in the amount of US$48\.5 million to the Republic of Uganda for a Privatization and Utility Sector Reform Project\. Report No: 20016-UG 19\. IDA (2009) Implementation Completion Report on US$62million Fourth Power Project, Report No: ICR0000760\. 20\. IDA (2006) Implementation Completion Report on a Credit in the amount of US$48\.5 million to the Republic of Uganda for a Privatization and Utility Sector Reform Project\. Report No: 000041-UG\. 21\. IDA (2001) Project Appraisal Document of a Proposed Credit in the amount of US$62 million for Fourth Power Project, Report No: 22318-UG\. 22\. IDA (2002) Implementation Completion Report on US$125 million Third Power Project, Report No: 24406\. 42 Map Umeme footprints in 2009 and 2014 43

REVIEW

P009065

 ICRR 11183 Report Number : ICRR11183 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 04/24/2002 PROJ ID : P009065 Appraisal Actual Project Name : Bursa Water & Sanitation Project Costs 258\.4 193\.2 Project US$M ) (US$M) Country : Turkey Loan/ US$M ) 129\.5 Loan /Credit (US$M) 107\.7 Sector (s): Board: WS - Water supply Cofinancing 0 0 (52%), Sewerage (38%), US$M ) (US$M) Solid waste management (8%), Sub-national government administration (2%) L/C Number : L3565; L3566 Board Approval 93 FY ) (FY) Partners involved : Closing Date 06/30/2001 06/30/2001 Prepared by : Reviewed by : Group Manager : Group : Kavita Mathur Roy Gilbert Alain A\. Barbu OEDST 2\. Project Objectives and Components a\. Objectives The main objectives of the project were to: a\. improve the environmental conditions and reduce health hazards in Greater Bursa caused by: (i) inadequate collection, and lack of treatment of municipal and industrial sewage; (ii) seasonal flooding in some areas because of poor stormwater drainage; and (iii) inadequate domestic solid waste disposal, and lack of hazardous solid waste management; b\. improve the institutional arrangements regarding the management of municipal water supply, sewer services, and of domestic and hazardous solid waste; c\. meet the demand for water supply, sewerage, flood protection and solid waste services, including the demand from the poor living on the fringes of the city; d\. postpone the need to develop new water resources by improving the efficiency of water usage by reducing the volume of non-revenue water from the presently high level of 63%; and e\. implement appropriate cost recovery policies\. b\. Components (A) Water Supply, Sewerage and Stormwater water supply works and equipment (actual cost US$41\.9 million): (i) renovate existing springs; (ii) rehabilitate existing distribution networks; (iii) increase the production of well-fields; (iv) construct a distribution reservoir; and (v) construct main pipelines\. sewerage works and equipment (actual cost US$27\.2 million): (a) extend the collection networks; and (b) treat and dispose sewage flows collected by the sewerage networks\. stormwater drainage works and equipment (actual cost US$19\.2 million): (i) rehabilitate the existing networks; (ii) construct three open channel interceptors; and (iii) extend the collection system by laying about 14\.2 km of collectors and construction of networks in new areas covering about 337 ha\. technical assistance for project implementation and for institutional development\. (B) Solid Waste: civil works and equipment (actual cost US$7\.9 million): (i) rehabilitate the existing dump sites; (ii) develop a new landfill site; (iii) construct a waste transfer station for 600 tons per day; (iv) provide collection vehicles; and (v) provide facilities for two clinical waste incinerators of 0\.5 tons per hour unit capacity\. technical assistance for project implementation and for institutional development\. c\. Comments on Project Cost, Financing and Dates  Total project cost at completion is US$193\.2 million compared to the appraisal estimate of US$258\.4 million\. Out of a difference of about US$65 million, US$55 million is on account of the postponement of the second phase of BUSKI (Bursa Water and SAnitation Company) wastewater treatment plants\. The remaining US$10\.0 million is due to lower costs for technical assistance to BUSKI; stormwater works; postponement of the three open channel interceptors; sewerage civil works; and solid waste equipment\. The final amount of the Bank loan is US$107\.7 million and US$21\.8 million was canceled\. The loan was closed on schedule on June 30, 2001\. 3\. Achievement of Relevant Objectives: The objective to improve the environmental conditions and reduce health hazards in Greater Bursa was generally achieved\. Under the project wastewater collection systems and networks were put in place\. It is estimated that 80 percent of the wastewater now receives pre-treatment in anaerobic ponds\. Stormwater drainage and rehabilitation works were completed\. The project improved solid waste collection and disposal services\. An air quality monitoring system was installed\. The objective to improve the institutional arrangements was achieved modestly\. Institutional strengthening for BUSKI was expected to be developed with the help of first, the twinning arrangement and later, the private operator\. Since this did not occur, institutional strengthening outputs did not develop as planned particularly in regard to training of BUSKI staff and management, and the development of asset management and management information system\. However, BUSKI improved worker productivity per connection, reduced unaccounted-for-water and bill collection ratio\. To improve the organizational arrangements for solid waste services, BMM (Bursa Metropolitan Municipality) has contracted out the waste collection and landfill operation services to private contractors\. The objective to meet the demand for water supply, sewerage, flood protection and solid waste services, was generally met\. Population with water supply increased from 93% in 1993 to 97% in 2000 and with sewerage increased from 73% in 1993 to 82% in 2000\. The objective of postponing the need to develop new water resources by improving the efficiency of water usage by reducing the volume of non-revenue water was achieved\. Significant improvement in the management of unaccounted-for-water were made\. UFW decreased from 63% in 1993 to 45% in 2000\. The objective of implementing appropriate cost recovery policies was achieved\. BUSKI has engaged private sector for meter reading, billing and invoicing\. BUSKI exceeded the appraisal operating ratio target of 73%, operating ratio declined from 89% in 1993 to 59% in 2000\. The targets for working ratio were achieved - working ratio declined from 87% in 1993 to 51% in 2000\. 4\. Significant Outcomes/Impacts: The project resulted in promotion of private sector participation in water supply and sewerage sectors\. BUSKI has engaged private sector for meter reading, billing and invoicing and BMM has contracted out the waste collection and landfill operation services to private contractors\. Also the project had substantial impact on reduction in unaccounted-for-water in Bursa\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): The twinning-type technical assistance for strengthening the institutional capacity of BUSKI was not successful\. The project did not develop monitoring indicators to quantify projects impact on environment\. The project did not monitor the reduction of pollution in the Nilufer River and Sea of Marmara and reduction in water-borne diseases\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev \.: Modest Modest 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: 1\. Once it is clear that a particular institutional goal intended by the project is not likely to succeed, as in the case of the twinning contract, the Bank needs to be pragmatic and should pursue alternative options\. 2\. The Bank needs to be mindful of the broader objectives and impacts of the project when helping the Borrowers  to set up monitoring and evaluation systems; in the case of the project, while physical and institutional progress indicators were well developed, the system did not provide for evaluating progress in achieving the larger objectives\. 3\. A high degree of Borrower commitment and a well-defined action program are necessary for a successful program of reduction in non-revenue and unaccounted-for-water\. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: The quality of the ICR is satisfactory\. In spite of being one of the main objectives of the project, the ICR does not provide information on the service coverage for poor living on the fringes of the city\.

REVIEW

P092353

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) Report Number : ICRR0021528 1\. Project Data Project ID Project Name P092353 ET-Irrigation & Drainage SIL (FY07) Country Practice Area(Lead) Additional Financing Ethiopia Water P125307 L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IDA-43330,IDA-49760 31-Oct-2015 105,794,445\.60 Bank Approval Date Closing Date (Actual) 21-Jun-2007 31-Oct-2017 IBRD/IDA (USD) Grants (USD) Original Commitment 100,000,000\.00 0\.00 Revised Commitment 121,314,499\.56 0\.00 Actual 105,794,445\.60 0\.00 Prepared by Reviewed by ICR Review Coordinator Group Ebru Karamete Christopher David Christopher David Nelson IEGSD (Unit 4) Nelson 2\. Project Objectives and Components a\. Objectives The project development objectives stated in the Financing Agreement (page 5) and Project Appraisal Document (page 10) was: “to sustainably increase agricultural output and productivity in the Project Area\. “ The project development objectives were revised on Sep 12th, 2016 as: “to improve access to irrigation and drainage services and build farmers' capacity in irrigated agriculture in the Project Area\.” Page 1 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) 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 12-Sep-2016 PHEVALUNDERTAKENLBL c\. Will a split evaluation be undertaken? Yes d\. Components The project had four components: 1\. Irrigation Development (Appraisal: US$75\.0 million, Revised: US$126\.3 million, Actual: US$150\.7 million)\. This component aimed to finalize feasibility and detailed design studies and develop irrigation infrastructure for about 20,000 hectares in Megech and Ribb benefiting approximately 12,600 households\. The component also aimed to conduct feasibility studies for 80,000 hectares of newly developed irrigated agriculture in selected sites including Anger, Upper Beles, Negesso and Megech, and promote low-cost irrigation technologies in low-lying areas around Lake Tana\. Environmental and social assessment of the investments were to be financed under this component\. In addition, as the project investment in Ribb area would rely on the construction of the Ribb Dam, financed by the government, the project identified mitigation measures to reduce risks\. One of the measures included dropping the Ribb area and expanding the Megech area investments instead\. The restructuring in 2014 after the Mid Term Review (MTR), reduced the scope of the two schemes and eliminated the activity related to groundwater development through low-cost technologies because the priority was to develop surface water systems\. The restructuring in 2016 eliminated the implementation of the Environmental and Social Impact Assessments (ESIAs) and the Resettlement Action Plans (RAPs) for the 80,000 ha of new irrigation and the proposed hydraulic infrastructure in the Lake Tana sub-basin because there was neither funding nor time to develop any of this new irrigation before the Credit closed, and the Credit was not financing any other hydraulic infrastructure in the Lake Tana sub-basin\. 2\. Agriculture and Market Development (Appraisal: US$17\.0 million, Revised: US$20\.4 million, Actual: US$6\.5 million)\. This component aimed to establish forward and backward linkages between irrigated agriculture and markets so that multiplier effects of irrigation development would be captured by direct and indirect beneficiaries\. This was to be achieved through support for the delivery of adaptive research and development (R&D) on improved production systems and technologies, agricultural advisory services and Page 2 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) the improvement of market linkages, development of value chains through matching grants within the project’s target Woredas (districts) and Kebeles (sub-districts)\. Activities under this component were to be implemented by the regional agricultural bureau and complement the interventions of the Rural Capacity Building Project (RCBP) in the relevant project areas\. The Additional Financing in 2011 added soil fertility management and land leveling activities for the newly redistributed irrigated land\. The restructuring in 2016 scaled down the activities under Component 2, because there was insufficient time to implement them\. 3\. Irrigation Management (Appraisal: US$13\.3 million, Revised: US$21\.3 million, Actual: US$20\.0 million)\. This component aimed to establish accountable and transparent irrigation management in two ways: (i) strengthening the capacity of Water User Groups to carry out the necessary operation and maintenance (O&M) and cost recovery functions; and (ii) promoting and implementing a greater role for public-private partnerships in irrigation infrastructure management in order to improve the efficiency and operational performance of the sector\. 4\. Project Management (Appraisal: US$4\.7 million, Revised: US$5\.7 million, Actual: US$6\.5 million)\. This component financed project management related activities through the provision of technical assistance, training, auditing, evaluation studies, operating costs, overall project planning, strengthening procurement and financial management capacities, and preparation and implementation of a communications strategy; and the establishment of a monitoring and evaluation (M&E) system and performance-based management information system (MIS)\. e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost: Total project cost at appraisal was estimated at US$110\.0 million, then it was revised to US$173\.6 million with the Additional Financing in 2011, as estimated costs increased substantially after the design was approved\. Costs were revised to US$181\.1 million during the restructuring in July 2014 and then to US$183\.7 million during the restructuring in September 2016\. Actual costs were slightly higher at US$183\.9million\. Please note that total costs were not finalized at the time of the ICR and during this review, as the final audit was yet to be finalized\. Financing: The IDA grant (IDA-43330) of US$100\.0 million increased to US$160\.0 million with the IDA Additional Financing grant (IDA-49760) of US$60\.0 million\. The total disbursement was US$129\.9 million\. Borrower Contribution: It was planned that the Borrower and local communities would provide US$10\.0million, which was revised to US13\.6 million with the additional financing\. The actual contribution was US$53\.8 million\. Page 3 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) Dates: The project was approved on June 21st, 2007 and effective seven months later, on January 24th, 2008\. The original closing date was October 31st, 2015 and the actual closing date was two years later (with the Additional Financing), on October 31st, 2017\. The Additional Financing (AF) was approved on June 23rd, 2011 and extended the project closing date for 2 years\. The delay was due to delays in detailed engineering designs, the time needed to complete the rebidding process for Megech and Ribb civil works contracts and to mobilize contractors\. Restructuring: The project went through three restructurings, and one additional financing\. The AF in June 23rd, 2011: (i) included US$60 million additional financing, after it became clear based on the detailed designs that estimated costs were about eighty percent higher than the estimations of the preliminary designs; (ii) allocated US$10 million to the Fertilizer Support Project that was approved during the food crisis in 2009; (iii) extended the original closing date for two years; (iv) eliminated the intermediate outcome indicators that were of low relevance or difficult to measure, clarified the wording of some indicators, or incorporated new indicators with targets disaggregated by gender , and the targets for the areas covered with new I&D services were changed from the initial estimate of 20,000 ha gross of irrigation and appurtenant infrastructure to 17,300 ha net, reflecting the detailed designs\. Following the Mid Term Review, the restructuring on July 31st, 2014: (i) revised the project budget from US$173\.6 million to US$181\.1 million and reallocated funds between disbursement categories to account for the changes in project scope; (ii) revised the intermediate outcome targets to reflect the reduction in project scope and the decision in 2012 to split the Ribb scheme into two phases\. The restructuring on September 12th, 2016 increased the total project budget from US$181\.1 million to US$183\.7 million due to exchange rate savings and cancellation of the US$10 million for the food crisis emergency response\. The final restructuring on October 30th, 2017 revised the PDO and designed new intermediate outcome indicators to capture targets that could be achieved during the remaining project period, including length of the main canals constructed, a number of operational training and service centers, and a number of functional O&M systems\. Other indicators such as the change in yield, the real value of marketed projects, and the adoption of modern technologies, and irrigation efficiency of the main supply system were dropped because they were not achievable, difficult to verify, and no longer aligned with the revised PDO\. The restructuring also allowed the Borrower to use Credit funds for compensating 6,618 project-affected persons (PAPs), including cash payments for livelihoods restoration for 1,486 PAPs, at a total cost of US$9\.68 million\. 3\. Relevance of Objectives Rationale Original Objective: Page 4 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) While the original project development objective was relevant to the country and World Bank strategies at appraisal and closing, they were quite ambitious considering the implementation capacity in the country, as well as the project’s scope versus its duration as a single project\. In addition, there was the issue of unclear and insufficient linking between particularly productivity aspect and the market linkages presumptions\. At the time of project appraisal, agricultural productivity in Ethiopia was low with productivity of major cereal crops was around 990 kg per hectare, and cropping intensity was approximately 0\.5, corresponding to one crop every two years\. The country’s irrigation potential was estimated to be 3\.7 million hectares (ha), with actual irrigation development representing only 0\.5 percent of this potential and irrigation accounting for only three percent of food production\. The government’s strategy for achieving the Millennium Development Goals called for a rapid scaling up of existing irrigation plans with an aim to develop irrigation on 717,400 ha, with 381,000 ha serving small scale farmers (ICR page 12-13)\. Based on the above issues, Ethiopia’s Second Poverty Reduction Strategy (2006), namely the “Plan for Accelerated Sustained Development to End Poverty Strategy” aimed to promote market-based agriculture as well as integrated water resources management with an emphasis on irrigation development\. The World Bank Country Assistance Strategy (FY08-FY11), strategic objective 1 (Fostering economic growth), included increasing productivity of agriculture through investments in irrigation and preparation of value chain analysis (page 26)\. The World Bank’s Country Partnership Framework’s (FY18-FY22), focus area 1 (promote structural and economic transformation through increased productivity) noted that agriculture was one of the key drivers of growth and poverty reduction and included improved agricultural productivity and commercialization as one of the objectives (page 28-30)\. Focus area 2 (building resilience and inclusiveness) was also aligned, seeking to achieve enhanced management of natural resources and emphasized that the recent investments in sustainable land and water management, and small-scale irrigation have improved land quality\. The World Bank would continue to support the government in sustaining the gains that have been made (page 33[CDN1])\. Revised Objective: The revised PDO became more relevant as it became more streamlined, realistic and linked to project activities[CDN2] \. That is the revised PDO dramatically moved towards what the project sought to do in improving irrigation\. However, it was done very late during project’s implementation\. Rating Substantial 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective The original objective, “to sustainably increase agricultural output and productivity in project areas”, is rated Negligible\. Page 5 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) Rationale According to the theory of change (TOC), the project development objective, to increase agricultural output and productivity in rural areas, would be achieved through three main activities: (i) Developing irrigation that would lead to increased productivity and incomes; (ii) Under Component 2, supporting agricultural intensification and commercialization in the areas served by the new irrigation systems\. This support would focus on improving production systems and technologies, strengthening value chains, and facilitating market linkages\. (iii) Measures under Component 3 to ensure the sustainability of the new irrigation systems by developing or strengthening water user associations to carry out operations and maintenance (O&M) and cost recovery, as well as the promotion of public private partnerships (PPPs) that presumably will lead to improved irrigation efficiency and operational performance\. The higher-level objective of reducing poverty would be obtained through the targeting of small farmers and higher productivity and production outcomes attained through project infrastructure investments\. However, these objectives were overly ambitious\. Given this limitation, a significantly delayed restructuring in 2016 simplified the PDO to include improvement of irrigation and drainage services and building farmers’ capacity on irrigated agriculture, better reflecting what the project was actually doing\. The key expected outcome indicators were: (a) a 40 percent increase in value added per worker; and (b) a 40 percent increase in value added per hectare\. The project did not monitor these indicators; nor the other outcome indicators and intermediate outcome indicators on yields, cropping intensity, value of marketed products\. Irrigation efficiency was dropped during the restructuring in 2016, as they were either not achievable or difficult to verify\. Thus, with insufficient evidence to justify achievement, the original objective is rated as Negligible\. Rating Negligible PHREVDELTBL PHINNERREVISEDTBL Objective 1 Revision 1 Revised Objective Revised objective was to “improve access to irrigation and drainage services and build farmers’ capacity in irrigated agriculture in project areas”\. First part of the revised PDO, “ to improve access to irrigation and drainage” is rated negligible\. Revised Rationale The changes in the PDO and outcome targets in 2016 were made to align them with results that could be achieved and measured by the closing date\. However, due to significant delays in implementation, very few of the activities were completed, and none of the outcome targets were met\. The following overview summarizes the project’s achievements: Page 6 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) • Provision of new or improved irrigation or drainage infrastructure in the Megech-Seraba Scheme was planned to cover 4,000 ha (revised target), reaching a total of 10,097 beneficiaries\. By project closing, only 1,000 ha (25 percent) in the Megech-Seraba Scheme were completed\. Also, during the 2016 growing season, only 18\.25 ha (0\.46 percent of the target) were fully utilized for irrigation in the Megech-Seraba Scheme, benefitting only 28 farmers (0\.28 percent of the target)\. The reasons for such limited use of the I&D services in the Megech-Seraba Scheme Phase 1 were that the provision of irrigation water was delayed and many farmers continued their traditional rain-fed agricultural approach, and higher than average rainfall reduced the farmers’ demand for irrigation water\. During the 2017 growing season, the lack of a reliable power source for the pumping station continued to be a limiting factor in the provision of irrigation water\. A continuous power supply to the Megech pump scheme remained a challenge because the backup power supply generators was delayed due to procurement issues\. The project team informed IEG that the provision of the power supply has been resolved and now there is reliable power supply via the national grid\. • The remaining 3,000 ha (Megech Scheme Phase 2 Scheme) still had unfinished canal works, crossing structures, and flood protection emergency works at project closing\. The on-farm works were only 14 percent completed\. • Under the Ribb Scheme Phase 1 (3,000 ha), only 44 percent of the main irrigation system was completed at project closing\. The intake structures and most of the primary canal was completed but the majority of the canals and drainage channels remained unfinished\. The planned completion date for the main system was April 8, 2018, about 5 months after the project closed\. The project team subsequently informed IEG that due to higher than average rainfall and localized flooding in 2018, the works have still not been completed and the contract has been extended\. The physical works progress now stands at 79 percent and the planned completion date is May 2019\. Due to very limited progress on outcomes and outputs by project closing, the achievement of the revised objective is rated Negligible\. Revised Rating Negligible PHEFFICACYTBL Objective 2 Objective There was no second objective prior to the restructure\. The second objective of the revised PDO, was “to build farmers’ capacity in irrigated agriculture in project areas”, and was rated as Negligible\. Rationale Outputs: Page 7 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) • The project provided capacity building support to Amhara Regional Agricultural Research Institute (ARAR) to conduct, validate, and deliver irrigated agriculture research outputs\. ARAR conducted 46 adaptive irrigated agriculture research studies and provided demonstrations in selected commodities\. • 24 irrigation technologies were developed\. • Nine farmer training centers were constructed\. • 4,416 farmers and agriculture extension workers directly benefited from field days, trainings and experience sharing visits\. • Nine animal health posts were established to provide critical veterinary services\. • Matching grants were provided to create 66 micro-enterprises (exceeding the target of 18), These included: 42 cooperative grain stores, four milk production and processing facilities, two oil extraction plants, three shallow well digging service providers, 13 onion and onion seed producers, and two chemical spraying service providers\. All of these services were operational by the closing date, and all adopted financial management and accounting systems\. • Only five IWUAs in the Megech-Seraba Scheme were operational (out of the targeted well-functioning 35 schemes), and 12 IWUAs were established in the Ribb Scheme, but they had not become operational due to delays in the completion of irrigation infrastructure\. By project closing the management and supervision contract (MSC) had not taken any meaningful steps to transfer knowledge and skills for O&M, and there was no scheme level water management plan informed by a clearly defined cropping pattern and calendar\. Outcomes: There were some positive results under the matching grants scheme to establish micro-enterprises\. Nevertheless, while the project provided training to farmers and helped improve the capacity of ARAR, due to delays in receiving irrigation services, none of the 3,000 target project beneficiaries adopted an improved agricultural technology promoted by the project\. In addition, the achievements on establishing functioning Integrated Water Resources Management (IWRM) and knowledge transfer on O&M and water management plans were very limited\. There was evident activity that took place during the course of the project, but there is no substantive evidence of outcomes against this objective\. Rating Negligible PHREVDELTBL PHOVRLEFFRATTBL Rationale The combined rating under original and revised objective is Negligible\. Overall Efficacy Rating Primary reason Negligible Low achievement Page 8 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) PHREVISEDTBL 5\. Efficiency Economic and Financial Efficiency: Using only Component 1 cost and benefits, the project prepared financial and economic analyses four times (at appraisal, during additional financing, during restructuring and at completion), and each time there were changes in scope, changes in the cost assumptions, cropping patterns and intensity\. A representative farm model was designed separately for Megech and Ribb irrigation schemes for with and without project scenarios\. A cropping pattern was formulated using thirteen new crops for irrigated and rain fed farming and for wet and dry seasons\. The discount rate was 12 percent at appraisal, while the ICR used two different discount rates of 10 percent and 6 percent\. Benefits were derived from increases in farm income as a result of increases in crop and livestock productivity and production\. Unit costs for irrigation differed considerably between the PAD and the ICR level analysis (cost per ha was estimated at US$ 2,800 per ha, vs\. US$13,709 considering that the schemes would be completed using additional sources)\. There were significant cost over-runs\. Considering that only 18\.3 ha was completed as opposed to the target of 7,000 ha, the overall NPV was negative\. Based on the above, Net Present Value (NPV) of the project at completion was US$-52\.2 million using a 10 percent discount rate and US$-77\.2 using a 6 percent discount rate (compared to the appraisal estimate of US$12\.34 million)\. Using the assumption that the schemes would be completed using additional resources, then the NPV becomes US$-7\.1 (for 10 percent discount rate) and US$17\.7 million (using 6 percent discount rate), also the EIRR becomes 8\.4 percent (compared to 15 percent at appraisal)\. Administrative and Operational Efficiency: There were significant delays in developing infrastructure and operationalizing the irrigation schemes\. Even though the project ‘s original duration of approximately 7\.5 years was extended for two more years, this extension was still not sufficient, and only an insignificant portion of the works could be completed at project closing\. Efficiency Rating Negligible 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 (%) 72\.00 Appraisal  15\.00 Not Applicable 0 ICR Estimate 0 Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated\. Page 9 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) 6\. Outcome While the original project development objective was relevant to the country and World Bank strategies at appraisal and closing, they were quite ambitious considering the implementation capacity in the country, as well as project’s scope versus its duration as a single project\. Therefore, relevance of the original objective is rated substantial\. The revised objective remained relevant as it became more streamlined, realistic and linked to project activities, however the revision was done very late during project’s implementation\. The project’s, original development objective “to sustainably increase agricultural output and productivity in project areas”, is rated Negligible, as the project did not monitor and report on any of the indicators designed to measure the achievement of this objective\. The revised objective 1: “ to improve access to irrigation and drainage” is rated Negligible, due to significant delays in implementation, very few activities were completed, and none of the outcome targets were met\. The second objective, added as part of the revision to the PDO, “to build farmers’ capacity in irrigated agriculture in project areas”, is also rated Negligible\. While there were positive results on the micro-grant schemes, and improvements in the capacity of ARAR, there were significant delays in receiving irrigation services and none of the 3,000 target project beneficiaries adopted an improved agricultural technology promoted by the project\. In addition, the achievements on establishing functioning IWRMs and knowledge transfers on O&M and water management plans were very limited\. Efficiency of the project is rated Negligible, due to negative NPV at the time of project closing, very high unit costs due to cost over-runs and completing only insignificant portion of the works\. The project results did not improve despite the two-year extension\. Thus, the original and the revised combined overall outcome is rated Highly Unsatisfactory\. a\. Outcome Rating Highly Unsatisfactory 7\. Risk to Development Outcome The risk to development outcome is significant given the limited progress and threats on O&M\. As mentioned in the Efficacy section, by project closing, only 1,000 ha of water delivery and distribution infrastructure out of the revised target of 4,000 ha were completed, and the pumping station to ensure the sustainable delivery of the water was not functioning\. The ICR noted that (para\. 87), the remaining 3,000 ha in the Megech scheme and an additional 3,000 ha in the Ribb scheme were expected to be completed by June 2018, based on the government’s commitment on the use of budgetary resources\. Nevertheless, provision of a sustainable power supply to Megech remained an issue by the end of the project period, threatening full operation of the scheme (4,000 ha) during the 2017/2018 growing season\. In addition, there were very low gains in institutional capacity building and technical knowledge transfer due to delays in construction that led to limited deployment of O&M staff\. Thus, by the end of the project, the GoE intended to transfer management of the Page 10 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) Megech-Seraba Scheme to the regional government through a dedicated unit within the Abbay River Basin Authority (ARBA), even though the scheme lies outside its mandate\. Regarding the government funded Ribb Dam, the main works were completed but as the government had not completed all of the actions recommended by the dam safety review panel (DSRP), this posed a threat not only to the dam structures but the safety of downstream communities and infrastructure\. The project team informed IEG that remedial measures recommended by the DSRP were finalized but impoundment of the dam was delayed by a year to allow for recommended investigation and remedial measures\. 8\. Assessment of Bank Performance a\. Quality-at-Entry The rapid project preparation resulted in a weak project design\. The project was conceived based on a series of regional meetings as part of the Nile Basin Initiative supported by the Bank\. The Eastern Nile Subsidiary Action Program (ENSAP), which includes the countries of Egypt, Ethiopia, and Sudan, sought to initiate a regional, integrated, multi-purpose program through a series of investments, and the Eastern Nile Council of Ministers decided in March 2001 that funding should be sought to advance studies of promising irrigation and drainage sites to the feasibility and design level in October 2004, when ENCOM decided to fast-track the preparation of the I&D project\. The project was designed about two years after this decision\. However, the project was not ready at the time of appraisal, and it needed to complete the detailed preparation work required for project implementation\. Since, past irrigation investments in Ethiopia were on a limited scale and under institutional arrangements different from those intended under this project, past lessons were of limited applicability\. Therefore, the project team designed the investment using information from conceptual designs that relied on simple assumptions and cost estimates that were highly unrealistic\. The project risk assessment ignored the low implementation capacity in the country, therefore sufficient time and resources to build this capacity were not included in implementation arrangements\. For example, considering the Government’s limited experience, structuring a Management Supervision Contract in a country with low project management capacity and limited experience with private operators in the water resources management sector, the Bank did not ensure that the Government had sufficient time to internalize options and build the necessary capacity for managing complex contracts of this nature\. The design was also too optimistic in expecting the construction of civil works to be completed within two to three years in view of the government’s limited experience\. More time would be needed to address safeguard requirements and social factors under this project, as well as the government funded Ribb Dam project\. The project technical design did not consider that the farmers would be using a new irrigation system for the first time, and that dedicated support to the farmers in transitioning from their traditional rain-fed agricultural practices to the irrigated agriculture would be needed\. The original design did not include soil and land management support for the newly irrigated land\. This was a later addition\. Page 11 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) Quality-at-Entry Rating Unsatisfactory b\. Quality of supervision The number of project missions by the bank team were sufficient, i\.e\. during the project’s ten-year implementation period, 21 supervision and support missions were carried out (about every six months)\. The missions were staffed with the required experts to cover technical reviews of all components, in addition to fiduciary safeguard support, including experts in dam safety\. Aide Memoires and Implementation Status Reports noted the emerging issues related to procurement, financial management, institutional capacity, and safeguards\. In the course of implementation, four different task teams brought in a range of expertise\. The ICR did not report on any issues or concerns caused during transitioning between different task team leaders\. However, there were shortcomings\. These were as follows: • The project development objective and results framework revisions were done very late during project implementation, despite the significant shortcomings with the results framework\. Mission conclusions tended to be overly optimistic during the early years and the achievement of the PDO was rated satisfactory, despite bottlenecks\. During the 2011 request for AF, there was sufficient evidence that the project was facing serious issues and limitations, as well as cost increases\. However, instead of restructuring the project during the time of the AF, the Bank waited another five years before revising the PDO and establishing more realistic targets during the 2016 restructuring when there was only about a year remaining in the project period\. Although the project had started to show more progress by then, it was still highly unlikely that the project would meet its targets by the closing date\. Thus, the project team discussed with the client another year’s extension to complete the physical works for Megech\. Although the client was in favor of the extension, the World Bank management refused to extend the project given the ongoing implementation problems\. • Another significant flaw was on the social and environmental safeguards\. Bank decision making delayed the allocation of government funds for compensation payments\. The project was not in compliance on safeguards throughout most of the implementation period\. The outstanding issues by the end of the project posed serious flood risks, dam safety risks, and reputational risks associated with the 6,616 people that were not compensated, lost their livelihoods, lost access to utility services, or were at risk of being encircled by the Ribb reservoir\. It was only at the end of the project when the final restructuring allowed the government to use credit funds to compensate these impacted people that some of these risks were mitigated\. These issues could have been resolved much earlier during project implementation\. Page 12 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) Quality of Supervision Rating Unsatisfactory Overall Bank Performance Rating Unsatisfactory 9\. M&E Design, Implementation, & Utilization a\. M&E Design M&E responsibility was shared between the National and Regional Project Coordination Office to carry out annual work plans and annual progress and performance reviews, routine monitoring activities, and the maintenance of a systematic project database to facilitate periodic reporting\. There were issues with the selection of outcome indicators and intermediate outcome targets, which had to be revised later on during implementation\. b\. M&E Implementation The M&E system could not consolidate, highlight and transmit on time information on the project progress and implementation challenges to relevant decision makers\. Therefore, issues were mostly identified during the Bank supervision missions, rather than through adequate M&E processes and procedures\. The project could carry out only two of the three planned surveys required, but with delays\. c\. M&E Utilization M&E information was rarely used for addressing any of the bottlenecks, delays, and other challenges arising during project implementation\. Despite changes in the outcome and intermediate indicators reflecting greater attention to gender, the data did not lead to any actions that would facilitate women’s participation in project benefits\. M&E Quality Rating Negligible 10\. Other Issues Page 13 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) a\. Safeguards The project was categorized as Category A on environmental and social safeguards triggering seven safeguards: Environment Assessment (OP 4\.01), Natural Habitats (OP 4\.04), Pest Management (OP 4\.09), Physical Cultural Resources (OP 4\.11), Involuntary Resettlement, (OP 4\.12), Safety of Dams (OP 4\.37), and Projects on International Waterways (OP 7\.50)\. A Resettlement Policy Framework (RPF) and a detailed Environmental and Social Impact Assessment were prepared during project preparation\. Environmental Safeguards: The ICR noted that (para 76) implementation and compliance of environmental safeguards were unsatisfactory due to the poor performance primarily related to OP 4\.01 and OP 4\.37\. The issues in general were: (a) weak commitment of the client to periodically follow up and review implementation progress and take the necessary remedial measures; (b) limited staff capacity in the national and regional project coordination offices; (c) poor coordination at all administrative levels; and (d) poorly performing contractors and international consultants\. Environment Assessment (OP 4\.01)\. Critical safeguard issues remained outstanding at the closing of the project\. The main issues as reported by the ICR were (para 77) limited proactivity to rehabilitate non-active borrow/quarry areas that posed health, safety, and environmental (HSE) hazards to local communities, as well as to maximize future use of these sites; flood emergency preparedness plans for both schemes and river training works for the Ribb scheme, which were not completed by the closing of the IDA credit; and delays in the construction of an access road and two pedestrian bridges across the main and secondary canals for the partially isolated village (approximately 200 households) at the Ribb Reservoir\. The latter posed particularly adverse impacts on vulnerable groups such as children, elderly, pregnant women and disabled individuals\. Safety of Dams (OP 4\.37)\. This policy applied to the GoE-financed Ribb Dam, which was at the feasibility stage during the time of appraisal\. An Independent Panel of Experts was contracted to support the review, design, and construction of the dam, and the Dam Safety Review Panel (DSRP) carried out periodic visits and provided detailed recommendations\. However, enforcement and implementation of these recommendations proved to be a challenge because the construction of the dam lied outside the purview of MoWIE\. Eventually, the Bank and DSRP experts ensured preparation of a series of critical instruments and tools, including an emergency preparedness plan, operation and maintenance plan, dam safety instrumentation plan, and reservoir impoundment plan\. However at project closing, several critical dam safety issues remained outstanding\. To address these issues, a dedicated committee was formed to follow up on the remedial measures recommended by DSRP before proceeding with plans for reservoir impoundment\. Project team informed IEG that after the project closed, remedial measures recommended by DSRP were finalized, but impoundment of the dam was delayed by a year to allow for recommended investigation and remedial measures\. Pest Management (OP 4\.09) and Physical Cultural Resources (OP 4\.11)\. Overall compliance with these policies was satisfactory\. The Physical Cultural Resources policy measures were addressed as part of a detailed Environmental and Social Impact Assesment, which did not find any critical heritage sites in the project areas\. Page 14 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) Projects on International Waterways (OP 7\.50)\. Riparian notifications were sent to all downstream neighbors\. The project was regionally identified under the auspices of the Nile Basin Initiative, which helped underpin the feasibility of the project and provide assurance that the levels of water abstracted would not cause noticeable changes in water availability for downstream riparian\. Thus, compliance with this OP was rated by the ICR as satisfactory\. The ICR did not report on the compliance with the Natural Habitats (OP 4\.04) policy\. Social Safeguards: Regarding the Resettlement Action Plan, by the end of the project period, 6,618 project affected persons were identified and still needed to be compensated either for temporary loss of access to their land during redistribution and construction, or for permanent relocation due to the construction of the GoE-financed Ribb Dam and Reservoir\. The total estimated cost of US$21\.7 million was to cover compensation for temporary or permanent relocation and livelihood restoration\. However, the government financed only US$11\.17 million equivalent for resettlement cash compensation\. In August 2017, the government requested that the Bank allow an exceptional use of IDA credit proceeds to finance the long delayed cash compensation to the 6,618 people identified in the approved RAPs\. On October 31, 2017, the Bank approved US$9\.68 million to be used for compensating the PAPs who had been identified before the Credit closed\. In addition, although the livelihood restoration for displaced persons was also the government’s obligation, weak institutional capacity limited implementation of the planned activities\. A decision was made to compensate the people who resettled from Ribb Reservoir for livelihood restoration in the same way the cash compensation was paid to the eligible people, so that they can adjust to their new urban setting\. In February 2017, the GoE requested Bank financing for livelihood restoration activities\. Subsequently, it was agreed that the IDA credit would finance the estimated cost of US$4 million equivalent for resettling 1,486 people affected by the Ribb Dam and Reservoir construction\. The project team informed IEG that all compensation payments were completed within the grace period of the project, but there were still outstanding safeguards issues, which were: (i) finalization of flood protection works – ongoing to be completed with construction of Ribb scheme; (ii) access and bridge for partially encircled community at Ribb dam – completion stalled due contractual issues\. As of December 2018, a new contractor was on board and a bridge is due to be completed by March 2019; (iii) restoration of non-active burrow sites – 4 out of the 11 burrow/quarry sites are under still under rehabilitation\. The ICR noted that (para 75), the performance in social safeguards was unsatisfactory due to prolonged delays in making compensation payments and supporting livelihood restoration for the people in the Ribb reservoir and dam construction site\. This poor performance contributed to increasing frustration on the part of the affected communities and rising tension in the project areas\. Due to project delays, the participating communities had little incentive to give up their land, and to some extent caused disruption or damage to already installed infrastructure\. Thus, throughout much of the project implementation period, the project was not in compliance with OP 4\.12 and posed high social risk\. It was only after credit closure that the project could be brought into compliance through the use of the credit to cover the costs\. Page 15 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) b\. Fiduciary Compliance Financial Management\. Audit reports were submitted with unqualified opinions, and the project team took timely action on report findings and other Bank recommendations\. Although the team was proactive in addressing financial management issues, challenges continued throughout the project period\. For example, although the World Bank moved to an online withdrawal application submission system to facilitate disbursement, the project continued to face delays in submitting withdrawal applications because the signatories did not sign off in a timely manner\. In addition, internal weaknesses were observed mostly in fixed asset management\. Procurement\. The ICR noted that procurement performance was unsatisfactory (para 69)\. Many procurement packages and contracts, including the main civil works contracts, remained incomplete by the credit closing date, with little progress in implementing agreed actions\. The Project coordination office’s capacity was not sufficiently strengthened to manage multiple complex contracts and other obligations\. Requests by the Bank for independent review of some allegations were not followed up to verify the quantities certified for both the Megech-Seraba and Ribb schemes\. Moreover, requests for submission of revised, realistic, and resourced schedules for all outstanding contracts were not addressed in a timely manner, thus complicating the orderly closure of the IDA credits\. Such delayed actions as well as procurement and contractual issues exposed the government to contractual disputes and claims, some of which required lengthy negotiations between MoWIE, contractors, and consultants\. In addition, delays in establishing dispute boards for the civil works and MSC as per the provisions of each contract undermined resolution of claims and disputes\. Procurement reviews often identified inconsistencies with World Bank procedures\. In one case, mis-procurement was declared after project closure due to the lack of sufficient evidence to justify conducting a transaction without an approved procurement plan, and the awarding of a contract to an ineligible state-owned enterprise dependent on the implementing agency\. c\. Unintended impacts (Positive or Negative) No unintended impacts were reported\. d\. Other --- 11\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Outcome Highly Unsatisfactory Highly Unsatisfactory --- Page 16 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) Bank Performance Unsatisfactory Unsatisfactory --- M&E design, implementation Quality of M&E Modest Negligible and utilization was extremely weak\. Quality of ICR Substantial --- 12\. Lessons The ICR provided comprehensive lessons\. The most relevant ones follow with some modification of language: • Reforms that include a transformation from rain fed to irrigated farming as well as the introduction of private operators and Water User Associations require a long term and phased approach implemented through more than one project\. This project experience showed that a single project is not sufficient to introduce large scope irrigation investments and innovations for the first time in a country\. Proper phasing of an I&D investment would ideally include infrastructure development and initial development of WUAs in the first phase\. The second phase would aim at operationalizing the WUA as well as improving and commercializing agricultural markets and value chains\. Innovative technological advancements could be piloted in small areas first to be scaled up in later phases\. • Ensuring project readiness before approval is one of the key success factors\. Incomplete preparation of the project led to long delays (up to four years) and unreasonable timeframes for meeting project objectives and unrealistic targets\. In the future, the Bank should ensure that project designs are based on sound assumptions and detailed engineering designs\. Project teams may be able to use a PPF or trust fund to finance these preparation costs well before project implementation\. • Realistic assessment of the project performance by the Bank during implementation accompanied by course revisions to address all the needs and bottlenecks, is likely to ensure more realistic results\. During the implementation of the project, the Bank teams consistently assigned high ratings despite obvious signs that the project was facing issues that could seriously undermine the project achieving its objectives\. Teams need to conduct realistic assessments of project performance and consider either substantial reductions in project scope or even dropping a project when it becomes apparent that project constraints could not be overcome within the original project period and financing\. 13\. Assessment Recommended? No 14\. Comments on Quality of ICR The ICR candidly presented a narrative that supported the ratings and available evidence\. The report was concise, followed the guidelines, and was focused on results\. The project’s theory of change was adequately Page 17 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review ET-Irrigation & Drainage SIL (FY07) (P092353) presented and helped the reader to understand how the ratings had been reached\. The ICR’s lessons were clear, very useful and based on evidence outlined in the ICR\. The only weakness was there was inconsistency in terms of project costs and disbursements in the report\. a\. Quality of ICR Rating Substantial Page 18 of 18

REVIEW

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REVIEW

P000193

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 16843 IMPLEMENTATION COMPLETION REPORT BURUNDI AGRICULTURAL SERVICES SECTOR PROJECT (Credit 2024-BU) June 30, 1997 Agriculture 2 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: US$1 Equivalent= Year Burundi Franc (BuF) (annual average) 1987 124 1988 140 1989 159 1990 171 1991 182 1992 208 1993 243 1994 253 1995 250 1996 302 WEIGHTS AND MEASURES Metric System GOVERNMENT OF BURUNDI FISCAL YEAR January I -December 31 ABBREVIATIONS BCC Burundi Coffee Company CFD Caisse Francaise de D6veloppement CICM Centre International du Credit Mutuel COOPEC Savings and Credit Cooperative DGPA Direction Generale de la Planification Agricole FAO/CP Food and Agriculture Organization/ Cooperative Program with the World Bank IDA International Development Association ISABU National Agricultural Research Institute (Institut des Sciences Agronomiques du Burundi) GOB Government of Burundi FACAGRO Faculty of Agronomy MOAL Ministry of Agriculture and Livestock MRDH Ministry of Rural Development and Handicraft OCIBU Coffee Parastatal (Office des Cultures Industrielles du Burundi) RDC Regional Development Company Vice President C\. Madavo Country Director N\. Tcheyan Technical Manager J\. Baah-Dwomoh Staff Member M\. Muhtar  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT BURUNDI AGRICULTURAL SERVICES SECTOR PROJECT (Credit 2024-BU) PREFACE EVALUATION SUMMARY TABLE OF CONTENTS A\. Introduction \.i B\. Project Objectives \.i C\. Implementation Experience and Results \. ii D\. Summary of Findings, Future Operations & Key Lessons Learned \. iii PART I: PROJECT IMPLEMENTATION ASSESSMENT A\. Introduction \. 1 B\. Statement of Objectives \.2 C\. Achievement of Project Objectives \. \.2 D\. Implementation Record and Major Factors Affecting the Project \. \.5 E\. Project Sustainability \.7 F\. Bank's Performance \.8 G\. Borrower's Performance \.9 H\. Assessment of Outcome \.9\.9 I\. Future Operations \.9 J\. Key Lessons Learned \. 10 PART II: STATISTICAL ANNEXES Table 1: Summary of Assessments \.11 Table 2: Related Bank Loans/Credits \.13 Table 3: Project Timetable \.14 Table 4: Credit Disbursements: Cumulative Estimated and Actual \.15 Table 5: Key Indicators for Project Implementation \. 16 Table 6: Key Indicators for Project Operation \. 17 Table 7: Studies Included in Project \. 17 Table 8A: Project Costs \. 17 Table 8B: Project Financing \. 18 Table 9: Economic Costs and Benefits \. 18 Table 10: Status of Legal Covenants \. 19 Table 11: Compliance with Operational Manual Statements \. \. 23 Table 12: Bank Resources: Staff Inputs \. 23 Table 13: Bank Resources: Missions \. 24 ANNEX: A: Comparison of the Agricultural Services Sector Project with the Muyinga Agricultural Development Project \. \. 26 B: Implementation Completion Mission Aide-M6moire \. 27 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\.  I  IMPLEMENTATION COMPLETION REPORT BURUNDI AGRICULTURAL SERVICES SECTOR PROJECT (Cr\. 2024-BU) PREFACE 1\. This is the Implementation Completion Report for the Agricultural Services Sector Project in Burundi for which Credit 2024-BU in the amount of SDR 25\.1 million (US$33\.1 million equivalent) was approved on May 25, 1989 and made effective on February 20, 1990\. 2\. The credit was closed on December 31, 1996\. Final disbursement took place on April 24, 1997, at which time the cumulative balance of SDR 9\.72 million (US$13\.3 equivalent), representing the undisbursed amount, was canceled\. 3\. The ICR has been prepared by Mansur Muhtar, with support from D6sire Coquillat, Prosper Nindorera and Eavan O'Halloran, and with input from local consultants\. A mission took place to discuss the preliminary findings of the ICR with the Borrower during May 15-19, 1997\. These have been endorsed by the Borrower, with some suggested minor modifications which have been incorporated in the final ICR\. The Aide-Memoire of this mission is attached as Appendix 1\. The Borrower's contribution has not been received by the Bank\.   IMPLEMENTATION COMPLETION REPORT BURUNDI AGRICULTURAL SERVICES SECTOR PROJECT (Cr\. 2024-BU) EVALUATION SUMMARY A\. INTRODUCTION 1\. Agriculture is the mainstay of the Burundi economy, and has, for the past few decades, contributed about 60 percent of GDP and employed more than 90 percent of the population\. For much of the 1970s and 1980s, agricultural productivity increases in the sector were marginal, with production growth accounted for by cultivation of previously unused lands\. Bank support to the sector has evolved from financing crop and sub-sector specific investment activities to technical assistance projects and area-based integrated rural development operations\. The latter type of operation was envisaged as the model for agriculture and rural development\. However, poor implementation performance and weak results recorded in various African countries, including Burundi, necessitated a revision of philosophy and approach\. Accordingly, following protracted dialogue with Government, it was decided to abandon the integrated rural development approach in favor of a more focused agriculture services sector project\. B\. PROJECT OBJECTIVES 2\. Project Objectives\. The Agricultural Services Sector Project (PASA) was designed as a hybrid operation supporting policy and institutional reforms as well as a multitude of investment activities in the agricultural sector\. The policy component was intended to support the reform of the national input policy and assist in the restructuring of provincial agricultural services as well as facilitate the reform of salary structure for agriculture staff\. The objectives of the investment component were to: (a) develop MOAL's analytical, programming, budgeting and sector management capacity; (b) design and establish a national extension system based on the Training and Visit principle; (c) strengthen agricultural research; (d) rehabilitate the cooperative movement and promote the development of savings and credit cooperatives (COOPECS); and (e) promote communal development and rural youth employment\. 3\. Evaluation of Project Objectives\. Although the objectives supported by the project derive from the Government's agricultural development strategy, they are too broad to be pursued under a single operation\. Their incorporation into the PASA operation has resulted in a complex project design, with 6 components and numerous sub-components involving 20 discrete activities\. Implementation arrangements involved 8 different agencies, posing serious coordination problems\. Project management structure was grossly inadequate, with project complexity taxing the weak capacity of Government and limiting the ability of the Bank to provide effective supervision\. Technical assistance provision made under the project was incapable of resolving the problem\.  - ii - 4\. Project Costs and Financing\. At appraisal, total project costs were estimated at US$40 million, of which US$33\.1 million was to be financed by an IDA credit and $5\.4 million by the GOB\. The remaining balance was to be financed by Belgium, France and the European Development Fund\. The quick disbursing component made up 23 percent of project cost\. At the time of credit closing, US$21\.7 million had been disbursed from the IDA credit, representing 60 percent of the SAR target\. Of this amount, US$11\.7 million was disbursed from the quick- disbursing component\. Government's total contribution to project financing amounted to about US$1\.4 million\. C\. IMPLEMENTATION EXPERIENCE AND RESULTS 5\. Achievement of Project Objectives and Sustainability\. After initial start-up delays, progress was made in achieving some of the project objectives, with varying degrees of success\. Major achievements included: (i) the dissolution of the Regional Development Companies (RDCs) and the creation of decentralized service structures with more focused roles; (ii) the establishment of a national agricultural extension system; (iii) the reform of agricultural input policy; and (iv) the privatization of some structures/services\. Some limited progress was also registered in agricultural research activities and in the strengthening of MOAL's capacity\. The objectives of strengthening the cooperative movement, promotion of savings and credits as well as those of promoting communal development and rural youth employment, were not achieved\. Progress in achieving project objectives was thwarted by the ethnic conflict and protracted violence, which followed the assassination of the country's president in October 1993\. The continuing unstable situation since then meant that it was impossible to put things back on track and restore the momentum\. The overall assessment is that, the project has only partially met its objectives and its sustainability is uncertain\. 6\. Major Factors in Achievement of Objectives\. The execution of the project's investment component suffered initial start-up delays, associated with management weaknesses and the slow recruitment of technical assistance staff\. Overall project implementation was impeded soon afterwards by the emergence of tensions generated by Burundi's nascent democratization process\. For the most part, the project had to be implemented amidst a turbulent socio-political climate, which degenerated into protracted crises and cycles of violence\. The conflict situation generated serious security problems, massive social dislocation, erosion of trust, acute macro-economic imbalances, and the collapse of institutions, all of which were inimical to effective project implementation\. The June 1996 embargo and sanctions imposed by neighboring countries, in an effort to force a negotiated peace accord, furither accentuated the difficulties, necessitating the suspension of the credit\. 7\. In addition to the conflict situation, project design complexity continuously rendered effective implementation difficult\. Technical assistance, which was designed to facilitate project execution, was either partially effective or not effectively managed/utilized by the Borrower\. The performance of the Government and the implementation agency also had a bearing on the achievement of project objectives\. Problems encountered included: (a) frequent government- induced turnover of key management staff and lack of suitable TA counterparts; (b) continuous counterpart funding shortages; and (c) weak financial and administrative management and poor procurement management\. The formalization of an agreed project restructuring, designed to refocus and simplify the project activities while strengthening management, was pre-empted by  - iii - the deterioration of the political and security conditions\. The embargo and sanctions imposed by neighboring countries in 1996 further complicated the situation by limiting the flow of needed project inputs and resources and rendering effective supervision, monitoring and execution of project activities impossible\. 8\. Performance of the Government\. Project identification and preparation were quite lengthy, due mainly to the Government's initial lack of commitment to the new project concept, which required a lot of dialogue and consensus building\. Government's failure to provide the necessary counterpart staff to work with technical assistance, as well as the frequent staff redeployments, undermined project performance\. The Government also failed to make available sufficient budgetary resources to meet the project's counterpart funding needs, and was reluctant to approve training programs\. Financial management was lax, resulting in the incurring of substantial non-eligible expenditures\. Following the first suspension of the credit, there was a distinct effort by the Borrower to improve project performance and to lay the institutional framework for effective project execution as well as strengthen ownership and participation\. This was, however, stymied by the conflict\. 9\. Performance of the Bank\. The Bank can be faulted for designing a complex hybrid operation which was difficult to implement given the limited implementation capacity\. The reliance on technical assistance, even though this was locally derived, overestimated the Government's capacity to manage and utilize technical assistance effectively\. The supervision of the project by the Bank was not systematic during the first three years of project execution\. Supervision missions were scattered throughout the year, covering different themes, which stretched project management capacity and created coordination and integration problems\. Bank supervision efforts during the second phase of project execution were more focused and intensive, involving a full-time local staff recruited to provide direct implementation support and ensure closer follow-up of activities\. Over the project implementation period, there were frequent changes in task management responsibilities for the project, which resulted in discontinuity\. 10\. Project Outcome\. The overall project outcome is unsatisfactory because the main objectives of strengthening MOAL's analytical, programming, budgeting and monitoring capability and improving agricultural research and services were only partially achieved\. A great deal of the benefits were diluted by the impact of the conflict and project sustainability currently remains uncertain\. The dislocations associated with the crisis since October 1993, including the displacement of people, destruction of infrastructure, continuing insecurity, paralysis of the agricultural service delivery system, and breakdown of the public expenditure programming process, have rendered it difficult even to retain the partial gains registered\. D\. SUMMARY OF FINDINGS, FUTURE OPERATIONS AND KEY LESSONS LEARNED 11\. Project Implementation Experience and Sustainability\. The implementation of the policy component took off smoothly, while delays were experienced in starting up the investment components\. Project design complexity, weak management capacity and poor coordination continuously impeded project execution\. There were also problems associated with inadequate counterpart funding and poor personnel management and human resources development policy as well as excessive reliance on long term local technical assistance\. Notwithstanding these difficulties, progress was made in implementing some of the project  - iv - components and some success was registered\. However, the accentuation of the socio-political crisis, and its degeneration into a cycle of violence, thwarted efforts at project implementation, undermining some of the registered gains\. Project restructuring plans were also pre-empted by these unfavorable conditions\. Given the limited progress in implementing project activities, and the subsequent disruption associated with the conflict, project sustainability is not assured\. The civil conflict has eroded the country's fiscal and human resource base and deepened divisions in society\. 12\. Lessons for Future Projects\. Some of the key lessons learnt from this operation include: (a) project design should be kept simple and tailored to the Borrower's absorptive and implementation capacity, with objectives, components and activities prioritized and focused; (b) technical assistance components and activities, where necessary, should be carefully designed and monitored, taking into account Borrower's ability for effective management and utilization as well as the over-riding requirement for transfer of skills, capacity building and training; (c) project coordination arrangements operating outside of the public service structure, limited to overall coordination, facilitation and management, may be necessary in some instances to facilitate effective project execution; (d) the establishment of effective accounting and financial management systems as well as the Borrower's internalization of Bank's operating procedures are necessary prerequisites for project implementation, and should receive early attention; (e) attractive salary and incentive structures should be established within the context of overall civil service reforms, to attract and retain high quality staff for project execution; and (f) socio-political instability, conflict, and adverse political and security conditions have an overriding impact on project outcomes, and should be factored into project design and supervision to the degree possible\.  IMPLEMENTATION COMPLETION REPORT BURUNDI AGRICULTURAL SERVICES SECTOR PROJECT (Credit 2024-BU) PART I: PROJECT IMPLEMENTATION ASSESSMENT A\. NTRODUCTION I\. Agriculture is the mainstay of the Burundi economy, and has, for the past few decades, contributed about 60 percent of GDP, employing more than 90 percent of the population\. For much of the 1970s and 1980s, food production kept pace with population growth, but productivity increases in the sector were marginal, with production growth accounted for by cultivation of previously unused lands\. The agricultural services delivery system relied heavily on top-down, coercive approaches and lacked relevant technology packages to diffuse to farmers\. Over this period, Bank support to the sector evolved from financing crop and sub-sector specific investment operations to technical assistance activities and area-based Integrated Rural Development operations\. The latter were piloted initially in two provinces under management of newly created Regional Development Companies (RDCs)\. It was anticipated that they would constitute the model for agriculture and rural development\. However, by the early 1980s, it became necessary to revisit this philosophy and approach as a result of poor performance recorded in various African countries, which were also manifested in Burundi\. The integrated rural development approach in Burundi resulted in the establishment of high-cost, unsustainable development "enclaves" which became heavily reliant on technical assistance\. RDC activities resulted in duplication of efforts with sectoral Ministries and other government agencies, and were often inconsistent with the role and functions of Government\. Private sector initiatives were undermined by the pursuit of commercial activities and subsidized input distribution under these projects\. Extension services supported by the RDCs were distracted by an array of secondary, unrelated duties\. 2\. Following protracted dialogue, the Government agreed to abandon this development pattern\. A new Agricultural and Livestock Sector Policy was prepared by the Ministry of Agriculture and Livestock (MOAL) within the context of a Structural Adjustment Program (SAC II), and the GOB requested Bank's support in implementing this policy\. The Agricultural Services Sector Project (PASA) constituted the principal vehicle for providing this support\. It was designed as a hybrid operation, supporting policy and institutional reforms as well as a multitude of investment activities in the agricultural sector\. Specifically, it sought to redynamize Burundi's agricultural sector and improve cost-effectiveness of public interventions in the sector, while creating a conducive environment for greater private sector participation\. The project was approved by the Board on May 25, 1989, and became effective on February 20, 1990\.  -2 - B\. STATEMENT OF OBJECTIVES 3\. Project Objectives\. The project was designed as a hybrid operation\. The objectives of the quick disbursing policy component were to support the reform of the national input policy and assist in the restructuring of provincial agricultural services as well as facilitate the reform of salary structure for agriculture staff\. The objectives of the investment component were to: (a) develop MOAL's analytical and long-term programming and budgeting capability and sector management capacity; (b) design and establish a national extension system responsive to farmer's needs and constraints, based on the Training and Visit principle and aimed at developing technologies adapted to the various ecological and farming systems; (c) strengthen agricultural research on fertilization and pest control; (d) rehabilitate the cooperative movement and promote the development of savings and credit cooperatives (COOPECS); and (e) promote communal development and rural youth employment\. To achieve its objectives, the project financed the following components: (i) strengthening of MOAL's programming, budgeting, and monitoring capabilities; (ii) strengthening of agricultural research; (iii) reorganization of agricultural services; (iv) reorganization of RDCs' commercial activities; and (v) strengthening of the cooperative movement\. 4\. Evaluation of Project Objectives\. The objectives supported by the project derived from the Government's agricultural development strategy, and address perceived sectoral constraints\. These objectives were, however, too broad to be pursued under a single operation\. Their incorporation into the PASA operation resulted in a complex project design -- a hybrid operation addressing a multiplicity of policy, institutional reform and investment issues across the sector\. Because of the multiplicity of these objectives, project design ended up with six separate components, including a policy component\. Each of these had a series of sub- components, some of which were unrelated, bringing the total number of discrete activities to 20\. Implementation arrangements involved 8 different agencies, spanning across the Ministries of Agriculture, Environment and Communal Development\. Coordination requirements were quite intensive, while management arrangements, involving central coordination by the MOAL Director General of Agricultural Planning, proved inadequate, given the conflict with other statutory responsibilities as well as the immensity of the task\. Project complexity severely taxed the weak capacity of Government and limited the ability of the Bank to provide effective supervision\. Technical assistance provision made under the project could not resolve the problem, for reasons to be elaborated upon later\. 5\. Project Costs and Financing\. At appraisal, total project costs were estimated at US$40 million, of which, US$33\.1 million was to be financed by an IDA credit and $5\.4 million by the GOB\. The remaining balance was to be financed by Belgium, France and the European Development Fund\. The quick disbursing component made up 23 percent of project cost\. At the time of credit closing, US$21\.7 million had been disbursed from the IDA credit, representing 60 percent of the SAR target\. Of this amount, US$11\.7 million was disbursed from the quick- disbursing component\. Government's total contribution amounted to approximately US$1\.4 million\. C\. ACHIEVEMENT OF PROJECT OBJECTIVES 6\. After initial start-up delays, progress was made in achieving some of the project objectives, with varying degrees of success\. Major achievements included: (i) dissolution of the  - 3 - RDCs and the creation of decentralized service structures with more focused roles; (ii) establishment of a structured, disciplined, national agricultural extension system; (iii) reform of agricultural input policy; and (iv) privatization of rice mills and garage services\. Some limited progress was also registered in agricultural research activities and in the strengthening of MOAL's capacity, both of which relied excessively on technical assistance support\. The objectives related to strengthening the cooperative movement and promotion of savings and credits as well as those of promoting communal development and rural youth employment were not achieved\. Progress in achieving project objectives was thwarted by the ethnic conflict and protracted violence, which followed the assassination of the country's president in October 1993, and which eroded some of the earlier gains\. The continuing unstable situation meant that it was impossible to put things back on track and restore the momentum\. The overall assessment is that the project has only partially met its objectives\. 7\. Support to Policy and Institutional Reforms\. Conditions for the release of the two quick-disbursing tranches were satisfactorily fulfilled by the Government, with the exception of those related to the study on salary structure for extension staff which were waived\. As envisaged, the implementation of the policy component resulted in the dissolution of the RDCs and the creation of provincial directorates with well-focused responsibilities, that were more consistent with the role and functions of the state\. Some progress was also made in privatization of certain entities hitherto managed by the RDCs, in particular\. The coffee washing stations were partially sold to private investors, with the Government holding a minority or majority position depending on the interest shown by the private sector\. Garages were also leased to private operators\. The Ngozi/Kirundo rice mills were however not privatized, but are being managed as separate commercial entities\. The policy component also supported the reform of agricultural inputs management through the enactment of a unified fiscal policy for both public and private sectors as well as a transfer of retail marketing to the private sector\. In this regard, however, the measures taken for liberalizing the fertilizer sector were insufficient for permitting the development of the private sector in the distribution of fertilizers\. In addition, not much progress was made with respect to the commercialization of seed service activities\. The reform of the salary and incentives structure for agricultural services personnel in the Ministry of Agriculture was also aborted, as this could not be pursued independently of wider civil service practices\. 8\. Strengthening of the Ministry of Agriculture's Programming, Budgeting, Monitoring and Sector Management Capabilities\. During the first three years of project execution, the project succeeded in developing public expenditure programming, budgeting, and financial control tools and instruments for the Ministry of Agriculture, with support from local long-term Technical Assistance\. Even though a satisfactory Public Expenditure Program (PEP) was produced for the 1992-1994 and 1993-1995 periods, the PEP instrument remained disconnected from the budget because it was perceived as cumbersome, and it was not sufficiently internalized\. The strict classification of budget categories did not favor integration of this instrument in the budgetary process\. A monitoring and evaluation system was also designed and successfully tested in the Muyinga province\. These tools, however, were not sufficiently internalized in the Ministry because of the lack of suitable counterpart staff, frequent staff turnovers, and low motivation created by poor salary structures\. Technical Assistance continued to play a substitute role and there was no effective transfer of skills\. In some instances, the relationships between Technical Assistance staff and regular staff were antagonistic and conflictual\. As a result of these problems, the tools and instruments developed by the TA remained unutilized in operational contexts other than on a pilot basis\. Political  -4 - changes since June 1993 resulted in high staff mobility and further weakened the capacity of the Ministry, exacerbating the problems already being encountered and eroding the registered gains\. Internalization efforts and training of civil servants between 1994 and 1996 did not yield much results\. 9\. Design and Establishment of a National Extension System\. After initial delays in project implementation, a participatory extension method, emphasizing farm-focused/bottom-up approaches reliant on farmer organizations and field demonstrations, was developed by the Directorate General of Extension\. This was endorsed, at the highest level, as the national policy and was successfully piloted by the project in two provinces\. Subsequently, it was extended to other provinces beginning in 1993, with some improvements relating to management and training\. Extension-research linkages were also beginning to show signs of improvement after initial difficulties associated with confusion regarding research-extension roles and relationships as well as weak organizational capacities\. ISABU's on-farm participatory research sites (ateliers regionaux multidisciplinaires) and the T&V workshops provided the principal mechanisms for development of technical themes\. By mid-1993, important progress was being made in the extension component and these efforts were beginning to show promising results\. Progress was, however, ruptured by the crisis triggered by the October 1993 events, which ushered in conditions of uncertainty, insecurity and mistrust that impacted negatively on project implementation\. The fiscal crisis of the State also constituted another constraint as it limited the flow of counterpart funds needed for meeting basic operating costs\. Since mid-1995, credible attempts were made to redynamize the extension system and adapt to the crisis situation\. A more focused and flexible approach, involving prioritization of activities and greater partnership with private sector, was adapted, following agreement on the restructuring of the project\. Political support was strengthened and staff motivation enhanced as the project geared itself to relaunch extension and adaptive research activities\. However, the continued deterioration of the security situation thwarted these efforts\. 10\. Strengthening of Agricultural Research\. The National Fertilizer Research Program, supported by the project, suffered start-up delays due to the inability to recruit expatriate TA and the shortage of local staff\. As the tenor of activity picked up, some useful research results began to materialize, showing promising directions, especially with the early reorientation of project focus to on-farm-based research\. The momentum was, however, slowed by the onset of the political crisis and growing insecurity\. The withdrawal of donor financial and technical assistance support threw the research institute into complete disarray and eventual paralysis\. Experiments initiated under the project could not be completed and much of the preliminary results remained unanalyzed\. The definition of a Research Master Plan proposed under the project has not been carried out\. Despite the interesting results achieved in the area of fertilization research, the objectives of this component were not achieved on the whole\. 11\. Strengthening of the Cooperative Movement and Promoting Savings and Credit Cooperatives\. The Government and the Bank agreed to redesign the cooperative development component, following a reform plan to be drawn up and carried out with the participation of the cooperatives and other NGOs\. The implementation of this component was only initiated at the beginning of 1993 (more than three years after credit effectiveness) due largely to delayed recruitment of technical assistance\. The lack of support from the authorities to the process of reform of the cooperatives, the problems linked to the coordination and management of the project, and the country crisis from October 1993 did not permit this component to achieve tangible results\. However, the savings and credit cooperatives (COOPECS) whose activities  5- were financed by the French under a parallel financing arrangement, achieved some good results with a rapid increase in the number of offices and deposits\. This growth was tempered by the project organizers who were concerned that the component was developing at a pace incompatible with the available human resources\. The development of the COOPECS did not continue after the events of October 1993, but almost all COOPECS were able to resume their activities from 1995 onwards\. Financial support under the credit was limited to the financing of technical assistance, a few vehicles and equipment, and a planned construction program was not carried out due to the difficult country conditions\. 12\. Promotion of Communal Development and Rural Youth Employment\. The preparation of a pilot communal development plan, which was to provide the basis for community development promotion, suffered considerable delays due to the transfer of responsibilities to a newly created Ministry and the project management's preoccupation with other more urgent tasks\. With the accentuation of the political crisis, it became evident that the execution of communal development programs was unfeasible, and no further effort was made to pursue this objective\. The promotion of youth employment was initiated in Ngozi and Kayanza provinces through a pilot dairy farm program for school leavers and its execution was contracted to a private entrepreneur\. This was, however, not given adequate support and technical supervision from government technicians\. As monitoring and supervision arrangements were weak, problems arose relating to contractual claims, resulting in costly litigation, which were eventually settled out of court\. Despite its promising potential, the pilot program was not successful\. D\. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT 13\. The implementation of the policy component of the credit took off smoothly, supported by the on-going Structural Adjustment Credit\. All conditions stipulated for release of the first tranche were fulfilled by the Borrower\. Conditions for release of the second tranche were also fulfilled after a two-year delay, with the exception of the study on salary and benefit policy for extension staff, which was waived as it was no longer considered important for the achievement of project objectives\. Disbursements under the first tranche were initially impeded because of weak demand for inputs as well as the availability of grant-financing of inputs by bilateral donors\. 14\. The execution of the project's investment component began to gain momentum only during the second year of project implementation, following an initial start-up delay associated with management weaknesses and delays in the recruitment of technical assistance staff\. By mid-1993, progress was being realized in some areas\. Overall project implementation was impeded soon afterwards by the emergence of tensions generated by Burundi's nascent democratization process\. The dramatic political changes generated a fluid and uncertain situation that was, at least in the short-term, inimical to the pursuit of developmental activities\. As political considerations took precedence over technical matters, policy changes were made and sector institutions reorganized, complemented by frequent government-induced turnover of key management staff, which added to the complexity of project management\. 15\. During the first three years of the implementation period, project design complexity continuously rendered effective implementation difficult\. Technical assistance, which was  -6- designed to facilitate project execution, was either partially effective or not effectively managed/utilized by the Borrower\. In many cases, it played a substitute role for regular staff, with little attention paid to training or skills transfer\. The coordinating arrangements involving the General Directorate of Agricultural Planning, which was also expected to perform other statutory functions, constituted an additional problem\. There was excessive centralization, resulting in delayed resource flows to decentralized executing agencies and poor procurement management\. Accounting and financial management also continued to be weak, with substantial delays registered in executing audits, which revealed unsatisfactory performance and uncovered substantial ineligible expenditures amounting to over US$300,000\. Chronic disbursement lags were also experienced as a result of continuous counterpart funding shortages and the existence of cumbersome government procurement procedures\. A stand-alone project implementation unit was created in April 1996, drawing on the positive experience of the Muyinga Agricultural Development project\. 16\. As major performance ratings slipped to unsatisfactory levels, it became obvious that some drastic remedial action needed to be taken to adapt to the situation\. Following a supervision mission in September 1993, agreement was reached with the Borrower to restructure the project to reduce its scope and modify management arrangements\. A renewed commitment was also obtained from the Government for diligent execution of the project and the provision of adequate human, material and financial resources\. Follow-up to this agreement was, however, thwarted by the eruption of violence in October 1993, triggered by the assassination of the President\. After a period of lull in project activities, IDA supervision was resumed in September 1994, during which the dialogue on project restructuring and strengthening of project management was restarted with the authorities\. The Bank also supported a process of beneficiary consultation to identify sector needs and constraints, re-evaluate the effectiveness of agricultural services and provide a solid framework for restructuring within the context of a crisis\. 17\. Due to lack of progress in meeting financial covenants related to audits, weak administrative and financial management structures, counterpart funding shortages, and the consistently poor project performance in achieving results, disbursements under the Credit were suspended on August 7, 1995\. Suspension was lifted on April 5, 1996, following the fulfillment by Borrower of conditions required to put the project on a sound implementation track\. Agreements were also reached on project restructuring to simplify the project and reduce its scope to a level commensurate with the Borrower's diminished implementation capacity as well as budgetary resource availability\. This restructuring constituted an attempt to maintain a scaled-down but well-focused IDA presence in the countrys agricultural sector amidst a precarious socio-political terrain\. The proposed amendment was also meant to realign the focus of activities towards agricultural services delivery\. The formalization of the project restructuring was, however, pre-empted by the further deterioration of the political and security conditions\. The embargo and sanctions imposed by neighboring countries in mid-1996 complicated the situation by limiting the flow of needed project inputs and resources, and rendering effective supervision, monitoring and execution of project activities impossible\. In October 1996, IDA suspended disbursements on the entire IDA portfolio until the country restored some normalcy to permit the resumption of activities\. 18\. Factors Not Generally Subject to Government Control\. For the most part, the project has had to be implemented amidst a turbulent socio-political climate, which degenerated into protracted crises and cycles of violence\. Burundi's Third Republic, which was instituted  -7- following a military coup in September 1987, initiated a policy of national reconciliation and unity between the country's major ethnic groups, which gradually moved the country towards political as well as economic liberalization\. The tensions and contradictions generated by this process, however, began to have a major impact on the pursuit of development activities, creating a difficult operating environment for the project\. Sector institutions were reorganized and political considerations began to take precedence over technical matters\. There were outbursts of violence in 1991, 1992 and 1993, underlining the fragility of the whole process\. Since October 1993, following the assassination of the President, and the subsequent related events in the Great Lakes region, the violence degenerated into a protracted civil war and low- scale genocide, which have only recently attenuated\. The conflict situation generated, over an extended period of time, serious security problems, massive social dislocations, erosion of trust, acute macro-economic imbalances, and the collapse of institutions, all of which were inimical to effective project implementation\. The embargo and sanctions imposed by neighboring countries, in an effort to force a negotiated peace accord, further accentuated the difficulties, necessitating the suspension of the credit\. 19\. Factors Generally Subject to Government Control\. Project implementation suffered from frequent government-induced turnover of key management staff\. Moreover, counterpart civil servants did not always have the proper background, experience and qualifications\. Local Technical Assistance expertise was poorly utilized and managed by the Government, and often played a substitute role for public administration staff, with limited transfer of skills and expertise\. Before 1995, no suitable action was taken for reinforcing or internalizing the ownership of the tools and instruments developed by the technical assistance, with the exception of the participatory extension approach\. Training schemes or programs proposed by the project were consistently turned down by the Ministry of Finance\. In addition, salary levels remained low and constituted a disincentive to efficient performance, prompting frequent staff departures from the civil service\. A proposed civil service reform was aborted by the Government\. The Ministry of Agriculture was also slow in consolidating a new organigram, which was established by a decree in mid-1993 but took more than three years to implement, thereby creating uncertainties and leaving a fluid situation with respect to roles and relationships\. Implementation delays were also caused by counterpart funding inadequacies associated with the diminished fiscal resource base of the state as well as a certain incoherence in the budgeting process\. Procurement delays resulting from cumbersome, centralized government procedures led to considerable disbursement lags\. 20\. Factors Generally Subject to Implementing Agency Control\. Project performance was severely hampered by an inefficient administrative management structure\. Decision-making remained excessively centralized, with provincial directorates lacking resources and management autonomy\. There continued to be problems of inter-agency coordination, especially across ministerial divides\. The human resource base of the implementation agency remained weak, especially in the area of accounting, financial management and procurement\. This caused considerable delays in project implementation, and also occasionally resulted in procurement problems as well as the incurring of ineligible expenditures amounting to over $300,000, which were eventually refunded by the Government\. There was a three-year audit backlog by 1995 and most audits produced under the project were unsatisfactory\.  - 8 - E\. PROJECT SUSTAINABILITY 21\. The Agricultural Services Sector project was conceptualized as a complex hybrid operation, supporting policy and institutional reforms as well as a multitude of investment activities in various sub-sectors of agriculture\. Its successful implementation required a strong Borrower commitment, adequate and timely deployment of resources, strong human resources base and managerial skills as well as careful and skilled coordination\. The massive dislocations associated with the socio-political crisis and ethnic conflict in Burundi make it unlikely that these conditions can be fulfilled in the near future and, hence, sustainability is questionable\. Moreover, at the time of project closing, only partial progress had been made in implementing project activities, some of which was eroded by the deleterious consequences of the conflict, thus leaving a limited basis and platform for continuation of project activities in their present form\. 22\. An additional constraining factor to project sustainability relates to the excessive reliance on local long-term technical assistance for project execution\. Public service staff made minimal contributions, and skills and expertise transfer were limited\. In general, the training program was not executed, leaving a weak human resource base incapable of implementing many of the project activities\. In addition, constant staff redeployment did not permit the build- up of a critical mass that would continue to manage the execution of project activities, but resulted instead in the loss of institutional memory\. The major risk identified in the SAR was the scarcity of qualified Burundians willing to fill high-level positions on a permanent basis in the DGPA, Provincial Services, ISABU, FAGAGRO, and MRDH\. This risk element will still constitute a binding constraint to implementation of project activities\. In general, Burundi's institutional structure and capacity has been weakened further by the deleterious consequences of the crisis\. F\. BANK'S PERFORMANCE 23\. Three phases of Bank performance may be distinguished: phase Ones from identification to signature, including design, preparation and appraisal; Pase_Tw, corresponding to supervision from signature to mid-term review; and PhaseThree supervision from the mid-term review to project closing\. Identification and preparation were quite lengthy -- taking about 5 years, from 1983 to 1987 -- due mainly to the Government's lack of commitment to the new project concept\. The Government's initial position was to multiply the RDCs and continue implementing integrated rural development activities, which the Bank was unwilling to support, due to the problems that had surfaced in this approach\. Once these disagreements were overcome, project preparation proceeded in earnest\. The Bank could be faulted for designing a complex hybrid operation, which would be difficult to implement given the limited implementation capacity\. Institutional arrangements for project coordination also proved unsatisfactory\. While the desire was to minimize duplication of structures and mainstream project execution into the Borrower's existing administrative structure, it was clear that the skill requirements and amount of effort required far exceeded the Agricultural Planning Department's capacity, given the number of tasks and implementation agencies involved\. The reliance on technical assistance, even though this was locally derived, overestimated the Government's capacity to manage and utilize technical assistance effectively\. 24\. The supervision of the project by the Bank was not systematic during the first three years of project execution (Phase Two)\. Because of the complexity of the project and the diversity of  - 9 - its components, project supervision was organized around key project activities, such as institution building, financial management, research and cooperative development\. Supervision missions were scattered throughout the year as it was difficult to mobilize the required technical expertise at the same time\. This stretched project management capacity, created coordination problems, and resulted in a lack of focus as well as poor integration of efforts\. Too much attention was paid to institutional development issues to the neglect of field-level activities, and the pertinent recommendations of the supervision missions were not followed up appropriately\. Subsequent Bank supervision efforts (Phase Three) during the second phase of project execution focused on simplifying the project and prioritizing field-level activities, taking into account the results of the consultations with the beneficiaries carried out at the beginning of 1995\. A full- time local staff was recruited to provide direct implementation support and ensure closer follow- up of activities, which proved quite helpful in securing a turn-around\. The concerted efforts of the Bank and the Government resulted in improvement in the management and coordination of the project, the restructuring of the project and the resumption of activities retained by the modified project\. G\. BORROWER'S PERFORMANCE 25\. Overall, the performance of the Borrower can be rated as deficient with nuances corresponding to the different phases above\. Initially, the Borrower did not assume full ownership of the project, especially in design and preparation\. During project implementation, Government did not provide the necessary counterpart civil servants to derive maximum benefit from technical assistance arrangements supported by the project\. There were also frequent staff redeployments which affected project performance and resulted in loss of institutional memory\. Government also failed to make available sufficient budgetary resources to meet counterpart funding needs\. The training program was not satisfactorily executed due to the reluctance of the Ministry of Finance to give its endorsement on the grounds that it was expensive without an integrated approach\. Studies financed by the project were not adequately monitored, and in many cases, there was no follow-up on the recommendations\. Financial management was lax, resulting in the incurring of substantial non-eligible expenditures\. Following the first suspension of the credit, there was a distinct effort by the Borrower to improve project performance and to lay the institutional framework for effective project execution as well as strengthen ownership and participation\. This was, however, stymied by the conflict and the situation became aggravated by the imposition of sanctions and the embargo\. H\. ASSESSMENT OF OUTCOME 26\. Benefits\. The project was initially designed to improve the living conditions and the nutritional situation in project areas through better linkages between extension and research\. There were also anticipated benefits from increased cost-effectiveness of public expenditures in the sector as well as enhanced private sector participation\. The overall project outcome is unsatisfactory because the main objectives of strengthening MOAL's analytical, programming, budgeting and monitoring capability and strengthening agricultural research and services were only partially achieved, a great deal of the benefits were diluted by the impact of the conflict, and project sustainability currently remains uncertain\. The original ERR estimate of 19 percent, calculated over 70 percent of total project cost, is unattainable in the present country context\. The dislocations associated with the crisis since October 1993, including the displacement of people, destruction of infrastructure, continuing insecurity, paralysis of the agricultural service  - 10- delivery system, and the breakdown of the public expenditure programming process, have considerably altered the critical variables on which these calculations were based\. Given the lack of a reliable database, and with the situation still remaining fluid and variegated, a meaningful recalculation of the ERR is not considered feasible or useful at this stage\. I\. FUTURE OPERATIONS 27\. The scope, timetable and features of a future operation would depend on how the country conditions evolve\. After a lengthy period of impasse, there have been some positive developments recently, which might open up new possibilities for dialogue and reconciliation among the various factions\. It is likely that this will be protracted, and a lengthy period of time may elapse before return to normalcy could be contemplated, which would enable resumption of development activities\. The major development challenge initially would be to resettle refugees and displaced persons, rebuild institutional capacity and restore trust, and re-establish basic productive capacity\. It is likely that an Emergency Assistance support could be provided by the international community during the initial period of re-engagement\. This could be accompanied or followed by dialogue and sector work to improve the knowledge base as well as actions supporting consensus and capacity building\. A pilot investment phase could be envisaged to test the operating environment and develop appropriate approaches\. J\. KEY LESSONS LEARNED 28\. Some of the key lessons learnt from this operation include: (a) Project design complexity and multiplicity of project objectives has impeded project implementation and taxed Borrower's weak capacity as well as limiting Bank's supervision abilities\. Project design should be kept simple, and tailored to the Borrower's absorptive and implementation capacity\. Objectives should be prioritized and focused, while activities must reflect an internal coherence and consistency\. The use of the logical framework approach could be useful in facilitating better project design\. (b) The role of Technical Assistance in project execution has been quite high, while the results are less than satisfactory\. The use of Technical Assistance, local or expatriate, should not be construed as a substitute for local capacity\. Technical Assistance components and activities, where necessary, should be carefully designed, taking into account Borrower's ability for effective management and utilization as well as the overriding requirement for transfer of skills, capacity building and training\. A preference should be given to short-term technical assistance\. In any case, there should be clearly defined benchmarks, monitorable indicators and management/supervision arrangements for the TA activities supported by projects\. (c) Project coordination arrangements operating outside of the public service structure may be necessary in some instances to facilitate effective project execution\. This unit's functions should be limited to overall coordination, facilitation and management, with execution of project activities to be carried out by established public service structures\.  - 11 - (d) The establishment of effective accounting and financial management systems is a necessary prerequisite for project implementation, and should receive early attention\. Procurement, disbursement and special account management procedures should also be internalized by the Borrower\. (e) Attractive salary and incentive structures are required to attract and retain high quality staff for project execution\. This should be pursued within the context of broader civil service reforms, to avoid distortions and ensure sustainability\. (f) Socio-political instability, conflict, and adverse political and security conditions have an overriding impact on project outcomes\. To the degree possible, country risks in relation to these factors should be taken into account in project designing, and appropriate risk-hedging measures should be adopted, including early restructuring and cancellations\. Project design, preparation and monitoring processes in such context should also involve social assessments\.  - 12- IMPLEMENTATION COMPLETION REPORT BURUNDI AGRICULTURAL SERVICES SECTOR PROJECT (Cr\. 2024 BU) PART II: STATISTICAL ANNEXES TABLE 1: SUMMARY OF ASSESSMENTS A\. Achievement of Objectives Substantial Partial Negligible Not Applicable (I'll' ) (V') ) Macro Policies Ol E Cl 0 Sector Policies 0 O °3 ° Financial Objectives O 0 Cl O Institutional Development 0 0 Ol El Physical Objectives O Ef Ol Ol Poverty Reduction O a 0 0 Gender Issues Ol El OE 0 Other Social Objectives E a O3 0 Environmental Objectives El E El E Public Sector Management 0 0 0 D Private Sector Development O 0 0l O Other (specify) E E E 0 B\. Project Sustainability Likely Unlikely Uncertain (1) (1) (1) El El 0  - 13 - TABLE 1: SUMMARY OF ASSESSMENTS (cont'd) Highly C\. Bank Performance Satisfactory Satisfactory Deficient (/) (1) (V) Identification E l 0 Preparation Assistance O 0 E Appraisal O E Supervision O E0 E Highly D\. Borrower Performance Satisfactory Satisfactory Deficient (/) (V) (V) Preparation O E Ef Implementation El 0 l0 Covenant Compliance E 0 El Operation (if applicable) E E E Highly Highly E\. Assessment of Outcome Satisfactory Satisfactory Unsatisfactory Unsatisfactory ElE 0 El  - 14- TABLE 2: RELATED BANK LOANS/CREDITS Loan/Credit Title Amount Objectives J Approved Status I(Million)l Preceding Operations Arabica Coffee Improvement USD1\.9 Support to Coffee Sector 08 April 1969 Completed (Credit 1470) (Improvement of Arabica Coffee) NGOZI III-Integrated - IFAD XDR6\.25 Support to Ngozi III project Effective Completed (Credit 1890) 07 June 1983 Coffee II USD5\.2 Support to Coffee Sector 18 Nov\. 1975 Completed (Credit 0593) Fisheries Development USD6\.0 Support to Fisheries Activities 20 April 1976 Completed (Credit 0626) Technical Assistance USD2\.5 Technical Assistance to Strengthen 24 May 1979 Completed (Credit 0917) Institutional Building Forestry USD4\.3 Support to Forestry Development 24 May 1979 Completed (Credit 0918) Project KIRIMIRO R/D USD19\.3 Support to Kirimiro Rural 16 June 1989 Completed (Credit 1165-BU) Development INT\.R/D NGOZI III USD16\.0 Support to Ngozi III Integrated Rural 08 Dec\. 1981 Completed (Credit 1192-BU) Development Third TAS Credit USD5\.1 Technical Assistance to Strengthen 17 April 1984 Completed (Credit 1456) Institutional Building Second Forestry USD12\.8 Support to Second Forestry 06 July 1985 Completed (Credit 1620) Development Project Agriculture MUYINGA USD10\.0 Support to Agricultural Development 10 Dec\. 1987 Completed (Credit 1857) in Muyinga APEX USD8\.00 Support to Small Scale Enterprises at 29 March 1988 Completed (Credit 1889) farm level Following Operations Coffee Sector USD28\.0 Support to Coffee Sector 10 April 1990 Completed (Credit 2123-BU) Agri-Business Promotion XRD2\.30 Support to Agri-Business Promotion 03 Sept\. 1992 On-going (Credit 2419)  - 15 - TABLE 3: PROJECT TIMETABLE Steps in Project Cycle Date Planned Actual Date Identification August 1983 Preparation October/November 1983 October/November 19 83 Appraisal September 1987 November/December 1987 Negotiations February 20, 1989 March 13-21 1989 Presentation to board May 23, 1989 May 25, 1989 Credit signature July 21 1989 July 21 1989 Credit effectiveness July 30, 1989 February 20, 1990 Midterm review September 93 September 1993 Project completion June 30, 1996 Not Completed Credit closing December 1996 December 1996 Final disbursement December 1996 April 1997  - 16- TABLE 4: CREDIT DISBURSEMENTS -- CUMULATIVE ESTIMATED AND ACTUAL Year Appraisal Estimate Actual Disbursements Cumulative Actual (US$ '000) (US$ '000) as Percent of Cumulative l__________________________________ _________________________________ Estimate Annual Cumulative Annual Cumulative Disbursement Disbursements Disbursement Disbursements FY 90 2800 2,800 0 0 0 FY 91 7,300 10,100 2,010 2,010 6 FY 92 8,700 18,800 1,930 3,940 12 FY 93 5,500 24,300 1,310 5,240 16 FY 94 4,500 28,800 6,960 12,200 37 FY 95 2,600 31,400 3,630 15,830 48 FY 96 1,700 33,100 240 16,070 49 FY 97 5,530 21,600 65 Date of final disbursement: 24 April, 1997 Balance of US$13\.3 million undisbursed  - 17- TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION Indicators Estimated Actual Key Indicators in DCA: Schedule 4 Measures: 1\. RDCs Reorganization of RDCs' a) Management (Buyenzi) Jan 31, 1990 Not done b) Extension Services Dec 31, 1992 Done c) Garage Operations (Study) Apr 30, 1991 Not done d) Road Maintenance Services Dec 31, 1990 Not done 2\. MOAL a) DGPA i) Technical Assistance Nov 30, 1989 Done in 90/91 ii) Junior Experts Sep 30, 1989 Done in Apr 91 b) Creation ofAdministrative and Financial Service Sep 30, 1989 Done early 1990 c) DVA -Staff appointments: Sep 30, 1989 Done Nov 11, 1990 i) Technical Assistance Done 90/91 ii) Junior Experts Not done iii) Extension & Training Chiefs d) Salary Study Completion Dec 31, 1989 Not done e) Preparation of three-year PIP and PEPfor Agricultural Sector i) Identification and Monitoring Sep 30, 1989 Not done ii) Preparation of guidelines Sep 30, 1989 Not done J) Design of National Fertilizer Program Sep 30, 1989 tbru Done with delay Dec 31, 1990 g) Reform ofAgricultural Inputs Management i) Unified fiscal policy for public and private sector Sep 30, 1989 Done in June 1992 ii) Transfer of retail marketing Dec 31, 1993 Already done iii) Creation of Cooperatives Promotion Committee Sep 30, 1989 Done in 1991 iv) Design of Pest Management Program to Coops and Jun 30, 1989 Done with delay Private Sector v) Design and Implementation of Seed Program Jan 31, 1990 Done with delay vi) Reorganization of Agricultural Research - Study to be approved by IDA Dec 31, 1990 Done vii) COOPEC Development - Recruitment of two experts Sep 30, 1990 Done in 1992 - Constructions of Regional Branches Nov 30, 1990 Not done  - 18- TABLE 6: KEY INDICATORS FOR PROJECT OPERATION Key Indicators for Project Operation were not available\. TABLE 7: STUDIES INCLUDED IN PROJECT N/A Purpose Status Impact of Study TABLE 8A: PROJECT COSTS Appraisal Estimates Actual/Latest Estimates Item (US$ million) (US$ million) Local Costs Foreign Total Local Foreign Total Costs Costs Costs MOAL Central Services 2\.6 5\.1 7\.7 1\.3 4\.8 6\.1 Regional Agricultural Services KirimirofRDC 2\.1 3\.2 5\.3 0\.4 0\.6 1\.0 Buyenzi RDC 1\.4 2\.7 4\.1 0\.1 0\.3 0\.4 Rural Youth Program 0\.3 0\.6 0\.9 0\.2 0\.4 0\.6 Communal Development 0\.3 0\.6 0\.9 0\.0 0\.0 0\.0 Research 1\.5 2\.1 3\.6 0\.3 0\.4 0\.8 Cooperative Development 0\.9 2\.5 3\.4 0\.1 0\.1 0\.2 Support to Adjustment - 9\.3 9\.3 0\.0 10\.3 10\.3 Total Baseline Costs 9\.1 26\.1 35\.2 5\.0 14\.3 19\.3 Physical Contingencies 0\.7 1\.2 1\.9 0\.4 0\.7 1\.1 Price Contingencies 0\.9 2\.0 2\.9 0\.5 1\.1 1\.6 Total Project Costs 10\.7 29\.3 40\.0 5\.9 16\.1 22\.0  - 19- TABLE 8B: PROJECT FINANCING Appraisal Estimates Actual/Latest Estimates (US$ million) (US$ million) Source Local Costs Foreign Total Local Costs Foreign Total Costs Costs Government 4\.2 1\.1 5\.4 5\.4 1\.2 6\.6 IDA 6\.4 26\.7 33\.1 5\.3 15\.93 21\.23 FAC/EDF - 0\.4 0\.4 0\.1 0\.4 0\.5 Belgium Assistance - 0\.8 0\.8 0\.12 0\.48 0\.6 COOPEC 0\.1 0\.2 0\.3 0\.15 0\.25 0\.4 TABLE 9: ECONOMIC COSTS AND BENEFITS The original ERR estimate of 19 percent, calculated over 70 percent of total project cost, is unattainable in the present country context\. The dislocations associated with the crisis since October 1993, including the displacement of people, destruction of infrastructure, continuing insecurity, paralysis of the agricultural service delivery system, and breakdown of public expenditure programming process, have considerably altered the critical variables on which these calculations were based\. Given the lack of a reliable database, and with the situation still remaining fluid and variegated, a meaningful recalculation of the ERR is not considered feasible or useful at this stage\.  - 20 - TABLE 10: STATUS OF LEGAL COVENANTS Credit Covenant Present Description of Covenant Comments Agreement Type Status Section 3\.01 (a) 4 CD The Borrower declares its commitment to Complied with; objectives of the Project as set forth in Sched\. 2 & however, there were shall cary out the project through MOAL with due some problems with diligence & efficiency & in conformity with Government efficiency appropriate administrative financial & agricultural and resource practice & shall provide promptly funds, facilities, availability\. services and other resources required by the project\. 3\.01 (b) 5 CD Without limitation upon the provision of para (a) Complied with some of this section and except as the Borrower and the delays\. Association shall carry out the Project in accordance with the Implementation Program set forth in Schedule 4 of this Agreement\. 3\.02 (a) 9 C The Borrower and Association shall from time to Complied with\. time and in any case not later than Sept\. 30 of each year, exchange views on the progress achieved in carrying out the Program and the actions specified in Sched\. 6 of this Agreement\. 3\.02 (b) 9 CP Prior to each such exchange of views as specified Project in para\. (a) of this section, the Borrower shall implementation start furnish to the Association for its review and was delayed\. First PIP comments: (i) detailed progress report of program and PEP produced achievements; (ii) the revised 3-yr\. rolling only for 93-95, with a Program\. of Investments & Public Expenditures delay\. No progress for MOAL & MRDH with terms & conditions report produced yet\. satisfactory to the Association\. 3\.02 (c) (i) 5 C During the exchange of views taking place no later Transfer completed\. than Sept\. 30, 1990, the Borrower & Association Transfer of extension shall also: (i) with respect to extension staff services from RDC to working in 5 provinces within Butenzi & Kirimiro, MOAL has been assess progress made in their transfer to the implemented DGVA\.  - 21 - TABLE 10: STATUS OF LEGAL COVENANTS (cont'd) Credit Covenant Present Description of Covenant Comments Agreement Type Status Section 3\.02 (C) (ii) 5 CP During the exchange of views taking place no later New system now being than Sept\. 30, 1990, the Borrower & Association put in place with some shall also: (ii) review the achievements of the new difficulties\. extension methodology, & more specifically the links between research & extension\. During the exchange of views taking place no later Complied with\. than Sept\. 30, 1990, the Borrower and shall also: (ii) 3\.02 (C) (iii) 5 C review the proposals on the new salary system for agricultural services personnel\. During the exchange of views taking place no later A mission to redesign than Sept\. 30, 1990, the Borrower & Association the cooperative shall also: (iv) assess the performance of MRDH's development 3\.02 (c) (iv) 5 C Cooperative Department in providing efficient component has taken (v) services to cooperatives; (v) review the progress in place\. The component establishing a national federation of cooperatives\. will focus on working with NGOs\. 3\.02 (d) 5 NC Prior to the exchange of views specified in para\. (c) Not yet complied with\. of this Section, the Borrower shall submit to the Association a study on salary & benefit policy for agricultural services personnel satisfactory to the Association\. 3\.03 6 C In the carrying out of Part B of the Project, the The Borrower has Borrower shall apply the principles on procurement, requested the assistance transportation, storage and disposal of pesticides set of FAO\. forth in the national regulation on pesticide usage to be formulated in accordance with paragraph I of Part B of Schedule 6 to this Agreement\.  - 22 - TABLE 10: STATUS OF LEGAL COVENANTS (cont'd) Credit Covenant Present Descripion of Covenant Comments Agreement Type Status Section 3\.04 4 CF The Borrower shall include the costs of provincial Costs included in 93-95 agricultural services under Part C of the Project in PEP\. Difficulties are the rolling programs under Section 3\.03 (b) (ii) of being encountered by this Agreement & without limitation upon the Borrower in meeting its generality of Section 3\.01 (a) of this Agreement with fnancial obligations\. regard to the provision of funds, shall sustain such costs in their entirety not later than January 1995\. 3\.05 (a) 5 C In order to carry out Part C of the Project, the Complied with\. Borrower shall: (a) not later than Dec\. 31, 1992, transfer to DVG the technical oversight of the extension staff working in the 5 provinces within Buyenzi and Kirimiro\. 3\.05 (b) 5 C In order to carry out Part C of the Project the Complied with\. Borrower shall: (b) maintain or cause the RDCs of Buyenzi & Kirimiro to maintain, all extension staff working in the 5 provinces within those areas in their employment status as of the date of this Agreement, until the earlier of (i) Dec\. 31, 1992; or (ii) the date of transfer of admin\. & fnancial responsibility over such extension staff\. 3\.05 (c) 5 CP In order to carry out Part C of the Project, the Study not yet submitted Borrower shall: (c) no late than April 1991 submit a but garages have been study satisfactory to the Association on RDCs leased to private garage Operations businessmen\. 3\.5 (d) 3 C In order to carry out Part C of the Project, the Complied with\. The Borrower shall: (d) no later than Dec\. 31, 1991 Board of Directors of the cause the RDC-Buyenzi to (i) have Ngozi/Kirundo Buyenzi RDC has rice mills managed as separate commercial and decided to privatize the financial entities; & (ii) implement recommen- rice mills\. dations of the action plan under para\.2 of Part A of Sched\. 6 for the transfer of Ngozi/Kirundo rice mills to the private sector or for their liquidation\.  - 23 - TABLE 10: STATUS OF LEGAL COVENANTS (cont'd) Credit Covenant Present Description of Covenant Comments Agreement Type Status Section 3\.5 (e) 3 NC In order to carry out Part C of the Project the Not yet complied with\. Borrower shall: (e) starting no later than Jan\. 1, 1992 sustain among others out of the profit margin on the sales of livestock drugs, the non-salary operating expenses of livestock agents in the 5 provinces of the RDCs of Buyenzi and Kirimiro\. 3\.6 3 C Except as the Association shall otherwise agree, Complied with procurement of the goods, works & consultant's services to be financed under the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement\. Covenant Types: I = Accounts/audits 6 = Environmental covenants 2 = Financial performance/revenue 7 = Involuntary resettlement 3 = Flow & utilization of project funds 8 = Indigenous people 4 = Counterpart funding 9 = Project Implementation not covered by 1-9 5 = Management aspects Status: CW = Complied With PCW = Partially Complied With NCW = Not Complied With NYD = Not Yet Due CD = Compliance after delay  - 24 - TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS Statement Number and Title IDescribe and Comment on Lack of Compliance There was compliance with the applicable Bank Operational Manual Statements TABLE 12: BANK RESOURCES - STAFF INPUTS Stage of Project Cycle Actual Weeks US$ ('000) Preparation to Appraisal 100\.9 218\.0 Appraisal 58\.7 135\.9 Negotiation through Board - Effectiveness 24\.4 62\.6 Supervision 191\.8 537\.1 Completion 24\.5 24\.5 Total 400\.3 978\.1  -25 - TABLE 13: BANK RESOURCES - MISSIONS Stage of Month/ No\. of Days Specialization Implemen Development Types of Project Cycle Year Persons in Staff Skills -tation Objectives Problems Field Represented Status Identification Oct 82 Sep 82 Apr 83 May893 4 4 Jul 83 2 7 Preparation Oct 83 4 4 A-AE-ES-AF Nov 83 2 A-ES May 84 2 28 A-AE Jul 84 1 3 A Oct 84 2 7 A-FA Mar 85 3 3 AE-E-ES Apr 85 1 10 ES Feb 86 6 15 A-ES-AE-FA-E Sep 86 4 10 A-AE-E-FA Nov 86 2 15 AE-FA Mar 87 2 15 AE-ES Pre-Appraisal Jun 87 6 28 AE-FA-ES-SPS Appraisal Dec 87 8 33 A-AE-FA-ES Post-Appraisal Jun 88 1 14 AE Supervision Mar 89 1 7 AE Jun 89 1 4 AE Sep 89 2 7 AE-FA Nov 89 1 12 AE Supervision Feb 90 1 10 AE NR NR LC-M-F-I Mar 90 1 10 AE 2 2 M-F-I May 90 6 17 AE-E-FA-ES NR NR LC-M-F-T-T Oct 90 1 12 AE NR NR I Supervision Feb 91 1 12 FA NR NR I-T Mar 91 3 16 AE-ES-FA 2 2 M-F-I-T Sept 91 2 18 AE-FA 2 2 M-T Oct 91 2 7 AE-FA 2 2 LC-M-T Nov 91 1 10 AE 2 2 I-T Supervision Apr 92 3 20 AE-FA-ES 2 2 LC-M-F-I May 92 1 7 FA NR NR I-T Jul 92 1 7 E NR NR M-I Apr 92 1 15 AE 2 2 I-M-T Nov 92 1 15 RDS 2 2 T Dec 92 2 25 AE-ES NR NR M-I-T  - 26 - TABLE 13: BANK RESOURCES - MISSIONS (cont'd) Stage of Month/ No\. of Days Specialization Implemen Development Types of Project Cycle Year Persons in Staff Skills -tation Objectives Problems Field Represented Status Supervision Jan 93 4 20 ES-CS-E-AE 2 2 LC-M-F-I May 93 1 21 ES NR NR M-I Jul 93 1 5 RDS 2 2 M-I-T Sep 93 1 19 FA 3 2 LC-M-F-I-T Supervision Sep 94 4 21 E-OA-OO HU HU M-l-F-T Dec 94 4 13 AE-RDS-OO HU U M-I-F-T Supervision Mar 95 5 12 E-FA-AE-ES NR NR M-I-F-T Jun 95 4 21 DC-E-AE-OA U U M-l-F-T Nov\. 95 3 7 FA-E-AE NR NR M-I-F-T Supervision Feb 96 6 10 PE-E-FA-OA-LA U U June 96 2 9 E-AE U U Key to Specialized Staff Skills: FA = Financial Analyst SFO = Small Farmer Organization E = Economist CS = Cooperation Specialist A = Agronomist OA = Operation Analyst DC = Division Chief RDS = Rural Development Specialist ES = Extension Specialist Key to Types Of Problems: M = Management I = Institutional P = Procurement NI = None Identified F = Funding LC = Legal Covenant Compliance T = Technical  - 27 - ANNEX A COMPARISON OF THE AGRICULTURAL SERVICES SECTOR PROJECT (CR\. 2024-BU) WIT THE MUYINGA AGRICULTURAL DEVELOPMENT PROJECT (CR\. 1857-BU) 1\. The Agricultural Services Sector Project (Cr\. 2024-BU) and the Muyinga Agricultural Development Project (Cr\. 1857-BU) have many common points: (i) the projects had similar objectives with the Agricultural Services Sector Project having an extended geographic scope covering several regions; (ii) the preparation, implementation and evaluation of the two projects were carried out in parallel with a little more than one year of difference between the two; and (iii) the Muyinga project served as a pilot for the Agricultural Services Sector Project\. 2\. The following components were inherent in the two projects: (a) A new Approach to Extension\. A new extension approach - The Participative Approach to Agricultural Extension - was successfully developed in the Muyinga project from 1991 onwards and was expanded to cover Gitega, one of the provinces covered by the Agricultural Services Sector Project\. This approach differed from the usual Training and Visit approach in that it involved the participation of the beneficiaries in the identification of the problems and in the decision-making process\. The socio-political crisis which occurred in 1993 did not allow for the new extension approach to be used across the country as had been hoped\. (b) Management System\. From 1993 onwards, the Muyinga project, with the support of short-term technical assistance, put into place a reliable and efficient management system which was carried out by the national agents of the project's financial and administrative service\. From the beginning of 1996, the developed this system for the rest of the country\. (c) Monitoring and Evaluation\. A system of Monitoring and Evaluation, based essentially on the effects and impact of the agricultural services (extension, research), was tested and developed in Muyinga in 1991 and 1992\. In 1993, this system should have been consolidated and progressively extended to the rest of the country under the Agricultural Services Sector Project\. Unfortunately, this did not happen due to the difficulties arising from the country's crisis in October 1993\. 3\. The Muyinga project played the role of pilot but the methods and approaches introduced in its context were not effectively reproduced for the rest of the country in the context of the Agricultural Services Sector Project\. This is mainly due to the deteriorating country situation (insecurity, embargo, suspension of projects financed by IDA) than by the failure of the methods and approaches themselves\. However, the new extension approach, monitoring and evaluation methods were effectively being adapted in the Agricultural Services Sector Project during 1996 before they were stopped by the suspension of IDA projects and the closure of the project\.  - 28 - ANNEX B AIDE-MEMOIRE DE LA MISSION RELATIVE AU RAPPORT DE FIN D'EXECUTION DU PROJET D'APPUI AUX SERVICES AGRICOLES -PASA- (Cr\. 2024-BU) 1\. Une Mission de la Banque Mondiale composee de Messieurs Mansur Muhtar (Charge de Projet au siege) et Prosper Nindorera (Charge des Operations a la Mission Residente) a sejourn6 au Burundi du 15 mai au 19 mai 1997\. La Mission avait pour objet d'une part de presenter le projet de rapport de fin d'execution du Projet d'Appui aux Services Agricoles (PASA, Cr\.2024- BU) pour discussion aux autorites et d'autre part de raffermir le dialogue entre le Gouvemement et la Banque concemant le secteur agricole\. 2\. La mission remercie Monsieur le Ministre de l'Agriculture et de l'Elevage, Monsieur le Ministre de la Planification du Developpement et de la Reconstruction, les Directeurs Gdneraux du Ministere de l'Agriculture, le Directeur Gdn6ral du Plan et les differents cadres des Ministeres de l'Agriculture, des Finances et du Plan rencontres pour l'excellent accueil qu'ils lui ont r6serve, pour leur disponibilite, leur collaboration ainsi que pour leur enrichissante contribution aux discussions\. Le projet de rapport de fin d'execution a etd revu et discute au cours d'une r6union a laquelle 6tait represente l'ensemble des services ayant participe a l'execution du PASA\. Quelques anciens cadres du projet ayant aujourd'hui d'autres fonctions avaient ete invit6s a cette reunion\. Les Ministeres des Finances et du Plan avaient 6galement delegues des representants\. Outre cette reunion, la mission a eu des entretiens avec des personnes ayant eu par le passe une part active dans la vie du projet\. 4\. De l'avis des participants a la reunion sus-cit6e comme de l'avis des autres personnes consultees, 1'6valuation du Projet d'Appui aux Services Agricoles ressortant du rapport de fin d'execution reflete bien les realisations, les exp6riences, les difficultes comme les acquis du projet\. Cependant quelques differences d'appreciation quant a la portee de l'un ou I'autre facteur ont ete constatees, ainsi que quelques omissions qui meritent d'etre relevees\. Ces nuances et omissions seront prises en consideration dans la version r6visee du rapport de fin d'execution, ils concement principalement les points suivants: (a) Intemalisation et appropriation du PASA\. Bien qu'il se soit ecoule pres de sept ans entre l'identification et la mise en vigueur, le nouveau concept de projet, passant de I'approche de projets regionaux de developpement integres a un projet sectoriel agricole, la reorganisation des services agricoles et les nouvelles approches en matiere de vulgarisation et de recherche n'etaient connus et maitris6s que par un petit noyau de personnes\. Ce petit noyau fut en grande partie disloque avant la fin de la deuxieme annee d'ex6cution du projet\. En raison de ce fait les mesures et la r6alisation des activites du projet etaient souvent mal comprises et ex6cutees ou realisees de maniere imparfaite, le plus souvent avec des retards importants\. (b) Gestion et coordination du projet\. La forte centralisation de la gestion et la mauvaise comprehension du concept de coordination ont porte un pr6judice tres important au projet\. Cette coordination inaddquate et peu performante a retarde  - 29 - et meme tres souvent lourdement handicape la realisation des activit6s sur le terrain notamment en matiere de vulgarisation et de recherche\. (c) Effets de la crise\. Le projet de rapport a surevalue les effets de la crise sur le projet, bien que ceux-ci n'en demeurent pas moins importants\. Les problemes majeurs et les limites du PASA etaient manifestes avant la crise, ils avaient d'ailleurs e clairement identifies par la Banque comme par des services du Gouvernement au courant de I'annee 1993\. La resolution de ces problimes ou du moins l'engagement des mesures visant a les resoudre a pris des delais tres importants\. Ces retards peuvent etre en partie imputes a la crise que le Burundi a connu A partir d'octobre 1993\. (d) Les capacites nationales\. II a e soulign6 que les capacites nationales qui auraient pu permettre une mise en oeuvre efficace du projet existaient\. Les probl'emes et les difficult6s imputes a la faiblesses de ces capacites sont plutot la cons6quence d'un manque d'internalisation et appropriation du projet par les services intervenant dans son execution, ainsi que le resultat de l'incapacite de l'administration a pouvoir attirer et plus encore a pouvoir retenir les homologues et les cadres les plus dynamiques\. (e) Les acquis du projet\. Certaines reussites non negligeables du PASA ont ete sous-6valu6es ou omises\. II s'agit entre autre des points suivants: (a) les acquis de la recherche sur la fertilisation; (b) la privatisation des Sogestals et des activites de decorticage du riz; (c) la promotion de l'expertise nationale\. 5\. La Mission s'est entretenue avec le Ministre de l'Agriculture et de l'Elevage sur les questions touchant l'evolution, au cours de ces demiers mois, du secteur agricole\. Bien que l'embargo ait limite les possibilites de developpement, le comportement de ce secteur ces derniers mois est assez remarquable\. L'amelioration de la securite dans la majeure partie du pays, les efforts des agriculteurs burundais et des conditions climatiques, jusqu'A ce jour, assez favorables permettent d'envisager une production agricole pour la saison B 1997 (Fevrier-Juin) nettement sup6rieure aux resultats de la m8me saison l'annee pass6e\. 6\. Le Ministre de l'Agriculture a souhait6 que ces efforts puissent 8tre appuyes par la Banque\. A court terme, le Gouvernement du Burundi a besoin d'une assistance d'urgence en matiere d'intrants agricoles pour renforcer la relance des activit6s agricoles\. Un accent particulier devrait 8tre port6, d'une part A l'assistance aux populations deplac6es et regroup6es pour leur permettre de travailler leurs terres ou celles mises a disposition et d'autre part a l'acquisition d'engrais (au moins 1\.500 T) pour la saison agricole A 98 (Septembre 97- Janvier 98) et de quelques semences\. A plus long terme, le Gouvernement souhaite que les reflexions qu'il a engag6es sur la reactualisation de la strat6gie de secteur puissent etre partag6es avec la Banque et que ce dialogue puisse jeter les bases pour la preparation d'une nouvelle operation qui du souhait du Ministre de l'Agriculture pourrait 8tre mise oeuvre des le d6but de 1998\. 7\. Le Ministre a informe la mission que la dimunition des ressources budgetaires contraignent le Gouvernement a r6organiser les services agricoles pour les reduire a une taille qui soit compatible avec les moyens du pays\. Les effectifs des services agricoles seront reduits de plus 35 %, principalement en raison la reduction de 50% des postes d'encadreur de base\. Pour pallier aux effets negatifs de cette coupe des effectifs, le Gouvernement compte d6velopper  - 30 - un nouveau mode d'interface avec les exploitants agricoles sur les collines, en recourant aux services de volontaires individuels ou en faisant appel a des associations ou en groupements d'exploitants agricoles pour vulgariser les messages et nouvelles techniques\. Enfin le Ministre a tenu a mettre en exergue les 6volutions politiques positives tant sur le plan exteme avec la levee partielle de 1'embargo que sur le plan interne avec l'engagement des pourparlers avec toutes les composantes et sensibilites politiques du pays\. 8\. La Mission s'est rejouie de ces d6veloppements positifs\. Certaines des mesures prises aujourd'hui avaient e preconis6es durant le projet, mais elles n'avaient pas rencontre I'assentiment du Gouvernement\. II a et rappele la disposition de la Banque a participer activement aux reflexions engag&es autour de la reactualisation de la strat6gie agricole\. La Mission a toutefois tenu a faire observer que dans les circonstances presentes, il etait tres pr6mature d'envisager le lancement d'une nouvelle operation classique et ce qui plus est dans les d6lais souhaites par le Gouvernement\. 9\. La Mission a r6affirme au Ministre de l'Agriculture et de l'Elevage la volonte de la Banque de soutenir le Gouvernement dans ses efforts visant la reconstruction, la rehabilitation et la reconciliation nationale des que les conditions le permettront\. La Banque envisage de renforcer les activites concernant la mise a jour de la connaissance de 1'evolution du secteur et la reactualisation de la strategie agricole cette derniere devant 8tre batie sur un large consensus\. Des actions d'investissement concretes dans le secteur pourraient etre envisagees a travers le Projet d'Actions Sociales, en matiere d'appui aux groupements de multiplication de semences et de construction de r6habilitation micro-projets d'infrastructures d'agriculture et d'e1evage appartenant ou g6rees par beneficaires eligibles au titre de ce projet\. Au fur et a mesure des nouveaux developpements positifs, il pourra etre initie des actions et de petits projets pilotes pouvant etre ulterieurement agrandis et reproduits a grande 6chelle\. L'ensemble de cette strat6gie sera entreprise en partenariat avec d'autres bailleurs de fonds et en faisant intervenir dans leur execution des les communautes de base et les b6neficiaires eux-memes, les O\.N\.G\. et les P\.M\.E\. 10\. Enfin la Mission a demand6 aux autorit6s d'accelerer et conclure des que possible leur propre rapport d'evaluation du Projet d'Appui aux Services Agricoles\. Ce rapport aurait du constituer un des elements du rapport de fin d'execution, si sa redaction avait pu etre conduite de maniere plus ou moins simultan6e avec le rapport de la Banque\. La mission a informe ses interlocuteurs que la version r6visee du rapport de fin d'execution du PASA leur sera soumise pour commentaires\.   IMAGING Report No: 1 643 Type: ICR

REVIEW

P064883

 ICRR 12209 Report Number : ICRR12209 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 08/12/2005 PROJ ID : P064883 Appraisal Actual Project Name : Western Altiplano Natural Project Costs 55\.6 0 Resources Management US$M ) (US$M) Project Country : Guatemala Loan /Credit (US$M) Loan/ US$M ) 32\.8 0 Sector (s): General agriculture fishing Cofinancing 8\.0 0 and forestry sector US$M ) (US$M) L/C Number : L7175 Board Approval 03 FY ) (FY) Partners involved : GEF Closing Date 12/31/2008 12/27/2004 Prepared by : Reviewed by : Group Manager : Group : Christopher D\. Roy Gilbert Alain A\. Barbu OEDSG Gerrard 2\. Project Objectives and Components a\. Objectives The overall objective was to improve the management and conservation of natural resources and biodiversity, and the incomes of the people who depend upon these resources in the Western Altiplano of Guatemala \. The specific objectives were to help alleviate rural poverty, reduce pressures upon and improve management of the natural resources base by : (1) increasing social capital around natural resources management (NRM), through support to communities, organizations and local authorities (traditional and municipal) to jointly define and implement a local development vision which takes NRM and sustainability objectives into account (2) increasing opportunities to sustainably improve productivity and diversify farming and other (off-farm) livelihood systems (3) extending and strengthening ongoing efforts of indigenous communities to establish permanent conservation areas within broader zones of biodiversity of global importance and to maintain the habitats which sustain this diversity (4) establishing and piloting a framework for environmental services markets to sustain local incentives for conservation\. The proposed project formed part of the Government's program of interventions relating to the implementation of the 1996 Peace Accords for the Western Altiplano \. It was also considered an indigenous peoples development project since 95 percent of population in the project were Mayan \. b\. Components The project had four components : (a) Sustainable livelihoods ($38\.8 million at appraisal, excluding contingencies ): This comprised (i) grants to rural community associations in the 54 targeted municipalities to finance sustainable production, NRM, and conservation projects, and (ii) grants to participating municipalities to finance technical assistance, training, and other services \. (b) Biodiversity conservation ($5\.4 million at appraisal): This financed activities to strengthen local and national capacity to conserve national habitats containing globally important biodiversity and other areas providing locally and nationally important environmental services \. (c) Environmental services markets ($1\.9 million at appraisal): This supported activities to develop a policy and institutional framework for market-based incentives for provision of environmental services \. (d) Project administration, supervision, monitoring and evaluation ($4\.7 million at appraisal) c\. Comments on Project Cost, Financing and Dates Of the total project costs of $ 55\.6 million (including contingencies), the World Bank was expected to finance $ 32\.8 million, the Government of Guatemala $8\.6 million, the Global Environment Facility $8\.0 million, and project beneficiaries an estimated $6\.2 million (primarily in kind)\. The project was cancelled in December 2004 after it failed to become effective within 18 months of Board approval\. 3\. Achievement of Relevant Objectives: The objectives were not achieved because the project was not implemented, largely due to the fault of the Borrower \. National elections in December 2003 resulted in a change in government \. The government administration with whom the Bank and the GEF prepared the project failed to gain legislative approval for the project prior to the elections, since the legislative agenda in the months before the election was dominated by unsuccessful attempts to pass the government's 2004 fiscal year budget\. Although the new administration demonstrated support for the project after the elections, it inherited a fiscal crisis \. To address the crisis, the administration required sectoral ministries to reassess their priorities\. Forced to choose between the Western Altiplano NRM project and a $ 100 million Land Administration Program, the Ministry of Agriculture chose the latter because it viewed this as the centerpiece of its agricultural program\. 4\. Significant Outcomes/Impacts: Not applicable\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): Not applicable\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Not Rated Not Rated Institutional Dev \.: Not Rated Not Rated Sustainability : Not Rated Not Applicable Bank Performance : Not Rated Satisfactory The objectives of the project were consistent with the Peace Accords and the Guatemala CAS\. Its design was consistent with lessons learned from the Bank's experience with NRM projects \. Borrower Perf \.: Not Rated Unsatisfactory The government failed to obtain legislative approval for the project \. 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 Bank should be cautious in approving projects within six months of a general election in countries experiencing political instability\. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: The Project Completion Note gave a satisfactory explanation of the reasons why the government failed to obtain legislative approval for the project \.

REVIEW

P004609

 ICRR 10628 Report Number : ICRR10628 ICR Review Operations Evaluation Department 1\. Project Data : Date Posted : 06/29/2000 PROJ ID : OEDID : L3745 P004609 OEDID: Appraisal Actual Project Name : Subic Bay Freeport US$M ) Project Costs (US$M) 52 52\.24 Country : Philippines Loan/ US$M ) Loan /Credit (US$M) 40 40 Sector, Major Sect \.: Ports & Waterways , US$M ) Cofinancing (US$M) Transportation L/C Number : L3745 FY ) Board Approval (FY) 94 Partners involved : Closing Date 06/30/1999 06/30/1999 Prepared by : Reviewed by : Group Manager : Group : Kavita Mathur Binyam Reja Ridley Nelson OEDST 2\. Project Objectives and Components a\. Objectives The objective of the project was to attract private investors to the Subic Bay Freeport (SBF) by: (a) improving infrastructure and access to the area for industrial, commercial and passenger traffic; (b) maintaining the SBF asset base, including protection of the environment; and (c) strengthening the capacity of the Subic Bay Metropolitan Authority (SBMA) to manage and administer the facility\. b\. Components Original components: (a) Site Improvement Component: land access improvements - construction of 4 kilometer of two-lane access road connecting Kalayaan Gate to Kalake Bridge; construction of an 82 meter, two lane bridge with pedestrian walkway linking Rizal Avenue to SBF; and construction of security plazas at the Main Gate Complex and Kalayaan Gate; airport improvements - runway repair, reconstruction of taxiway; apron strengthening at both passenger and freight operations; airport communications and navigation equipment; and conversion of one of the existing hangars into a passenger terminal; repairs to piers and wharfs; construction of standard factory building on a 10 hectare site within SBF; provision of security and miscellaneous equipment\. (b) Strengthen SBMA's Institutional Capacity Component: design and implement merchandise control system to monitor duty-free purchases; technical assistance in preparing zoning regulations and a building design code for SBF; design and implement automated financial and billing system; technical assistance for privatization of key assets and utilities; short-term training in freeport-related topics; strengthen SBMA's facilities management\. (c) Environmental Protection Component : preparation of an environmental baseline survey; institutional support for the newly-established Ecology Center, including provision of environmental monitoring equipment; and support of Environmental Management Plan covering the organization and work plan for the SBMA's Ecology Center\. Revised Components: The project components were significantly revised soon after implementation without changing the project objectives\. This changed the project focus from basic infrastructure improvement (roads, bridges, piers, wharfs and airport) to improvement of airport infrastructure\. Site Improvement Component: Access road and security gate construction was undertaken by BOT operator\. Pier and wharf repairs, construction of factory buildings, and procurement of security and miscellaneous equipment were all canceled\. Airport apron strengthening, airport pavement improvements and the air traffic control systems were upgraded\. Institutional Capacity Component: The merchandise control system sub-component was removed from the project\. Technical assistance to prepare zoning and building regulations was substantially upgraded to become preparation of a master plan for the central SBF area\. The planned automated financial management and billing system was also significantly upgraded to become an Integrated Financial Management System (IFMS)\. Environmental protection: None c\. Comments on Project Cost, Financing and Dates Project costs, US $ million\. Components Appraisal Actuals % of Appraisal Site Improvement 43\.80 45\.89 105 Institutional Support 5\.80 5\.39 93 Environment 1\.10 0\.96 87 TOTAL 52\.00 52\.24 100\.5 Within the site improvement component there was a substantial shift in funding from other infrastructure works to airport improvements\. The airport improvements cost increased from $20\.9 million (40% of total project costs) at appraisal to $45\.3 million (87% of total project costs) at completion\. 3\. Achievement of Relevant Objectives : The project achieved the objective of attracting private investors to the Subic Bay Freeport\. The total private sector investment in operational facilities for the period 1992-1999 was $2\.3 million of which 46% was for services facilities, 9% for transshipment facilities, and 15% each for manufacturing and tourism\. The export value of goods produced at SBF increased from $24 million in 1994 to $1,012 million in 1999\. The project boosted tourism\. The total number of visitors increased from 1 million in 1993 to 2\.6 million in 1997\. The number of visitors decreased to 1\.25 million in 1998 mainly because of the Asian financial crisis\. The number of domestic aircraft movements at SBIA increased from 1566 in 1993 to 16728 in 1997\. International aircraft movement increased from 40 to 5897\. The objective of improving basic infrastructure was largely met\. Airport improvement were made without delays\. Rizal Avenue Bridge was completed 2\.5 years behind schedule\. The improvements to access road were undertaken by BOT operator, financed by Government and private sector\. The repairs on piers and the wharf's were not completed because the bidding process for seaport privatization was challenged in court and the lawsuit was not resolved by project completion\. The environmental protection objective was partially met\. Environmental baseline survey was completed\. However, the project did not result in strengthening of SBMA’s Ecology Center's capacity to effectively monitor air and water quality and enforce environmental standards\. The Ecology Center did introduce some sound operational practices regarding land acquisition, working with local communities, and relationship with indigenous people\. The institutional development objective was not fully achieved\. The comprehensive master plan for the central area was developed and airport master plan was completed\. The significantly upgraded Integrated Financial Management System (IFMS) was not implemented\. Technical Assistance to enhance SBMA’s institutional capabilities was implemented at increased cost but very few of the freeport advisor's proposals were integrated into SBMA’s current operations\. SBMA was unable to design and implement merchandise control system\. Privatization of key assets and utilities, short-term training and strengthening SBMA's facilities management were not implemented\. 4\. Significant Outcomes /Impacts : The significant impacts of the project are: (i) increased trade; (ii) growth in tourism; and (iii) greater private sector participation in infrastructure development and services sector\. 5\. Significant Shortcomings (including non -compliance with safeguard policies ): The growth of SBF imposed additional burden on SBMA which at the outset lacked experience in freeport management\. The sub-components that were designed to build capacity e\.g\. short-term training, management of facilities, were not implemented\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev \.: Partial Modest These are equivalent ratings\. Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Satisfactory Satisfactory Quality of ICR : Satisfactory 7\. Lessons of Broad Applicability : The ICR identifies the following lessons of broad applicability: 1\. In converting existing infrastructure into freeport, a well planned program (supported with technical assistance) is critical\. 2\. Infrastructure improvement projects should include a program for developing comprehensive maintenance plan\. 3\. Proposals to revise project components should be evaluated rationally in order to ensure that the overall objectives of the project are met\. 4\. Institutional development goals should be set realistically\. A better legal framework is required so that building institutional capacity is not difficult and restricted by rules\. 5\. Stronger emphasis should be placed on staffing and staff training\. 8\. Audit Recommended? Yes No 9\. Comments on Quality of ICR : The ICR is satisfactory\. It has thoroughly analyzed the project's implementation experience\. The ICR does not discuss the disbursement profile, Aide-Memoire for the ICR mission is not available, and the section on "Transition arrangements to regular operations" could have been developed more\.

REVIEW

P061317

Page 1 1 IMPLEMENTATION COMPLETION REPORT Region: LAC Country: Panama Project ID: P061317 Grant TF No\. 022698 GEF Medium-Size Project: Panama: San Lorenzo Effective Protection with Community Participation Washington, D\.C\., June 2004 39204 Page 2 2 Table of Contents I\. BASIC DATA II\. PROJECT IMPACT ANALYSIS III\. SUMMARY OF MAIN LESSONS LEARNED IV\. FINANCIAL MANAGEMENT STATUS MAP The project area, showing the protected area at the northern Caribbean entrance to the Panama Canal, and rural buffer zone\. Page 3 3 GEF MSP IMPLEMENTATION COMPLETION REPORT (ICR) I\. BASIC DATA (1) Date of Completion Report: October 2003, Execution Date : August 1999 to September 2003 (2) Project Title: San Lorenzo: Effective Protection with Community Participation, Panama, TF 022698 (3) GEF MSP Allocation: $725,000 (4) Grant Recipient: CEASPA, Panamanian Center for Research and Social Action (5) World Bank Task Manager: Douglas Graham (initially John Kellenberg) Yabanex Batista (6) Goals and Objectives of the MSP grant : The goals of the MSP grant, as identified in the project document of June 1999, were to support the effective protection of the new San Lorenzo Protected Area in association with efforts to contribute to the long-term conservation and sustainable use of biodiversity in the Mesoamerican Biological Corridor; and to strengthen stakeholder support for the protected area\. These goals were to be achieved by: (i) developing and executing a management plan with participation from national authorities, local communities and non-governmental organizations; (ii) by contributing to the establishment of an appropriate institutional framework for the management of the new protected area; (iii) establishing financial mechanisms to generate resources for the long-term financial viability of the new protected area; and (iv) developing an education and training program to increase local capacity to use and to support the sustainable management of natural resources in the project area\. The expected project outcomes were an increased institutional capacity to manage the proposed protected area in a coordinated and participatory fashion, through the development and implementation of a management plan that establishes zoning uses and ensures the effective protection of the area; and the establishment of a system for generating financial resources to ensure the maintenance of the protected area in the medium to long term\. Another expected project outcome was increased local benefits from participatory management of the project area, particularly the buffer zones, through support for diversification of sustainable livelihoods, through increasing local capacities for organization and accessing resources\. There were no changes to the overall goals and objectives of the Project during the four years of project execution\. They were reviewed during the mid term evaluation, and considered to be valid and achievable overall\. Page 4 4 (7) Financial/Budget Information: Describe any changes from original financing plan (changes in co-financing or GEF-financing): See table on next page of Initial and Final allocations by components, GEF and co- financers\. The components 1 to 5 noted in the table are: 1\. Management Plan developed for San Lorenzo Protected Area 2\. Institutional framework for management of San Lorenzo Protected Area 3\. Financial mechanisms for medium and long term viability of protected area 4\. Local capacities developed for sustainable resource management 5\. Project management and evaluation\. The figures in the Planned column are taken from the Table in the Project Document as approved, page 26, MSP Budget by Outcomes and Financier, and the columns are presented in the same order\. GEF financing remained as planned, with some changes in assignation between components, agreed by the World Bank task manager in the annual budget approvals\. All co-financers increased their contributions beyond those anticipated, except for the IFAD-MIDA project to support sustainable rural development in Colon, Cocle and Capira, which suffered from delays in execution\. Two additional co-financers are noted, the World Monument Fund, with a contribution of US$140,000 for the World Heritage Site, Fort San Lorenzo, and the US Fish and Wildlife Service, with a grant of US$143,000 to CEASPA, for the project Making Achiote a Bird-Friendly and Birder- Friendly Community\. The community and local capacity component was complemented by leveraged funds from the Fundación Natura, the Peace Corps, the National Fish and Wildlife Foundation and the US Fish and Wildlife Foundation\. Page 5 5 T a b l e 1 \. I n i t i a l a n d F i n a l A l l o c a t i o n s b y C o m p o n e n t s , G E F a n d C o - F i n a n c e r s ( i n t h o u s a n d s U S $ ) C o - F i n 1 C o - F i n 2 C o - F i n 3 C o - F i n 4 C o - F i n 5 C o - F i n 6 C o - F i n 7 C o - F i n 8 C o - F i n 9 C o - F i n 1 0 C o - F i n 1 1 C o - F i n 1 2 G E F F u n d \. N a t \. S T R I A R I A N A M C E A S P A P e a c e C o r p s U S A I D / U S F S N F W F I F A D O t h e r G O P W M F U S F W S T O T A L N O N G E F T O T A L P r o j e c t C o m p o n e n t P l a n n e d A c t u a l P l \. A c t \. P l \. A c t \. P l \. A c t \. P l \. A c t \. P l \. A c t \. P l \. A c t \. P l \. A c t \. P l \. A c t \. P l \. A c t \. P l \. A c t \. P l \. A c t \. P l \. A c t \. P l \. A c t \. P l \. A c t \. C o m p o n e n t 1 2 3 2 3 0 5 5 0 0 5 5 0 2 0 0 2 0 0 6 8 6 8 5 5 1 0 0 5 0 0 4 0 4 0 8 0 8 0 1 4 0 3 0 9 9 3 1 6 1 3 1 2 2 5 1 9 1 8 C o m p o n e n t 2 5 0 4 0 1 2 3 0 3 0 1 0 3 0 5 2 8 0 9 2 C o m p o n e n t 3 5 6 4 8 1 0 1 2 3 0 3 0 1 0 3 0 6 2 8 6 1 1 0 C o m p o n e n t 4 2 6 9 1 6 3 6 0 6 3 1 0 1 0 1 0 8 8 7 0 2 4 5 4 5 3 0 3 0 1 0 0 5 0 5 0 5 0 7 8 3 2 8 5 8 9 5 9 7 7 5 2 C o m p o n e n t 5 1 1 8 1 6 9 6 5 6 5 1 5 0 4 0 4 0 1 5 1 2 0 1 2 0 2 3 8 2 8 9 T O T A L 7 2 5 7 2 5 6 0 6 3 5 1 0 5 6 0 2 6 5 2 6 5 8 3 1 0 0 5 3 5 3 7 0 2 4 5 1 0 0 5 4 5 7 0 8 2 1 0 0 5 0 1 9 0 1 9 0 0 1 4 0 0 1 4 3 1 5 0 1 2 4 3 6 2 2 2 6 3 1 6 1 Page 6 6 T a b l e 2 : C o f i n a n c i n g a n d l e v e r a g e d r e s o u r c e s ( f o r p r o j e c t s w h i c h u n d e r w e n t a m i d t e r m , p h a s e o r a t e r m i n a l e v a l u a t i o n i n F Y 0 3 ) * O t h e r i s r e f e r r e d t o c o n t r i b u t i o n s m o b i l i z e d f o r t h e p r o j e c t f r o m o t h e r m u l t i l a t e r a l a g e n c i e s , b i l a t e r a l d e v e l o p m e n t c o o p e r a t i o n a g e n c i e s , N G O s , t h e p r i v a t e s e c t o r a n d b e n e f i c i a r i e s \. N o t e : t h e f i g u r e i n G R A N T S i n c l u d e s o n l y t h e f u n d s m a n a g e d b y C E A S P A d i r e c t l y , f r o m t h e F u n d a c i ó n N a t u r a , N F W F a n d U S F W S \. O t h e r n o n - g o v e r n m e n t a l c o n t r i b u t i o n s a r e i n c l u d e d a s c o m m i t t e d i n k i n d c o n t r i b u t i o n s \. I A o w n F i n a n c i n g ( m i l l U S $ ) A R I , A N A M , G O P G o v e r n m e n t ( m i l l U S $ ) O t h e r * ( m i l l U S $ ) T o t a l ( m i l l U S $ ) T o t a l D i s b u r s e m e n t ( m i l l U S $ ) C o f i n a n c i n g ( T y p e / S o u r c e ) P r o p o s e d A c t u a l P r o p o s e d A c t u a l P r o p o s e d A c t u a l P r o p o s e d A c t u a l P r o p o s e d A c t u a l - G r a n t s 7 2 5 7 2 5 1 3 0 2 8 8 8 5 5 1 0 1 3 - L o a n s / C o n c e s s i o n a l / m a r k e t r a t e N A N A N A N A N A N A N A N A - C r e d i t s N A N A N A N A N A N A N A N A - E q u i t y i n v e s t m e n t s N A N A N A N A N A N A N A N A - C o m m i t t e d i n - k i n d s s u p p o r t 5 3 8 5 5 5 8 3 3 1 5 9 3 1 3 7 1 2 1 4 8 - O t h e r T o t a l s 7 2 5 7 2 5 5 3 8 5 5 5 9 6 3 1 8 8 1 2 2 2 6 3 1 6 1 Page 7 7 Leveraged resources The project was successful in leveraging additional funds for the project\. The Peace Corps placed the equivalent of 7 years of volunteers in communities in the buffer zone; the US Forest Service and the USAID provided training, technical support, publications about the San Lorenzo Protected Area, and have committed the funds for demarcation of the San Lorenzo Protected Area\. Private enterprises in Colon and the Colon Free Zone and some conservation and development projects, such as the GTZ Cerro Hoya National Park project, and the Jason project , have provided training and educational scholarship opportunities for local community students and teachers and adults\. The National Fish and Wildlife Foundation granted US$82,000 to CEASPA for Public outreach programs in support of the San Lorenzo Protected Area, and the US Fish and Wildlife Service granted CEASPA US$143,000 for bird habitat protection in the buffer zone and in the San Lorenzo Protected Area\. The World Monument Fund obtained US$140,000 from American Express to support research, publications and physical interventions in Fort San Lorenzo, the World Heritage Site, regarding the natural and cultural history and conditions of the area\. The contributions by beneficiaries and volunteers were not been quantified, although in time and effort these were substantial\. II\. PROJECT IMPACT ANALYSIS (1) Project Impacts: The main objectives of the project have been met during the four years of project implementation\. The biodiversity of the area is still present, as evidenced by jaguar prints seen by the Park guards in early 2003 in the protected area, indicating both the condition of the habitat, and also of the connectivity of the San Lorenzo Protected Area with surrounding forest cover\. The forest coverage has remained intact , see the Landsat photo taken in 2000 , and was observed as such in helicopter over flight in March 2002\. Two government agencies are financing ten park guards, an environmental educator, and the Director of the Protected Area\. The community mapping of the buffer zone gave a base line of vegetation cover for 90% of the western buffer zone\. Monitoring of changes in that vegetation cover after one year indicated only minor changes\. The park guards have equipment and training, and carry out regular patrols accompanied by a member of the Ecological Police Force\. Four government agencies agreed that the management category should be changed to that of National Park, and the Management Plan, complete with park limits and zoning, has been agreed\. The Management Plan is on the website of the project, at www\.sanlorenzo\.org\.pa \. The USAID has agreed to finance the delimitation of the National Park, at the request of the National Environment Authority\. Decision makers in the pertinent government agencies, private enterprise and local communities recognize the existence and importance of the San Lorenzo Protected Area\. Local communities in the buffer zone have received training and participated in activities relating to sustainable production, gender and development and rural and eco-tourism\. In two areas in the southern part of the Protected Area, where two government agencies had different policies regarding the use of the land, there have been some incursions and forest Page 8 8 conversion, though no permanent dwellings\. The investment projects planned in the built up area of Sherman, and for concessions within the Protected Area itself, are within the parameters of tourism, conservation and research\. The environmental impact statements and carrying capacity studies of these projects have not yet been made\. Describe to what extent the objectives have been met (the following description is presented by project component) Project objectives have been met overall\. Several aspects of the project have taken longer than CEASPA anticipated when formulating the project, and some decisions that correspond to the government are in process\. There was a change in government just when the project started, and in general, across all sectors, the execution of public sector commitments has been slow\. Management Plan of the San Lorenzo Protected Area developed and in execution\. With respect to the Management Plan, it is a great achievement that the final document was in fact agreed upon by four government agencies, although that process itself took two years and three months, compared with the original design of six months\. The consulting company that did the work showed considerable restraint and patience during the process of inter-institutional negotiating and decision making\. Once agreed upon, the National Environmental Authority has developed its own procedures for preparing the official resolution approving the Management Plan\. ANAM staff expect the resolution to be signed by the Administrator, together with the resolutions for three other protected area management plans\. As regards the preparation of the Management Plan, the process of inter institutional discussions between the four main government agencies - the Interoceanic Regional Authority, the National Environmental Authority, the Panamanian Tourism Institute and the National Culture Institute- was of critical important to those taking part in the review of each stage of the preparation of the Management Plan\. CEASPA and the consultants had anticipated a greater degree of input and discussion with other actors, such as local authorities, universities, other government agencies, communities, NGOs, etc\. Several mechanisms were used to obtain their input, but the draft final document was not submitted to them for review\. The contents of the Management Plan, in terms of programs and activities, indicate the potential for participation in the implementation\. See photos of interagency workshops in the field while preparing Management Plan\. One of the most important results of the Management Plan process was the discussion over the management category for the protected area\. Under the Law 21 of 1997 which decided land uses of the reverted lands, (former Canal Zone), this protected area had two management categories: protection forest and protected landscape\. During the negotiations of the Management Plan, it was agreed that this should be a National Park\. This is a highly positive result of the GEF project\. It is key element for the longterm biodiversity conservation, management principles, fund raising, relationships with investors in the area, and for decisions over visitor management and scientific research\. Page 9 9 Another important result of the project is the high visibility accorded to the area\. The San Lorenzo Protected Area has been recognized in international publications such as National Geographic in Spanish, and in publications of the Mesoamerican Biological Corridor, the IUCN Mesoamerica office, GEF publications about projects in Central America, the journal of the National Environment Authority and national newspapers\. A volunteer also researched and produced a book about the San Lorenzo Protected Area that CEASPA published in English and in Spanish \. See cover illustrated in photo\. The US Forest Service is in process of publishing in 2000 copies as a technical report an illustrated slide show text with 80 photographs and 7 maps of the San Lorenzo Protected Area\. The San Lorenzo Protected Area was visited by the educators´ institute of the Jason project, who bought videos, books, maps and T-shirts of the area\. In the school year 2003-2004 the Jason project will reach 1\.3 million students in participating schools in Panama and the United States, with information about Panama’s tropical forests\. Institutional framework for the Protected Area established Regarding the institutional framework for managing the San Lorenzo Protected Area on a long term basis, the relevant government agencies communicate regularly regarding issues that require coordination, and each of them, including the Panama Canal Authority, has an awareness of the importance of the area’s future development and conservation\. As an example of interinstitutional coordination, the Panama Canal Authority, the Interoceanic Authority, and the National Environment Authority are collaborating in providing information for the contract to carry out the demarcation of the Protected Area, approved by USAID at ANAM’s request, in the second half of 2003\. This is not to say that all government agencies share a similar vision\. Decisions over concessions of investors in Sherman are key with regards to protection, conservation, financing and management of the San Lorenzo Protected Area\. These decisions only started to take place in mid 2003, when the project was ending, and are handled exclusively by the government\. The San Lorenzo Project has provided information to the investors, when possible, about the protected area, and invited them to seminars and events relating to the area\. The kind of investments contemplated both in the Protected Area and in Sherman could be compatible with tourism, conservation and research, but there has been no public discussion of environmental impact studies, or carrying capacity studies of these particular investments\. Mechanisms established for financial viability of the protected area The financial viability of the San Lorenzo Protected Area is both possible and probable\. Several factors, such as accessibility to Panama and Colon, the cruise ship shore excursions development, and tourism development plans in Sherman, will all help make it more viable in the future\. However, decisions have to be made by government institutions; for example, to start charging entry fees, to invest in upkeep of the main access road and maintenance of Fort San Lorenzo- the main cultural attraction- and to charge concessionaires for use of the area; and to establish mechanisms for managing the funds generated\. The Management Plan lays out a menu of mechanisms and analyses their potential for supporting the long term protection and development of the area\. CEASPA helped to update the analysis in March 2003\. Page 10 10 Increased local community capacity for sustainable use and management of natural resources In the area of community development in the buffer zone, CEASPA had considerably greater autonomy of action than in the protected area\. In general the response and interest by local people to the potential of more sustainable use of natural resources has been positive\. That does not mean however that their incomes have increased substantially, or that many people have in fact succeeded in diversifying their incomes\. In the four years of project execution new ways of thinking, of relating between communities and within families, of marketing production and of developing new economic activities have been introduced to the area\. CEASPA hopes to continue and further that process with project funds from the US Fish and Wildlife Service\. Some examples are the annual festivals organized in Escobal by the environmental and tourism committees, the direct sale of quality organic coffee to the Duran coffee enterprise, interest by adults and children in birds and wildlife and their conservation\. Achievement of Performance Indicators Table 3 : Effectiveness Indicators Comparative Table Planned Current Status 1\. Management plan developed for the San Lorenzo Protected Area The San Lorenzo Management Plan was developed by a consulting company in consultation with five government agencies, local communities, university departments, civic groups from Colon city, and the Smithsonian Tropical Research Institute\. Four government agencies agreed to change the management category to National Park and agreed on the limits and zoning, and agreed to the Final Document in December 2002\. Annual operating plans have been prepared and negotiated with FIDECO, the Ecological Trust Fund, for support\. The communication strategy includes publications, a bilingual visitors´ guide, information stands, signage, a video, banners, leaflets, an audiovisual presentation and scientific review, and an environmental education program\. Park guards are equipped and have received training in patrolling, first aid, map reading, attention to visitors, bird watching, animal tracks, and have visited other protected areas\. See photos of park guard training\. Project personnel with the park guards and Director produced the first Protection and Patrolling Plan for a National Park in Panama\. The project provided a launch and motor for patrolling the river and lake\. ANAM requested support for building a control and information post at the entrance to the Protected Area, between Sherman and Fort San Lorenzo, construction began in September 2003\. Page 11 11 2\. Establishment of institutional framework for the management of the San Lorenzo Protected Area The protected area and Sherman are managed by an interinstitutional agreement between the Interoceanic Regional Authority, the National Environment Authority, the Panamanian Tourism Institute and the National Culture Institute\. ANAM runs the area as a National Park, with an experienced Park Director\. The ARI pays the park guards\. The ARI agreed to make the formal transfer of the protected area to the National Environment Authority once the demarcation has been completed\. The Management Plan presented several alternatives for managing the Area, but no final decisions were made\. The Smithsonian Tropical Research Institute and the Panama Canal Authority are supportive of the objectives of the National Park\. CEASPA helped facilitate government decision-making regarding aspects of management of the protected area by providing analysis, resources, publications and publicity for events\. 3\. Financial mechanisms to ensure the financial viability of the San Lorenzo Protected Area Studies of alternative mechanisms for the financial viability of the area were made for the Management Plan, in 2001, and updated to 2003\. A Cooperation agreement was signed between ANAM and Fundación Natura, and CEASPA, to open a dedicated bank account to receive funds for this protected Area\. The Controller General’s office has to give approval of the agreement\. The Management Plan recommends producing quality materials for sale, the project has produced a book, and visitors guide with map\. 4\. Increased local capacity for sustainable resource management CEASPA has worked with communities in the buffer zone in sustainable production, community-based tourism, and gender and development\. The participatory community analysis and planning produced vegetation cover and land use maps of 90% of the buffer zone\. Some local residents were trained also in mapping of land use of individual farms\. Results include the establishment of a coffee producers’ association, “Community, Coffee and Environment” that has sold coffee directly to one of the largest coffee marketers in Panama, Café Duran; the establishment of a nursery in Achiote producing native trees and ornamental plants; introduction of organic agriculture and soil conservation to the area; the establishment of rural tourism committees and the holding of three annual Agro- Ecotourism festivals in Escobal\. See photo of Festival\. Local people have been trained in bird watching with Page 12 12 experience as research assistants in monitoring of raptor migrations and guiding of bird tours, and in making puppets and presenting environmental puppet shows;\. Four active women’s groups have been established, and community promoters trained\. Synergies have been established with the Peace Corps, pertinent government agencies, University professors and students from Colon, and McGill, and NGOs, such as the Panama Audubon Society and APRONAD\. 5\. Project management and evaluation The project produced regular quarterly reports on progress, and a Mid Term Review was carried out by an external consultant, Dr\. Jim Barborak\. Financial and acquisition procedures were followed, the audits were approved\. CEASPA is proud of the safety record achieved during the project, zero work-related accidents, and only minor problems with equipment, vehicles, etc\. World Bank supervision missions were attended as required by the World Bank, and a special visit arranged for a World Bank mission to Panama in the fourth year of project execution\. The final evaluation was carried out by a local consultant, in interviews with government agencies and international cooperation representatives, and participatory evaluation of impact in the communities\. (2) Project Sustainability The San Lorenzo Protected Area has good potential for its long term sustainability\. The location makes it an area of national and international interest, and the public communication strategy has helped ensure that large numbers of people and institutions know about the area\. The potential for its financial viability is good, as negotiations are underway for support from the investors in Sherman for protection of the National Park\. The ground has been laid for communities to take a positive attitude towards the protected area, and towards conservation of their natural resources\. Thanks to an additional project financed by the US Fish and Wildlife Service, CESAPA is building a Community Learning Center and Visitors Center in Achiote in the buffer zone\. However, basic needs of the rural population (housing, water and sanitation, communications, roads, access to schooling, income earning opportunities) are far from being satisfied\. The National Environmental Authority, ANAM, has requested USAID to carry out the formal delimitation of the National Park, which is a necessary step for the area to be formally handed over from the Interoceanic Regional Authority to the ANAM\. This will pave the way for decisions on the management structure of the Park, as overlapping jurisdictions continue to present difficulties\. Page 13 13 Key issues requiring attention in the future include follow up with the private sector investors in Sherman, and proposals and actions to mitigate negative impacts of improved vehicular access and other infrastructure related to the Panama Canal expansion projects\. It is imperative for the long term conservation of biodiversity to strengthen the connectivity of this Protected Area with the forested areas and the protected area network of the Canal area, and towards the west, the Costa Abajo of Colon, towards Donoso and the Veraguas Caribbean coast\. (3 ) Replicability Key elements of the project that could be useful for other projects include the following elements: (i) a project design that works simultaneously in the field with families and communities in topics of direct interest to them, and with policy makers in the government and people and sectors who influence decisions\. (ii) A communication strategy that works on different levels and uses different media is also an approach that can be replicated, for example: using such varied methods as mobile workshops and guided tours with specialized information packets, a website with guest book, mobile photographic exhibition, a book published specially about the San Lorenzo Protected Area, ( a first in Panama, with exception of books about the Barro Colorado Island, which is run by the Smithsonian Tropical Research Institute), a professionally researched and developed slide show and short video, the preparation of hand made finger puppets and writing of puppet shows based on local knowledge, and use of the website, guest book and email\. (iii) Innovative financial approaches made by this project are also serving as a model for other protected areas: for example the Cooperation agreement for the establishment of a dedicated bank account to receive and manage funds raised specifically for the San Lorenzo Protected Area is serving the Fundación Natura and ANAM as a model for other protected areas\. (iv) Methodologies used for the first time in Panama in developing the San Lorenzo National Park Management Plan are being used in preparing Management Plans for other National Parks in the Mesoamerican Biological Corridor\. For example, the use of the US Forest Service methodology of applying Recreational Opportunities Spectrum planning methodology, and the use of the analysis of as many of 14 financial mechanisms in developing the financial strategy for financing the Management Plans of the Volcan Baru National Park and the La Amistad National Park\. (v) This project produced the first Protection Plan and Sign Maintenance Plan for a protected area in Panama\. The methodology was based on analysis of threats and critical areas based on the park guards´ knowledge, and some models used in the US National Park Service\. These are serving as models for similar efforts in other protected areas in Colon, and could do so nationally\. Page 14 14 (vi) The Nature Conservancy with USAID has designed a project for the Chagres National Park that includes decision-making by a management committee, made up of representatives of ANAM and three NGOs, including CEASPA, and TNC\. (vii) Design of an attractive, bilingual website with relevant links, has proved a highly effective way to reach people\. It even brought the National Geographic in Spanish to contact us for an illustrated article for the section on Conservation in Latin America\. (4 ) Stakeholder Involvement – Describe the approach taken for stakeholder involvement; and adjustments to the approach; and any lessons learned from this approach\. CEASPA signed a Memorandum of Understanding for project execution with four government agencies, the National Environment Authority, the Interoceanic Regional Authority, the Panamanian Tourism Institute and the National Institute of Culture\. Even though CEASPA did not take part in the regular meetings of the interinstitutional committee that these government agencies had formed for the management and integral development of the Sherman-San Lorenzo area, CEASPA played a facilitating and “confidence-building” role in promoting improved workings of this unique inter institutional decision-making committee, at least during the early stages of the project\. In addition CEASPA helped facilitate the elaboration and approval of the first Management Plan with input from the Panama Canal Authority and the Smithsonian Tropical Research Institute, in addition to local community, local government and civil society and university inputs\. CEASPA’s view of participation was consistently more encompassing than that of some of the government agencies, which led to some difficulties\. Personnel from the Mesoamerican Biological Corridor projects in Panama, World Bank and GTZ, and the World Bank were consistently helpful in advising CEASPA in these issues\. CEASPA took the approach that the more people and organizations who know about the area and its special characteristics and importance for biodiversity, and who have some direct involvement, the better\. With that in mind, CEASPA devoted many resources to outreach by traditional and new methods and to running an inclusive team\. Wherever feasible, CEASPA sponsored and organized joint activities, with groups such as the Panama Audubon Society, the World Monument Fund, the Patronato Panama Viejo, the Smithsonian Tropical Research Institute and the University of Panama Regional Center in Colon, among others\. CEASPA encouraged volunteers, locally and internationally, in professional and specialist activities, and university students doing internships and theses\. CEASPA has deliberately given attention to involvement by the international community, organizations and individuals, for their potential support for this area of international importance for biodiversity, scientific research, its World Heritage Site, and history\. Although local community organizations are active in the buffer zone, their participation inside the protected area itself is minimal\. Co-management with community participation of this particular protected area is still away in the future\. This is Page 15 15 disappointing to CEASPA\. CEASPA carried out stakeholder analysis periodically, in order to help identify with which organizations to promote greater (or lesser) involvement\. CEASPA worked with church based organizations, but not exclusively Catholic ones, as in some communities the Protestants have great influence\. Some groups in the area were suspicious of CEASPA’s activities due to the combination of working with local groups and with government agencies (with particular reference to the disputes over the Panama Canal expansion plans in the new watershed)\. CEASPA’s response was that actions speak louder than words\. Some lessons learned include: (i) Getting people into the field, involved in an activity, anywhere out of their normal working environment, is conducive to encouraging stakeholder involvement\. (ii) The nongovernmental stakeholders are interested in participation, often more than the government\. (iii) It is vital for the facilitating organization, CEASPA in this case, to carry out regular analysis of the context and the roles that different stakeholders are playing, in order to decide where to focus attention\. (5) Monitoring and Evaluation – Describe the approach taken, any adjustments to the approach, and any lessons learned\. It was agreed with the World Bank that CEASPA would write regular quarterly reports, maximum 5 pages, with annexes to include letters of no objection, approved terms of reference and other reports on project activities\. In addition, CEASPA provided special reports in a timely fashion when requested by the Task Manager, as inputs to World Bank internal reports\. CEASPA attended to the supervision missions, and Aide Memoires were prepared of most visits\. CEASPA was informed during project implementation that field supervision missions were intended to take place every six months\. The actual frequency during the project life was less than that, mostlu due to supervision budget contraints\. The Mid Term Review by an external consultant, at the decision of CEASPA, was helpful to CEASPA and the World Bank in making slight adjustments to project objectives, and in proposing a brief extension to the project duration\. The government (ANAM) carried out annual exercises in monitoring the effectiveness of the protected area management, using 45 indicators\. The indices showed considerable improvement over the four years, and this new protected area is well managed by national standards\. Some lessons learned: (i) a MSP related to a full size project with a shared Task Manager, leads to improved supervision and evaluation of the MSP\. (ii) The World Bank can assist a non governmental organization that is running a project that relies on governmental agreements to be taken more seriously\. For example, the government agencies are willing to come to meetings with the NGO when Page 16 16 the World Bank official is present\. It is not possible however to identify specific outcomes that have resulted as a result of the World Bank’s official presence\. (iii) The fact that the World Bank was overseeing the project run by an NGO gave the government confidence that the NGO would carry out a serious project\. (iv) World Bank backup and support gives the NGO greater confidence in carrying out the project and in dealing with the government\. (6 ) Special Project Circumstances – Provide an overview of the relevant economic, financial, social, institutional and environmental conditions that may have influenced project implementation\. Identify main factors affecting implementation and outcomes distinguishing those within and outside control of the recipient\. Special project circumstances that have affected project implementation include the change of government in September 1999, just two months after the project began execution\. Many of the technical personnel from the government involved in project formulation maintained their positions, but there were important changes in the decision makers and the Directors of the government institutions\. Project execution of elements under government responsibility in general was slower than anticipated\. The Mid Term Review by the external consultant, Dr\. Jim Barborak of the Wildlife Conservation Society, made this point in his report\. The procedures whereby four government agencies had to make decisions jointly about certain aspects of the San Lorenzo Protected Area were definitely unwieldy, fortunately not inoperative\. But all decision making is slow\. In the case of the Interoceanic Regional Authority, the change in government meant a change in the orientation of the development of Sherman by private enterprise and considerable delays\. Private investment in the area is beginning firm negotiations with the ARI in mid- 2003\. The National Environment Authority, as a recent institution, (created in mid 1998) is in the process of developing regulations for several topics of direct relevance to project components\. Examples are: the procedures for developing and approval Management Plans for protected areas; regulations for co-management, and for concessions to manage protected areas or to provide services within a protected area; regulations of the management of income generated by Protected Area entrance fees; a review of protected area categories\. Until these regulations are in place, there are no standard procedures for implementing several aspects of the project\. CEASPA through this project helped to put topics on the agenda and to provide information and analysis that would contribute to solutions and decisions\. The paragraphs above refer to factors outside the recipient’s control\. With regards to factors affecting implementation by CEASPA, there were some changes in members of the team, and a learning curve that took its time in developing effective communication and collaboration as the San Lorenzo project team, and in developing strong working relations with the other programs and activities that CEASPA has been involved in\. See photos of the project team\. The political and economic environment in Panama, particularly in Colon, has been characterized by distressed economic circumstances, and rather weak government, with increasing politicization and a Page 17 17 perception of generalized corruption\. Despite that environment, in general the news and the projection of the project’s activities has been positive, which is a considerable achievement\. (7) Institutional Capacity / Partner Assessments : Evaluate the implementing agency's performance during the preparation and implementation of the project, with an emphasis on lessons learned that could be relevant for the future; Evaluate the Bank and other co-financier's performance; and present any assessment(s) or comments from co-financiers and other project partners\. CEASPA’s experience with the World Bank as Implementing Agency was positive in general\. On occasions, decisions on procedures for MSP’s were not always in place and CEASPA had to wait while they were made\. The fact that this project was initially managed by the same Task Manager as a larger full size project in Panama meant that the MSP initially received regular attention in the field\. When this arrangement ceased, it was harder for the new Task Manager to devote time and attention or field visits to the Project\. Fortunately this change occurred after the Mid term review and so project execution was well under way\. The regular field visits were key in establishing confidence with the government institutions with whom CEASPA worked\. A reduction in their frequency coincided with a decline in government interest in the project\. III\. SUMMARY OF MAIN LESSONS LEARNED 1\. The importance of taking advantage of synergies and complementary efforts\. The objectives of the project and design meant that it was vital to get other people on board with shared interests so that they would take on responsibility for actions and follow up\. A great deal of effort went into working alongside other initiatives, institutions, organizations, whether local, civil society, international cooperation, NGOs, local government, central government, universities both national and international\. Mainly this strategy paid off, but one does not always know it will until after the effort has been made\. A constant reevaluation of the context and the actors, and a willingness to be flexible, to take advantage of unexpected offers and to follow up on new ideas, makes for an intense working environment and heavy workload, though it is for the most part very rewarding\. 2\. The great benefits of using a larger umbrella project to support a small focused one, that gives much greater resonance to the impact of the small one\. (Fundacion Natura, Community, Coffee and Environment) Relatively small amounts of leveraged funds can have a very effective impact, when integrated into a larger project\. The impressive results of the Fundacion Natura project are a result of dedication and long hours, but also the intangibles of counting on a larger team sharing the aims and resources, and providing full back up and extra support\. Page 18 18 3\. The focus on gender analysis with men, women and families, had a great liberating and cohesive community impact, in terms of human development, participation, motivation, self esteem, confidence, and social interaction \. The workshops CEASPA held exclusively with men, and then with women, had great impact\. In the case of the men, CEASPA worked with the park guards, community members and with the project team\. Among the park guards, some previously unresolved issues of family violence, drinking and abuse came out; again interpersonal relations improved after the workshop\. In the communities, the women’s groups started to organize themselves in a more consistent fashionand community activities in some cases showed an increase in the participation of both partners and of the sons and daughters of older community members\. Many community people refer to changes (positive ones) in family communication\. 4\. Care taken in designing and thinking through methodologies of how to get results in community changes and action pays off \. The project team ran into problems when we did not take sufficient time to think things through and even with the best design in the world, it is still not possible to guarantee or control how things will turn out\. This issue is one that requires constant revisiting\. There was a tendency to take for granted that the new people working on the project already had experience in the popular education methodologies, as they had worked in extension\. However, there is a world of difference between vertical communications and the approach of popular education methodology, that starts with respect and acknowledgement of where people are, their knowledge and experience, moves into reflection and deepening of that knowledge, and back to a transformation in praxis\. There is a tendency to fall into activism, and count the results in terms of numbers of workshops, meetings, etc\., rather than the quality of the decisions and outcomes and what people actually do as a result of a workshop\. 5\. Methodologies that work particularly well: exchange visits, field trips, mobile workshops, farmer to farmer interactions, horizontal exchanges, learning by doing, having fun, sharing a meal, getting people together in a new environment, doing something different\. In terms of thinking or experiencing something new, there is nothing quite like being in a different environment\. This project required participants, the project team, the government, local people, other institutions, to do a lot of envisioning, dreaming, daring to think out of the box, in a way that did not always square with their expectations or past experiences\. CEASPA had lots of opportunities to do things differently, to have new experiences, starting with becoming familiar with this beautiful area that had been largely off limits to Panamanians since the beginning of last century\. So CEASPA arranged bus trips, picnics on the beach, train rides, a boat trip down the river, horseback riding in the mud to get to more isolated communities, going up in a crane to above the forest canopy, muddy walks to caves and waterfalls deep in the Page 19 19 forest, exchange visits to campesino organizations in Darien, Veraguas, visits by park guards to other parks in the Canal area\. CEASPA arranged for children and teachers to go to festivals and school competitions, for campesino women leaders to leave their families to go to a residential course in a hotel, or even in Costa Rica; the project promoted increasing exchanges between communities, receiving young Canadians overnight, in villages completely unused to outsiders; arranging a Chinese breakfast for government officials with the CEASPA board of Directors, to break a deadlock in communication; and any chance to explore the unknown with interested people or groups\. 6\. People love to learn new things: especially in isolated rural communities, for example, the introduction of bird watching, making maps of the communities, monitoring raptor migrations, painting, puppet making, presenting puppet shows, community tourism exchanges\. People really like to visit new places, meet new people, talk about new topics, be taken into account\. The social interactions and the knowledge and confidence gained in new skills are experiences that stay with people, help them grow and sow seeds for the future with results way beyond the life of a project\. 7\. Students and volunteers can make the paid team far more effective and do wonderful and surprising things\. The positive energy in the ideas and dreams of the project attracted some great additions to the formal team and its activities\. The interns and volunteers from Canada, Panama, Spain, the United States, England gave a boost of energy, fun, brilliance, distraction and friendship, in addition to contributing in tangible ways with a video, a book, brochures, photographs, a community center in Caño Quebrado, publicity in Lonely Planet Guide Panama , website design, establishing of local committees, tears and laughter\. 8\. Communication is vital, a website and an attractive book mean people take you seriously\. The book Panama’s Caribbean Treasure: the San Lorenzo Protected Area ” was not a planned project output\. It was written by a volunteer\. However, without the project’s accumulated specialized documentation center, it would not have been possible\. Once available, the full value of it was realized, and CEASPA strongly recommends having a good website and publication about an interesting project within the first year\. 9\. Teamwork and networking are key\. Constant communication, feedback, promotion of identity, intensity of interaction, encouraging of incorporation of new elements were all needed and encouraged\. “Working as a team” is more than a cliché, or something that everyone knows how to do\. It takes a lot of hard work to get there\. The project was very complex, and ambitious\. It required permanent and intensive flows of information among all the components, people and activities, to be able to respond appropriately, take initiatives and follow up in a timely fashion, and to help promote movement Page 20 20 in a direction that would support the project objectives\. CEASPA spent a lot of time trying to promote the attitudes and behaviours necessary to achieve that permament intercommunication\. The project all felt the difference and knew when the flow was working, and conversely when not\. The external environment was not always positive towards the project, so it was particularly important to maintain a mutually supporting interactive environment within the project team\. The World Bank Task Manager can become part of that team, but is not necessarily so\. It’s great when they are\. 10\. Transition from military to civilian use with community participation is a high level objective\. And in times of national security needs, even more so\. The project aims are very ambitious\. There is not agreement between civil society and all government agencies as to what are the parameters of “community participation”\. The words are shared, but not necessarily the ideas and action that go behind them\. Moreover, the project area was used for jungle warfare training for forty years prior to 1999\. Old habits die hard\. CEASPA has learnt that despite all the efforts:- the investments, the publicity, the agreements among government agencies, the support of international agencies, including US government agencies- the siren call of “national security requirements” can override the efforts, at least temporarily\. Efforts such as these require long term commitment, way beyond four years of a project\. IV\. FINANCIAL MANAGEMENT STATUS Block A grant Audit sent: March 21, 2003, From September 1, 1998 to June 30, 1999, approved in 5 September 2003 Audit of calendar year 1999 sent September 18, 2000, approved in August 1, 2001 Audit of calendar year 2000 sent May 14, 2001, approved in August1,2001 Audit of calendar year 2001 sent April 16, 2002, approved in August 30,2002 Audit of calendar year 2002 sent to WB: March 21, 2003, approved in 5 September 2003 approved Due date of final statement of account and external audit/ period to cover: calendar year 2003: November 2003 Received by Task Manager: Yes\. Pending approval from FMS\. Page 21 21 ANNEX Photographs of the San Lorenzo project team and work (NB sent as individual files to facilitate desired layout) 1\. The project team (from left to right, top to bottom): Luis Espinosa, Administrative assistant; Sara Jalil, Administrator of natural resource projects; Charlotte Elton, Project Coordinator; Alvaro Jaén, Mapping and Information Management; Carlos Vigil, Community component coordinator; Daniel Holness, Natural resources component coordinator; Soledad Batista, ANAM, Director of the San Lorenzo Protected Area; José Herrera, Administrator and accountant; Manuel Hayen, Community promoter; Graciela Estripeaut, Consultant in systematizing experiences; Máximo Flores, Community promoter; Pedro Cedeño, Facilitator in popular education workshops\. 2\. Landsat photo 2000, showing forest cover of the northern, Caribbean portion of the Canal area\. 3\. Cover of book , Panama´s Caribbean Treasure: The San Lorenzo Protected Area , by Leslie F\. Larson\. The book was published by CEASPA, 2002\. The proceeds are earmarked for environmental education activities approved in the Management Plan\. 4\. Parkguards training in map reading, July 2003\. 5\. Gender workshop in the Achiote chapel, 2001\. 6\. Children from Escobal enjoying the CEASPA and San Lorenzo Protected Area exhibit at the III Agroecotourism Festival of Lake Gatun and the Costa Abajo of Colon, organized by the community of Escobal, July 2003\. 7\. Coffee plants in La Tagua, in a nursery, prior to planting on the farm, inspection by the coffee specialist, Carlos Ábrego, 2001\. 8\. On site planning for the World Heritage Site, Fort San Lorenzo, with the US Forest Service, Panamanian Tourism Institute, Management Plan consultants and park guards, 2000\. 9\. Jaguar footprint plastercast, made by ANAM park guard in the San Lorenzo Protected Area, after receiving training in animal footprints organized by the project, 2003\. 10\. US Forest Service workshop on recreational opportunities and scenery management of the San Lorenzo Protected Area, with Management Plan consultants, officials of the Panama Tourism Institute, the Interoceanic Regional Authority, the National Environment Authority and CEASPA, 2000\. Documents available on the website www\.sanlorenzo\.org\.pa 11\. Park guards in bird watching training session, 2001\. 12\. Buffer zone community of La Tagua , making organic fertilizer, 2002\. 13\. Hand puppet of a Toucan, made by the Girasoles Creativos women´s group, Escobal\. Page 22 22

REVIEW

P049543

Document of The World Bank Report No: ICR0000688 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-29870 IDA-2987A) ON A CREDIT IN THE AMOUNT OF SDR 21\.6 MILLION (US$30\.0 MILLION EQUIVALENT) TO THE REPUBLIC OF UGANDA FOR A ROAD SECTOR INSTITUTIONAL SUPPORT TECHNICAL ASSISTANCE PROJECT June 25, 2008 Africa Transport Sector Country Department AFCE1 Africa Regional Office  CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 2007) Currency Unit = Uganda Shillings (UGX) SDR1\.00 = US$1\.57 US$1\.00 = UGX1,701 FISCAL YEAR July 1 -- June 30 ABBREVIATIONS AND ACRONYMS APL Adaptable Program Loan CAS Country Assistance Strategy DCA Development Credit Agreement DUCARIP District, Urban and Community Access Roads Investment Plan EAB Executive Agency Bill ELU Environmental Liaison Unit FM Financial Management FRSP First Road Sector Project GOU Government of Uganda ICR Implementation Completion and Results Report IDA International Development Association JTSR Joint Transport Sector Review LOSP Letter of Sector Policy MC Management Committee MOFPED Ministry of Finance, Planning and Economic Development MOWHC Ministry of Works, Housing and Communication (July 1, 1998 to June 30, 2006) MOWT Ministry of Works, and Transport (July 1, 2006 to date) MTR Mid-Term Review NEMA National Environmental Management Authority OPRC Output Performance-based Road Contracts PDO Project Development Objective PEAP Poverty Eradication Action Plan PIP Project Implementation Plan PIU Project Implementation Unit PPP Public Private Partnership QAG Quality Assurance Group RA Road Agency RAFU Road Agency Formation Unit RAS Road Agency Study RDP Road Development Project RF Road Fund RSDP Road Sector Development Program RSISTAP Road Sector Institutional Support Technical Assistance Project SDR Special Drawing Rights TA Technical Assistance TAERA Transitional Arrangement for the Establishment of a Road Agency TSIREP Transport Sector Investment and Recurrent Expenditure Plan TYDRIP Ten-Year District Road Investment Plan UNRA Uganda National Road Authority USD United States Dollar Vice President: Obiageli Katryn Ezekwesili Country Director: John Murray McIntire Sector Manager: C\. Sanjivi Rajasingham Project Team Leader: Labite Victorio Ocaya ICR Team Leader: Dieter E\. Schelling  THE REPUBLIC OF UGANDA Road Sector Institutional Support Technical Assistance Project TABLE OF CONTENTS Data Sheet \. i 1\. Project Context, Development Objectives and Design\. 1 2\. Key Factors Affecting Implementation and Outcomes \. 5 3\. Assessment of Outcomes\. 11 4\. Assessment of Risk to Development Outcome\. 15 5\. Assessment of Bank and Borrower Performance \. 15 6\. Lessons Learned \. 18 Annex 1\. Project Costs and Financing\. 20 Annex 2\. Outputs by Component \. 21 Annex 3\. Economic and Financial Analysis\. 30 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 32 Annex 5\. Stakeholder Workshop Report and Results\. 33 Annex 6\. Summary of Borrower's ICR and/or Comments on Draft ICR\. 34 Annex 7\. Comments of Co-financiers and Other Partners/Stakeholders\. 49 Annex 8\. List of Supporting Documents \. 50 MAP Number IBRD 36109  A\. Basic Information UG-Road Sec & Inst Country: Uganda Project Name: Supt (FY98) Project ID: P049543 L/C/TF Number(s): IDA-29870,IDA-2987A ICR Date: 06/27/2008 ICR Type: Core ICR REPUBLIC OF Lending Instrument: TAL Borrower: UGANDA Original Total XDR 21\.6M Disbursed Amount: XDR 21\.1M Commitment: Environmental Category: C Implementing Agencies: Road Agency Formation Unit Ministry of Works and Transport of Uganda Cofinanciers and Other External Partners: B\. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 01/20/1997 Effectiveness: 08/27/1998 08/27/1998 Appraisal: 03/25/1997 Restructuring(s): Approval: 09/09/1997 Mid-term Review: 03/14/2000 Closing: 12/31/2000 12/31/2007 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 Quality of Supervision: Moderately SatisfactoryImplementing Agency/Agencies: Moderately Satisfactory Overall Bank Overall Borrower Performance: Moderately 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 Satisfactory 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 62 63 Roads and highways 38 37 Theme Code (Primary/Secondary) Administrative and civil service reform Secondary Secondary Infrastructure services for private sector development Primary Primary Rural markets Secondary Secondary E\. Bank Staff Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Callisto E\. Madavo Country Director: John McIntire James W\. Adams Sector Manager: C\. Sanjivi Rajasingham Yusupha B\. Crookes Project Team Leader: Labite Victorio Ocaya Yitzhak A\. Kamhi ICR Team Leader: Dieter E\. Schelling ICR Primary Author: Subhash C\. Seth F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The project objectives are: 1\. To strengthen the Government's road sector management capability through spinning off the road administration and execution activities of the Ministry of Works, Housing and Communications (MOWHC), and the creation of an autonomous and performance-based Road Agency\. ii  2\. To improve transport sector policy and management, through the redefinition of the role of MOWHC towards a regulatory and planning body\. 3\. To prepare physical infrastructure components to be included in the proposed First Road Sector Project which would contribute to economic growth and poverty alleviation and to improved access to social services\. Revised Project Development Objectives (as approved by original approving authority) (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 : Improve institutional efficiency of the road sector, measured through improved anagement of road works contracts\. RAFU to RAFU is under Value RAFU created as an RAFU improved transit to transition to UNRA quantitative or international organzation effiency of road UNRA and and will take over Qualitative) to manage large contrats\. works take over maintenance mainteanance on from MOWT July 1, 2008\. Date achieved 08/27/1998 06/01/2000 10/01/2007 12/31/2007 Comments RAFU#s performance has been satisfactory in improving road sector institutional (incl\. % efficiency by improving value for money of road works (see Annex 3)\. By achievement) project closure RAFU#s management capacity increased and was ready to take over as UNRA\. Indicator 2 : Redefine the role of MOWT (formerly MOWHC) Spin off of Spin off of MOWT is ready to Value Spin off of management spin off of national quantitative or of large contracts to national road national road road managment to Qualitative) RAFU management to management UNRA to UNRA UNRA starting July 1, 2009 Date achieved 08/27/1998 06/01/2000 10/01/2007 12/31/2007 Comments Management of large contracts was transferred to RAFU at the effectiveness of (incl\. % the project\. At project closing RAFU was in transition to UNRA\. Starting from achievement) July 1, 2008 UNRA will take over the maintenance of national roads from MOWT\. Achievement 90% Indicator 3 : Rehabilitate economic infrastructure Value quantitative or (national road network) in Commencement Economic infrastructure ofCommenceme Commencement of Qualitative) poor shape works nt pf works works Date achieved 08/27/1998 09/30/1999 06/30/2001 06/01/2001 Comments Works commenced in June 2001 through the follow-on Road Development (incl\. % Program (RDP), phase 1\. Achievement 100% iii  achievement) Indicator 4 : Improve environmental protection Value No Environnemental quantitative or Liaison Unit (ELU) in Establishment of Not revised ELU in MOWT Qualitative) MOWT ELU in MOWT operational Date achieved 08/27/1998 04/01/2001 04/01/2001 04/01/2001 Comments ELU has three environmental specialists, and it works in collaboration with the (incl\. % National Environmental Management Authority for all infrastructure projects achievement) under the ministry\. Achievement 100%\. Indicator 5 : Improve efficiency through involvement of the private sector 100% of new construction and 100% of new Value Weak local construction and construction and quantitative or capacity\. Over 35% of the rehabilitation 85% of annual Not revised rehabilitation and Qualitative) works executed by force 85% of annual account\. maintenance works contracted maintenance works out contracted out Date achieved 08/27/1998 12/31/2007 12/31/2007 12/31/2007 Comments (incl\. % UNRA plans to completely eliminate force account within three years\. achievement) Achievement 100%\. (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 : Preparation of road strengthening and upgrading sub-projects Value Feasibility study and (quantitative engineering design not Commencement ofCommenceme Commencement of or Qualitative) ready works nt of works works Date achieved 08/27/1998 09/30/1999 06/01/2001 06/01/2001 Comments 87 km of sub-projects for road strengthening and upgrading were designed under (incl\. % RSISTAP (more than originally planned 680 km), of which 795 km have been achievement) or are being executed under the follow-on Road Development Program, phases Indicator 2 : Establishment of a Road Agency RAFU established by Establishment UNRA established Value effectiveness and took Establishment of of an and ready for taking (quantitative over the management of an autonomous autonomous over from MOWT or Qualitative) large civil works road authority road authority and RAFU starting contracts from MOWT (UNRA) (UNRA) July 1, 2008 Date achieved 08/27/1998 06/30/2000 10/01/2007 12/31/2007 Comments RAFU was created at effectiveness as an #arms-length# road agency managing (incl\. % large contracts\. However, the creation of a fully autonomous road authority achievement) (UNRA) was delayed\. Its bill was approved by parliament in May 2006\. UNRA to commence full operations o Indicator 3 : Strengthen road management capacity iv  Value Sector management Sector Policy and Sector Policy and (quantitative studies required to Management Not revised Management or Qualitative)strengthen road management Studies completed Studies completed Date achieved 08/27/1998 12/31/2005 12/31/2005 12/31/2005 Comments (incl\. % No more delays in the provision of counterpart funding experienced in the achievement) funding of RDP\. Achievement 100% Indicator 4 : Timely availability of counterpart funds Value (quantitative Serious delays in GoU Budget discipline or Qualitative)counterpart funds\. established Date achieved 08/27/1998 12/31/2007 Comments (incl\. % achievement) G\. Ratings of Project Performance in ISRs Actual No\. Date ISR Archived DO IP Disbursements (USD millions) 1 10/01/1997 Satisfactory Satisfactory 0\.00 2 04/06/1998 Satisfactory Satisfactory 0\.00 3 06/15/1998 Satisfactory Satisfactory 0\.00 4 12/22/1998 Satisfactory Satisfactory 0\.50 5 04/06/1999 Satisfactory Satisfactory 0\.93 6 11/22/1999 Satisfactory Satisfactory 3\.30 7 04/20/2000 Satisfactory Satisfactory 3\.42 8 11/27/2000 Satisfactory Satisfactory 5\.15 9 05/29/2001 Satisfactory Satisfactory 6\.64 10 12/19/2001 Satisfactory Satisfactory 7\.73 11 04/26/2002 Satisfactory Satisfactory 8\.93 12 06/13/2002 Satisfactory Satisfactory 9\.53 13 09/30/2002 Satisfactory Satisfactory 10\.02 14 11/22/2002 Satisfactory Satisfactory 10\.63 15 03/31/2003 Satisfactory Satisfactory 11\.12 16 08/06/2003 Satisfactory Satisfactory 13\.09 17 12/23/2003 Satisfactory Satisfactory 14\.53 18 04/26/2004 Satisfactory Satisfactory 16\.15 19 09/09/2004 Satisfactory Satisfactory 17\.25 20 12/14/2004 Satisfactory Satisfactory 18\.81 21 01/26/2005 Satisfactory Satisfactory 18\.81 22 05/05/2005 Satisfactory Satisfactory 19\.93 23 10/19/2005 Satisfactory Satisfactory 20\.87 24 05/16/2006 Satisfactory Satisfactory 22\.44 v  25 12/18/2006 Satisfactory Satisfactory 24\.69 26 06/28/2007 Satisfactory Satisfactory 26\.35 27 12/07/2007 Satisfactory Satisfactory 27\.43 H\. Restructuring (if any) Not Applicable I\. Disbursement Profile vi  1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal 1\. In 1997, when the Road Sector Institutional Support Technical Assistance Project (RSISTAP) was appraised, Uganda was one of the fastest growing economies in Africa\. This was due to implementation of a series of structural and institutional reforms\. The government developed a comprehensive policy and institutional reform program aimed at deregulating the economy, eliminating direct state involvement in the public services, and improving institutional efficiency\. The government embarked on a major privatization program, a comprehensive civil service reform, public expenditures reform for both development and recurrent budgets and a decentralization process\. These elements of the government's reform program provided the background for the design of the RSISTAP\. 2\. RSISTAP was designed to support the Government of Uganda (GOU) in setting up an appropriate institutional framework in the roads sector and to prepare engineering designs for implementing the Road Development Program (RDP), a component of the proposed 10-year Road Sector Development Program (RSDP) 1996-2006\. RSDP is currently being supported by a four- phased IDA Adaptable Program Loan (APL)\. APL1, 2 and 3 are under implementation and APL4 is under preparation\. 3\. The creation of an autonomous, performance-based Road Agency (RA) was critical\. Accordingly, the overriding goal of RSISTAP was to support the government in setting up such RA within three years of project effectiveness\. It was planned to carry out a study for the establishment of a RA, which would cover the statutory, legal and regulatory framework required for the establishment and operation of the RA\. The study was also required to assess the funding arrangements for the road sector and for operation of the RA including the possibility of a user- managed road fund\. Prior to the establishment of the RA, consultant services for transitional institutional arrangements in the form of a Road Agency Formation Unit (RAFU) were agreed to be financed under RSISTAP\. RAFU was to be created prior to effectiveness of the credit and to take over the management of large contracts from the Ministry of Works and Transport (MOWT)\. This institutional arrangement was intended to ensure a more effective program management and project implementation capability in the road sector, thus creating a conducive environment for effective implementation of the RDP and the creation of an autonomous RA\. The strategy at project appraisal was that by the time parliament passes the bill to create a RA, the institutional capacity of RAFU in financial management, procurement, environment and monitoring would sufficiently develop to transform RAFU to Uganda National Road Authority (UNRA)\. 4\. The design of RSISTAP was consistent with the World Bank Group's Country Assistance Strategy (CAS), which was discussed at the Board on May 20, 1997, and the GOU Letter of Sector Policy (LOSP), which was signed by the Minister of Finance, Planning and Economic Development (MOFPED) on July 16, 1997\. RSISTAP was part of IDA's operational program, which was designed to reduce poverty through a medium term strategy focused on private investment-led growth\. Lowering transport costs and improving reliability of accesses to infrastructure were the key elements to facilitate business development\. RSISTAP was designed to: (i) strengthen the budgetary process through the development and implementation of a management information system; (ii) provide support for implementation of parastatal reforms in the transport sector; (iii) create an enabling policy and regulatory environment for private sector investment and management; (iv) improving environmental protection though the establishment of an 1  Environmental Liaison Unit (ELU) within MOWT; and (v) prepare for the rehabilitation and upgrade of economic infrastructure through feasibility and engineering studies, and the preparation of bidding documents\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 5\. The project objectives were to: (i) strengthen the government's road sector management capability through spinning off of the road administration and execution of activities under MOWT, and the creation of an autonomous performance-based Road Agency; (ii) improve transport sector policy and management, through the redefinition of the role of MOWT towards a regulatory and planning body; and (iii) prepare physical infrastructure components to be included in a future road sector program which would contribute to economic growth and poverty alleviation and to improved access to social services\. 6\. As given in the Memorandum and Recommendations of the President to the Executive Directors, dated August 4, 1997, Technical Annex 7, the key indicators to assess the outcomes and impacts of project development objectives were as follows: Creation of an autonomous Road Agency by June 1, 2000\. Spin off executing functions from MOWT by June 1, 2000\. Establishment of an Environmental Liaison Unit (ELU) within MOWT by July 1998\. Increased volume of road works to be contracted out to the private sector increasing to 85% of the total in 2000/2001 from 65% in 1996/97\. Commencement of physical investments in support of economic growth and market integration by September 1999\. Project funds would be properly budgeted, accounted for and audited within a satisfactory system of internal control\. Improved co-ordination between national environmental sector policy and implementation of road programs\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 7\. There was no change in the PDO\. However, some indicators and their target values were modified and realigned in the process of the extensions of credit closing dates as follows (see data sheet): (A) PDO Indicators: Improve institutional efficiency of the road sector measured through improved management of works contracts\. Redefining the role of MOWT with a target date for transferring maintenance activities to UNRA by October 1, 2007\. Rehabilitate economic infrastructure with a target date of commencement of physical investments in support of economic growth and market integration by June 30, 2001\. 2  Improve environment protection with a target date for setting up an ELU in MOWT by April 1, 2001\. Improve efficiency through involvement of the private sector with following target values to be achieved by December 31, 2007: (i) 100 percent new construction and rehabilitation works contracted out; and (ii) 85 percent maintenance works contracted out\. (B) Intermediate Outcome Indicators: Preparation of road rehabilitation and upgrading sub-projects with a target date for commencement of physical investments by June 1, 2001\. Establishment of UNRA by October 1, 2007\. Strengthen road management capacity with a target value of completing road sector policy and management studies by December 31, 2005\. Timely availability of counterpart funds with appropriate budget discipline established by December 31, 2007\. 1\.4 Main Beneficiaries 8\. The primary target group or main beneficiary of the project was the MOWT\. RSISTAP supported setting up of ELU, technical advisory services for the operation of RAFU, creation of UNRA, external auditing, and carrying out of studies relating to sector policy, institutional development, capacity building and technical management\. It also supported preparation of engineering design of selected road projects, which have been or are being implemented under the follow-on road sector projects\. These activities have led to substantial savings in vehicle operating costs and travel time on national roads\. The study to develop a ten-year district road investment plan (TYDRIP) was a precursor to the policy and development of the ten-year district, urban and community access roads investment plan (DUCARIP) currently under implementation with support from other donors\. Improvement and timely maintenance of district roads will benefit local governments, farmers, traders and rural population through increasing agriculture produce, and contributed to improving delivery of social services in the rural areas\. Since the identified sub- projects were part of a comprehensive countrywide road investment strategy, RSISTAP contributed to foster economic growth and poverty alleviation through improvement in market integration and accessibility\. The completed sector studies benefited in rationalizing road sector management and improved efficiency and management effectiveness in the road sector\. The main beneficiaries identified at project appraisal remained the same during project implementation\. 1\.5 Original Components (as approved) 9\. As provided in the Development Credit Agreement (DCA) of March 1998, the RSISTAP comprised the following components\. 10\. Part A: Institutional Developmental and Capacity Building: Strengthening the borrower's road sector management capability through provision of technical advisory services by: 3  (i) Staffing RAFU as the nucleus for the proposed Road Agency; and (ii) Establishing and staffing a new ELU in MOWT\. 11\. Part B: Sector Policy and Management Studies: Improvement of the Borrower's road sector policy and management through provision of technical advisory services for studies on: (i) an autonomous Road Agency; (ii) road safety audit and regulations; (iii) road network management policy; and (iv) development of a management information system\. 12\. Part C: Infrastructure Preparation Studies Preparation of the physical infrastructure components of a proposed multi-year roads rehabilitation and improvement program through: (i) the carrying out of feasibility studies and if feasible, the detailed engineering design and environmental assessment of about 680 km of main roads; and (ii) (a) preparation of a national feeder road study and (b) detailed engineering designs for about 500 km of feeder roads\. 13\. Part D: External Auditing: Provision of technical advisory services for the auditing of accounts under the projects\. 1\.6 Revised Components 14\. Per the government's request dated February 4, 1999 an amendment to the DCA was signed on May 5, 1999 to add the following component: 15\. Part E: Office equipment, computers and vehicles for RAFU estimated at US$720,000\. The justification for such equipment was well explained and linked to capacity building in the government's request\. Accordingly, in the DCA, Schedule 1 (Withdrawal of the Proceeds of the Credit), Schedule 2 (Description of the Project) and Schedule 3 (Procurement) were amended\. 16\. In addition, the government's request also included a revision to Part A for institutional development and capacity building\. In the original component, it was envisioned that RAFU would be staffed by teams provided by international consulting firms\. The selection of consulting firms would have caused less management problems in handling a large number of technical assistance staff\. But based on findings of a consultant's report on "The Transitional Arrangements for the Establishment of a Road Agency" (TAERA) and the government's experience in the country on setting up of a similar organization such as the "Uganda Revenue Authority", the government was convinced that the recruitment of individual consultants for line positions within RAFU, combined 4  with the recruitment of technical assistance consultants, both individuals and firms would be the most effective way of achieving capacity building\. 1\.7 Other significant changes 17\. No significant changes were made in the overall project objectives and design\. However, some changes as summarized below were made in the scope and scale, implementation schedule and funding reallocation\. 18\. Scope and scale: On October 4, 2001 the DCA was amended to allow for the following changes in the scope and scale of the project activities: (i) increasing the coverage of roads under detailed engineering design and environmental assessment from 680 km to 730 km; (ii) increasing the coverage of engineering design for the 10 years district road investment program from 500 km to 1000 km; and (iii) carrying out a feasibility study and detailed engineering design for upgrading from gravel to paved (bituminous) standard of about 300 km of district roads that were reclassified to national roads\. 19\. Implementation Schedule: The original project closing date was December 31, 2000\. During the life of the project the closing date was extended four times because of the delays in achieving the critical development objective of establishing the national road authority, as follows: (i) on May 5, 2000, for one year until December 31, 2001; (ii) on October 4, 2001, for two years until December 31, 2003; (iii) on March 10, 2003, for a further two years until December 31, 2005; and (iv) finally, on December 23, 2005, for a period of another two years until December 31, 2007\. The compelling justification for all extension requests were that the project's development objectives were still achievable, but that more time was needed to implement the intended ambitious reforms\. 20\. Funding Reallocation: Funding reallocation among the categories of institutional development, capacity building and equipment was done three times: on May 5, 1999; October 4, 2001; and on November 2, 2004\. The aim was to ensure that the revised components were adequately funded\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 21\. In the LOSP, the government expressed commitment to continue selection and prioritization of the transport investments and recurrent expenditures in a rational manner\. This was necessary at that stage when new projects were competing for very limited resources\. As part of the medium term strategy for the transport sector, the government developed the 10-Year (1996-2006) RSDP to promote economic growth, reduce poverty, and improve access to social services\. Consistent with the goals of institutional reform RSDP provided emphasis on privatization of road management and restructuring of MOWT\. RSISTAP supported GOU's institutional reform objectives in the road sector and facilitated consultants in preparation of the investment component of RSDP and conducting sector policy, management and technical studies\. 22\. The following lessons drawn from the experience of earlier transport operations in Uganda were reflected in the design of RSISTAP: (i) limited capacity of the implementation agency to address the problems relating to contract management, financial and technical monitoring; (ii) substantial delays in the processing and awarding of contracts, which led to delayed completion, 5  cost overruns, and loss of investment; (iii) the need to first undertake the main institutional and policy changes, including restructuring road administrations as well as changes in the decision making process before proceeding with any road sector investment; and (iv) the need to update engineering design before commencement of projects so as to avoid substantial changes in the field\. RSISTAP took these lessons into account\. As a result, the Bank did not support implementation of the government's First Road Sector Project (FRSP: 1997-2001) though the project was ready at the time of the RSISTAP's appraisal as the critical institutional reforms aimed at improving management efficiency in the road sector had not been completed\. Accordingly, in order to address the institutional reforms, on September 1, 1998, RAFU was established as a nucleus and precursor to the proposed autonomous road authority\. RAFU was given responsibility for the management of large civil works contracts\. RAFU being an "arms-length" agency with competitively selected and well salaried professionals, it greatly enhanced road management as compared to the Ministry\. 23\. At project preparation, a risk analysis was carried out and the mitigation measures were correctly identified\. The results of the proposed institutional restructuring/setting up of a road agency associated with mobilization of government funding for its sustained operations was allocated "high risk" rating and this was adequately mitigated through the credit by adopting a market based remuneration system and extending contract on long term basis that would attract qualified and experienced technical staff\. The other risk of developing adequate management and technical capacity was managed through agreeing on a series of key actions as follows: (i) appointment of the head of RAFU by credit effectiveness, (ii) approval of an action plan recommended by the study on the transitional arrangements for the establishment of the Road Agency by credit effectiveness; (iii) compliance with key target dates under an agreed action plan prior to appraisal of the proposed follow-on FRSP (RDP Phase 1); and (iv) allocation of adequate counterpart funds (US$ 3\.0million)\. However the delay in fulfilling the mandatory procedures required prior to setting up of an autonomous road agency such as approval of a road agency bill by the cabinet and then by the parliament was not conceived as part of the risk analysis\. 24\. RSISTAP was prepared in a collaborative manner and GOU took the lead role\. Information sharing and consultations also took place with the donor community\. Within the framework of RSDP, two donor technical meetings took place in Uganda in April and October 1996\. In addition, a Donor's conference was held in Paris on November 20, 1996\. The draft project concept document was disseminated to the donor community and formerly reviewed in March 1997 at a stakeholders' meeting comprising of GOU, local government officials, representatives of the donor community, professional bodies, academia, transport operators and road users during appraisal\. 25\. The Quality Assurance Group (QAG) carried out a quality at entry review during the period December 1, 1997 to January 16, 1998 and rated it as satisfactory (see paragraph 63)\. 2\.2 Implementation 26\. The Bank approved the project on September 9, 1997, the DCA was signed on March 9, 1998 and the credit became effective on August 27, 1998\. The credit was scheduled to be effective within 90 days of the credit signing by June 9, 1998, but by that date the government could not meet the following effectiveness conditions: (i) the terms and conditions of employment of RAFU staff as recommended in the study on TAERA; (ii) key RAFU staff selected; (iii) approved action plan for implementation of the TAERA study recommendations; and (iv) consultants selected for carrying out four studies under the component of sector policy and management studies\. Accordingly, the credit effectiveness date was extended for a further period of three months\. All effectiveness conditions were met by the extended effectiveness date of August 27, 1998\. The 6  major delay was due to the difficulty in the recruitment of the Director of RAFU\. This position was first advertised in July 1997 and was only filled on September 1, 1998 after a re-advertisement because the first advert did not attract competent applicants\. The other key positions of Finance and Administration and Deputy Director were filled on December 3, 1998 and January 7, 1999 respectively\. 27\. A mid-term review (MTR) took place in March 2000\. The MTR noted that project objectives two and three: relating to improving sector policy and management through redefining the role of MOWT, and carrying out engineering studies for the preparation of the physical infrastructure component of the follow-on project were being successfully accomplished\. However, the first project objective related to the creation of an autonomous performance based road agency was not progressing satisfactorily, as preparation and processing of the legislation for the establishment of UNRA took much longer than anticipated\. A draft bill was prepared and discussed with stakeholders in late 2004 and was approved by Cabinet in April 2005\. The bill was presented to parliament on April 13, 2006, and was approved on May 5, 2006\. Though it took long to establish (see paragraph 30 below for the main reasons of the delay in implementing UNRA, and Annex 2, Table 2\.3 for a chronology of events for setting up UNRA), due to its transparency requirements, the involvement of the private sector in the Board of Directors, and the requirement to adhere to the performance agreement between MOWT and UNRA the bill is being considered as best practice by road management specialists\. 28\. During implementation, the project was twice subjected to a QAG review: (i) October 12, 2004; and (ii) September 22, 2006\. In the first review of October 2004, the overall rating of assessment was moderately satisfactory\. However in the second review of September 2006, the overall rating was satisfactory (see paragraph 65)\. 2\.2\.1 Major Factors Affecting Implementation Factors outside the control of the GOU or implementing agencies: 29\. There were no major factors outside the control of GOU or implementing agencies that affected the implementation of the project\. Factors generally subject to government control 30\. Selection of the appropriate option either Road Agency or Authority: In April 2001, GOU prepared policy guidelines and implementation strategy for promoting an executive agency program and RAFU was identified as one of the candidates for converting to a road agency using a "fast track" program\. In May 2001, the road agency study was launched and its report was discussed in a workshop held in Kampala on March 3, 2002\. In January 2003, though GOU was still committed to develop RAFU as a Road Agency based on the Executive Agency Bill (EAB), it was recognized that the EAB would not provide sufficient autonomy needed for the operation of a road agency\. As a result, in June 2004 the option of establishing an executive agency was abandoned, and GOU authorized MOWT to develop its own bill for the establishment of an autonomous road authority\. In September 2004, the MOWT with support of consultant prepared the UNRA Bill which was submitted to Cabinet in October 2004\. Cabinet approved the bill in April 2005 and the bill was approved by parliament on May 5, 2006\. In between, there were parliamentary and presidential elections that delayed the approval process\. Though GOU took a long time in deciding the appropriate option of an Executive Agency or Authority, it must be recognized that this decision was arrived at in a consultative and democratic manner taking into account the views of sector 7  stakeholders and that the final outcome is highly commendable\. A chronology of the main events that have happened for the setting up of UNRA is shown in Annex 2, Table 2\.3\. Factors generally subject to the implementing agency's control 31\. As mentioned before RAFU, an "arms-length" agency under the control of the MOWT, was created as an interim measure to enhance the capacity for the management of large contracts (financed by GOU and development partners) prior to creation of a fully autonomous road agency (UNRA)\. With the creation of RAFU road management capacity considerably improved (see Annex 3)\. However, initially RAFU had limited procurement and contract management capacity, was slow in recruiting its staff, and had weak monitoring and reporting capacity throughout the execution of the project as is explained in the paragraphs 32­35\. 32\. Initially inadequate capacity of RAFU for procurement and contract management: Although technical assistance was provided to RAFU in these areas, it was initially still overwhelmed with the massive task of procurement and contract management since it took over the management of all GOU and development partner financed large contracts\. 33\. Delay in recruiting RAFU key staff: The following problems were experienced in recruiting local engineers: (i) the perception that transfer from MOWT to RAFU would be automatic created some confusion; (ii) the condition to resign from public service prior to joining RAFU on a fixed term contract of one year, though renewable, was not clear as many of the staff had job security and were not sure whether they would forfeit their terminal benefits or not; (iii) the government's requirement for engineers in responsible positions is that they must be registered engineers in accordance with the laws of the country, i\.e\. the Engineer's Registration Act 1965, and this condition for recruitment of engineers in RAFU was an obstacle as many of the registered engineers were holding top government positions or were well placed in the private sector\. To overcome these issues the following was agreed: (i) to assign 13 young engineers who had not been registered by the Engineer's Registration Board, many of them with Masters level degrees, to RAFU on probation and their appointment letters were issued promptly upon registration; (ii) in order to build confidence in the staff, performance evaluation was carried out to enable management to assign the correct responsibilities to them; and (iii) renewal of the annual contracts was made automatic provided the performance was satisfactory\. Many of the young professionals performed well and some have competed successfully to occupy managerial positions in UNRA\. 34\. Weak monitoring capacity\. The project included key output and outcome indicators for monitoring and evaluation\. However the long decision-making process that require the approval of the contracts committee, lack of follow up on the agreed performance indicators, incomplete design of the monitoring and evaluation framework have contributed to implementation delays of some project activities\. 35\. Lack of comprehensive progress reporting\. RAFU prepared progress reports on individual project activities, but paid little attention to produce more comprehensive and consolidated progress reports for the information of all stakeholders interested in the road sector\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 36\. M & E Design: The key performance indicators for monitoring the achievement of the project objectives, project implementation, and financial progress were designed at project appraisal\. The framework provided adequate information on inputs, outputs, risks, critical assumptions, outcome and impacts\. However, the QAG review noted that it was not sufficiently sensitive to track 8  progress through intermediate targets and benchmarks\. The ICR team agrees with the QAG review report that it did not provide a good measure of progress as these were formulated in terms of end results or outputs whereas capacity building and institutional developments were through a phased process and needed intermediate benchmarks to monitor progress and to make adjustments as the need arose\. 37\. M & E Implementation: During project implementation, the performance indicators were modified and realigned as necessary (see paragraph 7) specifically to measure the progress of achieving development objectives and to take into account the changes made in the project activities\. The ICR team agrees with QAG review report that: (i) results framework agreed at entry was not modified during project implementation; (ii) the four project extensions were not subjected to easily monitored benchmarks; and (iii) the results framework should have been revised and updated at the time of each credit extension\. RAFU had a monitoring officer but no comprehensive evaluations were carried out to assess the performance of the organization in terms of procurement delivery, contractor payments and the performance of contractors and consultants\. 38\. M & E Utilization: UNRA will have a Planning Directorate with an adequately staffed unit responsible for M & E functions\. 2\.4 Safeguard and Fiduciary Compliance 39\. Procurement: At project appraisal, all procurement arrangements including procurement plan and procurement methods were discussed and agreed consistent with the World Bank (WB) guidelines\. The project included mainly procurement of consultant's services which comprised consulting firms and individual consultants\. The selection methods used were quality and cost based for technical assistance, engineering and policy studies; and least cost selection methods for the audit services\. For the supply of vehicles, computer and other office equipment, the procurement methods of international bidding and shopping were used, which were consistent with the World Bank guidelines\. Despite RAFU's efforts to follow procurement plans, delays occurred\. On some occasions the quality of procurement documentations were not up to standard at the initial stages of the project\. However, by project closing and with the formation of working teams of international consultants and local staff, the quality of procurement documents improved and procurement activities for most of the goods and consulting services contracts were satisfactorily completed\. 40\. Financial Management: There was a separate Finance and Administration Division, in RAFU, that was responsible for all aspects of financial management\. A well documented Financial Management Manual was developed\. The manual outlines internal control procedures as well as financial reporting arrangements for the funding received from the GOU budget and the WB and other donors\. Effective July 2001, the accounting system was fully computerized based on a double entry accounting system\. The ratings of the Financial Management (FM) in the ISRs were satisfactory\. The quality of the financial management reports in general was good\. Satisfactory audit reports were received on a timely basis, which were reviewed by the Bank and the comments sent to the Borrower\. FM issues were identified and appropriate recommendations made\. The absence of an internal audit unit had been a theme for a long time and it is now being established under UNRA\. Consistent with the DCA, the following financial covenants were complied with: (i) carrying out audits of the special account in accordance with appropriate auditing principles by independent auditors and (ii) furnishing of the information concerning the records and accounts\. There had been some delay in the release of counterpart funds due to budgetary constraints, but prior to project closing this was fully resolved\. 9  41\. Environment: At appraisal the project was considered as a Category "C" project with no environment risks as the project included no physical components\. An ELU was established in MOWT to monitor the activities of not only road projects but all environmental issues relating to infrastructure projects under the jurisdiction of the ministry\. ELU was formed in April 2001 and now it has three environmental specialists\. ELU works in collaboration with the National Environmental Management Authority (NEMA) and follows the recommendations of the road sector environmental policy and management study report completed earlier in the project\. ELU ensures that all road projects have NEMA approval prior to start of their implementation\. 42\. Social: As this project was primarily technical assistance for the institutional transformation of the road sector in Uganda, no direct social impacts occurred\. However, the project provided adequate emphasis on addressing the social issues through the engineering design of feeder roads to be implemented under the follow-on projects\. In addition, under RSISTAP, a road safety improvement and audit study was completed\. The main purpose for this study was to review the road safety problems in Uganda and to develop an action plan for remedial measures to improve road safety under the follow on projects\. The plans have been implemented under the RDPP2 project\. These include: (i) preparation of curricula for driving instructors and driving schools; (ii) training manuals for teaching road safety in primary schools; (iii) provision of road safety enforcement equipment, motor-cycles, computers and associated training for the traffic police; and (iv) capacity building for the injury control center of Mulago Hospital\. 2\.5 Post-completion Operation/Next Phase 43\. RSISTAP supported the preparation of institutional reforms while setting up RAFU as an interim measure\. It also carried out the feasibility studies and prepared the engineering design and bidding documents for rehabilitation and upgrading of the prioritized road projects to be executed through the four phased APL: Road Development Program described below\. The overall performance of these operations can be attributed to the performance of RAFU\. 44\. Road Development Program Phase 1 (RDPP1): The size of the credit was US$119 million and IDA financed US$102 million\. The original allocation was US$90\.98 million\. The increase was due to the appreciation of the Special Drawing Rights (SDR) against the United States Dollar (USD)\. It was approved by the Board on June 29, 1999, became effective on February 1, 2000 and will close on June 30, 2008\. Its key objective was to improve access to rural and economically productive areas and to gradually build up road sector planning and management capability\. The Project completed the construction of the Pakwach-Nebbi-Arua road (130 km) and Busunju-Kiboga-Hoima road (145 km) designed under the RSISTAP\. 45\. Road Development Program Phase 2 (RDPP2): The size of the credit was US$97 million and IDA financed US$79 million\. The original allocation was US$66\.5 million\. The increase was due to the appreciation of the SDR against the USD\. It was approved by the Board on July 3, 2001, became effective on April 11, 2002 and will close on June 30, 2008\. Its key objective was to improve access to rural areas and economically productive areas and to progressively continue to build up sustainable road sector planning, design and program management capability, as well as road safety management\. The project completed the construction of Karuma-Olwiyo- Pakwach road (108 km) and Fortportal-Kasese-Katunguru and Equators road (162 km)\. It also financed the improvement of safety at selected road accident black spots, capacity building activities, and the production of a national transport master plan including a specific plan for the Kampala metropolitan area\. 10  46\. Road Development Program Phase 3 (RDPP3): The size of the credit/grant is US$114 million\. The original allocation was US$107 million\. The increase was due to the appreciation of the SDR against the USD\. It was approved by the Board on May 20, 2004, and became effective on June 23, 2005\. Its key objective was to improve access to rural areas and economically productive areas and to progressively continue to build up sustainable road sector planning, design and program management capability including road safety management\. The Project is implementing the construction of Soroti-Dokolo-Lira road (125 km) and Kampala-Gayaza-Zirobwe road (42 km)\. The project also finances feasibility and detailed design for the Gulu-Atiak-Nimula and the Arua- Koboko-Oraba roads, and the detailed design of 300 km of district roads, as well as capacity building in RAFU/UNRA\. 47\. Road Development Program Phase 4 (RDPP4): This project is under preparation\. It is proposed to complete the balance of work which could not be financed under the RDPP3 on account of cost overruns\. The roads included are Busega-Mityana road (57 km) and Zirobwe- Wobulenzi road (26 km)\. The project also plans the financing of road safety activities, the preparation of a future urban transport component in Kampala, capacity building and preparation of design and bidding documents on priority roads\. The project is scheduled for Board presentation on October 30, 2008\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation 48\. The project design addressed the objectives of carrying out appropriate institutional reforms, which were critical for the implementation of the government's 10-year RSDP\. The project objectives were relevant to the country's development priorities and the circumstances prevailing in the road sector\. Given that this was a technical assistance project supporting major sector reform, the planned implementation period of only three and a half years was too short\. Similar institutional reform processes in the region have taken not less than a decade The project preparation was timely and responsive to the ministry's needs for making preparations for implementing the First Road Sector Development Program (1997-2001), which was to be the first five year phase of the 10-year Road Sector Development Program (1997-2006) with a cost estimated at US$1\.5 billion\. The Bank carried out a diagnostic analysis of the government's planned RSDP and correctly advised to start with a technical assistance project for addressing critical needs of building institutional capacity, creating an independent road agency, and preparing detailed designs and bidding documents for the rehabilitation/paving of the main road network, and all these were adequately reflected in the design of RSISTAP\. 49\. The project objectives were clear, relevant and important to improve sector policy, road management, preparation of the future road sector investment programs, and improving access to social services\. The project components had a good linkage with the project objectives\. The project also contributed to the Bank's CAS strategic outcomes of lowering transport cost, improving reliability of access to infrastructure services, and poverty reduction through medium term strategy focused on private investment led growth\. The project objectives were also in line with the country's (1998) Poverty Eradication Action Plan (PEAP), and the LOSP through facilitating the efficient and reliable provision of transport services, increasing agricultural production, enhancing linkages with neighboring countries, promoting economic growth and integrating the country as a whole\. 11  3\.2 Achievement of Project Development Objectives 50\. As given in section 1\.2 above there were three PDOs\. The relative importance of each project objective, its linkage to the high level objectives and the rating for the assessment of its outcome is described below: 51\. The first objective of strengthening the government's road sector management capability through spinning off of the road execution and administration activities of the MOWT, and creation of an autonomous performance based road agency has been largely achieved, though with considerable delay\. Its rating is assessed as "moderately satisfactory" due to these delays\. For the achievement of this PDO, 70% of the project resources were allocated and therefore, this PDO carries the most weight\. RAFU was created as an interim solution in September1998 and was given the task to procure and manage large contracts for upgrading, rehabilitation and periodic maintenance on the national road network\. Through setting up of RAFU, the implementation of large contracts improved considerably in terms of quality of outputs and time of delivery\. The creation of an autonomous performance based road agency that would fully manage the national road network (including maintenance) however took much longer than planned for the following reasons: (i) in 2000, the government approved the Executive Agency Bill (EAB) and selected RAFU to be converted to a Road Agency as per EAB, but in 2002 the road agency study recognized that EAB will not provide adequate autonomy and recommended not to move forward with this proposal; and (ii) in 2004 the government abandoned the idea of creating a road agency under EAB and started preparation of the UNRA bill which took until April 2005 to be approved by Cabinet and until May 2006 to be approved by parliament\. Thereafter the Board of Directors of UNRA was appointed in January 2007, the CEO selected in November 2007, Directors in March 2008, and key staff in May 2008\. Throughout the project duration RAFU carried out one of the key functions of UNRA, the management of large contracts (which constitutes about 70% of its overall tasks), on the national road network with increasing efficiency and has thereby enhanced sector efficiency substantially (see Annex 3)\. RAFU has also, with the help of the project, implemented an extensive capacity building program in the sector that has now enabled it, including its well developed fiduciary functions, to transit to UNRA as of July 1, 2008 and take over maintenance works from MOWT\. With effect from January 1, 2008, GOU has been financing the salaries of RAFU staff\. Meanwhile the majority of the RAFU staff has been selected for the various positions of UNRA and appropriate allocation has been made for the payment of market based salaries of UNRA staff in the FY08/09 budget\. 52\. The second objective of improving sector policy and management through redefining of the role of MOWT towards a regulatory and planning body has been substantially achieved and its rating is assessed as "satisfactory"\. For the achievement of this PDO, 7% of the project resources were allocated\. To improve sector policies and road management, RSISTAP has financed several studies including the road agency study, road network management and financing study, road safety audit, motor vehicles inspection study, in-house development of management information system and a study in the use of local lime in road construction\. Many of the recommendations resulting from these studies have been implemented\. For example, based on the recommendations of the road management and financing study, a Road Fund (RF) bill was prepared and the RF legislation passed by Parliament on June 19, 2008\. It is expected that the RF will be fully operational by July 1, 2009\. The axle load regulation and control policy has been reviewed, revised and axle load control is being implemented by MOWT\. Further studies were carried out under the follow-on RDP projects, including a study for the spinning off of the surface transport regulatory functions of the MOWT to an autonomous agency\. This is now under consideration by the government\. 12  53\. Achievement of the third objective of preparing physical infrastructure components to be included in the future road sector program has exceeded the original targets by 128%, and its rating is assessed as "highly satisfactory"\. Feasibility studies were carried out and the engineering designs prepared for upgrading/rehabilitation of a total length of 795 km compared to the envisaged 680 km at appraisal\. One road, Kapchorwa-Suam, was found not feasible\. The upgrading of 383 km and rehabilitation/strengthening of 162 km of roads have been completed under the follow-on projects RDPP1 and RDPP2, which will close on June 30, 2008\. The rehabilitation and upgrading of the remaining 250 km of roads will be completed under the ongoing RDPP3 and the RDPP4 which is under preparation\. A pre-investment study for the Nile Bridge at Jinja was completed in March 2006 and the key findings were that the low traffic levels would make it difficult to use a Public Private Partnership (PPP) arrangement for construction of the new bridge, but the bridge was assessed to be in critical condition needing urgent attention\. Meanwhile, as GOU is conducting repair works, JICA has agreed to finance preparation of detailed design and bidding documents and possibly the construction of a new bridge\. Regarding feeder roads, detailed engineering designs for 1,000 km under the ten year district road investment program were completed, which is over and above the planned 500 km\. 3\.3 Efficiency 54\. The RSISTAP did not include the implementation of civil works\. Therefore, conventional quantitative economic analysis which is normally carried out for investment projects does not apply\. However, an autonomous road agency (with RAFU as a transitional arrangement) is being set up and significant economic benefits were achieved through better road network management\. A study to review the benefits of institutional effectiveness through setting up an autonomous road agency was concluded in September 2004 and its key findings are that institutional reforms can result in: (i) higher quality of roads; (ii) fewer contract cost overruns; (iii) greater private sector participation; and (iv) value for money as a whole on the projects completed\. A summary of the assessment is given in Annex 3\. 3\.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 55\. The project has laid a strong foundation for the management and sustainability of the road sector and has successfully prepared the design and bidding documents for the follow-on projects RDP-Phase 1, 2, 3 and 4\. By creating RAFU it has successfully increased road management capacity, however, one of its objectives to create an autonomous road agency took much longer than anticipated and was not fully achieved by project completion and therefore the overall outcome is rated as moderately satisfactory\. The project outcome is still fully relevant to current Bank and government strategy and sector efficiency has been sustainably improved\. However, the efficacy of the process has been less than fully satisfactory\. Hence, the overall rating of Moderately Satisfactory\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 56\. Poverty impact: As this was a Technical Assistance (TA) project, it did not have any direct impact on poverty alleviation, gender and social development aspects\. However the project included an engineering study for the upgrading and rehabilitation of feeder roads to be implemented under the follow-on projects\. It is expected that after the improvement works are 13  completed on feeder roads, it will have an impact on the economic growth and poverty reduction through lowering transportation costs, savings in travel time, and improving access to social services\. The policy and strategy paper on feeder roads also provided equal employment opportunities for male and female workers on road rehabilitation works\. (b) Institutional Change/Strengthening 57\. During the implementation phase the following institutional changes were made: (i) MOWT established RAFU in September 1998, which was condition of effectiveness of the credit\. RAFU took over the management of large contracts and performance improved considerably in terms of quality and time delivery\. Maintenance of the national road network remained with the engineering department of MOWT\. All responsibilities for the management of national roads will be transferred to UNRA by July 1, 2008\. (ii) An ELU was established in April 2001 within MOWT and its objective was to provide coordination with NEMA\. (iii) For the overall coordination of RSDP, a steering committee was established under MOFPED in September 1998\. (c) Other Unintended Outcomes and Impacts (positive or negative): 58\. At project design in 1997, the establishment of the Road Fund had not been planned for\. During the implementation period, the creation of a Road Fund was discussed and agreed upon with GOU\. This change will be a positive step towards ensuring adequate and stable flow of maintenance funding and sustainability of the project outcomes\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 59\. As this was a technical assistance project aimed at carrying out institutional reforms, conducting sector policy studies and preparing engineering design for the main and feeder roads, it was not required to carry out such beneficiary surveys\. However the following stakeholder workshops were held: (i) On November 20, 1996, a donor's conference was held in Paris to discuss government road sector strategy for the national road network, which was reflected in the first 5-year phase (1996- 2001) of the GOU's 10-year (1996-2006) road program\. (ii) In January 1998, a stakeholder's workshop was held in Kampala to review the TAERA study report and recommendations\. (iii) On March 3, 2002 a stakeholder's workshop was held in Kampala to discuss the road agency study\. (iv) On April 23-24, 2002 a stakeholder's workshop was held in Kampala to discuss an update of the GOU 10-year (1996-2006) road program\. This workshop was attended by all stakeholders, including development partners interested in the road sector\. (v) On June 28, 2005, a stakeholder's workshop was held in Kampala to review the performance of the transport sector\. 14  (vi) On October 16-19, 2006 a joint transport sector review meeting was held in Kampala to review performance of the sector\. The workshop was attended by all stakeholders, including development partners\. (vii) On October 30, 2007, a stakeholder workshop was held in Kampala to discuss the findings and recommendations of a study aimed at promoting PPP through using the concept of Output Performance-based Road Contracts (OPRC) for the maintenance and management of roads in the country\. 4\. Assessment of Risk to Development Outcome Rating: Moderate 60\. The risks identified during appraisal were associated with the mobilization of government funding for sustainable operation of the Road Agency and development of its capacity to implement the RSDP, given the incentive problem and the likely competition for qualified human resources in the sector across the region\. By adopting a market-based remuneration system and by extending contracts on a long term basis, RAFU was able to attract and retain the appropriate staff\. By establishing a Road Fund, it is anticipated that the risk associated with sustainable funding will be mitigated\. Considerable progress has been made towards the establishment of a Road Fund and the likelihood for adequate future financing of road maintenance has considerably increased\. It is therefore judged that the reforms are irreversible and the rating for the risk to the development outcome is assessed as "moderate"\. Other risks not identified earlier are associated with the creation of an executive agency as opposed to an autonomous road authority\. This risk was mitigated after government realized that an executive agency would not have sufficient autonomy, unlike an autonomous road authority\. Hence, the creation of an agency under the Executive Agency Bill (EAB) was dropped in favor of an autonomous road authority, UNRA, which will be fully operational by July 1, 2008\. The restructuring of MOWT is on-going to transfer the management of national roads to UNRA\. The roads designed under RSISTAP are being implemented under RDPP Phase 1, 2, and 3\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 61\. The project design was relevant, appropriate and responsive to the client's needs\. The government's 10-year (1997-2006) road sector investment program estimated to cost US$1\.5 billion was ready and it sought Bank's support to implement its first 5-year phase (1997-2001)\. The Bank reviewed the size of the program and was not convinced about the adequacy of the institutional set up and management capacity of the implementation agency, MOWT, to embark on such a large project\. As such, the team correctly advised the client to first prepare a TA project with a specific focus on strengthening management capacity, reviewing sector priorities, and implementing policy and institutional reforms, which were critical prior to considering any major investment in the road sector\. The Bank's assessment of the lack of capacity and its proposed ameliorative measures were correct\. 15  62\. Taking into account that the consultative and legislative process for the creation of a road authority is a long process, the proposed project implementation period of three and half years was too short\. Experience shows that road sector reforms seldom take less than a decade to complete\. Setting the establishment of a new autonomous road agency as the primary development objective of RSISTAP was indeed an ambitious target to achieve in 3-4 years\. The overall risk of the project at appraisal was assessed as "high" and the mitigation measures were adequate, though a comprehensive risk mitigation plan to follow during project implementation was not designed and discussed with the borrower\. This gives the main reason for the quality at entry rating of "Moderately Satisfactory"\. 63\. The ICR team agrees with QAG quality at entry review report's rating that the project concepts, objectives and approach were "satisfactory", and the rating for institutional capacity analysis and readiness for implementation "marginally satisfactory"\. The ICR team also agrees with the QAG findings carried out in 2004 and 2006\. The QAG Quality of Supervision Assessment (QSA6) report dated October 12, 2004 highlighted the following issues related to the quality at entry: (i) the project was not ready for implementation at approval; (ii) project preparation took nine months, and project effectiveness took another twelve months, (iii) institutional capacity analysis was not adequate; (iv) some of the problems encountered during implementation could have been easily identified by a thorough stakeholder assessment and a proper institutional analysis; (v) project team should have identified, at entry, both the champions of supporting reforms and those resisting reforms; (vi) an organizational/management specialist might have provided insights into a more appropriate timeframe and the organizational capacity for project implementation; and (vii) it might have been more appropriate to require the passage of some sort of umbrella legislation by project appraisal\. Instead of including several effectiveness conditions, which delayed the project effectiveness, the task team should have spent more time in ensuring project readiness\. (b) Quality of Supervision Rating: Moderately Satisfactory 64\. A Project Implementation Plan (PIP) was prepared, which has provided a good basis for the project supervision\. The skills mix of the Bank supervision team was well balanced and the Bank team provided good guidance to the government in meeting the effectiveness conditions\. The Bank team maintained a strategic vision on institutional development during the project implementation\. The supervision team worked closely with the client and not only pushed forward the agreed agenda of institutional reform, but provided guidance on other cross-cutting issues such as the creation of a RF, strengthening contract management and enhancing donor collaboration in the road sector\. The quality of the financial management reviews was found to be satisfactory and consistent with the Bank guidelines\. The supervision aide-memoires for the most part of the implementation phase were extensive and provided highlights on the key issues, thus providing prompt information to the client and Bank management\. However, the Bank's supervision teams should have been more realistic in assigning the ratings for development objectives and implementation performance in the ISR (the ratings were consistently shown as satisfactory in all ISRs throughout the life of project) and should have been more proactive in addressing the causes of these delays\. 65\. The ICR team agrees with the QAG findings that: (i) this was a high risk ­ and high reward venture; (ii) there was significant involvement of the Bank's team to resolve day to day problems; (iii) from the strategic standpoint, the Bank was highly responsive in recognizing the problems and providing space and time for their resolution; (iv) the actions taken by the Bank to resolve implementation bottlenecks were adequate; (v) additional management attention to both the 16  substance and reporting of project results might have helped to further advance the institutional reform agenda of the project; and (vi) a major effort should have been undertaken to revise the results framework particularly at the time of each credit extension\. However, the ICR team does not agree with the QAG finding that the Bank could have been more proactive beginning with the progressive cancellation of the credit as the critical milestones were missed and the recommendation to release the IDA resources for other projects in Uganda or elsewhere in SSA\. Such cancellation of portions of the credit would likely have imperiled the reform process and the project might not have achieved the reforms as they are now in place\. Rather, the supervision team and the client have, through persistence, eventually achieved the initially planned institutional reforms and more\. (c) Justification for Rating of Overall Bank Performance: Rating: Moderately Satisfactory 66\. Though the Bank underestimated the time needed for the envisaged reforms, the Bank's advice to the Borrower that the investment program could only be supported if the government was ready to strengthen road management capacity through reforms and that an interim RAFU should be created was appropriate and commendable\. During the implementation phase, the Bank worked closely with the client to achieve quality reforms over and above what was envisaged at appraisal (for example, approval of the RF Bill)\. The setting up of UNRA took much longer than initially planned and the Bank could have been more proactive in furthering these reforms, therefore the overall rating of the Bank's performance is assessed as "moderately satisfactory", despite the successful outcome of the other two objectives of improving sector policy and preparing the engineering designs of physical infrastructure\. 5\.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 67\. The government showed strong commitment in implementing the institutional reforms\. UNRA is in the final stages of becoming operational\. MOFPED commenced to finance the operational cost of RAFU/UNRA after the RSISTAP credit was closed on December 31, 2007\. In addition, government has shown a strong commitment to move the institutional reforms further by setting up a Road Fund to enhance financial sustainability of road maintenance\. Furthermore, the government is in the process of approving a policy for improved vehicle inspection\. In order to monitor performance of the transport sector, government has convened, on an annual basis, a Joint Transport Sector Review Workshop (JTSR), the last of which was held on October 18-19, 2006\. The next JTSR is scheduled to take place in September 2008\. However, due to the long time taken to establish UNRA, the Borrower's performance is rated as moderately satisfactory\. (b) Implementing Agencies' Performance Rating: Moderately Satisfactory 68\. RAFU's Management Committee (MC) was responsible for monitoring and providing advisory services\. The MC comprised the Minister of MOWT (Chairman), the Permanent Secretary, Engineer-in-Chief/Director of Engineering and the Director of RAFU\. The head of the RAFU desk in MOWT, financed by DANIDA, served as a secretary to the MC and acted in a liaison role 17  between RAFU and MOWT\. To ensure efficiency, RAFU appointed highly qualified core staff in the engineering, finance and administration divisions\. The staff was engaged on one year, renewable, performance based contracts\. As of September 30, 2002, RAFU had 66 staff (including support staff) against the established 94 positions\. As of December 31, 2007, the date of project closing, 63 positions were filled\. RAFU has proven its functionality and viability by improving the quality of output and shortening the time taken for implementing major civil works by approximately 50 percent compared to the time taken previously by MOWT, although its takeoff was delayed due to initial difficulties to employ appropriate staff\. 69\. In July 2005, the Bank expressed its concerns regarding quality of procurement and urged RAFU management to streamline and centralize the operation by introducing tight quality control measures as the procurement documents, such as evaluation reports, contained inconsistencies and was not always compliant with the procurement guidelines\. Subsequently, the formation of teams comprising of foreign and national professionals to handle procurement helped to considerably improve the situation and build capacity\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 70\. The government showed strong commitment to carry out institutional reforms in the road sector, and implemented the key recommendations of several studies completed on road safety, vehicle inspection and road network management\. The implementing agency, MOWT delegated much of the project management responsibilities to the newly established RAFU\. RAFU being a new and inexperienced agency was a bit slow at the initial stages, but soon picked up in fulfilling its responsibilities\. RAFU had to face a major challenge of recruiting national professional staff as they were neither sure of their terminal benefits if they left their incumbent positions, nor of their future if they accepted the one year contract in RAFU\. In order to solve the impasse, the ministry and the Bank agreed to assign young professionals to RAFU for training\. These professionals, who have been working in RAFU for the last seven years, now form the nucleus of the present RAFU and many of them are likely to occupy key positions in UNRA\. Due to the initial problems related to the capacity of RAFU and due to the delays in creating UNRA the overall performance of the government and the implementing agency is rated as "moderately satisfactory"\. 6\. Lessons Learned 71\. Technical Assistance: When RAFU was created in 1998, its head and other key staff were expatriate staff appointed under the project funded TA program\. The involvement of the TAs was slowly phased out as the capability of national professionals was developed to manage the activities of the sector\. In 2004 a Ugandan national professional with a good performance record was appointed as the Director of RAFU, thus replacing an expatriate staff and this has proven to be effective\. However, the skill transfer to local staff was not very effective and took a very long time\. In designing a technical assistance program, it is critical to evaluate the knowledge, skills, talents and competencies of national professionals so as to appoint them to senior positions\. Future TAs should have clear objectives of training national professionals in a specified time to ensure institutional sustainability\. 72\. Policy and institutional reforms: The policy and institutional reforms to transform the ministry's road agency (RAFU) to an autonomous road authority (UNRA) have taken much more time than the anticipated three and half years as that required launching a study, holding stakeholders´ workshops, reaching a consensus, preparation of a draft legislation, cabinet approval, 18  discussion in parliament, and enacting the Bill into a law, which are the unavoidable processes to set up a road authority\. Making UNRA effective also required a comprehensive institutional analysis, preparation and agreeing on the organization chart, recruitment of staff, preparation of an operations manual, etc\. Therefore it is critical to allow sufficient time for designing, planning and implementing policy and institutional reforms in the sector\. In hindsight, one could have designed RSISTAP as a smaller credit focusing on the base studies for the reform and preparation of design and bidding documents for the follow-on APL, and link the reform process with triggers to the implementation of the various phases of the APL\. 73\. Project Implementation Unit (PIU): RAFU was created as a default PIU and as a nucleus for the establishment of an autonomous road authority and most of its salary and operational costs were funded by the project\. This was to mitigate the risks related to sustainable government financing and to ensure that the staff was well motivated to implement the costly projects\. However, it took long for government to prepare a realistic budget to meet the requirements of UNRA as the extended credit continued to finance the salaries of RAFU\. As such, this became a disincentive for moving rapidly toward a government financed road authority\. The lesson is that the putting in place of a PIU may be a disincentive for the implementation of institutional reform\. 74\. Monitoring and Assessment Framework: At project preparation, a set of good outcome and impact indicators were designed, but no framework was agreed to monitor project performance and as a result no effective monitoring was carried out during project implementation\. Therefore to only design performance indicators may not be enough unless a comprehensive monitoring and assessment framework has been agreed upon with all stakeholders at the project design stage\. The monitoring and assessment framework should include a time based action plan to carry out baseline studies, regular reviews of interim benchmarks, and a well coordinated mechanism for evaluation and reporting of the project performance at least biannually\. 75\. Inadequate procurement capacity that resulted in implementation delays: RAFU was a new agency and it did not initially have adequate procurement capacity to launch and manage large works and services contracts\. The lesson is that the initial TA team for the support of RAFU should have included more and better qualified procurement and contract management specialists\. 19  Annex 1\. Project Costs and Financing (a) Project Cost by Component (in US$ Million equivalent) Appraisal Revised Actual Disbursement Estimate Components Estimate (USD Nov 2004 Amount (US$) Percentage of millions) (USD Appraisal millions) INSTITUTIONAL DEVELOPMENT AND CAPACITY 14\.60 20\.55 21\.58 148% BUILDING SECTOR POLICY AND MANAGEMENT STUDIES 2\.20 2\.44 2\.33 106% CONSULTING SERVICES FOR PHYSICAL COMPONENTS 12\.20 7\.59 7\.98 65% EX TERNAL AUDITING 0\.1 0\.12 0\.04 40% OFFICE EQUIPMENT, COMPUTERS AND VEHICLES - 2\.30 2\.04 - Total Baseline Cost 29\.10 33\.00 33\.97 117% Physical Contingencies 2\.90 - - - Price Contingencies 1\.00 - - - Total Project Costs 33\.00 33\.00 33\.97 103% Front-end fee PPF - - - - Front-end fee IBRD - - - - Total Financing 33\.00 33\.00 33\.97 103% (b) Financing Revised Actual Disbursement Type of Appraisal Estimate Source of Funds Co- Estimate Nov 2004 Percentage of financing (USD Amount (US$) millions) (USD Appraisal millions) Borrower 3\.00 3\.00 4\.17 139% International Development 30\.00 30\.00 29\.80 99% Association (IDA) 20  Annex 2\. Outputs by Component Table 2\.1: Comparison of Activities Proposed at Appraisal and outputs achieved at Project Completion Comp Name of Activities Agreed at Output Achieved at Percent Remarks Component Appraisal/through Project Completion Amendments A Institutional A1\. Consultant RAFU was established RAFU currently manages Development services/TA for in 1998 and it has been all development projects\. and Capacity the Road Agency operating successfully\. 100% The delay in establishing Building Formation Unit Most of the technical UNRA was due to the fact (RAFU) and professional staff that government had has been recruited\. 4 initially planned to Technical Assistance convert RAFU into an teams to support the Executive Agency\. engineering division of However, it was later RAFU were engaged, realized that the as a result RAFU has Executive Agency Bill built capacity to did not give the agency manage road sufficient autonomy and it development was abandoned\. In favor programs\. of the Road Authority\. The UNRA board and Executive Director have been appointed\. A2\. Capacity Building The ELU was The ELU has been for the established in April monitoring the activities Environmental 2001\. 100% of the RSDP with respect Liaison Unit, ELU to adherence to environmental protection policies and mitigation of adverse environmental and social impacts\. A3\. Capacity Building Cancelled from the Uganda Bureau of for the National project\. Statistics, UBOS secured Statistical Bureau - funding from other donors\. A4\. Preparation and Study completed\. A 90% The study Design of a pilot workshop to review recommendations will be project for Area the study implemented through Wide Output & recommendations was future projects Performance held on October 29-30, Based Road 2007\. Contracts B Sector Policy B1\. Autonomous Road The recommendation 100% It is anticipated that by and Agency study made in the report July 1, 2008, UNRA will Management formed the basis of the be fully operational\. Studies action plan for establishing UNRA\. 21  Comp Name of Activities Agreed at Output Achieved at Percent Remarks Component Appraisal/through Project Completion Amendments B2\. Road safety 3 year and 5 year Implementation started improvement and Action plans under a World Bank audit study developed\. \. funded RDPP2 program B3\. Road network The study was 100% The functional road management study completed in classification system November 1999 and as developed has been used a result a Network to classify the road management policy network into national, was established and a district, urban and national axle load community roads control program is being implemented B4\. Development of Was dropped and 100% RAFU Information management instead an in house services division has information review of the MIS developed a systems needs was done and an comprehensive strategic in-house system was information system plan\. developed\. B5\. Reintroduction Study completed in 100% The key recommendation and April 2007 and handed is establishment of commercialization to the MOWT to privately owned and of Motor Vehicle formulate appropriate operated vehicle Inspection policies\. inspection stations\. services B6\. Use of Lime in Study completed in 100% The MOWT is currently Road Construction March 2007\. formulating policies to in Uganda address the consultant's recommendations C Infrastructure C1\. Carrying out Feasibility study and 119% The civil works for Preparation feasibility studies, detailed engineering upgrading of 383 km and Studies Detailed design for 870 km of strengthening of 162 km engineering of national roads (total 545 km) completed about 730 km of completed under RDPP1 and main roads RDPP2\. 250 km (178 km for upgrading and 72 km for widening/ strengthening) are to be constructed under RDPP3 and RDPP4\. One road, Kapchorwa-Suam road (75 km) was not economically feasible and was therefore dropped\. An investment 100% Rehabilitation the 1,000 program was km of district road is to be C2\. 10 -Year District developed for 1,000 undertaken by other Road Investment program and 22  Comp Name of Activities Agreed at Output Achieved at Percent Remarks Component Appraisal/through Project Completion Amendments design of about km of district roads donors who are focusing 1000 km of roads designed under the specifically on the project\. Estimated development and investment is US$10 maintenance of district, million\. urban and community access roads\. C3\. Pre-investment The study was 100% A PPP arrangement for study for the Nile completed in March constructing a new bridge Bridge at Jinja 2006\. was not found feasible\. D External External Auditors will Auditors have been 100% Audited Financial Auditing be appointed by the appointed and audits statements for each of the Auditor General for FY 98/99 to fiscal years of project 2006/07 carried out\. implementation were submitted to the Bank\. E Office Acquisition of office All the planned office 100% Additional office Equipment, equipment, computers equipment, computers equipment and vehicles to Computers and and vehicles for RAFU and vehicles were meet part of the needs of Vehicles procured\. UNRA have been procured\. 23  Table 2\.2: Comparison of Performance Indicators at Project Appraisal and Project Completion in December 2007 Performance Indicator Remarks Percent Project Objective Planned Outputs at Achieved Outputs at Achieved Appraisal and/or as Project Completion amended (Dec 2007) 1 ­ Project Objective Indicators 1\.1 Improve Study on the establishment The Uganda National The creation of the Institutional of the road Management Road Authority (UNRA) Road Agency by efficiency of the Units, particularly creation became effective on June 1, 2000 was 80% road sector of an autonomous Road January 22, 2007 on not achieved Agency by June 1, 2000 appointment of the Board because government of Directors\. The Chief had initially planned Executive and heads of to convert RAFU departments (Directors) into an Executive have also been Agency\. However, appointed\. it was later realized that the Executive Agency Bill did not give the agency sufficient autonomy and it was abandoned\. 1\.2 Redefine the Government white paper Study on "Restructuring The ministry will 90% role of MOWT on the new role and of the Ministry of Works retain the core functions of MOWT, and Transport" financed functions of policy, focusing on economic and by DANIDA, June 2005 planning, setting technical regulation, sector standards, planning, budget monitoring and management and evaluation\. monitoring of sector agencies by June 1999 Spin off executing The ministry has As of July 1, 2008, function from MOWT by transferred the executing Uganda National June 2000 functions to the Road Roads Authority Agency Formation Unit will be in charge of which handles all road planning, road upgrading and major development, rehabilitation projects maintenance, and with the exception of axle control and maintenance, road safety road safety\. and axle control\. Strengthening of MOWT's Several studies covering The role in sector planning, Road Safety and Audit recommendations of economic regulation, Study, Road Network the studies are being budget management and management, Motor implemented\. 24  Performance Indicator Remarks Percent Project Objective Planned Outputs at Achieved Outputs at Achieved Appraisal and/or as Project Completion amended (Dec 2007) monitoring of parastatals\. vehicle inspection study and use of lime in road construction have been carried out\. 1\.3 Rehabilitate Increased private sector Consultants are now There is need for Economic participation being used to supervise developing the 100% infrastructure road maintenance local consultants to operations\. be able to take on assignments for major works\. Increased volume of road Volume of road works The Force account works to be contracted contracted out to the operations are out to the private sector, private sector has usually undertaken increasing from 65%of increased from 65% in to respond to the total in 1996/97 to 1996/97 to more than emergency road 85% in 2000/2001 85% of the total in repairs\. 2007/08 Commencement of All the roads for which Physical physical investment in detailed engineering construction started support of economic designs were prepared in 2001 and about growth and market have been included in 400km of road integration by September the ongoing programs\. have been 1999 constructed\. 1\.4 Improve 100% of total new 100% of all The volume of efficiency construction and upgrading/rehabilitation maintenance works 100% through the rehabilitation works to be and periodic executed by involvement of contracted out and maintenance road works contract has risen the private increase contracted are carried out by to over 85%\. sector maintenance to 5% contact\. annually\. Increase efficiency in the Most of the projects The procurement execution of road works which have been time has also implemented and reduced compared completed under RAFU to previous have been within time procurements under and budget and the ministry\. satisfactory quality\. 1\.5 Improve Establishment of new The ELU was Technical Environmental environmental Liaison established in April Assistance for one protection Unit within MOWT by 2001\. year was provided 100% July 1998 by technical advisors; Environmental 25  Performance Indicator Remarks Percent Project Objective Planned Outputs at Achieved Outputs at Achieved Appraisal and/or as Project Completion amended (Dec 2007) Advisor funded through RSISTAP and Social Advisor by DANIDA\. Improved coordination The ELU unit has a All projects must between national principal environmental obtain approval of environmental policy and officer as its manager the National implementation of road assisted by two other Environmental programs\. officers Management Authority as a pre- condition for implementation\. 2 ­ Project Implementation Indicators 2\.1 Preparation of Completion of studies Feasibility study and Only one road, road and designs for detailed engineering Kapchorwa-Suam strengthening strengthening and design for 7 (seven) (75 km) was found 100% and upgrading improvement of 680 km road links (730 km) not to be feasible\. subprojects of paved roads by completed\. October 1998 Pre-selection, feasibility 740 km of district The length studies and engineering roads were designed for designed was designs for 500 km of rehabilitation\. limited by the feeder roads subprojects available budget of only US$10 million\. Commencement of Physical construction Civil works have physical investments by on road strengthening been carried out September 1999 and upgrading projects /are ongoing under started in 2001 and 545 World Bank km of roads have been financed projects of upgraded/rehabilitated which RDPP1, to date\. RDPP2, and RDPP3 are ongoing and RRPP4 is under preparation\. 2\.2 Establishment Speed up efficient RAFU was established The final of a Road management of road in 1998 as a nucleus for recruitment of 90% Agency works the Road Authority\. UNRA staff is Formation Unit RAFU currently expected to be manages an expanding completed by June portfolio of projects 2008 Establishment of the funded through diverse Road Agency by June 1, development partners 2000 and GOU 26  Performance Indicator Remarks Percent Project Objective Planned Outputs at Achieved Outputs at Achieved Appraisal and/or as Project Completion amended (Dec 2007) 2\.3 Strengthen road Outcome and Some of the outcomes The management recommendations of the from the studies include recommendations 100% capacity studies carried out under road classification are being the project system, Action Plan for implemented\. Road Safety Improvement, Creation of UNRA, Setting up of a Road Fund, and development of Road Network Management Policies Implementation of the The recommendations A Road safety recommendations of the are being implemented policy has been studies by the under other Bank established and the implementing agencies financed projects\. recommendations of the Network Management Study have been implemented\. 3 ­ Financial Indicators 3\.1 Strengthen Implementation of the A financial management The system is budgetary Road management system has been always updated to process Information System and developed in accordance comply with any 100% articulation with TSIREP with the Financial new requirements and the Budget Management Action for World Bank Framework Paper Plan\. Financed projects\. Establish a financial A financial Management Effective from July management system for manual was developed 2001, the accounting project management for the Project\. system has been fully computerized and is based on a double entry accounting package Institutional capability of Both financial and The Audits have MOWT to allocate funds technical audits are assisted the Ministry for and audit performance carried out every to improve the of road operations financial year by implementation and 27  Performance Indicator Remarks Percent Project Objective Planned Outputs at Achieved Outputs at Achieved Appraisal and/or as Project Completion amended (Dec 2007) Consultants appointed by management of road the Ministry of Works operations\. and Transport\. Project funds will be External Auditors are Audited Financial properly budgeted for and engaged to carry out the statements for each audited within a audit of the project on of the fiscal years of satisfactory system on behalf of the Auditor project internal control General every financial implementation year\. were prepared and submitted to the Bank\. 3\.2 Timely Timely budget transfers Some delays have been Despite the delays, 100% availability of experienced in payments most of the projects counterpart for the GOU component have been funds due budgetary completed on time\. constraints\. Timely project Most projects have been The savings have Implementation implemented on time and been used to within budget\. implement additional studies\. 28  Table 2\.3: Chronology for setting up UNRA Date Action Taken July 1998 TAERA Study March 2000 Ministry of Public Service Tabled the proposed Agency Act April 2001 Government prepares Executive Agency Program, Policy Guidelines and Implementation Strategy\. May 2001 Commencement of Road Agency Study August 2001 Appraising and prioritizing Agency Candidates\. RAFU was identified as one of candidate for converting to a Road Agency using fast track program under Executing Agency Bill (EAB) April 2002 Completion of Road Agency Study (RAS) January 2003 RAS recognized that EAB will not provide sufficient autonomy June 2004 The option of EAB was abandoned, and GOU authorized MOWT to develop its own bill of Road Authority September 2004 Consultant Prepares Action Plan for Establishment of UNRA October 2004 Submission of UNRA Bill to Cabinet for Approval April 2005 Cabinet Approved UNRA Bill May 2006 Parliament Approved the UNRA Bill January 22, 2007 Board Appointed November 01, 2007 CEO appointed March 17, 2008 Directors appointed April 14, 2008 Managers appointed May 30, 2008 Project Engineers appointed June 20, 2008 Support Staff appointed July 1, 2008 UNRA will be operational 29  Annex 3\. Economic and Financial Analysis 1\. This project does not include civil works\. Therefore, conventional quantitative economic analysis similar to that for investments project does not apply\. However, an autonomous road agency (with RAFU as a transitional arrangement) has been set up\. As such, significant economic benefits can be achieved through better road network management\. A study conducted by a consultant (Mark Thriscutt an Independent Road Management Consultant) dated September 2004, has analyzed the benefits induced by such an institutional reform\. The conclusions drawn from this study are as follows: Higher quality of road treatments (including road construction and maintenance) through improved contract procurement and supervision: It is widely recognized that works carried out under RAFU management is to a higher standard due to more rigorous supervision and closer adherence to contractual requirements\. For example, insisting that contractors have separate materials testing laboratories on site contributed towards an improvement in the quality of materials used by contractors\. The use of technical audits by RAFU also resulted into continued quality improvements\. Reduce Losses due to "Unrecorded Payments: Without good pay and a professional working environment, it is more likely that corruption will happen with the procurement of big public work contracts\. The Mark Thriscutt report mentions that "unrecorded payments" made by contractors and consultants in one form or another range from 10 percent and 20 percent\. Conversely, there was no evidence that such losses were being incurred in contracts being managed by RAFU\. Fewer contract cost overruns: In addition, with professional management from RAFU, late completion of civil works was substantially decreased compared with the completion of works under the management of engineering department under the ministry\. This resulted in fewer contract overruns under RAFU\. Greater Private Sector Participation: By introducing competition in the provision of services, and by having the right institutional framework, private sector companies have been encouraged to develop more efficient and effective ways of providing the required services\. According to Transit NZ of New Zealand, competitive tendering could reduce costs by 10 percent - 15 percent\. Cost Benefit Analysis of the Reform to the Date of 2004 2\. A cost benefit analysis was carried out on the road projects managed by RAFU and the results showed very good internal rates of return, thus indicating that the reforms offered a positive value for money to the economy as a result of improved contract management\. On the average, IRRs of 53% were obtained for the most optimistic scenario and 14% for the most pessimistic scenario\. Table 3\.1: Estimated Benefits from Improved Performance in 2004 prices (US$ million), using only known RAFU Projects Scenario Most Optimistic Most Pessimistic NPV (2004 prices, using $119 million $3\.3 million 12% discount rate) IRR (%) 53% 14% 3\. If the profile of work continued over the next 20 years, then the benefits from the reforms will be much larger\. The result of the evaluation is listed in Table 3\.2 30  Table 3\.2: Estimated Benefits over the next 20 years due to Improved Performance of RAFU in 2004 prices (US$ million), Assuming future RAFU Workload will remain similar to present levels Scenario Most Optimistic Most Pessimistic NPV (2004 prices, $1, 490 million $710 million using 12% discount rate) IRR (%) 67% 51% 4\. However, all the analyses were done before the project closed in December 2007; the analyses evaluated the benefits brought by the institutional setting of RAFU rather than of UNRA\. If UNRA can operate as efficiently and autonomously as designed, it is expected that the benefits of reform can be sustainable\. 31  Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility/ Specialty Yitzhak A\. Kamhi Consultant AFTTR TTL from 04/1997-11/2004 Stephen J\. Brushett Lead Transport Specialist LCSTR TTL from 11/2004-03/2005 Supee Teravaninthorn Program Coordinator AFTTR TTL from 03/2005 ­ 08/2006 Dieter E\. Schelling Lead Transport Specialist AFTTR TTL from 08/2006 ­ 5/2007 Labite Victorio Ocaya Highway Engineer AFTTR TTL since 05/2007 Peter Okwero Sr Health Spec\. AFTH1 Social Aspects Jocelyne O\. Do Sacramento Operations Analyst AFTTR HIV/AIDS Richard Olowo Sr Procurement Spec\. AFTPC Procurement Patrick Piker Umah Tete Sr Financial Management Specialist AFTFM Financial Management Nina Chee Sr Environmental Spec\. AFTEN Environment Kristine Schwebach Operations Analyst AFTCS Environment Olav E\. Ellevset Sr Transport\. Spec\. AFTTR Road Management Jonas Hermanson Transport\. Spec\. AFTTR Road Safety Farida Khan Operations Analyst AFTTR Portfolio Agnes Kaye Program Assistant AFMUG Team Assistant UG Nina Jones Program Assistant AFTTR Team Assistant HQ Subhash Seth Consultant AFTTR ICR Fang Xu Young Professional AFTTR Assistance with ICR Shuo Zhang Operation Officer AFTTR Assistance with ICR (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 FY97 83\.04 FY98 39\.94 Total: 122\.98 Supervision/ICR FY98 36\.96 FY99 68\.39 FY00 24 77\.03 FY01 21 63\.97 FY02 25 74\.80 FY03 19 54\.57 FY04 14 51\.44 FY05 16 69\.10 FY06 16 76\.81 FY07 14 43\.92 FY08 4 7\.68 Total: 153 624\.67 32  Annex 5\. Stakeholder Workshop Report and Results Activities Date Place Report Result Donor's Conference Nov 20 1996 Paris Report on the Donor's (i) Discussed GOU 10-year (1997- Conference, MOFPED 2007) Road Sector Development Program; (ii)GOU sector strategy for national road network reflected in the first RSDP to implement the first 5-year phase of the 10-year Program\. Review of TAERA January 1998 Kampala Final GOU Review Study recommendations Report, dated June 19, 1998 Review of the Road March 3, 2002 Kampala Stakeholder Incorporation of the Agency Study Report recommendations recommendations in the final study report and adoption of the draft legislation for the establishment of UNRA\. Road Conference Apr 23-24, 2002 Kampala Updated RSDP to Discussed the second five year include District, Urban phase of the 10-year Program\. and Community Access Roads Stakeholder workshop Jun 28, 2005 Kampala Republic of Uganda Road sector progress review (including donors) Transport Sector Review Mission June23-July 6 2005 Aide Memoire signed by all Development Partners Stakeholder Aug 6, 2006 Kampala Republic of Uganda Discussed the mode of future workshop(including Transport Sector collaboration in support of the donors) Review Mission August government's transport sector 5-10 2006 Mission Aide program Memoire Main Findings, signed by all Development Partners Stakeholder Oct 16-19, 2006 Kampala Republic of Uganda Agreed on Action Plan with workshop(including Transport Sector realistic targets to guide future donors) Review Mission performance of the sector\. June23-July 6 2005 Aide Memoire signed by all Development Partners Stakeholder Oct 30, 2007 Kampala Republic of Uganda Discussed a study on OPRC for workshop(including IDA Transport Sector promoting PPP in the road sector donors) Supervision Mission October 22-November 2 2007 Mission Aide Memoire, signed by all Development Partners 33  Annex 6\. Summary of Borrower's ICR and/or Comments on Draft ICR 6\.1 INTRODUCTION 1\. The short and mid term strategy of the Government of Uganda is to promote and develop cheaper, more reliable and safer transport services to support growth in the different sectors of the economy\. In order to implement the above strategy, the government prepared a 10-Year Road Sector Development Program (RSDP) which received Donor Support in November 1996\. However, the efficient implementation of the RSDP required broad institutional reforms and policy development as well as infrastructure preparatory studies for the physical components\. 2\. The International Development Association (IDA) of the World Bank agreed to support the institutional reforms, policy developments, and preparation of infrastructure studies of the RDP through the Road Sector Institutional Support and Technical Assistance Project (RSISTAP)\. The Bank approved the project on September 9, 1997, and the Development Credit Agreement (DCA) between government and the Association was signed on March 9, 1998\. 6\.2 PROJECT OBJECTIVES 3\. The primary objectives of the project were to (i) strengthen the government's road sector management capability, through spinning off the road administration and execution activities of the Ministry of Works and Housing and Communications (MOWHC), (now Ministry of Works and Transport) and the creation of an autonomous and performance-based Road Agency; (ii) improve transport sector policy and management, through the redefinition of the role of MOWHC to that of a regulatory and planning body; and (iii) prepare physical infrastructure components to be included in a future road sector program, which would support domestic market integration thus contribute to economic growth and poverty alleviation, and improved access to social services\. 4\. The project objectives remained the same throughout the life of the project; however, the scope was revised to accommodate additional sector policy and management studies, consulting services for physical components and to provide for equipment and software for the Road Agency Formation Unit as part of capacity building\. 6\.3 Project components 6\.3\.1 Original Project scope 5\. The projects objectives were originally to be achieved through the following 4 (four) components: Part A: Institutional Development and Capacity Building 6\. This component aimed at strengthening the road sector management capacity through provision of technical advisory services by (i) staffing the Road Agency Formation Unit (RAFU) as the nucleus for the proposed Road Agency (ii) Establishing and staffing a new Environmental Liaison Unit in the Ministry of Works, Transport and Communications, now Ministry of Works and Transport\. Part B: Road Sector Policy and Management Studies 7\. This aimed at the improvement of the road sector policy and management through the provision of technical advisory services for carrying out studies on: (i) an autonomous Road Agency; (ii) Road safety Audit and regulation; (iii) Road Network Management Policy; and (iv) Development of a Management Information System\. 34  Part C: Infrastructure Preparation Studies 8\. These were to include (i) feasibility, detailed engineering design and environmental study of about 680 km of main roads (ii) national feeder roads study (iii) detailed engineering design of 500 km of feeder roads\. Part D: External Auditing 9\. This provided for the technical advisory services for auditing of accounts under project\. 6\.3\.2 Changes in the project scope 10\. On May 5, 1999, the Development Credit Agreement (DCA) was amended to provide for a new component, Part E of the project which aimed at enabling procurement of office equipment, computers and vehicles for the Road Agency Formation Unit, RAFU\. The amended credit also allowed for individual recruitment of RAFU staff under Component A of the project based on personal qualification and experience\. 11\. On October 4, 2001, the DCA was amended again, to re-allocate the project proceeds and allow for the following changes in the project scope (i) increase main road to be designed from 680 km to 730 km, (ii) replace the District Feeder Roads study with two separate studies: (a) Preparation of a 10 Year National Feeder/District Road Investment Program, and feasibility study and detailed engineering design for rehabilitation of 1000 km of feeder/district roads (b) Carrying out feasibility study for upgrading about 300 km of district roads to national standards; (iii) substitution of the Kapchorwa-Suam road study by feasibility study and detailed engineering design of Soroti-Lira road, and (iv) extend support for capacity building to the Uganda Statistics Bureau\. 12\. On November 2, 2004, the DCA was again amended to re-allocate the project proceeds and allow for the following additional changes in the project scope (i) Motor Vehicle Inspection Services study, use of Lime in road construction in Uganda and pre-investment study for a second Nile bridge at Jinja under project component B; (ii) feasibility study and detailed engineering design of Busega-Mityana road under component C; (iii) additional equipment for new staff/consultants within RAFU under project component E, 6\.4 Project costs 6\.4\.1 Original IDA financing Allocations 13\. The DCA for RSISTAP signed on March 9, 1998, provided for the following allocation of the SDR 21,600,000 credit proceeds: Part A: Institutional Development and Capacity Building (SDR 10,060,000), Part B: Sector Policy and Management Studies (SDR 1,450,000); Part C: Consulting Services for Physical Components (SDR 8,560,000); Part D: External Auditing (SDR 80,000) and unallocated (SDR 1,450,000)\. 6\.4\.2 Amendments and Re-allocations 14\. On May 5, 1999 the credit proceeds were re-allocated as follows: Part A: Institutional Development and Capacity Building amount was reduced to SDR 9,340,000 to allow for a new component Part E: Office Equipment, Computers and Vehicles (SDR 720,000)\. 15\. On October 4, 2001, the credit proceed were again reallocated and the following changes were made: Part B: Sector Policy and Management Studies amount was increased to SDR 1,600,000 and Part C: Consulting Services for Physical Components was reduced to SDR 8,410,000\. 35  16\. On November 2, 2004 the credit proceeds were again re-allocated and the following changes were made: Part A: Institutional Development and Capacity Building was increased to SDR 13,420,000, Part C: Consulting Services for Physical Components was reduced further to SDR 4,970,000; and Part E: Computers and Vehicles was increased to SDR 1\.530,000\. These changes resulted into zero balance on the unallocated component\. 6\.5 Project Implementation 6\.5\.1 Implementation Schedule 17\. The credit became effective on August 27, 1998 with an original closing date of December 31, 2000\. Due to delays in achieving one of the critical development objectives of the credit, of designing and building a strong and sustainable national road authority, and the desire to enable continuous support of the institutional reforms, the credit was extended four times to the current closing date of December 31, 2007 as follows: Extension to December 31, 2001 was sought on April 10, 2000 and approval was given on May 5, 2000; extension to December 31, 2003 was sought on September 10, 2001 and approval was given on October 4, 2001, extension to December 31, 2005 was sought on January 8, 2003 and approval was given on March 10, 2003; and extension to December 31, 2007 was sought on November 18, 2005 and approval was given on December 23, 2005 \. The extensions were asked for by the government and were approved by the World Bank to enable the credit support the completion of the institutional reform process, which had taken much longer to complete than had been envisaged when the project was appraised\. The schedule of implementation of the project activities is in given in table 7\.1\. 6\.5\.2 Financial performance 18\. A summary of the financial status at project closure is shown in the table below\. From the table, the percent utilization of the credit in terms of SDR is 98 percent while in terms of US$ it is 95 percent\. The difference in percentages is due to depreciation of the dollar against the SDR over the years\. 36  TABLE 6\.1: FINANCIAL STATUS AT PROJECT CLOSURE As Appraised Revised, Nov Actual Components 2004 SDR US$ SDR US$ SDR US$ 1\. IDA FUNDS Part A: Institutional Development and Capacity Building 10\.06 13\.99 13\.42 18\.64 12\.92 18\.43 Part B: Sector Policy and Management Studies 1\.45 2\.00 1\.60 2\.22 1\.18 2\.10 Part C: Consulting Services for Physical Components 8\.56 11\.90 4\.97 6\.90 4\.78 7\.18 Part D: External Auditing 0\.08 0\.11 0\.08 0\.11 0\.03 0\.05 Part E: Office Equipment, Computers and Vehicles 1\.53 2\.13 1\.64 2\.04 Unallocated 1\.45 2\.00 - - - SUB-TOTAL (IDA) 21\.60 30\.00 21\.60 30\.00 20\.55 29\.80 2\. GOU COUNTERPART FUNDS 3\.00 3\.00 4\.17 GRAND TOTAL 33\.00 33\.00 33\.97 Notes: At Appraisal SDR 1 = US$ 1\.3889 and this is the same rate which has been used to determine the US$ equivalent of the November 2004 re-allocation\. Details of the financial performance for the individual projects is given in table 6\.2 TABLE 6\.2: IMPLEMENTATION DATES FOR THE PROJECT STUDIES STUDY CONSULTANT PLANNED ACTUAL Start date End date Start date End date A Sector Policy and Management Studies A1 Study of the Autonomous Road WSP, 19 April 5 April Agency International/Prome Dec 1998 Nov 1999 2001 2002 A2 Road Safety Improvement and Phoenix Engineering & Sept 14 May 12 Sept Audit Study Research 1998 May 1999 1999 2000 A3 Road Network Management Tahal Consulting Sept 6 Nov 15 Nov Policy Study Engineers 1998 May 1999 1999 1999 A4 Re-introduction and Lea International commercialization of Motor 21 Aug 23 Dec 1 Aug 11 April Vehicle Inspection 2005 2005 2005 2007 37  STUDY CONSULTANT PLANNED ACTUAL Start date End date Start date End date A5 Use of lime in road CSIR/Transportek 8 Aug 30 Dec 8 Aug 27 Dec construction in Uganda 2005 2005 2005 2005 A6 Pre-investment study for the Mott Macdonald 27 Sept 30 Dec 1 Sept 29 Mar Nile Bridge 2005 2005 2005 2006 B Review/Update Feasibility studies, detailed engineering design and Environmental /Resettlement assessment B1\.1 Karuma-Pakwach-Arua road Roughton International 6 Oct 25 Jul 6 Oct 25 Jan (238 km) 1998 2000 1998 2001 B1\.2 Karuma-Arua road (RAP) Roughton International 1 April 30 Oct (Addendum) 2004 2002 B2 Busunju-Kiboga-Hoima road Renardet 9 Nov 20 Jan 16 Nov (145 km) 1998 2000 1998 1 Dec 2002 B3\.1 Fortportal-Kasese-Katunguru Scott Wilson (112 km), Kasese-kilembe (12 19 Oct 22 Aug 23 Sept 25 Jan km) and Equator road (38 km) 1998 2000 1998 2001 B3\.2 Fortportal-Kasese-Katunguru Scott Wilson 23 Mar 23 Oct (RAP) (Addendum) 2002 2002 B4\.1 Kampala-Gayaza-Zirobwe- Phoenix Engineering 31 Jan 12 Dec 10 June 25 Sept Wobuenzi road (68 km) 2000 2001 2000 2002 B4\.2 Kampala-Gayaza-Wobuenzi Phoenix Engineering 25 Mar 23 Oct (RAP) (Addendum) 2002 2002 B5 Kapchorwa-Suam road (75 km) Mott Macdonald 21 Sept 3 Dec 17 Sept 4 May 1998 1999 1998 2000 B6 Soroti-Dokolo-Lira road (125 H\.P Gauff Ingenieure 4 Nov 16 Dec 22 Jan 4 April km) 2002 2003 2003 2005 B7 Busega-Mityana road (57 km) ICT/UNISEL 17 May 31 Jan 17 May 2003 2005 2004 - C District/Feeder Roads Studies C1 10 Year District Road Phoenix Engineering & Investment program and design Research 16 Aug 11 Dec 14 Nov 30 Dec of about 1,000 km of roads 2002 2003 2002 2003 C2 300 km district road upgrading Roughton International and reclassification as national 14 Dec 23 Dec 22 Feb 9 Dec 2003 roads 2002 2003 2003 Notes: Studies A4, A5, A6, B6 and B7 were not included in the original scope\. They are additions due to saving in the credit arising from SDR/US$ fluctuations and re-allocations within the credit components\. 38  TABLE 6\.3: DETAILED FINANCIAL PERFORMANCE STUDY Appraisal Revised Actual % Increase Est\. Est\. Nov of 2004 Appraisal est\. 1\. IDA FUNDS A Sector Policy and Management Studies 13\.99 18\.64 18\.43 42% A1 RAFU Salaries/Technical Assistance 17\.99 18\.43 A2 Capacity Building/Establishment of ELU 0\.50 - A3 Capacity Building to UBOS 0\.15 - B Sector Policy and Management Studies 2\.00 2\.22 2\.10 4% B1 Study of the Autonomous Road Agency 0\.19 0\.19 - B2 Road Safety Improvement and Audit Study 0\.91 0\.91 - B3 Road Network Management Policy Study 0\.40 0\.40 - B4 Development of Management information Systems 0\.13 0\.03 - B5 Re-introduction and commercialization of Motor Vehicle Inspection - 0\.24 0\.18 - B6 Use of lime in road construction in Uganda - 0\.20 0\.15 - B7 Pre-investment study for the Nile Bridge - 0\.15 0\.15 - B8 Road Fund Study - - 0\.09 C Consulting Service for physical Components 11\.90 6\.90 7\.18 - C1 Infrastructure Preparation studies C1\.1 Karuma-Pakwach-Arua road (238\.km) 0\.98 0\.98 C1\.2 Busunju-Kiboga-Hoima road (145km) 0\.73 0\.73 C1\.3 Fortportal-Kasese-Katunguru (112km), Kasese-kilembe (12km) and Equator road 0\.56 0\.56 (38km) C1\.4 Kampala-Gayaza-Zirobwe-Wobuenzi road (68km) 1\.04 1\.04 C1\.5 Kapchorwa-Suam road (75km) 0\.45 0\.45 C1\.6 Soroti-Dokolo-Lira road (125km 0\.89 0\.89 C1\.7 Busega-Mityana road (57km) 0\.25 0\.25 C2 District/Feeder Roads Studies C2\.1 10 Year District Road Investment program and design of about 1000km of roads 1\.28 1\.56 C2\.2 300km district road upgrading and reclassification as national roads 0\.72 0\.72 D External Auditing 0\.11 0\.11 0\.05 - E Office Equipment, Computers and Vehicles 2\.13 2\.04 104% Unallocated 2\.00 - - SUB-TOTAL IDA 30\.00 30\.00 29\.80 - 2\. GOU COUNTERPART FUNDS 3\.00 3\.00 4\.17 39% TOTAL 33\.00 33\.00 33\.97 3% 39  6\.6 Achievement of Project, implementation and financial Objectives 6\.6\.1 Overall Assessment Achievement of Project and Implementation Objectives Objective No\.1 20\. The first objective was to strengthen the Borrower's road sector management capability through spinning off of road administration and execution of activities under MOWHC and the creation of an autonomous performance-based Road Agency\. This objective was to be achieved through project component, Part A: Institutional Development and Capacity Building through technical assistance services\. The rating for the achievement of this objective is: SATISFACTORY as shown in the table below\. Objective No\.1: Performance Indicators Remarks Physical Cap\. Bldg Outcome Creation of a Redefine Creation of an The Road Agency Formation Unit (RAFU) was Road Agency the role of autonomous Road established in 1998 and it immediately took over the Formation Unit MOWHC Agency by June 1, implementation of all IDA and other donors by October 1997 in regard to 2000 financed road projects\. Presently, RAFU is policy managing more projects than the sector has handled matters before\. Spin off executing function from Since establishment of RAFU, MOWHC has been MOWHC by June concentrating on policy and planning, A policy and 2000 strategy for district (feeder) and community roads (White Paper) and Road Network management policy have been developed\. Co-ordination office for monitoring and updating of transport sector was established in the ministry of Finance Planning and Economic Development\. Cabinet approved the legislation for the Uganda National Roads Authority on 3 August 2005\. The Roads Authority Board was appointed on 22 January 2007 and Executive Director on 1 November 2007\. The Positions of Directors and Managers were advertised in November 2007 and December 2007 respectively\. It is anticipated that by 1 July 2008, the Roads Authority will be fully operational\. Creation of new Road Improved An Environmental Liaison Unit was established in Environmental environmen coordination MOWHC in April 2004 following the Liaison Unit in tal between national recommendations of the sector environmental study MOWHC by protection environmental and guidelines\. February 1998 sector policy and All proposed road projects have approval of NEMA implementation of roads before starting\. Support to the This capacity building activity was cancelled after Uganda Bureau UBOS secured funding from other Donors\. of Statistics (UBOS) 40  Objective No\.2 21\. The second objective was to improve transport sector policy and management, through the redefinition of the role of MOWHC to that of a regulatory and planning body, and improved road management and increased involvement of the private sector in road management\. This objective was to be achieved through project component, Part B: Sector Policy and Management Studies\. The rating for the achievement of this objective is satisfactory\. Six Sector Policy studies and Management studies were conducted instead of the four as shown in the table below\. The studies, namely the Road Network Management study, Road Safety Improvement and Audit study, Road Agency Study, Re- introduction and commercialization of Motor Vehicle Inspection, Study on use of lime in Road, will/have formed the basis for government policy in various aspects of road management\. Objective 2: Performance Indicators Remarks Physical Cap\. Bldg Outcome Safety Audit and Improve Technical and Road Safety Improvement and Audit study completed in Regulations by institution economic September 2000\. A 3 year and 5 year action plan were November 1998 al basis for developed and their implementation started under a World efficiency National Road Bank funded RDPP2 program\. Road Safety policy has of the road Safety been established\. sector Regulations Study and development This study was excluded from the credit and a RAFU in- of MIS by June 1998 house Strategic Information Systems plan was developed\. This is the one which was/will be used to provide the strategic framework for developing MIS in RAFU/UNRA\. Study on Road Agency Basis for Study on Road Agency completed in April 2002 and its by November 2000 legislation of recommendations formed the basis for the UNRA National Road legislation\. Agency Road Network Study on Road Network Management Policy was Management Policy by completed in November 1999\. As a result a national axle November 1998 load control program was implemented and the road networks classified into National, District, Urban and Community roads\. Commercialization of Study was completed in April 2007 and the Motor vehicle recommendations were handed to Ministry of Works and inspection Transport to formulate appropriate policies Use of Lime in Road Study was completed in March 2007 and its Construction In Uganda recommendations were handed to Ministry of Works and Transport to formulate appropriate policies Feasibility Study and The feasibility study was completed in December 2003\. Detailed Engineering Detailed Engineering design is being undertaken under Design of 300km of re- RDPP3, IDA funded program\. classified National Roads 41  Objective No\.3: 22\. The third objective was to prepare physical infrastructure projects to be included in a future road sector program, which would support market integration and improved access to social services\. This objective was to be achieved through the project component, Part C: Infrastructure Preparation Studies\. The rating for the achievement of this objective is highly satisfactory\. Feasibility study and detailed engineering design was done for 870 km of national instead of the 680 km planned at appraisal\. Civil works on all the designed roads have been carried out/ongoing under IDA/GOU financing\. Objective 3: Performance Indicators Remarks Physical Outcome Feasibility and Basis for Feasibility studies and detailed designs for 7 national roads Engineering designs for implementation of (870 km) were completed\. Civil Works of 545 km carried out upgrading and road construction under RDPP1 and RDPP2 IDA funded programs\. The strengthening of 730 km of under a follow-up remaining 250 km to be constructed under RDPP3 IDA national roads\. lending operation funded program\. 10 Year District Roads A study was completed in December 2003\. An investment Investment Program and plan was developed and detailed design for 740 km to fit in design of about 1,000 km the budget of US$10 million\. of District Roads Feasibility Study and The feasibility study was completed in December 2003\. Detailed Engineering Detailed Engineering design is being undertaken under Design of 300 km of re- RDPP3, IDA funded program\. classified National Roads Financial objectives: The rating with respect to achievement of the financial objectives is as follows: Financial Objective No\. 1: Strengthen the Budgetary Process\. The rating for this objective is satisfactory\. Financial Objective 1: Performance Remarks Indicators Physical Outcome Implementation of Road Institutional Both financial and technical audits are carried out every Management Information capability to allocate financial year by Consultants appointed by the Ministry of System and articulation funds and audit Works and Transport\. with TSIREP and the performance of road Budget Framework Paper projects A central budgetary system controlled by MOFPED is place\. The ministry allocates funds based on guidelines issued by MOFPED every fiscal year\. Establishment of a Funds properly A financial management system has been developed in financial system for budgeted and accordance with the Financial Management Action Plan\. The project management accounted for and system is always updated to comply with any new audited requirements for World Bank Financed projects\. A financial Management manual was developed for the Project\. Effective from July 2001, the accounting system is 42  Financial Objective 1: Performance Remarks Indicators Physical Outcome fully computerized based on a double entry accounting package External Auditors are engaged to carry out the audit of the project on behalf of the Auditor General every financial year\. Financial Objective No\. 2: Timely Availability of local counterpart funds: The rating for this objective is satisfactory\. Financial Objective 2: Performance Remarks Indicators Physical Outcome Timely Budget Transfers Timely project Some delays have been experienced in payments for the GOU Implementation component due to budgetary constraints\. However, most projects have been implemented on time and within budget\. 6\.6\.2 Component Assessment Part A: Institutional Development and Capacity Building Staff RAFU as a nucleus for the proposed Road Agency 23\. The project supported institutional reforms and technical assistance to the Ministry of Works and Transport, specifically in setting up of a performance oriented Road Agency Formation Unit (RAFU), the nucleus of the Uganda National Roads Authority (UNRA)\. RAFU started operating in 1998, and its functionality and viability was proved through improved quality of outputs and by shortening the time taken for the procurement processes for the civil works compared to the time taken by other management arrangements\. 24\. The Road Agency Formation Unit, (RAFU) since establishment has been manned by highly professional and experienced staff employed on performance based renewable personal contracts\. The staffing levels at project closure were as indicated in table 6\.1\. During program implementation, the following consultants provided Technical Assistance: (i) Specialists Services: Four consultants provided Technical Assistance (TA), comprising of a Transport Economist, an Environmental Specialist, Bridges Engineer and Soils/Geotechnical Specialist, collectively referred to as Team 1, from May 2001 to January 2004\. A similar team of consultants referred to as Team 3, provided by Louis Berger International Inc\.-USA provided Technical Assistance from March 2004 to July 2007\. (ii) Project Engineers: Four Project Engineers (two Senior Project Engineers and two Project Engineers) were engaged as Team 2 from January 2002 to February 2004\. Another Team of four Senior Project Engineers, Team 4 provided Technical Assistance from March 2004 up to August 2007\. 43  Environmental and Social Management 25\. An Environmental Liaison Unit (ELU) has been established in the Ministry of Transport to provide the capacity to monitor the activities of the RSDP in particular, and those of the ministry in general with respect to adherence to environmental protection policies and mitigation of adverse environmental and social impacts (including land acquisition, compensation and resettlement) resulting from road works\. The ELU, formed in April 2001, is currently staffed with a Principal Environmental Officer as its Manager and two senior officers; one in charge of environmental matters and the other social issues\. Technical assistance for one year was also provided by technical advisors; the environmental advisor was funded through the credit and the social advisor by DANIDA\. Workshops to sensitize Engineers from Ministry of Works and Transport and the Road Agency Formation Unit (RAFU) were held from 11-13 January, 2005\. Table 6\.4: RAFU Staffing Level at Project Closure STAFF CATEGORY Established Filled Posts % Progress Posts A\. Individuals Directorate 3 1 50 Engineering Division 36 16* 46 Maintenance Division 0 2** 17 Information Services Division 5 6 100 Finance and Administration 8 10 83 Support Staff 30 26 96 Sub-total 82 63 77 B\. Consultants (TA Teams) EU Specialists (Senior Project Engineers) 3 EU Specialists (Short Term Specialists) 2 *The Division has been supported by Technical Assistance Teams as elaborated below\. ** Attached Maintenance Division Manager and Senior Project Engineer seconded from the Ministry\. Sector Policy and Management Studies Road Safety Improvement and Audit Study 26\. The main purpose of the study conducted by Phoenix was to review road safety problems in Uganda and to develop an action plan of remedial measures to improve road safety\. The study, completed in April 2002, identified institutional weaknesses, poor infrastructure, ineffective laws and regulations, poor enforcement, poor vehicle conditions, among the causes of the high accident rates\. As a result, 5-year Improvement Plan and a 3-year Action Plan, were developed\. The 3-year action plan comprised of engineering actions, enforcement actions, education actions and human resource actions and the 5-year plan action plan covered 58 black spots on rural highway and urban roads\. Implementation of the prioritized elements of the Action Plan comprising provision of enforcement equipment to traffic police, physical improvement to identified black spots on one Key route (Kampala-Jinja road), a road safety institutional support project have been/are being undertaken under the IDA funded RDPP2 credit\. 44  Management Information System Development Study 27\. The study was aimed at developing the proposed Road Works Management System to provide MOWHC with a basic management tool for operational maintenance management, programming, and management of projects under RSDP\. However, with the establishment of the Division of Information Services (ISD) in RAFU it was no longer necessary to undertake the study\. As a result the study was excluded from the credit\. The Information division of RAFU undertook a much wider review and developed a comprehensive strategic information systems plan which provided a frame for building a robust information structure and a strategic direction for developing information systems in the roads sector with main focus on internal users (RAFU and UNRA), key business partners and external customers\. Implementation of these initiatives has been ongoing and is to continue in accordance with UNRA priorities and available resources\. Road Network Management Policy Study 28\. The objective of the study conducted by Tahal was to develop a functional Road Classification System, Pavement Management System, and Axle Control mechanisms to enable MOWHC to effectively plan network development and management\. The study was successfully completed in November 1999 and the following were the outcomes (i) road functional classification system, road numbering and network planning, (ii) recommendations regarding axle loads, (iii) recommendations regarding pavement maintenance practices, and (iv) recommendations regarding the Pavement Management System\. The road networks in the country have now been classified to national, district, urban and community roads and axle load control programs implemented\. Road Agency Study 29\. The study was awarded to M/s WSP International (UK) in April 2001 and the services commenced in May 2001\. The study conducted by WSP International (UK) was concluded in April 2002 and the recommendations made in the report formed the basis for establishing the Uganda National Roads Authority\. The recruitment of UNRA staff is in progress\. The board was appointed in January 2007, the Executive Director was appointed on November 1, 2007 and the positions of the Directors and Managers advertised in November 2007 and December 2007 respectively\. It anticipated that UNRA would be fully operational by 1 July 2008\. Re-introduction and Commercialization of Motor Vehicle Inspection 30\. The objectives of the study were: (i) to determine the viability, cost effectiveness, of re- introducing and privatizing motor vehicle inspection services, (ii) to review existing legislation to ensure its sufficiency in the re-introduction, privatization and provision of quality vehicle inspection services, (iii) to plan and propose institutional set-ups and linkages for managing the vehicle inspection process, (iv) to specify the desired minimum level for vehicle inspection and prepare the related reference documentation (e\.g\. Inspection station manual, station layout), and (v) to prepare documentation for the procurement of firm(s) to provide Motor Vehicle Inspection Services\. The study was successfully completed by Lea International in April 2007 and its main recommendation was that the government re-introduces motor vehicle inspection (MVI) services as commercialized self-financing services through concessions of periods ranging between 5 years to 8 years\. Additionally the study produced a Motor Vehicle Inspection Manual and Operations/Procedures Manual\. The recommendations were forwarded to the Ministry of Works and Transport to formulate appropriate policies\. Use of Lime in Road Construction in Uganda 31\. The major objective of the study was to investigate possible sources of lime, its quality, industrial production and methods of production\. The study was successfully completed by CSIR 45  Transportek in March 2007, and the recommendations were that there should be improvements in the production methods for lime and testing procedures\. It also recommended that the stabilization design guide for Uganda should be developed, and General Specifications should be improved\. Consulting Services for Physical Components 32\. The following Consulting services have been completed: (i) Karuma-Pakwach-Arua Road (238 km): Designs were completed in May 2001 by Roughton International and Resettlement action plans in December 2002\. Civil works were carried out under RDPP1 (Pakwach-Arua section) and RDPP2 (Karuma-Olwiyo-Pakwach section) and have been completed\. (ii) Busunju-Kiboga-Hoima Road (145 km): Designs were completed in December 1999 by Renardet and works were carried out under RDPP1\. (iii) Fortportal-Katunguru-Kasese, Kasese-Kilembe; Equator road (162 km): Detailed designs completed in May 2001 and Resettlement Action Plans in December 2002 by Scott Wilson\. Civil Works were carried out under RDDP2 and have been completed\. (iv) Kampala-Gayaza-Zirobwe-Wobulenzi road (68 km): Detailed designs were completed in April 2002 by Phoenix Engineering\. The works are to be carried out under the RDPP3 & RDPP4 project\. (v) Kapchorwa-Suam road (75 km): Feasibility study was completed in December 1999 by Mott Mcdonald\. The improvements were found not to be economically viable\. (vi) Soroti-Dokolo-Lira road (125 km): Detailed designs were completed in October 2005 by H\.P Gauff Ingeniure\. The works are to be carried out under the RDPP3 project\. Works contract for the two road sections (Soroti-Dokolo & Dokolo-Lira) have been awarded and works are in progress for the Soroti-Dokolo section\. (vii) Busega-Mityana road (57 km): Detailed designs were completed in October 2005 by ICT\. The works are to be carried out under the RDPP4 project\. (viii) Ten Year District Roads Development Investment Program and Design of 1,000 km of Roads (TYDRIP): Study and Detailed designs and bidding documents for phase 1 package completed in August 2003, Phase 2 package in December 2003 by Phoenix Engineering\. A Ten Year District Road Investment Plan was also developed and detailed design for 740 km to fit in the budget of US$10million\. (ix) Feasibility Study to upgrade 300 km of District Roads to Re-classified National Road Standard: The study was completed in March 2004 and detailed engineering design is being undertaken under RDPP3\. Office Equipment, Computers and Vehicles 33\. All the planned office equipment, computers and vehicles have been delivered and RAFU maintains a register of all the equipment\. External Auditing 34\. The Auditor General appointed Ernest & Young as Auditors for the RSISTAP for the entire credit period using QCBS procurement method of the World Bank, however the appointment had to be re-validated every financial year\. In compliance with the credit requirements, Audited Financial 46  Statements for each of the fiscal years of project implementation right from credit effectiveness were prepared and submitted to the Bank\. 7\.7 Major Factors affecting Implementation and Outcome 35\. Delayed project start: The start up of the project delayed by more than one year compared to the original implementation plan\. 36\. Conditions for Credit Effectiveness: Satisfaction of the conditions of credit effective achieved in September 1998, six months after credit signing\. 37\. DCA amendments: The development credit agreement (DCA) had to be amended to allow for the provision of a new component, Part E to provide for acquisition of office equipment, computers and Vehicles for RAFU\. The credit had been originally negotiated on the basis of staffing RAFU with consultants and office equipment would have formed part of the consultant's package\. However, the government decided to staff RAFU by recruiting on individual basis, thus the need to provide for procurement of office equipment, computers and vehicles\. 38\. Optimistic Implementation Program: Following the consultant's report on Transitional Arrangements for Establishing a Road Agency, the government produced its own report in July 1998 providing for recruitment of individuals\. The government's report anticipated a mobilization period which if achieved would have led to completion of the project by December 31, 2000\. The proposal in this report proved to be very optimistic and it was found very difficult to recruit individual engineers with the required qualifications and experience\. The government changed its strategy, after consultation with the World Bank, by continuing with recruitment of individuals in parallel with technical assistance teams supplied by international consultants\. 39\. Limits of the Staff Recruitment Market: Throughout the life of the project it has been very difficult to recruit highly experienced professionals on individual basis\. The continuing lack of success in recruitment of sufficient experienced professional staff has resulted into increased work load for the RAFU staff adversely affecting their performance\. In particular pressure on staff in the procurement and site supervision areas has exposed some to challenges beyond their current level of skill and experience\. 40\. Investigation of Complaints: Some ministry of Works and Transport staff who could not qualify for employment in RAFU lodged complaints which had to be investigated and disposed off before proceeding with the recruitment process\. 41\. Resistance to Change: The institutional changes and reforms experienced some resistance from some stakeholders\. 42\. Delayed UNRA Bill: By January 2003, the Government of Uganda was committed to a policy of developing executive agencies based on a single Executive Agency Bill (EA) and RAFU was listed as a high priority case for converting to an executive agency\. Ultimately it was recognized that the Agency Bill did not give sufficient autonomy and as a result this strategy was abandoned and the Ministry reverted to developing its own bill\. This process was not concluded until 5 May 2006 when the UNRA Bill was passed by Parliament\. 43\. Government Bureaucracy and lengthy parliamentary legislative process: It took over 9 (nine) months to have the UNRA bill approved and becoming law\. 47  6\.8 Bank and Borrower Performance 6\.8\.1 Bank 44\. Throughout the life of the project, the Bank showed commitment to ensuring that the reform process was successful, particularly ensuring that a road agency is created and this was the major reason why the credit closing date was extended four times\. Additionally the Bank has been instrumental in the improvement of sector policies by allowing introduction of additional studies in the project\. With respect to supervision, regular implementation support missions have been conducted throughout the project's life\. In this regard, the Bank performance is rated as being satisfactory\. 6\.8\.2 Borrower 45\. Government: The project risks identified, with respect to the borrower, were committing financial resources and managerial autonomy\. From the table showing funds utilization, GOU contribution is US$4\.17 million against the appraisal figure of US$3\.0 million\. Additionally GOU has accepted to establish a road fund to support UNRA operations\. On the side of autonomy, by the government dropping the Executive Agency Bill which did not give sufficient autonomy in favor of the UNRA bill it was a clear indication of total commitment to granting managerial autonomy to the Road Agency\. Ministry of Finance, Planning and Economic Development was also actively involved in the reform process and demonstrated ownership\. 46\. Implementing Agency: In order to ensure satisfactory performance, the operations of the implementing agency were supervised by a management committee comprising of the Minister of Works and Transport as its Chairman, the Permanent Secretary, the Engineer-in-Chief/Director of Engineering, and the Director, RAFU\. While the overall operations of the Road Sector were being monitored and evaluated by the steering committee comprising of Permanent Secretaries and Senior officials of the MOFPED, Ministry of Public Service, by March 2000 the project objectives related to transport sector policy management and preparation of physical implementation components had been successfully accomplished\. The outstanding objective was related to establishing RAFU and its staffing which had experienced delays\. Based on the above observations, the Borrower is rated as being satisfactory\. 6\.9 Lessons learned and benefits 47\. RAFU has changed the mode of delivery of road projects and consequently the culture of both private and public sector entities, and that of professionals and administrative staff involved in road administration and the broader civil engineering sector in Uganda\. As a result, the performance of road programs has improved as evidenced by the number of projects delivered on time and within budget\. 48\. The local engineers have been able to go through a capacity building program\. They can now take up higher positions of responsibility in the roads sectors\. 49\. Financial management systems have been put in place which meets the Bank's requirements and standards\. A well documented financial management manual outlining the internal control procedures as well as financial reporting requirements to government and the World Bank was developed\. Additionally, a computerized accounting package was procured and is fully operational\. 50\. Technical Audits in addition to financial audits need to be continuously carried out, as these have enabled success of the changes that have been introduced\. \. 48  Annex 7\. Comments of Co-financiers and Other Partners/Stakeholders EU Financed Technical Assistance to RAFU 1\. The European Commission financed a Technical Assistance (TA) team to assist RAFU and other TA teams within RAFU for a period of 36 months, commencing April 2005\. The team was predominantly involved in administering EDF funded projects and projects funded by other agencies and contributed to the effective management of EDF financed projects, increased technical assistance, technology transfer to Ugandan engineers and sustained, improved performance of the road authority\. 2\. The team comprised of the following experts: (i) Team Leader; (ii) Senior Project Engineer I (SPE I / Contract Management); and (iii) Senior Project Engineer II (SPE II / Procurement)\. 3\. The TA support has now been extended to August 2009 and the scope has been widened to: (i) provide support in the establishment of UNRA through a Reform Implementation Team (RIT) Advisors; (ii) addresses the transfer of MOWT road maintenance, ferries, axle load control and main bridge functions to UNRA in 2008; and (iii) provide assistance in setting up a Secretariat for the Road Fund, with the medium term goal of facilitating direct budget support by donors to UNRA\. 4\. The revised TA composition beginning January 2008 is as follows: (i) Senior Project Engineer I (SPE I / Contract Management); (ii) Senior Project Engineer I (SPE II / Contract Management); (iii) Change Management/Institutional Expert (RIT); and (iv) Road Sector Reform Expert (RIT)\. 5\. In addition to the above, the EU will finance short term specialists for an input of 310 man days\. 49  Annex 8\. List of Supporting Documents 1\. Memorandum and Recommendation of the President of the International Development Association to the Executive Directors 2\. Country Assistance Strategy 3\. Technical Annexes 4\. Project Implementation Plan 5\. Development Credit Agreement, March 9, 1998 6\. Amendment of Development Credit Agreement, May 5, 1999 7\. Amendment of Development Credit Agreement, October 4, 2001 8\. Amendment of Development Credit Agreement, November 2, 2004 9\. Mid Term Review Report, March 14, 2000 10\. Quality at Entry Review Report(December 1, 1997 ­ January 16, 1998) 11\. Quality of Supervision Report, October 2004 12\. Quality of Supervision Report, September 2006 13\. Executive Agency Implementation Policy Framework and Implementation Strategy, March 2000 14\. Uganda National Road Authority Act, June 8, 2006 15\. Consultants' Study Reports: (i) Transitional Institutional Reforms for the Establishment of Road Agency, June 1998 (ii) Road Agency Study, March 2002 16\. Project Appraisal Documents for: i) Road Development Program, Phase I Project ­ June 3, 1999 ii) Road Develop Program, Phase II Project ­ June 7, 2001 iii) Road Development Program, Phase III Project ­ August 9, 2004 17\. Development Credit Agreements for: i) Road Development Program Phase I Project ­ November 22, 1999 ii) Road Develop Program, Phase II Project ­ August 16, 2001 iii) Road Development Program, Phase III ­ February 23, 2005\. 18\. Aide-memoire, implementation status reports and project progress reports\. 50  IBRD 36109 UGANDA ROAD WORKS DESIGNED UNDER RSISTAP AND EXECUTED UNDER THE ROAD DEVELOPMENT PROGRAM PHASE 1­4 UGANDA RDPP1 COMPLETED PAVED ROADS RDPP2 COMPLETED GRAVEL ROADS RDPP3 ON GOING DISTRICT CAPITALS RDPP4 UNDER PROCUREMENT NATIONAL CAPITAL DROPPED RIVERS Source: Ministry of Works and Transport; INTERNATIONAL BOUNDARIES Road Agency Formation Unit (RAFU) 30°E 32°E This map was produced by the Map Design Unit of The World Bank\. 0 25 50 75 100 Kilometers S U D A N 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\. 0 25 50 75 Miles To To Juba Juba To To 4°N Faradje Faradje 4°N MoyoMoyo K E N Y A Yumbe umbe KaabongKaabong KobokoKoboko AdjumaniAdjumani KitgumKitgum MarachaMaracha Nile AruaArua Albert KotidoKotido To To Lodwar Lodwar KilakKilak GuluGulu AbimAbim MorotoMoroto DEM\. REP DEM\. REP\. Olwiyo NebbiNebbi Pakwach Nile OF CONGO OF CONGO Victoria Karuma OyamOyam LiraLira BulisaBulisa 2°N ApacApac AmuriaAmuria KatakwiKatakwi NakapiripiritNakapiripirit 2°N To To DokoloDokolo Beni Beni KaberamaidoKaberamaido AlbertHoima MasindiMasindi AmolatarAmolatar SorotiSoroti KumiKumi Hoima Lake KapchorwaKapchorwa NakasongolaNakasongola SironkoSironko PallisaPallisa BukwoBukwo BudakaBudaka MbaleMbale To To KibogaKiboga KamuliKamuli Bunia Bunia KaliroKaliro For Fort KibaleKibale LuweroLuwero Butaleja Butaleja BubuloBubulo BundibugyoBundibugyo PortalPortal NakasekeNakaseke Wobulenzi BusikiBusiki KyenjojoKyenjojo KayungaKayunga MubendeMubende Tororo ororo Zirobwe To To Busunju Wakiso akiso IgangaIganga BugiriBugiri Nakuru Nakuru Gayaza MityanaMityana BusiaBusia MukonoMukono JinjaJinja Kilembe KamwengeKamwenge MpigiMpigi KAMPALAKAMPALA KaseseKasese To To Kisumu Kisumu Mpondwe 0° SembabuleSembabule 0° Pakwach Katunguru IbandaIbanda Lake MasakaMasaka Edward KiruhuraKiruhura KalangalaKalangala To To BushenyiBushenyi K E N Y A Beni Beni MbararaMbarara IsingiroIsingiro RakaiRakai KanunguKanunguRukungiriRukungiri Ntungamo Ntungamo Lake Victoria KisoroKisoro KabaleKabale amoGGomaoT TANZANIA ANZANIA To To To To TANZANIA ANZANIA Kigali Kigali Nyakanazi Nyakanazi RWANDARWANDA 32°E 34°E APRIL 2008

REVIEW

P034081

Document of The World Bank Report No: 29173 IMPLEMENTATION COMPLETION REPORT (SCL-42000 SCL-42001) ON A LOAN IN THE AMOUNT OF US$430 MILLION EQUIVALENT TO THE PEOPLE'S REPUBLIC OF CHINA FOR THE XIAOLANGDI MULTIPURPOSE PROJECT: STAGE II June 28, 2004 Rural Development and Natural Resources Sector Unit East Asia and Pacific Region  CURRENCY EQUIVALENTS (Exchange Rate Effective January 2004) Currency Unit = Yuan (Y) Yuan 1\.00 = US$ 0\.12107 US$ 1\.00 = Y 8\.26 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AS - Antiepidemic Station BCM - Billion Cubic Meters CAS - Country Assistance Strategy CCPN - Central China Power Network CPLG - Central Project Leading Group CUM - Cubic Meter CUMEC - Cubic Meter per Second DRB - Disputes Review Board DSP - Dam Safety Panel EIA - Environmental Impact Assessment EMO - Environmental Management Office EMP - Environmental Management Plan EPMs - Environmental Protection Measures EPP - Emergency Preparedness Plan GOC - Government of China GWh - Gigawatt hours ICB - International Competitive Bidding IDA - International Development Association LRM - Lower Reach Model MCM - Million Cubic Meters MWR - Ministry of Water Resources NCB - National Competitive Bidding NCPN - North China Power Network NCHEI - North China Hydroelectric Institute PAB - Provincial Audit Bureau PAD - Project Appraisal Document POE - The International Panel of Experts on Environment and Resettlement PRO - Provincial Resettlement Office QAG - Quality Assurance Group RPDI - Reconnaissance Planning and Design Institute SAA - State Audit Administration SBD - Standard Bidding Document SEPA - State Environment Protection Administration SOE - Statement of Expenditures WRPI - Water Resources Protection Institute XECC - Xiaolangdi Engineering Consulting Company  XLD - Xiaolangdi Project YRCC - Yellow River Conservancy Commission YRCCRO - Yellow River Conservancy Commission Resettlement Office YRCHU - Yellow River Central Hospital Unit YRWHDC - Yellow River Water and Hydropower Development Corporation YRWHIDCRO - YRWHDC Resettlement Office Vice President: Jemal-ud-din Kasum Country Director: Yukon Huang Sector Director: Mark D\. Wilson Task Team Leader: Xiaokai Li  CHINA XIAOLANGDI MULTIPURPOSE PROJECT: STAGE II 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 5 5\. Major Factors Affecting Implementation and Outcome 20 6\. Sustainability 23 7\. Bank and Borrower Performance 25 8\. Lessons Learned 26 9\. Partner Comments 28 10\. Additional Information 38 Annex 1\. Key Performance Indicators/Log Frame Matrix 45 Annex 2\. Project Costs and Financing 47 Annex 3\. Economic Costs and Benefits 49 Annex 4\. Bank Inputs 51 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 53 Annex 6\. Ratings of Bank and Borrower Performance 54 Annex 7\. List of Supporting Documents 55 Annex 8 \. Compliance with Loan Covenants 58 Annex 9 \. Operation and Maintenance Plan and Emergency Preparedness Plan Summary 59 Annex 10\. Loan Allocation and Disbursements 64  Project ID: P034081 Project Name: CN - XIAOLANGDI MULTI\. II Team Leader: Xiaokai Li TL Unit: SASRD ICR Type: Core ICR Report Date: June 28, 2004 1\. Project Data Name: CN - XIAOLANGDI MULTI\. II L/C/TF Number: SCL-42000; SCL-42001 Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: Power (98%); Central government administration (2%) Theme: Other urban development (P); Rural services and infrastructure (P); Water resource management (P) KEY DATES Original Revised/Actual PCD: 02/28/1997 Effective: 10/31/1997 01/12/1998 Appraisal: 02/28/1997 MTR: 07/31/1999 06/11/2002 Approval: 06/24/1997 Closing: 12/31/2003 12/31/2003 Borrower/Implementing Agency: PRC/YELLOW RIVER COMM\. Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Jean-Michel Severino Country Director: Yukon Huang Yukon Huang Sector Director: Mark D\. Wilson Geoffrey Fox Team Leader at ICR: Xiaokai Li Daniel Gunaratnam ICR Primary Author: Daniel Gunaratnam 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: HS Sustainability: HL Institutional Development Impact: SU Bank Performance: S Borrower Performance: HS QAG (if available) ICR Quality at Entry: HS HS 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: A\. to provide flood protection for 103 million people in the North China Plain in rural areas, B\. to control sediment accretion in the lower reach of the Yellow River for a period of about 20 years; C\. supply water to several large and medium cities and major industrial centers, cities and industries; D\. to supply irrigation water (and increase the reliability of irrigation) for some 2 million hectares and ensure more stable water supplies for downstream and E\. to generate much needed hydropower to meet the peak power requirements in the Henan Grid\. 3\.2 Revised Objective: The above objectives remained relevant through out the entire project\. 3\.3 Original Components: The total Xiaolangdi multipurpose investment was supported by the Bank in two project stages\. This report is concerned with the second stage project\. (Stage I Project 12329-CHA)\. In considering the implementation completion of this stage II project, it is logical to consider as appropriate, both stages together, because the civil works and all other major contracts continued and were financed across both stages\. Therefore, the objectives for both stages remained primarily the same\. Project Component 1--Dam and Appurtenant Structures and Hydropower Plant, including hydropower plant (turbine and generators), administration, engineering and consultants\. The main features of this component were: l construction of Xiaolangdi rock-fill dam, 154 m high, with a crest length of 1,370 m; l construction of a common intake structure, feeding nine large diameter tunnels and surface spillway for river diversion, flood handling and sediment management, discharging into a common plunge pool; and l construction of a power station with six associated power tunnels with turbine and generators with an installed capacity of 1,800 MW (6 x 300 MW) and associated switchyards, and transformers\. This component contained the major investment under the project and supported all five project objectives (A-E) above\. This component was completed well ahead of schedule and the quality of construction was excellent and is therefore rated highly satisfactory Project Component 2--Training for Operation\. The main emphasis of this component was to complete the training on construction management commenced under the previous stage 1 project and proceeded more intensified training for the post construction, management and operation skills required by YRWHDC\. The main objectives of this component were: l to enable YRWHDC to function as a autonomous body in the efficient development and operation of water and hydropower projects, and be capable of exploiting opportunities expected to arise from the current wave of enterprise reform in China; and l to staff YRWHDC with appropriately skilled personnel, capable of handling the planning, general management, and financial management in order to run YRWHDC as a proper business enterprise\. This component supported component 1 and contributed heavily to the sustainability of the project\. This component was fully completed ahead of schedule and has therefore been rated highly satisfactory\. Project Component 3--Environmental Management Plan Implementation\. A salient feature of the environment protection program in the stage 1 project was the implementation of an Environment Management Plan\. The Plan included the setting up of an Environmental Management Office (EMO) - 2 -  which, had the lead and coordinating responsibility for implementing all needed environmental protection measures including: l Management of continuing periodic monitoring for assessing the actual impact of the project; l Planning and implementation of the needed correction measures identified through the monitoring program; l Preparation of routine periodic reports (and special reports, when needed) for distribution to concerned Government agencies and to the Bank; and l Long-term monitoring of the downstream river hydrology and sediment flows and deposition\. The stage II project continued the detailed monitoring through the EMO to ensure the environmental management plan was implemented\. There were five new areas of monitoring introduced: l Construction Site Monitoring\. l Public Health\. l Seismic Monitoring l Downstream catchment hydrology, sedimentation , etc l Special Studies and monitoring This component supported project sustainability, addressed one of the Bank's key safeguards areas and added to the overall quality of completed works under component 1\. It was completed ahead of schedule and was very thoroughly performed and is being adopted as a model for other projects and is rated highly satisfactory Project Component 4--Flood and Sediment Forecasting and Water Dispatching System\. The objective of this component was to upgrade the old flood management system to a modern integrated MIS for flood, drought, sediment and ice flow management and at the same time to establish modern institutional arrangements consistent with this integrated water resource management approach\. Institutional reforms redefined the roles of the existing institutions of the YRCC for (a) data collection; (b) data base development and management; (c) model building and operation; and operation of decision support systems\. The component also included the upgrading of existing facilities, computer networks, and communications systems\. The component was supported by both international and national technical assistance for MIS design, modelling, training etc\. This component supported the 4 objectives A-D\. The outcomes and impact go well beyond those documented in the PAD and is therefore rated highly satisfactory\. Project Component 5--Water Institutional Reform\. This component consisted of reforming the water institutions to ensure that water management of the lower reach of the Yellow River is sustainable\. In particular, there was a separation of the primary regulatory and operational functions and rationalization and amalgamation of both the existing functional responsibilities and the many existing institutions with responsibilities for managing the lower Yellow River\. The important issues of water pricing across sectors and services, cost recovery and regulation were also address\. This component supported project sustainability and was successfully completed for the lower reach with a new management structure operating on a business basis and is therefore rated satisfactory\. The outcomes were the establishment of a new agency to coordinate the Lower Yellow water distribution operations covering two of the largest provinces in China (Henan and Shandong with over 200 million people) and the successful agreement on water tariff reforms, involving the interplay of several government agencies and institutions, both at GOC and provincial level\. - 3 -  3\.4 Revised Components: The components of this project were not revised in the course of implementation\. 3\.5 Quality at Entry: 1\. The Quality at Entry was independently assessed and rated by the Bank's Quality Assurance Group (QAG) in 1997/1998 as highly satisfactory\. The relevance of the objectives and matching of components in support these objectives is considered to be an important part of the quality at entry\. The project objectives were consistent with GOC strategy, policy and priorities relating to flood control and management and water shortages for urban and irrigation\. Therefore, the flood control objective of the project, including the requirements for sediment control to stabilize the lower reach of the River and to improve the environment and the safety of the river was the main feature of the project\. The other objectives relating to water supply and irrigation stabilization were seen as very important priorities, as part of project\. The generation of hydropower was an integral part of the multipurpose nature of the project\. The project was consistent with the Bank's Country Assistance Strategy (CAS), which emphasized support to environmentally responsible infrastructure development and is consistent with the Country Water Resources Assistance Strategy which emphasizes a combination of infrastructure development and institutional reforms for better water resource management\. In addition, and to ensure sustainable utilization of water resources, the Government, in October 2002 issued the new national Water Law and a series of other laws/regulations that provided a legal and policy basis for the sustainable management by water management agencies and water projects\. These clearly define the responsibility, duty, function and role of water management agencies and provide specific measures for the long-term development of such agencies\. 2\. The components were geared to achieving the objectives and all the objectives were component-supported\. YRWHDC had adequate capacity as the implementing agency\. It had built up its administrative capacity for physical implementation through appointment of managerial staff with successful experiences in the XLD Stage I project\. Relevant lessons learned during the stage I project were applied in the stage II project design, procurement and through continuity of experienced staffing, supplemented by the hiring of experienced staff and consultants\. The financial management capacity of YRWHDC had been built up during the stage I project and was operating at an adequate level for stage II\. The project management arrangements set up under stage I, comprising a corporatized enterprise (YRWHDC) rather than as a government agency where already in place and functioning at a high level\. 3\. A feature of the design of the physical components was the support provided by timely and adequate technical studies\. World-class experience was tapped through a Special Panel of Consultants throughout the design and construction process\. As a result the designs were technically sound and met all applicable safeguard policies and contributed to the quality at entry assessment\. The economic and financial analysis was established using river basin optimization models, which used a full 70 years series of hydrologic sequences and gave a detailed picture of the possible risks under different hydrology\. The project preparation also anticipated the need for a Disputes Review Board (DRB) to resolve any disputes that arose between the international contractors and the owner\. This DRB, consisted of consultants funded by the credit, proved to be very effective in dealing with complex contract variations and claims over the course of civil construction\. 4\. The design of the project addressed the Bank's safeguard polices for Dam Safety and the Environment\. A international panel of Dam safety experts (DSP) was established to oversee the design and construction activities\. The environmental analyses properly assessed adverse impacts and formed the basis of a well-defined Environment Management Plan (EMPs)\. Based on the experience and outputs of - 4 -  the stage I project, the Environmental Impact Assessment (EIA) was revised and upgraded and presented to the Bank's Board\. The recommendation in the EIA and PAD to split the Environmental Management Office (EMO) into two functional areas, one for the Multipurpose Dam Project and the other for the Resettlement Project, which proved to be most effective\. Public participation mechanisms before major decisions on environmental and resettlement issues were made, worked satisfactory\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective: The project achieved or exceeded all the objectives before the loan was closed in December, 2003\. Most of the components were completed 12-15 months ahead of schedule\. Therefore, the overall outcome is rated highly satisfactory\. The main objectives of the project and achievements under each of the main components are presented below: Objective A: Introduce flood control in the lower reaches of the Yellow River Basin to protect major infrastructure and 103 million people\. Achievements: Starting from year 2000, the flood protection level downstream of Xiaolangdi Dam had been increased to 1:1000\. The downstream ice flood hazards are eliminated\. All the common floods, in particular those very frequent floods that could inundate the vast flood plains where over 1\.3 million people live, are brought under control avoiding the enormous possible flood damage of the past\. As an illustration prior to the completion of the dam, the 1996 flood event caused the following: (a) 251,000 ha of land (including 200,000ha farmland) was inundated; (b) 2\.4 million people affected with 800,000 people entrapped; (c) estimated economic losses of Y6\.46 billion\. Starting from 2000 this type of damage has been avoided with the completion of the Xiaolangdi Dam\. The dam is now capable of regulating the flows of the Yellow River during the flood and dry seasons\. The flood forecasting system has been significantly enhanced and institutions are now in place to undertake flood forecasting\. The reservoir is capable of completely reducing flood losses downstream between Huayuankou (Henan) and Lijin (Shangdong), and between Lijin and the estuary to a lesser extent\. The reservoir is also capable of regulating flows so that ice floods can be completely avoided\. During the 2000 winter, ice appeared on the piers in the river in Shandong, but there was no freezing of the river because adequate flow was released from the reservoir to prevent it from happening\. Objective B\. Sediment Control for Downstream River Channel Siltation\. Achievements: By end August 2003, a total of some 1 BCM of silt (see figure 1 below), about 14% of the storage reserved for sediment deposit (7\.55 BCM), has been trapped in Xiaolangdi reservoir preventing siltation of downstream river course\. In addition, an in-situ sediment-flushing test was conducted centered at Xiaolangdi July 4-15, 2002, resulting in erosion of the downstream river course with some 36\.2 million tons of silt flushed into the sea\. A total of 1\.036 BCM of silt has been prevented from deposition in the downstream channel of the river\. This level of silt control in the 3 years of operation clearly demonstrates that silt control by the dam is working very well\. Silt control is extremely important because the river flow capacity has decreased from 22,000 cumecs in 1958 to 7,000 cumecs in 1996 at Huayuankou\. The riverbed has been aggrading during this period and has lost 65 percent of its flow capacity\. With the Xiaolangdi dam it will be possible to recover some of these losses in capacity in the river channel because the dam will release water to flush out the silt from time to time and also prevent further aggregation of silt in the channel\. - 5 -  Figure 1 Sediment Trapped in Reservoir 2000-2003 1200 1000 Resevoir 800 in 600 Trapped Tons 400 Million 200 0 May-97 Sep-97 Jan-98 May-98 Sep-98 Jan-99 May-99 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Objective C: Supply Water to several large cities and stabilize water for 2 million ha of irrigation\. Accomplishments: Since early 2000, Xiaolangdi Project has played a critical role in increasing the water supply for each user sector in the downstream areas\. The downstream provinces are now able to be supplied with regulated water for urban and irrigation use when they most need it\. In 2000 there was a significant drought (1/ 200 year) in the downstream areas and it affected all the North China Plain, covering some 300 million people of whom 50-70 million are urban residents\. The only source of water was from Xiaolangdi Reservoir and the Government realized the strategic importance of using the reservoir to supply municipal and industrial water under severe drought, and consequently it has become the main objective of the project in the dry season above generating hydropower\. Some 800 MCM of water were released from the reservoir in 2000 to supply key cities such as Tianjin to meet current demands\. Table 1 for the incremental total and M& I water supplied with project\. Table 1 PAD ICR Analysis Of Water Supplied ICR Municipal and Industrial Water Supply 2020 (BCM/Yr) without Proj with Project Henan Shandong Total Henan Shandong Total Incremental Supply AVE 2\.48 2\.74 5\.22 2\.66 2\.78 5\.44 0\.22 MAX 3\.00 2\.82 5\.82 3\.00 3\.00 6\.00 0\.18 MIN 2\.25 1\.70 3\.95 2\.25 2\.47 4\.72 0\.77 ICR Agriculture Water Supplied AVE 2\.33 3\.22 5\.55 1\.91 5\.27 7\.18 1\.63 MAX 6\.98 10\.43 16\.56 8\.11 12\.87 20\.98 4\.42 MIN 0\.53 3\.05 3\.58 0\.09 5\.06 5\.15 1\.57 ICR Total Water Supplied AVE 4\.81 5\.959 10\.768 4\.57 8\.06 12\.62 1\.86 MAX 9\.975 13\.244 22\.377 11\.11 15\.86 26\.97 4\.60 MIN 2\.784 4\.742 7\.526 2\.341 7\.525 9\.866 2\.34 PAD Municipal and Industrial Water Supply 2020 (BCM/Yr) AVE N/A N/A 4\.67 N/A N/A 4\.78 0\.11 PAD Agriculture Water Supplied AVE 4\.39 8\.79 13\.18 4\.78 8\.95 13\.73 0\.55 It can be observed that, with the project, an average of 220 MCM increment of M & I water per annum can be made available to cities and in a dry year up to 770 MCM will be made available\. - 6 -  Objective D: Supply Irrigation Water to stabilize some 2 million ha irrigation\. Achievements: For agriculture, an average of increment of 1\.63 BCM/year will be made available\. This will help stabilize the irrigation water supply for some 2\.0 million ha\. For the 75% probability hydrologic sequence for which all the irrigation schemes are designed, a total of 2\.4 BCM (see figure 2) is made available for irrigation\. This would give 1200 cum/ha of additional water, which is crucial for stabilizing and increasing agricultural yields\. (e\.g\. Wheat by as much as 1\.0 tons/ha)\. Figure 2 Additional water supplied with Project 7 6 BCM/Yr 5 in 4 water 3 2 1 Additional 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Cumulative Probability % The analysis based on the 90-year hydrologic record simulation shows that the incremental water supply and grain production will increase grain production by 2\.4 million tons per year respectively (see Figure 2 and 3 )\. Figure 3 Incremental Grain Production 3\.5 3 2\.5 MT/yr 2 1\.5 Million 1 0\.5 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Cumulative Probability - 7 -  The efficiency of water use also increases because of better regulation from the reservoir\. Water is supplied at the time when plants need water\. Figure 3a shows that for 1 kg of grain production, an average of 5-6 % less water is used\. Analysis shows that without the project, water use is 1\.7 cum per 1 kg of grain production\. With the project the water use is 1\.6 cum per kg of grain production\. Figure 3a\. Grain Production Efficiency with and without Project 2\.1 1\.9 1\.7 water 1\.5 With project 1\.3 without project 1\.1 Kg/cum0\.9 0\.7 0% 20% 40% 60% 80% 100% Cumulative Probability Objective E: Power Generation to supply peak power to the Henan Grid\. Achievements: Power generation facilities were commissioned in January 2000, ahead of schedule\. However, due to the prevailing serious drought conditions (1:200 year), the high priority given to urban water supply, power production was at a much lower level (30 percent) of power production for the first year and for the three years subsequently\. Yellow River flows showed a consistent decline from 1990 to 2000\. Figure 4 shows a significant decline of 30% in measured and natural flows due to a long-term drought in the 1990's\. After 2003 the flows have picked up and are more normal because of a large flood in the Wei River in 2003\. - 8 -  Figure 4 River Fows Upstream at Sanmenxia (1980-2000) 800\.0 700\.0 600\.0 cum 500\.0 400\.0 million 300\.0 100200\.0 100\.0 0\.0 1980 1983 1986 1989 1992 1995 1998 Natural Measured It is expected that in normal years much more water will flow in the Yellow River such as in 2003/2004 and power production will increase to almost the appraisal levels of power production (see Table 2)\. Table 2 ICR and PAD Power Generation Total PAD 90% PAD Power % of PAD Income Prob Average % of Pad Year Generation note for Average ( million GWH GWH 90% Prob ( GWH) Condition Yuan) Energy Energy 2000 613 175 actual 1651 2275 37% 27% 2001 2109 566 actual 2257 3679 93% 57% 2002 3272 910 actual 2282 4231 143% 77% 2003 3690 1021 actual 2812 5115 131% 72% 2004 4982 1365 projection 3218 5115 155% 97% The table shows that power production is consistent with production when probability of flow is 90% exceedance flow (see Annex 4 Table A4\.3 of the PAD)\. Other Achievements: The dam started to regulate water flows in 2000 and managed to keep water flowing in the lower reaches with no days when the river dried up\. In contrast the river dried up for up to 180 days in 1990\. The continuous flow of the Yellow River will have significant impact on the estuarial ecology\. For the first time for many centuries the water below Xiaolangdi is clear and silt free\. This will significantly reduce the cost of water treatment for urban and agricultural use\. It will also enhance freshwater ecology in the river since most freshwater fish cannot normally survive in highly silted water\. - 9 -  4\.2 Outputs by components: All components were successful completed as defined and outputs often exceeded the expectations in the PAD\. Output: Dam, Inlet and Outlet Works, Power station (turbines and generators) including administration, engineering and consultants (see photographs in Other Information) Dam, Inlet and Outlet Works\. All these works were completed ahead of schedule and to very good quality of construction standards\. The preliminary work involved the construction of the main access roads, pilot tunnels for the diversion, and resettlement of the dam site resettlers\. All these works were undertaken by local contractors and were completed in June 1994 before the international contractors undertook the major civil works for the dam, inlet and outlet works and the power station\. The resettlement of 10,000 resettlers was also completed prior to the start of the major contracts\. Resettlers at the dam site were resettled in 15 new villages and the work was professionally done\. The major works on the dam, inlet and outlet construction and hydropower plant started in July 1994 by international contractors and despite some delay due to poor geological conditions in the tunnels, all works were completed 12-15 months ahead of schedule in 2001\. The interim completion dates for the diversion of the river in November 1997 were also maintained by the inlet and outlet works contractor\. The quality of works were exceptionally good as remarked by many senior international and Chinese experts\. The Dam Safety Panel (DSP) of experts was established in June 1994 with 8 international experts\. The aim of this panel was to review specific design and construction issues and to ensure that implementation of the project was of the highest possible standards, using the most appropriate and up-to-date techniques\. The panel had nine meetings throughout the project design and construction phases\. In the panel's 9th report they commented on the completed works\. Essentially they indicated that the dam construction quality was satisfactory and built to a high standard; the slope in the intake and outlet were safe; the underground works quality was satisfactory\. Overall rating of this set of outputs is highly satisfactory\. Turbine and gates , generator and switchyard supply and installation \. The turbines (6x 300 MW Francis Type), and some high voltage cabling were supplied by international suppliers and all other parts (generators (6x 330 MVA), switchyards) were all supplied by local suppliers\. The turbines were funded by export credit by USEXIM Bank\. All the works as part of this component were completed by December 1999 for the first turbine to go into operation\. The other five units went into operation by December 2001\. For the last 3 years the operation of the turbines, gates and generators have been very satisfactory\. Generation of power has been limited by the lack of water as stated above because of a prolong drought in the Yellow River\. Overall these activities are rated highly satisfactory\. Administration, Engineering and Consulting Services\. The administration of the project was performed by the owner Yellow River Water Hydropower Development Corporation (YRWHDC)\. The Engineer for the project was Xiaolangdi Engineering Consulting Company (XECC)\. The Reconnaissance, Planning and Design Institute (RPDI) of YRCC was the designer\. Throughout the project design and implementation, YRWHDC used the services of international consulting firms to assist XECC and RPDI in design, construction management, contract administration and quality assurance\. About 1200 person-months of consulting services were contracted for the Project\. All these services were financed through the Bank's loan\. This TA performed satisfactorily throughout and made a major contribution to efficient project management\. - 10 -  The same TA services were also retained for this stage II Project and an agreement was signed in January 1998\. The services covered: (i) the core advisory group providing general support and consultation on contractual matters; (ii) the DRB; (iii) specialists in civil, underground, mechanical and electrical engineering; (iv) establishment of a cost control system; and (v) start-up coordination during the commissioning stage\. Since major problems were encountered with claims from the main contractor (change of ground conditions), a specialist claims management consultant was also hired\. International consultants carried out training\. YRWHDC also employed several local experts to review issues as they arose\. Some 288 experts met on 27 separate occasions to review and discuss different technical issues\. Input of consultants and the competence level of staffing are considered to be appropriate\. This component is rated as highly satisfactory because of the high quality of works and there was a saving of time of 12-15 month to implement the project and there was also costs savings\. Output: Training for Operation Training was an important aspect for the Project\. As planned, training for YRWHDC staff during the period of 1997 to 2002 was implemented in two phases\. Local training was undertaken by the international consultants for construction supervision, which included such topics as inspection of works, quality control, and construction scheduling using computer aided software, claims management, project management information systems\. Some 100 staff was also trained in financial management\. Specialized training of 107 staff was done overseas in the United States, Switzerland, France, Italy, Germany, England and Hong Kong SAR\. Phase 1\. During the 1997-1998 period, most of the training was focused on the overall qualities and financial management skills of senior and middle-level managers, as well as on the training of power operation staff\. In addition, more efforts for international project management and technology, training in the field of foreign languages, driving skills, business administration, project operation management and power plant O&M was arranged, including 440 person-months intensified training, 90 person-months counterpart professional training, and 81 person-months overseas training on financial management, project management and information management\. Phase 2\. The main emphasis in the second phase from 1999 to 2000 was on institution administration, project management, project supervision, and document processing, with continued efforts devoted to the training on project operation and power plant O&M\. This part of training included 329 person-months local training, 110 person-months counterpart professional training, and 145 person-months overseas training, study tour and technical exchange in the field of turbine, human resources administration, reservoir and water resources management\. Although in retrospect some of the courses should have had a longer duration, it is considered that considerable training was done during the Project and that it had a significant impact on improving the capabilities of the staff\. Overall this component is rated as Satisfactory\. Output: Environmental Protection Measures Environmental Impacts and Environmental Protection Measures\. As described in the Environmental Impact Assessment (EIA) , the major adverse impacts due to the project included resettlement of some 200,000 people, risks due to reservoir-induced earthquake, and impact on cultural relics and potentials of public health disasters\. Corresponding environmental protection measures (EPMs) were developed in the - 11 -  EIA to compensate, mitigate or minimize the impacts\. The EPM are internalized as part of the construction contract\. All these EPMs have been implemented during project implementation as described below (see chart of organization in Other Information)\. Resettlement\. The implementation of EPMs for resettlement program was carried out separately by Environmental Management Office for Resettlement (EMO/RS) in a separate IDA project: Xiaolangdi Resettlement Project (P003644)\. By the end of 2003, a total of 172,487 people have been successfully relocated\. Detailed discussions on this activity are covered in the ICR for the Xiaolangdi Resettlement Project\. (Report No\. 29174-CN) Dam Safety\. All dam safety measures including establishment of a panel of experts, set-up of earthquake monitoring network, all earthquake resistance design measures have been implemented and all are working effectively\. In addition a dam safety program, including an Emergency Preparedness Plan (EPP) has been prepared to ensure safe operation of the dam and that in event of any emergency\. (See Annex 9 for details) Cultural Relics\. This activity was closely managed by the EMO\. Excavation and preservation of cultural relics sites was carried out by Henan and Shanxi Provincial Archaeological Bureaus in accordance with the program plan with a budget of some Y 30 million\. The program for excavation and preservation of identified relics below EL275 has been completed as planned\. Two summary reports (books) have been prepared and published separately in book form by Henan and Shanxi provincial archaeological bureaus in 2000\. Public Health\. Effective measures on public health, including provision of safe drinking water, food sanitation, medical screening, rat and mosquito control, and vaccination were continuously taken by all contractors and the project owner\. Regular physical examinations were conducted for all workers at the construction sites\. EPMs at Construction Sites Worker Safety\. Surveillance of safety in construction areas was the responsibility of the XECC through the special Safety Department (SD/XECC)\. Each contractor had a corresponding safety division with responsibilities of safety management\. All possible measures were taken to reduce working accidents\. According to statistical safety report of YRWHDC, the number of accidental deaths was within the range of 0\.5% [publications from FIDIC indicate statistical incidence of accidents in such types of projects], considering the total number of workers involved, near 10,000 at peak, and the duration, 6 years, in such a complicated project, with over 100 tunnels and a huge underground power house\." Solid Waste Management\. All solid waste, including production waste such as construction spoils and wastes from camps was collected and transferred to designated disposal sites\. Water Pollution Control\. All wastewater discharged from all the project construction areas and camp areas basically met the standards and continuous monitoring results have showed that the impact of the waste water discharge on the Yellow River water quality was negligible\. Dust and Noise Control\. Responsibilities for dust control in all construction areas and roads was assigned to different contractors and the project owner\. Regular road watering was conducted by contractors and the owner (YRWHDC) on their responsible roads\. Noise due to construction was monitored and controlled at an acceptable level\. Measures were taken for those noise sources with impact - 12 -  on local residents\. As an example, the Heqing Village School near the construction area was relocated due to noise impacts with fund provided by the corresponding contractor and YRWHDC\. Environmental Monitoring A complete environmental monitoring system was established and functioned well for the duration of the project\. Environmental monitoring tasks related to Xiaolangdi dam site such as water quality, public health, air quality, water pollution control were assigned to and carried out periodically by different monitoring institutes\. Systematic and large amounts of monitoring data was generated and necessary actions taken during project implementation to resolve environmental issues identified by monitoring such as Heqing School relocation and use of wastewater treatment facilities by one of the principal contractors to name two\. Comparison of Environmental Activities The following table shows a comparison between the environmental activities required in the project appraisal document and those actually implemented during project implementation\. It is clear that all the activities required have been implemented with satisfactory results and some even with highly satisfactory results\. A Comparison of PAD Requirements on Environmental Management and Implementation PAD Requirements Implementation Evaluation 1\. Establishment of EMO Established from 1994 to now Satisfactory with Competent Staff 2\. Employment of Employed from 1994 to now Highly International Panel of Experts Satisfactory 3\. Environmental Protection 3\.1 All measures planned have been Satisfactory Measures on implemented Highly 3\.1 Dam Safety 3\.2 Planned program has been completed Satisfactory 3\.2 Cultural Relics 3\.3 All measures taken with excellent Highly 3\.3 Public Health results Satisfactory 4\. Resettlement Some 200,000 people have been Highly successfully Satisfactory relocated (A separate IDA project) 5\. Measures to Mitigate An effective environmental management Highly adverse impacts cause by system Satisfactory project construction established and been functioned well with minimized impacts 6\. Timely EMP EMP implemented with project progress Satisfactory Implementation 7\. Review of detailed action Yes Satisfactory plans by Panel and Bank 8\. Ensure YRCC, Henan, Yes Satisfactory Shanxi participation Review Reports of Panel of Experts The International Panel of Experts on Environment and Resettlement (POE) was established in June 1994 under the stage I project and it continued for the duration of stage II\. One of the objectives of the panel was to ensure implementation of the Environmental Management Plan and minimize adverse environmental impacts caused by the implementation of the project\. By the end of March 2001, the panel was convened 12 times\. Review of the panel reports indicates that the panel played a very important role in the whole process - 13 -  of environmental management in Xiaolangdi Project, especially on establishment, improvement, and effective function of the environmental management system mentioned above\. Xiaolangdi experience has suggested that such a panel was necessary to ensure successful implementation of EMP especially for those large-scale projects with significant environmental management risk\. Overall rating of this component is highly satisfactory\. Output: Flood, Sediment, Ice and Drought Management According to the Government laws/regulations and MWR stipulations, flood, sediment, ice and drought management in the whole Yellow River basin (including Xiaolangdi reservoir area) is under the control of YRCC\. Institutional reforms were initiated by YRCC in the course of project implementation\. Organizations and their responsibilities for planning, allocation and management of water resources, including water supply, flood, sediment, and ice and drought management are summarized as follows: Chief Engineer's Office\. Assist the chief engineer and the deputy chief engineer in performing the overall technical responsibility of YRCC; make arrangements for the study of the Yellow River management strategies and significant technical issues, undertake the "Digital Yellow River" project planning and construction management; and fulfill the routine duties of YRCC Commission of Science and Technology\. Water Resources Management and Allocation Bureau\. Organize investigation and assessment of basin-wide water resources, develop trans-province water distribution schemes, annual schedules and water resource allocation options for the purpose of unified water allocation; organize and/or steer justification of important water developments in the basin; organize the implementation of the water extraction permits as authorized; direct water saving activities in the basin; and publish basin-wide water resources communiques\. Flood Control Office\. Make arrangements for or take part in developing basin-wide flood control schemes and supervise the implementation thereof; perform flood/drought management of important water projects as required and authorized; direct and supervise the management and compensation of flood detention basins; and organize and direct the justification of important water projects in respect of flood control\. Flood, Sediment, Ice and Drought Management Information System\. As part of the Project an automatic water regime forecasting system consisting of data collecting subsystem, data transmission, data processing and flood forecasting subsystem was developed\. This system comprises 54 precipitation stations, 11 hydrologic stations and 7 water level stations, with data automatically collected and then transmitted via ultra-short wave and satellite communication\. There are 2 central stations, one in Zhengzhou and the other at Xiaolangdi, with PCs connected to satellite terminals and databases developed using Foxpro\. This system was implemented by YRCC Hydrology Bureau in 1997 and completed in 2001 at a total cost of Y 13\.37 million\. At the same time, YRWHDC has invested Y 54 million and US$ 390,000 in hydrological and sediment survey since 1997, with a considerable amount of measuring equipment purchased for these purposes\. The survey provides some baseline data for establishing the database of the Yellow River flood, sediment, and ice and drought management information system\. This part of work was completed and taken over in early 2002\. - 14 -  To improve sediment management, YRWHDC has also provided Y 41\.72 million for YRCC to study the Xiaolangdi reservoir operation mode\. This study was completed in 2001, with findings already applied to the recent water/sediment regulation tests\. This provides a new solution to the problem of sediment in the Yellow River\. In addition, YRCC is now developing the "Digital Yellow River", which, when completed, will qualitatively improve the flood, sediment, ice and drought information system of the whole middle and lower Yellow River reaches in respect of technology and management (see chart of the network in Other Information)\. Overall evaluation of this component is satisfactory\. Output: Institutional Support to YRCC For the institutional support the YRCC which was the executing has undertaken two items: First, YRCC has set up a water dispatch office within YRCC, which monitors and collects charges at 90 points downstream\. This water dispatch office coordinates with the YRCC's Henan and Shandong River Bureaus\. For efficient distribution of water, the following is now being contracted with the lower reach water users: l Contracts are in process of being signed between YRCC's River Bureau's and the relevant Irrigation districts at each diversion point along the Lower Yellow River\. Contracts will also be signed with all irrigation areas within the dikes\. l The contracts will contain the timing and quantity of water to be delivered\. It will be the responsibility of YRCC's River Bureaus to ensure that there is no siltation of the entrances to the diversion points\. l Measuring devices with continuous recording instruments will be installed at each diversion point to ensure that water delivered will be accurately measured\. l Communications by computer data connections will transmit the water data diverted each week to YRCC's headquarters for computation of charges\. l Charges will be imposed on all water diverted from the river based on the following principles: a) All charges will be on a volumetric basis\. Municipal and Industrial (M&I) water will be charged much higher rates than irrigation water; b) water charges will recover all operation and maintenance costs and capital costs allocated for irrigation and M&I; c)Charges will be based on the scarcity of water according to the seasons: dry-season water will be charged much higher than wet-season water; and discounts will be provided when water has very high silt content, and d) Penalties will be imposed for late payment by irrigation districts\. Cost recovery would cover, among others, flood and sediment control\. A system of rationing has been agreed between YRCC and the irrigation districts for water delivery during periods of drought\. A monitoring system has been established to indicate water deliveries and charges collected on a real-time basis to measure efficiency of delivery( see chart of the procedures in Other Information)\. The implementation of this component has clearly had significant impact on the downstream flows and the availability of water\. The lower reach up to 800km from the estuary was drying up\. After the implementation, it was found that even under extreme drought conditions continuous minimum flows could be regulated through a rational dispatching arrangement\. (see Figure 5)\. Overall assessment of this component is satisfactory\. - 15 -  Figure 5\. Drying up of Yellow River from Lijin (river mouth) 800 250 700 200 600 500 150 dry 400 Dry 100 days km 300 of No 200 50 100 0 0 -100 1972 1974 1975 1976 1978 1979 1980 1981 1982 1983 1987 1988 1989 1991 1992 1993 1994 1995 1996 1997 1998 2000 2001 2002 -50 Year km of river dry Days dry 4\.3 Net Present Value/Economic rate of return: The economic benefits were determined based on the value added to agriculture, M & I water, Flood Control, Sediment Control and hydropower as described in the PAD\. The basic analysis to evaluate the benefits for added values used a simulation program using a 70 year hydrologic series (1919-1989)\. The PAD analysis did not capture the 1990-2000 period when a major drought occurred and all the major benefits for irrigation and power production declined significantly\. Incremental Production: Irrigation\. Figure 6 shows that incremental production of grain increased to 1\.84 million tons in 2000, but declined to 1\.46 million tons\. Since the water flows vary from year to year the variation showing the highs and lows is presented on the graph\. The details of M & I water supplied is given in Table 1 above and is 0\.22 BCM for an average year and 0\.77 BCM for a dry year\. However, the benefits are integrated over the whole probabilistic flow supply\. For power the incremental power production follows the actual production from 2000-2004 from the table 2 and it levels off to 5800 Gwh forecasted after 2008\. Detailed scenarios were looked at and 5800Gwh was the most likely production that could be sold to the Henan grid\. - 16 -  Figure 6 Incremental Production of Grain with Project 2\.50 2\.00 Tons 1\.50 Expon\. (Average 1\.00 52%) Million Expon\. (98% Prob) 0\.50 Expon\. (33% 0\.00 Probability) 1990 2000 2010 2020 2030 Incremental benefits\. The net incremental benefits have been worked for the five sets of benefits streams using the simulation model also used for the PAD economic analysis: (a) flood control; (b) Sediment control; (c) Irrigation; (d) hydropower; and (e) municipal and industrial water\. The incremental benefits are incremental production multiplied by the economic prices\. The price methodology is similar to that used in the PAD, but updated\. The prices used to develop the flood control is essentially the damage reduced with the project in areas between the dikes, detention basins and losses when the dikes breach\. Sediment benefits were estimated based on the cost foregone in raising the dikes because the reservoir will radically reduce the sediment downstream of the dam\. Irrigation benefits have been updated using economic farm gate prices for all outputs and inputs, including labor based on the latest border prices as proxy for economic prices\. M & I water was valued conservatively based on present tariffs of water for M & I water of Y1\.2/cum\. Hydropower was valued on the present tariffs (equivalent to willingness to pay) from the Power Purchase Agreement of Y0\.3/Kwh\. Since peak power is valued the same as the base power the average tariff undervalues the hydropower\. Based on this methodology the discounted benefits are as indicated in Table 4\. Economic cash flow is presented in Annex 7\. Table 4 Discounted benefits ICR PAD % of Total ICR/PAD Bil Y Bil Y Agriculture 9\.87 12\.089 30% 82% M & I 1\.94 1\.717 6% 113% Hydropower 6\.17 16\.536 19% 37% Flood Control 11\.39 7\.345 35% 155% Sediment 3\.40 2\.817 10% 121% Total 32\.77 40\.50 100% 81% - 17 -  Figures 7 PAD and ICR Project Benefits PAD Benefit Estimation ICR Benefits Sediment, 2\.817, Sediment, 3\.40, 7% 10% Agriculture, Agriculture, 9\.87, Flood Control, 12\.089, 30% 30% 7\.345, 18% Flood Control, 11\.39, 35% M & I, 1\.717, 4% M & I, 1\.94, 6% Hydropower, Hydropower, 6\.17, 16\.536, 41% 19% Based on Table 4 and Figure 7 it is clear that the benefit structure is similar, but hydropower share has declined (41% to 19%) because of the lower tariffs and lower generation rates due to lower flows\. The tariffs declined from 0\.52 fen/Kwh to 0\.275 fen/Kwh\. There was a surplus of power in China between 2000-2002 and it was impossible to negotiate higher rates\. However, with the growth of China pushing upwards and the power sector reforms for a two part tariff it is expected that tariffs will not remain low for long\. The share of flood control has increased (18%-35%) especially after a Y 6\.5 billion damage in the downstream areas of the 1996 floods\. Sediment benefits have also increased because of the constrictions in the channel due to sedimentation in the 1990's and these costs have been updated\. The agriculture benefit declined because of lower flows (90-year series shows lower averages)\. M & I benefits essentially remain the same\. Decline in benefits due to several factors is Y 8\.73 billion or 21%\. However, Y32\.8 billion in benefits is still very large for the project Economic Costs\. Economic cost includes the cost of the dam and all the associated structures and the cost of compensation for resettlement (proxy for benefits foregone)\. All interest and transfer payments were remove to obtain the economic costs\. Resettlement cost have increased by about $200 million\. The discounted costs are Y29\.0 billion in 1997 which have increased from Y21\.7 billion (33%), all due to resettlement cost increases\. Economic Rate of Return Analysis: Detailed economic cash flow streams are shown in the Annex 3\. The EIRR for the base case is 13\.2%, which is down from 20\.8% in the PAD because of the 21% decline in benefits and 33 % increase in costs\. However, an ERR of 13\.2% for such a large project is still considered to be good\. Risk Analysis\. Risk analysis was performed examining the effects of decline in agricultural prices, hydropower decline in generation or tariff rates or decline in M & I water rates and values\. The EIRR shows that the project is robust and declines in prices or tariffs only cause a decline in EIRR of less than 1% (see table 6) despite 20% decline in the benefits\. In addition to the economic benefits, the project delivers huge social benefits arising from the protection of more than a 100 million people from floods, enhanced security and water supply to 40 million people in urban areas, and enhanced stability and supply to some 25 million farmers\. - 18 -  Table 6 Risk Analysis ICR PAD Base case 13\.2% 20\.8% -20% Agriculture value 13\.0% 19\.7% -20% in Power Price 12\.6% n/a -20% in generation 12\.6% 17\.8% -20% in M& I valuation 13\.1% n/a 4\.4 Financial rate of return: Detailed financial analysis was performed for the YRWHDC\. It can be observed that the financial covenants for the project have been met fully in terms of debt service coverage and current ratio, but the rate of return on revalued assets for power will be satisfied only in 2010 and that for the whole company by 2020\. This essentially would mean that the Xiaolangdi Project, with water charge collection and subsidies for flood and sediment operation, can have funds to pay back the loan and meet its obligations for operation and maintenance\. However, the Rate of Return on Assets of the entire project will not be met until 2020\. The project is reasonably healthy since all such public utility projects with large flood control, irrigation and sediment control components in the UK and US only achieve rates of return of 2-4%\. Table 7 shows essentially all the financial requirements as required by the Bank at appraisal have been satisfied\. The analysis at ICR was based on the 2002 financial statement\. The 2003 statement should have much higher power revenues and therefore should show a better financial situation\. Table 7\. Financial Ratio's for YRWHDC Year 2002 2005 2010 2015 2020 2021 Rate of Return(%) Net Revalued Fixed Assets 0\.4 0\.5 3\.0 4\.1 5\.0 5\.2 Bank Covenant 2\.0 2\.0 5\.0 5\.0 5\.0 5\.0 Rate of Return on Power(%) Return On Net Fixed Assets - Power 7\.5 7\.9 13\.9 17\.6 20\.8 21\.5 Bank Covenant 5 10 10\.0 10 10 10 Current ratio Current Ratio 2\.2 2\.1 3\.3 5\.1 7\.8 8\.4 Bank Covenant 1 1 1\.0 1 1 1 Debt Service Ratio Debt Service Coverage Ratio 1\.4 1\.1 2\.7 6\.8 29\.7 30\.2 Debt Service Coverage Ratio (considering DSRF) 1\.4 1\.5 3\.6 8\.8 38\.1 38\.7 Bank Covenant 1\.3 1\.3 1\.6 1\.6 1\.6 1\.6 4\.5 Institutional development impact: The impact on institutional development is rated high\. Under the total project (stages I and II), the Ministry of Water Resources, for the first time formed a corporate entity to manage the project and to ensure that the management entity had the right training so as to be financially self-sustaining into the future\. Because of the strategic nature of the project, the YRWHDC is still under the supervisory control of YRCC for its strategic operations for floods and water supply to cities\. However, YRWHDC is the first attempt to create - 19 -  a water resources entity, which will be essentially be financially autonomous for it's commercial undertakings (except for the flood and sediment control-considered public goods)\. YRWHDC is also paying back the World Bank Loans, including the IDA Credit for the resettlement project and also the other local and foreign loans\. With the construction of the Qijiayuan re-regulating dam, the power production capability and supply more peak power to the Henan Grid should increase\. The second most important institutional impact is the development of the institutional arrangement for water dispatching to the lower reach\. No other major river basin has this type of dispatching system with solid contractual arrangement with water users in the two downstream provinces\. This arrangement will also ensure that the that water is released for environmental purposes and the flow in the Yellow River will reach the estuary (see Figure 5)\. Thirdly, institutional rearrangements now ensure the integrated management of the water resources of the lower river, including the complex arrangements for flood, ice flood, sediment and drought forecasting and management will be undertaken properly\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of government or implementing agency: Since many of the large contracts were with international contractors - German, French and Italians the exchange rate fluctuations which caused initial losses to the US$\. In early 1995, the RMB Yuan depreciated by some 50% against the US$\. In 1996-1997 the exchange rate of the DM versus the RMB Yuan was considerably increased\. All these factors have largely increased the budget funds of Xiaolangdi Project at the time of budget adjustment in 1997\. In the earlier stages of the Project the Employer had foreign exchange losses of up to US$30 million, but with the DM 2\.0 = US$ 1\.00 between 1998 and 2001, it subsequently recovered most of these losses\. The final status is that $70 million dollars was cancelled from this loan because of the foreign exchange saving which occurred in the later part of the project 2000-2002\. 5\.2 Factors generally subject to government control: Strong commitment by the implementing agency MWR enabled the project to be completed on time with all interim dates of completion being kept\. When problems resulted the MWR committed a Vice Minister to be in charge of the Corporation\. Other factors: a) In 1993-1995, the yearly increase of commodity prices in the domestic market rose quickly 10-14%% due to inflation\. This considerably increased some of the Project components cost\. Most cost increases could have been prevented by Government by reducing the tariffs on imported goods so that imported goods could substitute for local goods, especially for some construction materials such as timber and steel\. This would have prevented the price hikes\. b) In the course of economic transformations, the Government made changes to some legislation in 1993 and promulgated some new laws such as Tax Law, Labor Law amongst others\. All these new laws had a great impact on the contractors and gave rise to the contractors' claims and increased the Project costs components to some extent\. 5\.3 Factors generally subject to implementing agency control: Strong commitment by the implementing agency, YRWHDC, enabled the project to exceed PAD expectations in human resource development, project coordination, design and construction management, and cost control\. - 20 -  The implementation of such a large project with all sorts of technical complexities was a real challenge\. Changes in scope due to underground geological changes created problems\. This was the first time that YRWHDC executed a major set of international contracts\. The entire FIDIC conditions of contract was new\. The need for the "Engineer" to be independent according to FIDIC conditions of contract was also new\. So initial stage of the implementation the implementation agency was on a learning curve, which took about two years\. In addition some of the international contractors were also new to such large contracts in China\. After this initial stage things seem to settle down and work moved very rapidly and was completed 12-15 months ahead of schedule\. In addition except for one major claim (changed of ground conditions), which dragged on for 2 years before being settled all other claims were expeditiously settled\. The international consulting services working along side the Chinese staff greatly assisted not only the technical aspects of the project but also the contractual and claims aspects of the project implementation\. The appointment of the Disputes Review Board (DRB) helped considerably to solve a lot of the claims issues\. Training was key to success of the construction implementation\. The stage I training (see section on training) which included contract management and claims management proved to be extremely useful\. In early 1995, construction progress of Lot II was seriously delayed due to several tunnel collapses, which cast a shadow over the river diversion objective\. One of the main reasons for the delay was that one Contractor failed to obtain qualified local techniques and labor\. As recommended by the Employer, the Contractor agreed to introduce a new subcontractor and take active acceleration measures\. Measures were set in place by the Employer and by the MWR, to ensure that the River Diversion interim completion date was achieved\. YRWHDC's major effort resulted also in the completion of the inlet and outlet tunnels, plunge pool and spillway construction by September 2000, some 6 months ahead of schedule\. The same applies to the civil works of the underground facilities (power house cavern, power tunnels, the main transformer chamber, the valve chamber, tailrace tunnels and outlet structures), which were completed in September 1999, 7 months ahead of schedule\. Power conduits and penstocks were also completed in advance of the date required\. During the implementation of the Project, many additional reinforcement measures were adopted in design for underground excavations and high slopes particularly for safety reasons and long-term stability\. Whilst this did not affect the timing it nevertheless became design adjustments resulting in variations and hence in the increase of some of the Project components costs\. 5\.4 Costs and financing: In considering the costs and financing for the whole project covering both stage I and stage II, it is logical to consider both stages together because the civil works and all other major contracts continued and were financed across both stages\. The total project appraisal cost, excluding interest during construction (IDC) was US$2855\.8 million equivalent, of which $1307\.2 million (46%) was foreign costs\. The actual competed cost was US$2,688\.8 million equivalent, of which US$843 million (31\.3%) was foreign costs\. The total savings in foreign cost ($464\.2 million) came mainly from project investments because the government decided to finance many small items totalling US$121 million and another US$343 million saved in IDC because government directly funded all local costs, instead of borrowing from local banks\. - 21 -  Overall cost savings, net of inflation originated from: (i) sharp local competitive bidding for mechanical and electric equipment , (ii) efficient contract and funds management, especially for foreign contract claims; (iii) a design that minimized change orders; and (iv) savings due to the devaluation of the Deuch Mark against the US dollar\. Figure 8\. Cost Comparison of Major Items 900 800 700 $ 600 500 Estimated 400 Actual Million300 200 100 0 1 2 3 Lot Lot Lot Electrical Mechanical Admin/Eng Since the loan financed the second stage of the total project, it is necessary to look at the total financing picture, including both stage 1 and stage 11 project loans and the role they played in the overall financing\. All funds provided are shown in table below\. Government resources from budget were Y15014 million; Local loan funds from China Development Bank and Construction Bank amounted, $2,723 million All the funds needed for the construction of Xiaolangdi Project were in place on time, which greatly assisted project implementation according to the planned schedule\. The total available foreign funds were US$ 999 million of which Bank loan Stage I was $460 million and Stage II Loan of $430 million equivalent and export Credit and loan funds of $109 million\. Funds used were, Y12\.555 billion from the central government; Y2\.523 billion from China Development Bank; Y200 million from China Construction Bank; US$459\.78 million from World Bank stage I loan; US$216 million (US $ portion) and $91\.6 million equivalent (DM portion) from World Bank stage II loan ; and export credits totaling US$74\.00, US$55\.84 million from American Import and Export Bank and US$18\.16 million from Tokyo Mitsubishi Bank\. There were a saving totaling US122\.4 million for in Bank the Bank loan (US$108\.4 million equivalent and US $14 million) from stage II and this amount was cancelled\. The actual sources and uses of funds for the whole Xiaolangdi Multipurpose Dam project is summarized in the table below\. Details of loan allocation and disbursements for the stage I and II loans are shown in Annex 10\. - 22 -  Xiaolangdi Project Financing Arrangements (Unit: million US$ and Y or RMB) Financial Source Estimated Actual Percentage RMB $ RMB $ RMB $ Funds from Government 15,014\.00 12,555\.00 83\.6% China Development Bank 2,523\.00 2,523\.00 100\.0% China Construction Bank 200\.00 200\.00 100\.0% World Bank Stage I Loan\a 460\.00 459\.58 99\.9% World Bank Stage II Loan($)\b 230\.00 216\.00 93\.9% World Bank Stage II Loan (DM)\c 200\.00 91\.60 45\.8% Export Credit\d 109\.00 74\.00 67\.9% Total 17,737\.00 999\.00 15,278\.00 841\.18 86\.1% 84\.2% \a Pooled currency loan $430million for project and $30 million for IDC capitalized \b Single Currency Loan in $ and DM \c The DM single currency loan was DM 346\.5 million and equivalent to $200 million \d From US EXIM Bank At the completion of the project, the actual total expenditure of funds was less than the estimate\. The was due mainly to the active and effective management measures to control project investment costs, favorable exchange rate variations and some changes of commodity prices used in construction\. 6\. Sustainability 6\.1 Rationale for sustainability rating: Sustainability is rated highly likely\. All physical components were constructed in a technically sound manner and all of the components have been operating for 3 years with all operating targets achieved, i\.e\. all six units hydro generation units are operational and functioning well; the operation of sediment tunnels and flushing test indicate that these work well; the main outlet tunnels have been operated and erosion on these tunnels is very minimal\. MWR has done a detailed evaluation of the project through a panel of experts and has accepted the project in terms of quality and functionality of all the elements of the project\. The international panel of experts from Norway, Italy, Brazil, USA and Canada made a final inspection and prepared their final report and indicated that all safety measures on the dam and the structures have been complied with and are thoroughly satisfied with the project quality\. All dam safety requirements in terms of future monitoring of the structures are operational and working well\. Some 3500 gauges are in place to monitoring the deflections, pore pressures, settlement etc of the dam and structures\. Emergency power to the gates have been completed so that gates and other structures can be operated even if the main and secondary line power fails\. In addition a set of seismographs telemeter via microwave stations the micro-seismicity due reservoir induced seismic activities\. Many of the reservoir banks are also being monitored for stability\. The major dam safeguards of an Emergency Preparedness Program has been prepared and will be operated by YRCC in event of any emergency in Sanmenxia or Xiaolangdi Dams\. Organization for Operation : The YRWHDC has been reorganized and reoriented from construction management to undertake operation of the dam and powerhouse and ensure full financial accountability\. All staff (524) are in place in the new organization and all departments had been established and are functional\. About 107 staff have gone through intense financial management training\. - 23 -  Implementation of flood, sediment, ice and drought systems has improve the level of project management and boosted the project benefits\. The Project Operator has formulated various rules and regulations, including operation specifications, project maintenance procedures, operation systems, and system of responsibilities, to ensure well-organized management and smooth operation of the Project\. Adequate rules and regulations are the legal basis of adequate project operation\. To ensure sustainable utilization of water resources, the Government has recently issued the new Water Law and a series of other laws/regulations that provides a legal and policy basis for the sustainable management by water management agencies and water projects\. These clearly define the responsibility, duty, function and role of water management agencies and provide specific measures for the long-term development of such agencies\. In May 2000 YRWHDC signed an agreement with the Henan Power Bureau for sales/purchase of power generated by Xiaolangdi to the provincial grid\. This agreement will allow YRWHDC to cover all operating costs, portion of repayment of loan principal and interests\. The Government of China (GOC) recognizes that Xiaolangdi is a strategic project for water supply as well as flood and sediment control, all of which have economic benefits that cannot necessarily derive financial revenues directly from the beneficiaries\. Hence the GOC will compensate the operation of the dam, if it cannot meet its financial obligations\. 6\.2 Transition arrangement to regular operations: As a State-Owned Enterprise, YRWHDC owns and operates all of the project facilities, and has a well trained staff complement of 524\. It has three profit centers, namely, Hydropower, Irrigation and M&I Water Supply, and Flood Control\. The following Departments are considered key to operation Hydropower Station\. The Hydro-Power Station is responsible for the entire operation and maintenance aspects of the Project\. There is 111 staff at the station\. The organization chart indicates a good set-up of the offices and workshop units\. The station carries out cost calculations for the various activities related to power generation and the release of water\. Hydropower production is based on the presently installed capacity of six units of 300 MW each\. Finance Department\. The Finance Department is headed by a Chief Accountant and two Finance Directors and has a total staff of 10 distributed in 4 units\. The Department is responsible for all accounting and computerization of financial information\. The staff has received the necessary training on how to operate the system\. One unit, the "Investment Settlement Section" is responsible of the raising, disbursing, monitoring and repayment of the World Bank Loans\. The unit is headed by a competent and trained accountant and has a total staff of three\. Business Management Department\. The Business Management Department is the planning and commercial center and is responsible for the marketing and sales of the outputs from the XLD, i\.e\. hydropower, irrigation and M & I water\. The Department plans and establishes the overall YRWHDC budgets for the operation, together with the Finance Department and the Power/Water Management Department\. The Business Management Department, together with the Chief Economist and the Hydropower Station Director, is responsible for negotiation of contracts with the main clients, YRCC, the power distribution companies (Henan Electricity Power Company) and the Henan and Shandong Municipal authorities\. The Department is headed by two directors and with staff of 9\. Operation and Maintenance\. The technical operation and maintenance rules and procedures formulated and followed by YRWHDC for the dam/power plant operators are satisfactory and in line with the pertinent codes/specifications and regulations of the Chinese Government\. As for the O & M Plan specified in the - 24 -  legal agreement for this project, a document entitled "Management and Maintenance Program for the Operation of the Power Plant" was prepared together with the "Operation, Maintenance and Surveillance Manual for Xiaolangdi Dam Safety" and some related guidelines developed with the assistance of an international consultant team (see Annex 9)\. Emergency Preparedness Plan (EPP)\. The YRCC has prepared the EPP for both Xiaolangdi and Sanmenxia Dams, as required by the Loan Agreement, with the assistance of YRWHDC\. These procedures will be activated in terms of emergency procedures in event of an emergency and a plan to evacuate people and to provide for all necessary shelter, food and public heath until the emergency is averted (see Annex 9)\. 7\. Bank and Borrower Performance Bank 7\.1 Lending: The Bank performance from Project preparation to implementation was highly satisfactory\. This started during the Project preparation for stage I and continued in the stage II project\. The Bank assisted in the following aspects via technical assistance credits: (i) Inviting foreign experts and consultants to review the Project; (ii) Establishing a system to identify the duties and responsibilities of the Employer, Engineer and Contractor; and (iii) Determining procurement of the civil works by lots and the relationship between foreign and local contractors, to enable technical transfer and good international practices\. The Bank also exerted special influence on developing a separate resettlement project and in defining the environmental requirement; and the Bank also supported the establishment of YRWHDC as a commercially independent entity responsible for construction of the Project, instead of Central Government Project Office as was the practice at that time in China\. In addition, during the preparation, considerable effort, were focused on works quality and institutional development for sustainability of the project\. 7\.2 Supervision: The Bank had 6 supervision missions for Stage II to review the Project\. The Bank performance during project supervision was satisfactory\. QAG undertook a review of the supervision arrangements and found it essentially satisfactory\. The Bank regularly supervised the Project and attached high priority to implementation issues related to technical, quality control, and financial and environmental aspects\. These supervision missions, provided many valuable comments and recommendations on implementation of the Project\. Clear and prompt responses to the questions raised by the Implementing Agency were given\. A close cooperation with the Implementing Agency prevailed\. All these contributed greatly to a successful Project implementation\. In the initial phases the Bank's supervision focused on technical and implementation issues\. In the later phases the focus was more on technical and environmental and financial matters\. This included promoting the creation of a Dispute Review Board and providing a workshop on claims\. Overall the Bank supervision brought significant added value to YRWHDC in ensuring the Project was on track on all aspects\. (financially, quality, schedule wise, solution to disputes, etc\.) 7\.3 Overall Bank performance: The Bank's overall performance is rated as satisfactory\. It was able to guide and assist the YRWHDC in a timely manner which resulted in the completion of such a large and complex Project ahead of schedule and below budget\. The project involved a lot of technically challenging aspects, but the Bank was able to maintain the cooperation with the Borrower and the Implementing Agency throughout\. The Bank was also effective in providing adequate coordination for all parties involved the project that lead to the completion of such a large project\. - 25 -  Borrower 7\.4 Preparation: The Government and the Implementing Agency's performance in preparation of the Project were highly satisfactory\. The Government was very responsive to all comments made by the Bank missions and independent panels\. YRWHDC was fully responsible for all the design and tender document preparation with the assistance of foreign consultants\. Most preparation work was done in record time of two years to ensure timely start-up of the Project\. YRWHDC invested considerable amounts of funds and prepared the resettlement and environmental plans to very high quality, which was highly favorable to the Bank Project appraisal and the implementation of the Project 7\.5 Government implementation performance: MWR, who represented the Government for this Project played a leading role at all stages of the Project preparation and implementation, and successfully coordinated the understanding of various ministries and provinces and strongly supported the Project implementation effort\. The Borrower (MOF) and MWR have fully complied with all the loan covenants (See Annex 8) except for the water charge covenant, which is partially complied with as it is still under negotiation with the provinces\. They do however collect water charges, but do revenues do not to cover all the O & M costs at this stage\. Since 1996 when there were delays of 11 months in the critical interim completion date with potential serious consequences, MWR took critical measures to coordinate all parties and stationed a vice-minister at the site to ensure that the Project problems were solved and adequate counterpart funds were made available\. This ensured the achievement of river diversion by October 1997, as scheduled\. MWR organized 27 meetings to review the Project at different stages to ensure that any special issue that arose from design or implementation was solved\. Overall MWR's performance was highly satisfactory\. 7\.6 Implementing Agency: The Implementation Agency, YRWHDC was established as agreed at the time of Project appraisal of the stage I project in 1993\. The stage II, YRWHDC remained fully responsible for the Project implementation, guided and coordinated by MWR and other relevant ministries\. YRWHDC has successfully implemented both phases of the Project\. Its primary achievement was to meet all the milestone dates of the physical construction and to ensure that the quality of works was excellent\. The Project has been essentially completed one year ahead of schedule and to high international quality standards\. YRWHDC has been open to new technologies and construction management techniques and able to adopt the best practice in terms of organization and Project management systems\. YRWHDC has successfully incorporated foreign and local panels of experts into project management, which greatly contributed to successful implementation management\. When delays occurred at various stages of construction, YRWHDC was able to promptly identify the problems on the critical path and take measures to solve them\. 7\.7 Overall Borrower performance: The Borrower's performance was highly satisfactory because it demonstrated strong ownership of the Project, completed all the project activities well ahead of schedule, below budget and to high quality standards\. 8\. Lessons Learned The Xiaolangdi project (stages I and II) is the largest Bank-financed project in China to date\. On the international scale, it was a very challenging project because of its huge size, predominantly large underground caverns, high degree of technical difficulties, and complex subsurface conditions\. Principal - 26 -  lessons learned from the Project include the following: a) High risk/high reward projects can be effectively implemented with the right skills on the Bank side, and high commitment by the client to good organization and competent management, combined with the judicious use of international technical assistance and review\. b) Implementing a project of the magnitude and complexity of Xiaolangdi will be greatly assisted if the implementation organization is in place prior to the start of the project\. It should be independent, have full decision-making authority and be accountable and responsibility for implementation performance\. c) The separation of the large and complex technical and civil works construction activities from large resettlement activities into two separate project operations worked very well and contributed to the effective and successful implementation of both\. It allowed both the Bank and the implementation agencies to concentrate their resources and efforts on the two activities, as separate operations\. This provides a valuable lessons for the Bank on how to manage large-scale resettlement associated with a major infrastructure investment\. d) The establishment and maintenance of effective forum for communications amongst various parties (owner, engineer, designer, advisors and contractors) should be actively pursued from the onset, to avoid misunderstandings that could cause delays and /or losses to the project\. Communication difficulties were perhaps the most difficult to resolve in construction of the Xiaolangdi scheme\. This issue is not simply of translation between different languages, but of communicating ideas and concepts across international boundaries of training and culture\. Most of the communication issues seem to decrease substantially in the second stage project because of the judicious use of consultants to interface between the contractor and the owner and there seemed to be significant communication between the various parties\. e) The use of the International Panel of Experts substantially reduced the time for resolving conflicts in understanding technical problems\. The POE for Xiaolangdi finally rested on 4 international experts and one Chinese Leader/Coordinator and this arrangement worked well\. (f) Experience suggests that an International Panel of Experts for environmental management was necessary to ensure successful implementation of EMP, especially for large-scale projects with significant environmental management risk\. g) The use of the Environment Supervising Engineer (ESE) and International Environmental Panel clearly demonstrated that all environmental issues were observed early and corrective actions were taken\. The ESE in the second phase of the project ensured that the contractors followed all environment requirements to offset negative impacts\. h) The use of Disputes Review Board (DRB) to resolved claims issues proved to be extremely useful and resulted in most claims being expeditiously resolved\. i) Training of staff on all aspects of implementation prior to the start of the project - scheduling, construction supervision, contract management, claims management and cost control averted many of the problems and issues encountered in the project, especially with the international contractor; j) Training of staff prior to completion of the project in financial management, business management and tariff negotiations added significantly the sustainability of the project\. - 27 -  9\. Partner Comments (a) Borrower/implementing agency: Borrower's Project Evaluation Summary (by YRWHDC, February 2004) I\. ACHIEVEMENTS OF PROJECT OBJECTIVES The project objectives are all achieved as planned and explained as follows: a) Flood Control Flood Control Objective Achievement The objective was to introduce flood control in the lower reaches of the Yellow River Basin and to protect major infrastructure as well as some 103 million people\.With the completion of the Xiaolangdi Dam in early 2000 the dam is now capable of regulating floods for return periods up to 1/1000 years as planned as well as regulating water during the dry seasons\. Flood forecasting systems have been significantly strengthened and the institutions are in place to undertake forecasting\. Further, ice flooding can be completely avoided and ice formation avoided downstream by adequate and controlled water release from the reservoir as was e\.g\. achieved in the winter of 2002\. b) Sediment Reduction Sediment Reduction Objective Achievement Control siltation in the 800 km downstream channel of the Yellow River and prevent further aggradation\. The reservoir began storage in the year 2000\. The reservoir stored some 233 million tons of silt and a further 19 million tons of was eroded in the downstream river channel totaling 252 million tons in its first year of operation\. This is in itself a remarkable achievement\. It is estimated that for an average year some 300 million tons of sediment will be controlled\. In the past 3 years some 900 million tons of silt were trapped by the Dam c) Water Supply Water Supply Objective Achievement The objective was to provide water for guaranteed irrigation and more reliable water supplies for downstream urban areas and industries The reservoir began supplying water for irrigation, industries and cities in the year 2000, one year ahead of the original schedule\. Some 2 billion m3 were supplied during one of the worst droughts of the last 100 years\. As such Tianjin received some 860 million m3 , whilst the remainder was supplied downstream for irrigation, industry, such as the Shengi Oil fields, and urban areas\. Some 21 billion m3 of additional water from the Xiaolangdi reservoir has been supplied to the downstream areas in the past 3 years\. d) Power Generation Power Generation Objectives Achievements The objective was to generate hydropower for supplementing the base load of thermal power stations in Henan and the Central China Power Network Power generation started in February 2000, albeit on a reduced scale, since first priority has been given to use of water to offset the serious drought conditions, with a total water release of 48 billion m3 and a power output of 550 Gwh by the end of 2000 compared to the 1650 Gwh anticipated\. This change in priority deprived the system of water supply and water heads for power generation\. However, from January 2001 until December 31, 2001 power generation was 2112 Gwh, compared to 2257 anticipated or 93 % and from January 2002 until December 30, 2002 power generation was 3280 Gwh\. - 28 -  e) Other benefits The Xiaolangdi Dam Project managed to keep water flowing to the lower reaches of the river with no days when the river dried up\. This continuous flow has a significant impact on the ecology of the estuary\. Further, reduced silt content of or silt free water will greatly enhance the freshwater ecology in the river since most freshwater fish cannot normally survive in highly silted water\. In addition, silt free water will significantly reduce the cost for water treatment for urban or agricultural use\. On environmental management, to minimize or mitigate the impacts environmental protective measurers were put into place and organizations established by YRWHDC according to the EIA/EMP\. With joint efforts made by the Employer, Contractors, Engineer and local governments, significant environmental damage and diseases prevalence were never encountered during the construction period, the environment in the project and beneficiary areas have been protected to the extent possible\. The government's environmental authority, SEPA, is planning to make the environmental protection implementation at Xiaolangdi a model for infrastructure projects in China\. II\. MAJOR FACTORS AFFECTING IMPLEMENTATION AND OUTCOME Factors outside the Control of Government or Implementing Agency The factors outside the control of Government or Implementing Agency mainly include: a\. Change of geological conditions A number of large tunnels and complex geological structures are the features of Xiaolangdi Project\. The rock formation consists of mudstones, siltstones and sandstones with widespread clay intercalations\. These complex geological conditions created considerable difficulties to the construction process and lead to some collapses of significant size\. This was the main reason for implemented design changes\. All these factors have given rise to contractor's claim and increased the Project costs component at that stage\. b\. Contract Management Some contractors were relatively new to China and were in the earlier stages of the Project implementation not necessarily familiar with China's labor market and its way of management\. At the early stages of the Project, some contractors hired a number of unqualified labors from the free labor market and managed them with foreign management method which failed to achieve expected results\. All these factors impacted the progress of the Project at that stage\. c\. Exchange rate In early 1995, the RMB Yuan was depreciated by some 50% against the US$\. In 1996-1997 the exchange rate of the DM versus the RMB Yuan was considerably increased\. All these factors have largely increased the budget funds of Xiaolangdi Project at the time of budget adjustment in 1997\. In the earlier stages of the Project the Employer had foreign exchange losses of up to US$30 million, but with the DM 2\.0 = US$ 1\.00 between 1998 and 2001, it subsequently recovered most of these losses\. - 29 -  Factors Generally Subject to Government Control a\. During the implementation of the Project, the central government, some related ministries and the government of two provinces have attached great importance to the Project\. Their great care and support have been the guarantees for the successful implementation of the Project\. Moreover, the direct leadership of MWR, the active participation and effective work of some departments has laid a solid foundation for the smooth implementation of the Project\. Also for the same reason, the Project has never been impacted by the unavailability of funds\. b\. The Government at high level has placed great confidence in YRWHDC and fully empowered it, in order for it to make timely and effective decisions\. YRWHDC was given the authority to make independent decisions with regard to some problems directly related to project quality and progress such as technical, financial and management issues\. YRWHDC was also empowered to fully deal with claims and contract disputes\. c\. In 1993-1995, the yearly increase of commodity prices in the domestic market was as high as 6-10% due to inflation\. This considerably increased some of the Project components costs\. d\. Inflation for local materials and labor was originally clear and payments were made which were acceptable to the contractors\. Subsequently, it was established that local escalation figures were computed such as it created a considerable dispute between the contractors and the Employer\. The local labor escalation particularly created a major problem\. e\. In the course of economic transformations, the Government made changes to some legislation in 1993 and promulgated some new laws such as Tax Law, Labor Law amongst others\. All these new laws had a great impact on the contractors and gave rise to the contractors' claims and increased the Project costs components to some extent\. Factors Generally Subject to Implementation Agency Control a\. Implementation Organization In accordance with the requirements of the World Bank and FIDIC, the Project Employer grouped a capable and effective management organization and appointed the Xiaolangdi Engineering Consulting Company (XECC as the Engineer\. XECC was formed from staff from several design institutes and construction companies\. The Employer has fully empowered XECC in field supervision, management and certification for payment\. The technical commission composed by the Employer's Canadian consulting experts and domestic experts has given valuable advice to the Employer in management\. The Yellow River Commission Design Institute Xiaolangdi Branch, Reconnaissance Planning and Design Institute (RPDI) was responsible for the design of the Project and ensured timely and full communication between various parties\. RPDI in China has been responsible for the design of several large dam projects and is highly qualified\. A Dispute Review Board (DRB was set up in 1998 to facilitate prompt resolution of dispute related to the ICB civil works contracts\. Both the Employer and the Contractors selected each one member of the DRB and the two elected members selected the chairman of the DRB\. - 30 -  The institutional setup for project implementation at Xiaolangdi proved to be one of the key successful factors for this project\. b\. Implementation Schedule The implementation schedule as established in the Staff Appraisal Report (SAR) established the commencement of the civil works in July 1994, river diversion by November 1997, commissioning of the first unit in January 2000 and the last unit by December 2001\. Project competition was scheduled by the middle of 2002\. This schedule therefore required building this complex scheme in 7 years instead of the originally planned 12 years; a very big challenge for all involved indeed\. With joint efforts, reorganizations and other measures implemented by the different parties, inclusive by the Employer and by the MWR, the first objective of 7 River Diversionwas timely achieved\. These major efforts resulted also in the completion of the inlet and outlet tunnels, plunge pool and spillway construction by September 2000, some 6 months ahead of schedule\. The same applies to the civil works of the underground facilities (power house cavern, power tunnels, the main transformer chamber, the valve chamber, tailrace tunnels and outlet structures) which were completed in September 1999, 7 months ahead of schedule\. Power conduits and penstocks were also completed in advance of the date required\. During the implementation of the Project, many additional reinforcement measures were adopted in design for underground excavations and high slopes particularly for safety reasons and long term stability\. Whilst this did not affect the timing it nevertheless became design adjustments resulting in variations and hence in the increase of some of the Project components costs\. III\. SUSTAINABILITY Rationale Great importance is attached by the Chinese government at various levels to, high construction quality, reform and constant improvement of the management system\. Subsequent auxiliary projects shall guarantee the sustainability of the Project\. The Project is considered sustainable because all necessary conditions have been achieved and can essentially be summarized as follows: 1\. The Project was completed in time and to the necessary quality and expectation; 2\. Key components subject to testing all performed satisfactorily; 3\. The Project implementation was structured following modern management practice and has already a proven record of working efficiently over the past 7 years; 4\. The institutional capability of YRWHDC has been strengthened in the course of implementation and 5\. Transfer of modern management was achieved over the past 7 years\. The following elements also contribute to the sustainability of the project\. High Attention of the Government The Xiaolangdi Multipurpose Dam Project is very important for the prevention of potential disasters due to the Yellow River and is also extremely critical for the development of Yellow River water usage - 31 -  and management\. It plays an important role in the effective use of Yellow River water resources and in ensuring stable development of the economy and the society in the lower reaches of the Yellow River\. A serious drought occurred in the Yellow River Basin at the early period of its operation\. The actual annual runoff of the Yellow River was only 60-70% percent of the design runoff\. Adequate operation of Xiaolangdi Project has under the circumstances nevertheless ensured water supply to the lower reaches thereby ending the history of the river drying out in the lower reaches over many years in the past\. As such, in the year 2000 the Xiaolangdi Dam was able to supply some 2 billion m3 of water to key cities such as Tianjin despite of a major drought affecting Northern China\. Therefore, the Chinese government at various levels pays great attention to the Xiaolangdi Project especially to its expected role and function\. This is the precondition to ensure the sustainability of the Project\. Quality The Xiaolangdi Project has been checked preliminary and accepted in December 2002 by experts grouped by MWR\. In 2003, it will be completely accepted by the State Development and Planning Committee\. Impounding acceptance results completed in 1999 showed that the Project quality is excellent in general\. At the preliminary operation period, it passed through the test of impounding to a level of 240\.87m with water and sand regulation\. Test results indicated that each part of the Project was working properly and as intended\. The high quality of the Project lays a good foundation for its sustainable development\. Implementation of environment protection and water and soil preservation has effectively improved the ecological environment nearby and also in the lower reaches by insuring continuous flow, enabling the preservation of the estuary ecology\. The provision of silt free water is another benefit\. This also creates good conditions for the sustainable development of the Project\. Management and Policy Framework Management Framework At the end of September 2002, the Chinese government issued a special implementation outline regarding the structural reform of water management departments\. Classification, qualitative determination, management and sources of funds, etc\. for these departments are clearly defined\. This establishes a basis for the constant improvement of Xiaolangdi management system and shall have a great impact on sustainable development of Xiaolangdi Project\. YRWHDC has recently established a capable and highly effective management agency to ensure the normal management of the Project\. Following further system reform of water management departments and carrying out of the compensation channels for social benefits such as flood control, etc,\. the maintenance fund required by Xiaolangdi Multipurpose Dam Project shall be guaranteed in terms of policy\. Management System Implementation of flood, sediment, ice and drought systems will improve the level of project management and boost the Project benefits\. The Project Management Agency has formulated various rules and regulations, including operation specifications, project maintenance procedures, operation systems, and system of responsibilities, to ensure well-organized management and smooth operation of the Project\. Adequate rules and regulations are the legal basis of adequate Project operation\. - 32 -  Policy Guarantee To ensure sustainable utilization of water resources, the Government has recently issued the Law of Water and a series of other laws/regulations, clearly defining the responsibility, duty, function and role of water management agencies and providing specific measures for the long-term development of such agencies\. This provides a legal and policy basis for the sustainable development of water management agencies and water projects\. Commercial Factor In May 2000 YRWHDC signed an agreement with the Henan Power Bureau for sales/purchase of power generated by Xiaolangdi to the provincial grid\. This agreement will allow YRWHDC to cover all operating costs, portion of repayment of loan principal and interests\. The Government of China (GOC) realizes that Xiaolangdi will be a strategic project for water supply as well as flood and sediment control, all of which have economic benefits that cannot necessarily derive revenues from user charges\. Hence the GOC will subsidize the operation of the dam, if it cannot meet its final obligations\. Follow-up Project Construction of the Xixiayuan Dam 16 km downstream, as a supporting project of Xiaolangdi, will commence\. This will help to make better use of Xiaolangdi benefits and improve its sustainable development\. Considering the operation mode of Xiaolangdi as a peaking station Xixiayuan will be able to store water during peak production and regulate needed water for the lower reaches\. Transition Arrangements to Regular Operation As a State-Owned Enterprise, YRWHDC owns and operates all of the project facilities, the total staff right now is 524\. It has three profit centers: Hydropower, irrigation and M&I Water Supply, and Flood Control\. So far the main revenue comes from the power generation but expects to be able to collect fees for Irrigation and M&I Water Supply in future\. Operation and Maintenance Procedures The technical operation and maintenance rules/procedures formulated and followed by YRWHDC for the dam/power plant operators are satisfactory and in line with the pertinent codes/specifications and regulations of the Chinese Government\. O&M Plan As for the O & M Plan specified in the legal agreement for this project, a document entitled anagement and Maintenance Program for the Operation of the Power Plantwas prepared together with the peration, Maintenance and Surveillance Manual for Xiaolangdi Dam Safetyand some related guidelines developed with the assistance of an international consultant team\. Emergency Preparedness Plan (EPP) MWR has entrusted YRCC to prepare the EPP for both Xiaolangdi and Sanmenxia Dams, as required by the Loan Agreement, with the assistance of YRWHDC\. This has been based on the following documents: - 33 -  1\. O & M and Surveillance for Dam Safety January 2002 (2 Volumes), prepared by CIPM\. 2\. Threshold Values of Monitoring, July 2002, prepared by the RPDI; 3\. Operation and Maintenance Manual October 2002\. 4\. Flood Response Plan Flood Information Center, YRCC IV\. WORLD BANK AND BORROWER'S PERFORMANCE World Bank Lending: The Bank performance from Project preparation to implementation was highly satisfactory\.During the Project preparation, the Bank assisted in the following aspects via technical assistance credits: l Inviting foreign experts and consultants to review the Project; l Establishing a system to identify the duties and responsibilities of the Employer, Engineer and Contractor; l Determining procurement of the civil works by lots and the relationship between foreign and local contractors, to enable technical transfer and good international practices; l The Bank has exerted special influence on developing a separate resettlement project and in defining the environmental requirement; l Supporting the establishment of YRWHDC as a commercially independent entity responsible for construction of the Project, instead of Central Government Project Office as was the practice at that time in China\. During implementation of the Project Phase I, adjustment to the loan proceeds by categories was always applied for YWRHDC and approved by the Bank in the right time\. This helped implementation of the Project\. To meet the implementation schedule, the Bank arranged the second loan in a timely manner to allow for the continuation of construction without interruption\. Supervision: The Bank regularly supervised the Project and attached high priority to implementation issues related to technical, implementation, financial and environmental aspects\. The Bank had 16 supervision missions to review the Project\. These supervision missions, headed by Messrs\. D\. Gunaratnam and Li Xiaokai, provided many valuable comments and recommendations on implementation of the Project, Clear and prompt responses to the questions raised by the Implementing Agency were received\. A close cooperation with the Implementing Agency prevailed\. All these contributed greatly to a successful Project implementation\. In the initial phases the Bank's supervision focused on technical and implementation issues\. In the later phases the focus was more on technical and environmental and financial matters\. This included promoting the creation of a Dispute Review Board and providing a workshop on claims\. Overall the Bank supervision brought significant added value to YRWHDC in ensuring the Project was on track on all aspects\. (financially, quality, schedule wise, solution to disputes, etc\.)\. Overall Performance: The Bank's overall performance is highly satisfactory since it was able to guide YRWHDC to timely completion of such a large Project\. By receiving the largest Bank loan in China, involving a lot of aspects and Project components and encountering complicated conditions, it maintained a good cooperation with the Borrower and the Implementing Agency\. It moreover provided adequate coordination for all parties to complete such a large Project on schedule and with some cost savings\. - 34 -  Borrower Preparation: The Government and the Implementing Agency's performance in preparation of the Project were highly satisfactory\. The Government was very responsive to all comments made by the Bank missions\. YRWHDC was fully responsible for all the design and tender document preparation with the assistance of foreign consultants\. Most preparation work was done in record time of two years to ensure timely start-up of the Project\. YRWHDC invested considerable amounts of funds and prepared the resettlement and environmental plans to very high quality, which was highly favorable to the Bank Project appraisal and the implementation of the Project\. Government's Performance: MWR who represented the Government for this Project played a leading role at all stages of the Project preparation and implementation, and successfully coordinated the understanding of various ministries and provinces of the Project objectives and components, which greatly promoted the Project implementation\. Particularly in 1996 when there were delays of 11 months in the critical interim completion date with potential serious consequences, MWR took critical measures to coordinate all parties and stationed a vice-minister at the Site to ensure that the Project problems were solved and adequate counterpart funds were made available for the Project\. This ensured the achievement of river diversion in October 1997 as scheduled\. MWR organized 27 meetings to review the Project at different stages to ensure that any special issue that arose from design or implementation was solved\. Overall the government's performance was highly satisfactory\. Implementing Agency's Performance: YRWHDC has successfully implemented both phases of the Project\. Its primary achievement was to meet all the milestone dates of the physical construction and to ensure that the quality of works was excellent\. The Project has been essentially completed one year ahead of schedule and to high international quality standards\. YRWHDC has been open to new technologies and construction management techniques and able to adopt the best practice in terms of organization and Project management systems\. YRWHDC has successfully incorporated foreign and local panels of experts into project management, which has greatly contributed to successful construction management\. When delays occurred at various stages of construction, YRWHDC was able to promptly identify the problems on the critical path and take measures to solve them\. The actual project costs were less than that evaluated both by World Bank and the State Development and Planning and Development Committee\. YRWHDC has a strong sense of project ownership and the overall performance is highly satisfactory\. Overall Borrower's Performance The Borrower's performance is highly satisfactory because it demonstrated ownership of the Project, completed a complex Project as Xiaolangdi one year ahead on schedule, with high quality of works\. The borrower is now deeply involved in ensuring that the project operation is successful\. V\. LESSONS LEARNED Xiaolangdi is the largest Bank-financed project in China and also a worldwide challenging project for its huge size, predominantly large underground caverns, high degree of technical difficulties, and complex subsurface conditions\. The planned schedule was quite long, but it appeared rather tight in comparison with the large quantity of works and the high degree of difficulty\. Due to the special role of the Xiaolangdi Project in the Yellow River flood control, the schedule allowed for no delay\. The large size of investment also represented demanding requirements for financial arrangements\. Introduction of international contractors challenged the Employer in terms of management and coordination\. The - 35 -  Project involved a resettlement population of about 200,000 people, which represented a hard task for the Employer\. YRWHDC also encountered many difficulties in the course of implementation\. With the support and solicitude of governments at different levels and the well-organized efforts of all parties involved in the Project, however, major Project components have been all completed ahead of schedule and within the cost estimate, and Project objectives have been achieved as planned\. The Government and the Implementing Agency's competence in respect of large-sized flood control project planning, design, research, organization, management and implementation is remarkably improved\. Principal lessons learned from the Project include the following: GOVERNMENT ATTENTION The Government has shown adequate attention and solicitude to the Project, which is the precondition of successful implementation\. The SPC (State Development and Planning Commission) and MWR were greatly interested in the project management and progress, with adequate support provided in terms of policies and funds and independent and full authority given to the Employer in respect of decision\. These have ensured timely decision and an efficient management\. PROJECT MANAGEMENT YRWHDC practiced the "Three systems" in project management, namely, System of Employer's Responsibility, System of Bidding and System of Construction Supervision This provided institutional guarantee for the success of the Project\. While attaching importance to his leading role in important decisions on management, technical and financial issues, the Employer also vested the Engineer with full authority in accordance with the Contract and gave full play to his important role in project management and contract administration\. As proven by practice, this is more than important to raise the level of project management\. Moreover, it cannot be stressed enough that a well designed and computerized project management system is a basis for success\. A document control system module, especially related to claims should be a full part of the system\. Such a system should be put into operation as early as possible in the Project Implementation\. Even if the contract is ICB , the system should be operable in both the contract language (generally English in ICB) and in the Chinese language\. As one of China's few water projects implemented on an ICB basis, Xiaolangdi also encountered many difficulties in initial management as a result of inadequate authority and improper decision\. Based on MWR correct and timely decisions, YRWHDC made important adjustment to his leading body and adopted effective measures to completely offset delays, which placed a solid ground for the success of river diversion in 1997 and final earlier than foreseen completion at lower cost than anticipated\. CONSULTANT SERVICES YRWHDC paid attention to cooperation with local and foreign consultants\. Many valuable suggestions were provided by the Panel of Experts, Consultants and YRWHDC's Technical Commission\. EXPERIENCE AND COMPETENCY OF PROJECT ENTITY Implementation of the Project provided YRWHDC with much experience in international project management, design, construction and resettlement among other aspects, and also a large number of competent managerial and technical staff\. This is significant to modernize water development and - 36 -  management\. Implementation of the Project made YRWHDC staff more competent to cooperate with foreign contractors and experts, and provided more opportunities for local consultants and contractors to be involved in international projects\. MANAGEMENT AND DISPUTE RESOLUTION During implementation of the Project, claims by the Contractor and disputes between the Contractor and the Employer resulted from complex geological conditions, variations, delays, acceleration and subsequent legislation\. These disputes were more than complicated and took a lot of time to solve by both parties\. However, they were finally solved through discussions on the basis of DRB recommendations and mediations\. DRB recommendations further provided a platform for discussions between the parties which finally resulted in an amicable settlement of the disputes\. The introduction and functioning of the DRB process provided very valuable experience for use in other projects in China\. Some adjustment to the Clause 67 of the General Conditions of Contract (Dispute Resolutions) might be required and useful for future use\. The development of claims and disputes involved technical, engineering, legal and other external factors, but it cannot be categorically denied that the Contractor took full advantage of the ambiguous and inoperable clauses of the Contract\. While emphasizing the Contractor's rights, these clauses did not provide adequate protection for the Employer\. This is one of the reasons that the disputes were or became complicated\. The major lesson from this is to provide clear and unambiguous technical specifications and contract documents for future contracts\. Extreme care should be taken when formulating conditions or particular application- as allowed for by FIDIC-or special conditions and ensuring that both these do not contradict other standard clauses or create a situation where ambiguity is present, which can and will be construed against the drafter, i\.e the Employer\. Conformed documents should be prepared and made available to all parties\. Claim avoidance or mitigation is another factor to consider and early resolution of dispute is beneficial to both parties\. The longer the disputes drag on, the more complex and expensive it will turn out to be at the end\. Early and prompt resolution of claims, disputes should therefore whenever feasible be addressed as early as possible, but requires a competent and efficient team, backed-up by higher management with adequate authority to make decisions\. TRANSLATION AND COMMUNICATION In case ICB contracts are considered it is of the highest importance that proper translation and communications are provided in order to avoid misunderstandings\. Improvement communication between various parties (owner, engineer, designer, consultants and contractors, etc\.) is not simply of translation between different languages, but of communicating ideas and concepts across international boundaries of culture and training\. (b) Cofinanciers: The EXIM Bank of the US which is the main co-financing partner has no comments\. (c) Other partners (NGOs/private sector): - 37 -  10\. Additional Information Organisation Charts and Other Information Figure 1 XLD Environmental Management System YRWHDC World Bank Construction EMO/Dam POE Department Engineer ESE EMIs Construction Area (CEO) Note: ---- = Coordination Relationship YRWHDC= Yellow River Water and Hydropower Development Corporation EMO/Dam= Environmental Management Office at Dam Site POE = Panel of Environment Experts; ESE = Environmental Supervision Engineer; EMIs = Environmental Monitoring Institutes; CEO = Contractor's Environmental Officer\. - 38 -  Figure 2 Organization of YRWHDC in 2002 for Operation Typical Organization Chart : Yellow River Water and Hydroelectric Power Development Corporation Year: 2002 Figure 3 YELLOW RIVER WATER AND HYDROELECTRIC POWER DEVELOPMENT CORPORATION (YRWHDC) & Planning) Center and and Office & Fund Affairs (Including Insurance Traffic) Department) Center Department Department Department M Staff Department Union Project & Production Security Central Supervision Department Business Management Department Contract Includes E Working partment Personnel Production Resources Environmental Waterborne Financial Workers Department De (Former Management's Including & Technical Auditing Department CCP (Former Workers Xixiayuan Dispatching Public Zhehgzhou and Functional Departments CCP & Peoples Project Management Department Dep\. Power Bureau Service Logistic DEPARTMENT Engineering Company Trading Zhengzhou XECC Plant Headquarters Management and Center Administration Departments Company Department Beijing Industrial Xiaolangdi Hydro-Electric Resettlement Comprehensive Luoyang Production Service OPERATION Secondary Units - 39 -  Figure 3 System of Water Allocation for the Downstream Areas of the Yellow River Yellow River water allocation decison support system roting treatment moni forecasting task compiling adjusting service dynamic management situation scheme crisis resource allocation management management resource simulation water information adjusting water Water water Operation adjusting Water adjusting application service platform (model base) Data saving management platform (database and its management) Communication and computer net system (data transmition) Information (whether, water quality, water diversion and drought situation) collecting system Figure 3 System for Water Allocation for Yellow River Downstream Areas - 40 -  Figure 4 Computer Network for Flood, Sediment, Drought and Ice Flood Management\. hwh computer net center water allocation net 11province Liujiaxia junction Henan Bureau net Longyangxia Junction Wanjiazai junction Center center exchanger exchanger Shandong Bureau ? Informatio net n center communication Shandong bureau management water allocation PIX edge exchanger center Work unit exchager ATM ? ? ? Information net( DDN? X\.25? PSTN ? ) Henan bureau water allocation edge slb water center exchanger Satellite conservancy communication net Guxian junction bureau net Sanmenxia junction bureau water resource protection bureau Luhun reservoir net Xiaolangdi reservoir hydrological hydrological situation sub- Optical fibre situation center under subordinate center Sanmenxia Twisted pair in the upriver of hydrographic bureau net line Sanmenxia Remote line Picture 5\.2-3 net topology - 41 -  Picture 1\. Xiaolangdi Intake Structure - 42 -  Picture 2\. Dam and Outlet facilities - 43 -  Picture 3\. Dam Body and intake - 44 -  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate Project Development Objectives Flood damage within dikes is reduced from Starting from year 2000, the flood protection 2-year recurrence to 7-year downstream of Xiaolangdi Dam has reached 1\. Reduce flood damage within the dikes and Catastrophic flood damage will be eliminated one-in-a-thousand years-floods\. The eliminate catastrophic damage from major Eliminate annual flood damage of $91 million downstream ice flood hazards are eliminated\. floods-Indicators are: per year All the common floods, in particular those MWR annual report of floods very frequent floods that could inundate the vast flood plains where over 1\.3 million people live, are brought under control\. With Xiaolangdi dam put into operation, enormous possible flood damage has been avoided\. Take the 1996 flood as an example\. The flood at Xiaolangdi was only 7,800 m3/s in 1996, much smaller than the design flood of Xiaolangdi (Q=40,000m3/s), the following damage occurred in the downstream areas: (a) 251,000 ha of land (including 200,000ha farmland) inundated; (b) 2\.4 million people affected with 800,000 people entrapped; (3) estimated economic losses of Y6\.46 billion as reported by YRCC\. Such damage would not have happened with Xiaolangdi dam\. In August 2003 for a major flood of 1 in 60 years the entire damage downstream was avoided\. Flood damage for large and small floods has been eliminated\. The 2003 flood of 1/60 years caused no damage\. Improve the safety of the dikes by sediment 800 km of the Yellow River dikes do not On sedimentation control, by end August control and is key to the river safety and its have to be raised between 2000-2025 2003, a total of some 1 BCM of silt (see assurance it does not divert\. figure below), about 14% of the storage reserved for sediment deposit (7\.55 BCM), \. has been trapped in Xiaolangdi reservoir preventing siltation of downstream river course\. In addition, a in-situ sediment flushing test was conducted centered at Xiaolangdi July 4-15, 2002, resulting in erosion of the downstream river course with some 36\.2 million tons of silt flushed into the sea\. Improved performance of urban and Industrial down-time reduced to 2 days/y due Over the past 3\.5 years (2000-2003 June), industrial growth through provision of water to lack of water; Riverbed ceases to rise the estimated incremental water supply by additional 2001-2025\. Xiaolangdi with the benefits produced to Shandong and Hehan provinces are as follows: (1) M&I: 0\.399 BCM ( or 8\.2%; Henan: 0\.388, Shandong: 0\.011), benefit of 1\.197 billion Yuan\. In 2000 alone some 800 million cum water released for Tianjin to avert a major water shortage in the city\. Overall industrial downtime from water shortage has completely been reversed Improve Irrigation Water supply Industrial Stabilize irrigation water so that grain and Farm production increases will be about 1\.2 downtime is reduced to two days/year due to cotton production increase farm income by t/ha for grain from 3\.8t/ha and 130 kg/ha for lack of water 30% , labor productivity by 25% in ginned cotton from 1t/ha\. Grain production Henan\.Grain yields will increase by 20% increased by 32%; cotton production from 4\.0 tons/ha to 4\.8 tons/ha and increased by 9%\. Farm incomes from this production will increase by 0\.515 million tons source would have increased by 33% from Y16/day to Y20/day\. Overall production will increase by 1\.6 million tons per year Generate peak hydroelectric power Power production increased from 1600 GwH Power production increased from 1600 GwH for the Henan Grid which is essentially in FY2000, 2700 GwH in 2001, 3100 GwH in in FY2000, 2700 GwH in 2001, 3100 GwH in thermal base power and thereby reduce the 2002, 3700 GwH in 2003 and 4200 Gwh in 2002, 3700 GwH in 2003 and 4200 Gwh in loss of downtime in industry 2004 2004 and is expected to continue to increase to 5800 Gwh by 2008 onwards - 45 -  Output Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate Component 1 River diversion in 11/97 River diversion took place Oct 1997\. 1\. Dam and Power house including First generator installed by 12/99 All generators were installed by 2001\. Consultants services\. Indicators are Sixth generator installed by 1/2001 Reservoir started operation in Jan 2000 and Supervision reports of YRWHDC and Project completion by 2002 power generation was also at the same time \. YRWHDC progress reports Also in 2000 some 800 mil cum of water was supplied to Tianjin city Component 2\. 1998-50 staff trained (finance/organizational 1998---58 staff trained operation of dam Training Indicators are YRWHDC's progress management 1999---80 staff train in O & M and another reports 1999-50 staff trained (as above) 81 staff on finance and management 2000-50 staff trained (as above) 2000--34 staff trained on dam safety and another--145 on detail technical and financial issues 2001--120 staff trained on dam safety and office automation 2002--174 staff trained on dam surveillance 2003---123 staff trained on reservoir sedimentation and O & M and concrete repair Component 3 Most EMP work was completed and Detailed environmental supervision was Environmental Management and contractors had left the site\. Detailed reports undertaken by YRCC Design Institute Monitoring--Indicies are the monthly progress on dam implementation monitoring, dam Environment Group\. In addition monitoring reports safety monitoring was being undertaken by was undertaken by YRWHDC the owner\. the government and the environment The Environmental and Resettlement Panel supervisors\. was spilt into two groups one for the Resettlement Project and other for the Dam Project\. The environmental protection measures undertaken were as follows: -a) Dam safety monitoring -b) Cultural relics restoration -c) public health and worker safety in the construction areas -d) pollution control of air, water and land areas in the construction site Component 4 Most of the work for this component was YRCC decided not to hire consultants but to Flood/Sediment/Ice Forecasting --progress already completed by the Government\. undertake to do the setup of the reported in the twice annual progress reports YRCC the executing agency used its own flood/sediment/ice/drought forecasting resources to develop and even go further system\. than what was required in the Bank -The only consultants that were hired were component\. RPDI of YRCC for the downstream dispatching of the flows especially in the dry season which will ensure that water is supplied for M & I needs, river is kept flowing, and irrigation needs are optimally met\. -Flood forecasting which is highly developed will use the existing system with YRCC Hydrology Bureau working with the Flood Information Center\. All flood management will be done with these two bureaus -Sediment forecasting will be done by YRCC-RPDI Component 5 Consultants had already built a water The water dispatch system for the Lower Institutional support for YRCC to develop a dispatch system and a State Council Yellow River has 90 dispatch points Lower Yellow River Institution Regulation had been passed for YRCC downstream\. A Dispatching office has been institution to establish within Shandong and established and a water fee collection study Henan Provinces to collect fees has been completed\. In addition a state council regulation is being implemented for water fee collection\. 1End of project - 46 -  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 Major Civil Works 1150\.44 1377\.02 119\.7 Minor Civil Works + Preparatory Works 369\.85 383\.84 103\.8 Electro-mechanical works + metal works 253\.07 150\.70 59\.6 Electrical Works 209\.64 105\.33 50\.2 Administration and Engineering 235\.48 201\.40 85\.5 Institutional Support 5\.06 4\.59 91 Environment Management 10\.10 13\.80 136\.6 Sediment/Flood/Drought/Ice Forecast Component 14\.80 14\.68 99\.2 Total Baseline Cost 2248\.44 2251\.36 Total Project Costs 2248\.44 2251\.36 Interest during construction 607\.40 437\.40 72\.00 Total Financing Required 2855\.84 2688\.76 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 1142\.98 0\.00 0\.00 372\.16 1515\.14 (809\.30) (0\.00) (0\.00) (0\.00) (809\.30) 2\. Goods 27\.69 0\.00 12\.20 431\.70 471\.59 (9\.54) (0\.00) (5\.13) (0\.00) (14\.67) 3\. Services 0\.00 0\.00 42\.22 196\.32 238\.54 (0\.00) (0\.00) (28\.21) (0\.00) (28\.21) 4\. Miscellaneous 0\.00 0\.00 10\.12 0\.00 10\.12 Training and (0\.00) (0\.00) (8\.28) (0\.00) (8\.28) Environmental Monitoring 5\. Other services 0\.00 0\.00 0\.00 13\.05 13\.05 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) 6\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) Total 1170\.67 0\.00 64\.54 1013\.23 2248\.44 (818\.84) (0\.00) (41\.62) (0\.00) (860\.46) - 47 -  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 1212\.20 0\.00 0\.00 345\.31 1557\.51 (726\.21) (0\.00) (0\.00) (0\.00) (726\.21) 2\. Goods 1\.20 0\.00 0\.00 446\.27 447\.47 (1\.32) (0\.00) (1\.15) (0\.00) (2\.47) 3\. Services 0\.00 0\.00 29\.76 199\.69 229\.45 (0\.00) (0\.00) (21\.28) (0\.00) (21\.28) 4\. Miscellaneous 0\.00 0\.00 10\.00 6\.93 16\.93 Training and (0\.00) (0\.00) (0\.67) (0\.00) (0\.67) Environmental Monitoring 5\. Other services 0\.00 0\.00 0\.00 (0\.00) (0\.00) () (0\.00) (0\.00) 6\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) Total 1213\.40 0\.00 39\.76 998\.20 2251\.36 (727\.53) (0\.00) (23\.10) (0\.00) (750\.63) Capitalized Interest of $30 million is excluded from the table\. If this included the total disbursements for Stage I and Stage two loans disbursed would be $780\.63 million compared to the original loans of $890 million\. There was a saving of $109\.37 million which was cancelled in the second loan 1/Figures in parenthesis are the amounts to be financed by the Bank Loan\. All costs include contingencies\. 2/Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units\. Project Financing by Component (in US$ million equivalent) Percentage of Appraisal Component Appraisal Estimate Actual/Latest Estimate Bank Govt\. CoF\. Bank Govt\. CoF\. Bank Govt\. CoF\. Major Civil Works 818\.10 332\.30 726\.21 486\.20 88\.8 146\.3 Local Works 369\.90 345\.30 93\.3 Mechanical & Electric Plt 7\.90 393\.21 74\.00 2\.47 371\.00 74\.00 31\.3 94\.4 100\.0 Admin and Engineering 196\.00 199\.60 101\.8 Consultant Services 24\.50 12\.40 21\.28 8\.46 86\.9 68\.2 Training & Inst\. Develop 6\.50 4\.00 0\.47 2\.34 7\.2 58\.5 Environmental 3\.00 7\.10 0\.20 13\.80 6\.7 194\.4 Management Total 860\.00 1314\.91 74\.00 750\.63 1426\.70 74\.00 87\.3 108\.5 100\.0 Notes: 1\. US$74\.00 million from Cofinancier, US Exim Bank for the Turbines\. 2\. The Bank loan was $460 m stage I and $430 m stage II, total available $890 m\. Total applied to the proejct was $860 m with anotehr $30 m for IDC\. However, the final disbursed amount was $750\.63 m and $30 m for IDC\. Stage I loan was fully disbursed - 48 -  Annex 3\. Economic Costs and Benefits The main benefits listed in the Economic Cashflow are the: agriculture benefits, municiple and industrial water and hydropower benefits are derived using the optimization simulation model using a 90 year hydrologic sequences\. The prices for agriculture commodities were economic farm gate prices derived from border prices for the three major crops: wheat, corn cotton and rice\. Sidelines and off-farm values were valued at local prices excluding taxes and transfer payment\. M & I water was valued at tariffs paid for water (Y1\.2/cum) as a proxy for willingness to pay, although previous analysis shows that the value of industrial water is about Y6/cu m and municipal water should be about Y3/cu\. m\. The value of hydropower benefits were at current and forecasted tariffs of Y0\.3/ KhWhr\. Flood control and sediment control benefits were based on similar methodology as in the PAD Annex 4\. The discounted benefits are presented in table 1 and the economic cash flow is present below in Table 2\. Table 1\. Discounted Benefits (Billion Yuan) ICR Mission PAD % of Total ICR/PAD benefits Adjusted 1994 1997 1997 Agriculture 5\.81 9\.87 12\.089 30% 82% M & I 1\.14 1\.94 1\.717 6% 113% Hydropower 3\.63 6\.17 16\.536 19% 37% Flood Control 6\.70 11\.39 7\.345 35% 155% Sediment 2\.00 3\.40 2\.817 10% 121% Total 19\.28 32\.77 40\.50 100% 81% - 49 -  Table 2\. Economic Cashflow (Billion Yuan) Agriculture M & I Hydropower Flood ControlSediment EIRR 13% HN-VAGRSD-VAGRTOT-VAGR VA-M+ISMX-VAEGYXLD-VAEGYTOT-VAEGYFlood ControlSedimentTotal BenefitsCapital costsO & M CostsTotal CostsNPV 2% 28% 30% 6% 0% 19% 19% 35% 10% 100% PV in Bil Y0\.37 5\.44 5\.81 1\.14 (0\.00) 3\.63 3\.63 6\.70 2\.00 19\.28 17\.39 0\.97 18\.36 0\.92 1994 0 0 0 0 0 0 0 0 0 0 1\.31 0 1\.31 -1\.31 1995 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 2\.56 0\.00 2\.56 -2\.56 1996 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 2\.93 0\.00 2\.93 -2\.93 1997 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 3\.41 0\.00 3\.41 -3\.41 1998 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.95 0\.00 0\.95 4\.31 0\.00 4\.31 -3\.36 1999 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.99 0\.00 0\.99 4\.13 0\.00 4\.13 -3\.14 2000 0\.09 1\.32 1\.41 0\.27 0\.00 0\.14 0\.14 1\.06 0\.51 3\.38 4\.13 0\.00 4\.13 -0\.75 2001 0\.09 1\.32 1\.41 0\.27 0\.00 0\.45 0\.45 1\.09 0\.51 3\.72 3\.95 0\.00 3\.95 -0\.23 2002 0\.09 1\.32 1\.41 0\.27 0\.00 0\.73 0\.73 1\.12 0\.51 4\.03 2\.42 0\.29 2\.72 1\.31 2003 0\.09 1\.32 1\.41 0\.27 0\.00 0\.82 0\.82 1\.15 0\.51 4\.15 2\.12 0\.29 2\.41 1\.74 2004 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.18 0\.51 4\.46 1\.27 0\.29 1\.56 2\.89 2005 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.22 0\.51 4\.49 0\.29 0\.29 4\.20 2006 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.25 0\.51 4\.52 0\.29 0\.29 4\.23 2007 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.28 0\.51 4\.56 0\.29 0\.29 4\.26 2008 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.32 0\.51 4\.59 0\.29 0\.29 4\.30 2009 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.35 0\.51 4\.63 0\.29 0\.29 4\.34 2010 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.39 0\.51 4\.66 0\.29 0\.29 4\.37 2011 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.43 0\.51 4\.70 0\.29 0\.29 4\.41 2012 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.47 0\.51 4\.74 0\.29 0\.29 4\.45 2013 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.51 0\.51 4\.78 0\.29 0\.29 4\.49 2014 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.55 0\.51 4\.83 0\.29 0\.29 4\.53 2015 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.60 0\.51 4\.87 0\.29 0\.29 4\.58 2016 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.64 0\.51 4\.91 0\.29 0\.29 4\.62 2017 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.69 0\.51 4\.96 0\.29 0\.29 4\.67 2018 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.74 0\.51 5\.01 0\.29 0\.29 4\.72 2019 0\.09 1\.32 1\.41 0\.27 0\.00 1\.09 1\.09 1\.78 0\.51 5\.06 0\.29 0\.29 4\.77 2020 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 1\.84 0\.20 4\.61 0\.29 0\.29 4\.32 2021 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 1\.89 0\.20 4\.66 0\.29 0\.29 4\.37 2022 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 1\.94 0\.20 4\.72 0\.29 0\.29 4\.42 2023 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.00 0\.20 4\.77 0\.29 0\.29 4\.48 2024 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.06 0\.20 4\.83 0\.29 0\.29 4\.54 2025 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.12 0\.20 4\.89 0\.29 0\.29 4\.60 2026 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.18 0\.20 4\.95 0\.29 0\.29 4\.66 2027 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.24 0\.20 5\.01 0\.29 0\.29 4\.72 2028 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.30 0\.20 5\.08 0\.29 0\.29 4\.79 2029 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.37 0\.20 5\.15 0\.29 0\.29 4\.85 2030 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.44 0\.20 5\.21 0\.29 0\.29 4\.92 2031 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.51 0\.20 5\.29 0\.29 0\.29 4\.99 2032 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.59 0\.20 5\.36 0\.29 0\.29 5\.07 2033 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.66 0\.20 5\.44 0\.29 0\.29 5\.14 2034 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.74 0\.20 5\.51 0\.29 0\.29 5\.22 2035 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.82 0\.20 5\.60 0\.29 0\.29 5\.30 2036 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.91 0\.20 5\.68 0\.29 0\.29 5\.39 2037 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 2\.99 0\.20 5\.77 0\.29 0\.29 5\.47 2038 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 3\.08 0\.20 5\.86 0\.29 0\.29 5\.56 2039 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 3\.17 0\.20 5\.95 0\.29 0\.29 5\.66 2040 0\.09 1\.14 1\.23 0\.33 0\.00 1\.02 1\.02 3\.27 0\.20 6\.04 0\.29 0\.29 5\.75 \Discounting at 12% Note: HN-VAG, SD-VAG represent the incremental value-added for agriculture for Henan and Shandong Provinces; VA-M&I is incremental value added for urban industrial water; SMX-VA,XLD-VA are for value added for hydropower for Sanmenxia and Xiaolangdi hydropower stations\. These values are derived from reruns of the simulation models using the latest prices\. Sediment and flood control benefits follow the PAD calculations when surveys were done in 1997 when the project were appraised\. These values were not changed but it is believed that most of the values could have been increased after 1996 flood damage values which were not available for appraisal\. The capital cost include the costs of resettlement which were completed at the time of appraisal\. - 50 -  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 3/10/97 Appraisal/Negotiation 03/11/1997 Mission Leader/Water Resources (1), Economist (5), Dam Specialist (3), Resettlement Specialist (1), Environmental Specialist (3), Financial Specialist (2), Flood Forecasting Specialist (1), Sediment Specialist (1), Reservior Operations (1) Supervision 06/03/1998 8 MISSION LEADER (1); DAM S HS ENGINEER (1); FINANCIAL ANALYST (1); DAM/TUNNEL SPECIALIST (1); GEOTECH\. SPECIALIST (1); ENVIRONMENT SPECIALIST (1); HYDRAULICS SPECIALIST (1); FLOOD FORECAST SPL\. (1) 11/02/1998 6 WATER RESOURCES ENG (1); S HS WATER RESOURCES SPEC\. (1); DAM/TUNNEL SPECIALIST (1); GEOTECH\. SPECIALIST (1); ENVIRONMENT SPECIALIST (1); FINANCIAL ANALYST (1) 03/30/2000 10 WATER RESOURCES SPL (3); S HS CLAIMS SPECIALIST (1); FINANCIAL ANALYST (2); DAM/TUNNEL SPECIALIST (1); GEOTECHNICAL SPL (1); ENVIRONMENTAL SPL (2) 09/06/2001 5 TASK TEAM LEADER (1); S HS WATER RESOURCES SPCL\. (1); ENVIRONMENTAL SPCL\. (1); FINANCIAL SPECIALIST (1); DAM SPECIALIST (1) 11/03/2002 6 TTL, WATER RESOURCES (1); S HS DAM SPECILAIST (1); - 51 -  WATER ENGINEERING (1); GEOTECHNICAL ENGINEER (1); ENVIRONMENT MANAGEMENT (1); ECONOMIC ANALYSIS (1) ICR 10/03/2003 6 TASK TEAM LEADER (1); S HS WATER RESOURCES SPCL/ECONOMIST\. (1); ENVIRONMENTAL SPCL\. (1); FINANCIAL SPECIALIST (1); DAM SPECIALIST/MODELLER (1) AND IRRIGATION SPECIALIST(1) (b) Staff: Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks US$ ('000) Identification/Preparation 130 650 Appraisal/Negotiation 50 200 Supervision 64 460 ICR 8 25 Total 252 1305 - 52 -  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 - 53 -  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 - 54 -  Annex 7\. List of Supporting Documents Origin Title Date 1 Bank Reports Staff Appraisal Report March 25, 1994 Xiaolangdi Multipurpose Project, Report 12339-CHA Project Appraisal Document June 23 1997 Xiaolangdi Multipurpose Project (Phase II), Report 16274-CHA Xiaolangdi Multipurpose Project: Stage March 11, 1997 II-Environmental Assessment Update (EIA/1997 Update)Prepared by Yellow River Reconnaissance, Planning and Design Institute, February 1997 (submitted to the World Bank Board as SecM97-179 Report on the Revised Resettlement Plan and February 1997 Implementation Progress, by Yellow River Water and Hydropower Development Corporation and the Reconnaissance, Planning and Design Institute, YRCC 2 Bank Mission Negotiations 1997 Reports Agreed Minutes Supervision 1997-2003 Mission Reports ICR 2003 Mission Report 3 Reports Negotiations 1997 Prepared by Agreed Minutes Employer for World Bank Missions Supervision 1997-2003 Implementation Progress Reports ICR February 2003 Borrower's ICR 4 Technical Report Dam Safety Panel Visit No\.1 September 1994 Reports prepared by Employer for Dam Safety Panel Report Dam Safety Panel Visit No\.2 September 1995 Report Dam Safety Panel Visit No\.3 March 1996 Report Dam Safety Panel Visit No\.4 September 1196 Report Dam Safety Panel Visit No\.5 March 1997 Report Dam Safety Panel Visit No\.6 September 1997 - 55 -  Report Dam Safety Panel Visit No\.7 June 1998 Report Dam Safety Panel Visit No\.8 August 1008 Report Dam Safety Panel Visit No\.9 September 2000 5 Dam Safety Dam Safety Panel Report No\.1 October 23, 1994 Panel Reports Dam Safety Panel Report No\.2 October 22, 1995 Dam Safety Panel Report No\.3 March 27, 1996 Dam Safety Panel Report No\.4 September 26, 1996 Dam Safety Panel Report No\.5 April 10, 1997 Dam Safety Panel Report No\.6 September 26, 1997 Dam Safety Panel Report No\.7 June 12, 1998 Dam Safety Panel Report No\.8 September 7, 1999 Dam Safety Panel Report No\.9 September 29, 2000 6 Other Pertinent Technical Reports 7 Pertinent Report prepared for Orientation Visit April 1998 Claims and Variations Reports (Prepared for DRB Hearings/Visits) Report prepared for Site Visit No\.1 August 1998 Report prepared for Site Visit No\.2 December 1998 Report prepared for Site Visit No\.3 March 1998 Report prepared for Site Visit No\.4 May 1999 Report prepared for Site Visit No\.5 August 199 Report prepared for Site Visit No\.6 January 2000 Report prepared for Site Visit No\.7 May 2000 Report prepared for Site Visit No\.8 October 2000 Report prepared for Site Visit No\.9 February 2001 8 DRB Reports Lot 2 ­ R1 Price Adjustment for Local Labour September 1998 HEARINGS BINDING Lot 2 Referral: Diversion Tunnels; February, 25, 1999 SUGGESTIONS Lot 2 - R2: Diversion Tunnels - Excavation & March 19, 1999 Support Extension of Time and Costs NOT BINDING Lot 2 ­ R3: Diversion Tunnels - Extension of Time July 22, 1999 and Acceleration NOT BINDING Lot2- R4: Measurement and Payment of Fault ZoneFebruary 15\.,2000 Excavation in Open Excavation BINDING Lot 2 ­ Ann\.B Diversion Tunnels Excavation & June 16, 2000 Rock Support - 56 -  SUGGESTIONS Lot 2 ­R5: Post-ICD6 Acceleration September 13,2000 BINDING Lot 2 ­ SS2: Diversion Tunnels Concrete Lining November 14, 2000 Acceleration SUGGESTIONS Lot 2 ­ R6: Indirect Cost, Overhead, Supplementary December 20\. 2000 Expenses BINDING 9 DRB Reports Orientation Visit April 18-23, 1998 Site Visits Report on Site Visit No\.1 August 23 ­September 1, 1998 Report on Site Visit No\.2 December 7-15, 1998 Report on Site Visit No\.3 March 8-19\. 1999 Report on Site Visit No\.4 May 31 ­ June 12, 1999 Report on Site Visit No\.5 August 12-26, 1999 Report on Site Visit No\.6 January 23 ­February 3, 2000 Report on Site Visit No\.7 May 4-14, 2000 Report on Site Visit No\.8 October 8-15, 2000 Report on Site Visit No\.9 February 11-22, 2001 10 Financial Reports 1998-2003 11 Environmental 1997-2000 Reports Panel of Experts 12 Institutional 1999 Reports 13 Training Reports 1997-2000 14 Monthly Reports Monthly Reports prepared by XECC and CIPM Every Month - Submitted to the Bank 15 6 Monthly Reports 6 Monthly Reports prepared by XECC and CIPM Every 6 months ­ Submitted to the Bank - 57 -  Additional Annex 8\. Compliance with Loan Covenants Section Covenant Fulfillment Description of Covenant Comments Agreement Type Loan 3\.04 0 C Dam Safety inspection arrangements for Sanmenxia Dam 3\.05(a) 7 C Implement resettlement plan satisfactorily 3\.05(b) 7 C Coffer dam is not closed if resettlement lags by four months 3\.05(c) 10 Not yet due Ensure water in damn does not go over level 265m before resettlement over 265m is completed 3\.06 10 Not required Transmission lines will be constructed for Transmission lines power grids to Shanxi and Hunan to Shanxi were not required and therefore canceled 5 para 1 5 C Maintain project coordinating groups at all levels 5 para 2 10 C Undertake all technical assistance and training for the institutional component satisfactory to the Bank 5 para 4 9 C Borrower/YRWHDC shall carry out a Mid-term review YRCC and Project Provinces carry out their 5 para 5 6 C respective parts of the EMP YRWHDC shall enter into a power sales 5 para 3 2 PC agreement with power companies Borrower/YRWHDC shall carry out a Project Para 7 9 C mid-term review YRWHDC shall enter into a power sales Power sales 3\.04 2 C agreement with power companies agreement on principles is agreed 4\.02 2 C Financial covenant-debt service ratio 4\.04 2 PC Charge water rates to recover full costs including depreciation and rate of collection should not be less than 85 percent\. It is being negotiated 2 para 3 5 C YRWHDC maintain its PMO with competent staff with adequate numbers, 2 para 4 5 C YRWHDC furnish annual financing plan and implementation program 2 para 5 10 C YRWHDC shall employ international panel of experts for reviewing dam safety 2 para 6 6 C YRWHDC shall: (a) employ intl\. Panel of experts for reviewing implementation of the Environmental Management Plan (EMP); (b) maintain an Environmental Management Office\. Acceptable to the Bank and (c) EMP is undertaken in timely and acceptable manner\. 4\.01 1 C Borrower shall have records audited for all financial project accounts including the Special Account\. Furnish to the Bank no later than June 30 audit reports of the last year C: Complied with NC: Not Complied with CP: Partially Complied with - 58 -  Additional Annex 9\. Operation and Maintenance Plan and Emergency Preparedness Plan Summary 1\. Procedures The technical operation and maintenance rules/procedures formulated and followed by YRWHDC for the dam/power plant operators are satisfactory and in line with the pertinent codes/specifications and regulations of the Chinese Government\. The newly revised technical manuals and specifications for Xiaolangdi Project operation and maintenance include the following: S Specifications of reservoir regulation S Specifications of surveillance for hydraulic structures S Specifications of maintenance of hydraulic structures S Specifications of generating system operation S Specifications of maintenance of high voltage system S Specifications of maintenance of power protection system S Specifications of maintenance of automatic control system S Specifications of maintenance of hydro-mechanical system S Specifications of operation and maintenance of gates and hoists The analysis of monitoring data is clearly specified in the Specifications of surveillance for hydraulic structures\. However, due to lack of personnel, this work was not carried out timely\. 2\. O & M Plan As for the O & M Plan specified in the legal agreement for this Project, a document entitled Management and Maintenance Program for the Operation of the Power Plant was prepared together with the Operation, Maintenance and Surveillance Manual for Xiaolangdi Dam Safety and some related guidelines developed with the assistance of an international consultant team\. The O&M Plan which covers the following aspects and will be updated at appropriate intervals: l General Project Information l Institutional Setup and Financing Plan l Operation l Reservoir operational rules l Sediment management l Flood forecasting l Flood operating procedures l Emergency operating procedures l Maintenance l As built-drawings and reports (historical document) l Performance indicators l Preventive measures - 59 -  l Instrumentation Plan l Surveillance l Standards l Regular inspections l Tests l Emergency Operations Plan 3\. Emergency Preparedness Plan (EPP) The preparation of EPP for both Xiaolangdi and Sanmenxia Dams as required by the Loan Agreement, MWR would entrust YRCC to prepare, with the assistance of YRWHDC, the EPP for both dams\. The Emergency Preparedness Plan (EPP), is based on normal international as well as Chinese practice for dam projects\. It identifies the procedures and processes that the dam operators would follow in the event of an emergency, such as e\.g\. 1\. failure of essential equipment such as flood gates, 2\. slope failure(s) having the potential to cause dam failure, or 3\. a complete failure of the dam caused by overtopping, earthquake or piping\. The EPP allows for planning by municipalities, army and local police, provincial agencies, telephone and transportation companies and other parties affected in the event of a dam break flood, and the coordination of efforts between provincial and municipal levels of government\. In the event of an emergency, the EPP will save lives and has the potential to reduce property damage by:\. l Hydrographic observation and flood warning scheme; l Drawdown and flood control operation of reservoir; l Emergency emptying of the reservoir; l Inundation maps for flows up to the design flood, and for catastrophic conditions caused by dam failure; l Evacuation of flood-threatened areas; l Rescue operations and other emergency provisions; l Equipment, material and support available for emergency relief; l Coordination of emergency relief actions with third parties (for instance: civil defense, police, hospitals, etc\.); l Emergency standby of public utilities; l Emergency operation of power plant, water supply scheme associated with the dam; l Emergency warning; l Emergency communication; l Emergency transportation; l Emergency access to the damsite; l Emergency decision-making process and procedures\. The Response Level is summarized on the table below and details of the type of events are not provided in the table as these are very extensive and are only in the detailed manuals\. - 60 -  Type of Event RESPONSE Hydrological Event LEVEL Flooding Emergency release from upstream reservoirs Earthquake Leakage causing internal erosion or piping Abnormal Instrument Readings Gate Failure/ power Loss/ Equipment Failure Sabotage Accident Internal Alert V: The Situation can I:V: be managed I:V: internally\. Outside I:V: notification is NOT I:V: required I:V: I:V: I: Response V: Level 1 I:V: Conditions are such I:V: that they may cause I:V: downstream flooding\. I:V: I:V: I:V: I: Response V: Level 2 I:V: Prepare for I:V: Evacuation I:V: I:V: I:V: I:V: I: Response V: Level 4 I:V: Evacuation is I:V: necessary I: Major V: YES I:V: I: Yes V: I:V: Major I: V: Visual Observations I: Monitoring/Instrumentation Readings 4\. PERFORMANCE OF SANMENXIA DAM Dam: The Sanmenxia Dam was completed in the early 60s\. In 1983, the Sanmenxia Project Management Bureau was established, and has since been in charge of all the project structures, while YRCC is in charge of reservoir dispatching\. The dam safety monitoring center was established in Sanmenxia Project Management Bureau\. The basic O & M manuals and specifications for monitoring, inspection and surveillance are available in the center, as required by the government rules on dam safety\. The dam is located in high seismicity region (with intensity of 8 degree)\. In order to improve the seismicity monitoring work, a seismic monitoring station was established in 1978 at 3 km west of the dam\. This station is now included in the national seismic observation network\. Since the dam was designed against higher head and is now operated against lower head, there should be no problem regarding the safety of dam including its stability, stress and deformation, etc\. However, after many years of operation most of the stress, strain and temperature monitoring instruments are either under aging conditions or out of work\. - 61 -  Replacement and renovation of key monitoring instruments not functioning as well as an overall dam safety assessment is in progress\. Water releasing structures: The water releasing structures at Sanmenxia consist of 27 items (excluding the hydro power units), namely, 2 tunnels, 12 deep outlets, 12 bottom outlets and 1 penstock\. Sanmenxia Project Management Bureau has been undertaking various repairs to the damaged parts of the tunnels and outlets\. Regular inspection and repairing of all the water releasing structures as needed will be conducted timely in future so as to guarantee the functionality of those important works Gantry cranes at dam crest:\. The following problems exists: l The lifting range of 72m is shorter than the 85m required; l The present lifting load 380t exceeds the design capacity of 350t; l At present, 10 hours are needed to open all 17 gates, which is longer than 8 hours as required by flood control dispatching; l The two cranes were put into use in 1962 and 1965 respectively, their service life exceeded the design life of 35 years\. Replacement and renovation of these cranes are urgently needed\. Operation of Sanmenxia Dam: The guiding principles of operation and maintenance of Sanmenxia Dam are as follows: l Conjunctive dispatching of the four reservoirs (Sanmenxia, Guxian, Luhun and Xiaolangdi) as managed by YRCC; l Storing the clear water and releasing the muddy water so as to maintain sufficient effective storage volume of the reservoir for a rather long period, thus to exploit the comprehensive benefit of the project flood control, ice flood control, irrigation, water supply, power generation, sedimentation reduction and eco-environmental protection etc\.; l To maintain relative stability of the river bed elevation at Tongguan to protect the Weihe River plain; l At present, monthly dispatching plan is worked out by Sanmenxia Project Management Bureaus\. This plan will be timely modified through instruction orders issued by YRCC\. Modifications are more frequent in flood season; l From 1989 to now, the operation pool level in flood season is controlled at 305m\. After 1993, the non-flood season pool level is controlled at 322m or lower\. EPP Sanmenxia Dam The Sanmenxia Dam Management Bureau has studied the actions to be taken in emergency of strong storm and in emergency of strong earthquake, which needs to be incorporated in the EPP for Sanmenxia Dam: (1) Actions to be taken in case of strong storms include: l Analyze and compute the forces acting on the dam for pool levels 335m and 340m; l Check the bearing capacity of dam for pool levels 335m and 340m; l Plug all galleries vulnerable to the entrance of flood water; l Guarantee the availability of stand-by power source and the reliability of E/M and metallic equipment; l Utilize turbine units to help to lower the pool level; - 62 -  l Evacuate people living under pool levels of 335m and 340m; l Timely close or open the gates according to the flood information; l Guarantee the safety of Xiaolangdi Reservoir and the downstream reaches of the Yellow River through real-time dispatching; l Prompt and precise communication with the Yellow River Flood Control Headquarters; l Prevent the flooding of power house by overtopping water coming from both downstream side and the upstream side\. (2) Actions to be taken in case of strong earthquakes include: l Rescue operation and other emergency provisions; l Equipment, material and support available for post disaster relief; l Emergency communication; l Emergency transportation; l Coordination of relief actions with third parties; l Emergency access to dam site and disaster areas\. - 63 -  Additional Annex 10\. Loan Allocation and Disbursements Stage I Loan Allocation and disbursements Revised Category Allocation Allocation Actual Withdrawal % Works ICB 386\.00 410\.49 414\.47 100\.97% Equipment & Materials 4\.90 4\.90 1\.32 26\.94% Vehicles 2\.53 1\.06 1\.06 100\.00% Consultant Service 12\.35 12\.35 12\.32 99\.76% Training 1\.20 1\.20 0\.60 50\.26% IDC 30\.00 30\.00 30\.00 100\.00% Unallocated 23\.02 0\.00% Total 460\.00 460\.00 459\.77 99\.95% Stage II Loan Allocation and Disbursements $ portion Revised Category Allocation Allocation Actual Withdrawal % Works ICB 206\.00 206\.00 205\.74 99\.87% Goods 4\.75 4\.75 0\.09 1\.96% Consultant Service 17\.10 17\.10 8\.96 52\.41% Training 2\.15 2\.15 0\.07 3\.27% Total 230\.00 230\.00 214\.87 93\.42% Stage II Loan Allocation and Disbursements DM Portion Revised Category Allocation Allocation Actual Withdrawal % Works ICB 200\.00 200\.00 91\.60 45\.80% Goods 0\.00 0\.00 0\.00 0\.00% Consultant Service 0\.00 0\.00 0\.00 0\.00% Training 0\.00 0\.00 0\.00 0\.00% Total 200\.00 200\.00 91\.60 46% - 64 -  - 65 -

REVIEW

P005735

 ICRR 10035 Report Number : ICRR10035 ICR Review Operations Evaluation Department 1\. Project Data : OEDID: OEDID : L3418 Project ID : P005735 Project Name : Gas Infrastructure Development Country : Tunisia Sector : Oil & Gas Transportation L/C Number : Loan 3418-TUN Partners involved : none Prepared by : Richard L\. Berney, OEDST Reviewed by : Yves J\. Albouy Group Manager : Roger H\. Slade Date Posted : 03/31/1998 2\. Project Objectives, Financing, Costs and Components : The project objectives were to develop a gas infrastructure network in southern Tunisia to facilitate domestic gas field development, to promote increased penetration of natural gas into the industrial and premium fuels markets; to establish a modern pipeline control system (SCADA), and to strengthen the financial structure of Tunisia's state owned gas and electricity enterprise (STEG)\. The components were (i) 240 km of 20 inch trunk pipeline between north and south of country; (ii) expansion of consumer connections, metering and regulating stations along the pipeline; and additions to the existing pipeline network of Tunis\. The project was financed 60% by a Bank loan and 40% by STEG internally generated funds\. 3\. Achievement of Relevant Objectives : The physical objectives related to increasing Tunisia's gas pipeline infrastructure capacity were effectively and efficiently met\. The institutional objectives of improving the financial condition of the power generation /distribution arm of STEG were not met\. 4\. Significant Achievements : The pipeline was installed at less than appraisal costs, due to lower than anticipated bids for its construction\. The pipeline was efficiently built and is being operated efficiently \. 5\. Significant Shortcomings : There was insufficient attention paid to expanding connections to major potential gas consumers, and as a result, only four of the fourteen proposed industries were converted from liquid fuels to gas, and they fully financed their own conversion \. No project funds were used for this purpose \. The Government was unwilling to meet its covenanted commitment to increase power tariffs to an economic level \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev \.: Partial Modest Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Satisfactory Satisfactory Quality of ICR : Satisfactory 7\. Lessons of Broad Applicability : The project failed to provide a framework within which private sector power projects could be developed and provided little incentive for the STEG to expand gas sales to industry \. Both issues could have been address more effectively if the sector dialogue have focused on unbundling the gas transmission activities of STEG from the power generation activities \. This would have (i) eliminated the cross subsidization (from gas sales to power sales), which allowed the Government to avoid increasing power tariffs; (ii) increased the gas company's interest in expanding its consumer connections; (iii) provided an institutional setting where private power companies could have bid for new generation facilities on a even footing with the STEG power generation company\. 8\. Audit Recommended? Yes No 9\. Comments on Quality of ICR : The ICR was of acceptable quality \. It could have been improved by by pointing out that supervision missions did not consider lack of compliance with tariff covenant to be important to lower covenant compliance to unsatisfactory until late in 1996, even though it was inadequate starting about two years earlier\.

REVIEW

P034035

Document of The World Bank Report No: 27547 IMPLEMENTATION COMPLETION REPORT (CPL-39300) ON A LOAN IN THE AMOUNT OF US$ 20\.0 MILLION TO THE LEBANESE REPUBLIC FOR A ADMINISTRATIVE REHABILITATION LOAN December 18, 2003  CURRENCY EQUIVALENTS (Exchange Rate Effective December 15, 2003) Currency Unit = Lebanese Pound 1550\.0 Pound = US$ 1\.00 US$ 1\.00 = 1550\.0 Pound FISCAL YEAR January 1 to December 31 ABBREVIATIONS AND ACRONYMS CDR Council for Development and Reconstruction COM Council of Ministers CSB Civil Service Board EU European Union GOL Government of Lebanon GovNet Government Wide Area Network IT Information Technology MOET Ministry of Economy and Trade MOF Ministry of Finance MOP Ministry of the President MOT Ministry of Transport NARP National Administrative Rehabilitation Program OMSAR Office of Minister of State for Administrative Reform PSIF Public Sector Improvement Fund PSR Project Status Report TA Technical Assistance TIS Trade Information Systems TRU Transport Regulatory Unit USAID United States Agency for International Development VAT Value Added Tax WAN Wide Area Network WTO World Trade Organization Vice President: Christiaan J\. Poortman Country Director Joseph P\. Saba Sector Manager Dipak Dasgupta Task Team Leader/Task Manager: Giulio de Tommaso  LEBANESE REPUBLIC Administrative Rehabilitation Loan 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 7 5\. Major Factors Affecting Implementation and Outcome 10 6\. Sustainability 12 7\. Bank and Borrower Performance 13 8\. Lessons Learned 14 9\. Partner Comments 15 10\. Additional Information 24 Annex 1\. Key Performance Indicators/Log Frame Matrix 25 Annex 2\. Project Costs and Financing 37 Annex 3\. Economic Costs and Benefits 39 Annex 4\. Bank Inputs 30 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 32 Annex 6\. Ratings of Bank and Borrower Performance 33 Annex 7\. List of Supporting Documents 34  Project ID: P034035 Project Name: LB-ADMIN\. REHAB\. Team Leader: Giulio De Tommaso TL Unit: MNSED ICR Type: Core ICR Report Date: December 30, 2003 1\. Project Data Name: LB-ADMIN\. REHAB\. L/C/TF Number: CPL-39300 Country/Department: LEBANESE REPUBLIC Region: Middle East and North Africa Region Sector/subsector: Central government administration (100%) Theme: Administrative and civil service reform (P) KEY DATES Original Revised/Actual PCD: 12/13/1994 Effective: 12/01/1996 12/01/1996 Appraisal: 05/16/1995 MTR: 06/30/1997 Approval: 08/03/1995 Closing: 12/01/1999 12/01/2003 Borrower/Implementing Agency: THE LEBANESE GOVERNMENT/GOVERNMENT Other Partners: STAFF Current At Appraisal Vice President: Christiaan J\. Poortman Caio Kock Weser Country Director: Joseph P\. Saba Barbara Kafka Sector Director: Mustapha K\. Nabli Anil Sood Team Leader at ICR: Giulio de Tommaso Salvatore Schiavo-Campo ICR Primary Author: Mikhail Pryadilnikov 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: 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: Background Lebanon emerged from the civil war with a devastated economy and a severely weakened public  infrastructure\. Its real per capita income was reduced by nearly two-thirds during the 15 years of war and military occupation and its physical assets completely run down\. Most Government buildings were damaged, office equipment had been destroyed or stolen, and public employment was reduced to a bare skeleton\. Fewer than 7,400 public posts were filled out of the 20,860 prescribed by the government's organizational structure, with nearly 60% of the management and mid-level posts in grades I, II and III vacant\. The prolonged isolation of the Civil Administration from the outside world reduced its exposure to new trends and thinking in Administration Reform\. As a result, the government's basic procedures, established for the most part in the 1950s became outdated and constituted an impediment to the process of physical reconstruction and economic recovery\. In this context, the basic rehabilitation of the administration was an important aspect of the initial program of reconstruction, in the period immediately following the end of hostilities\. In 1995 the government of Lebanon, in conjunction with international consultants funded by UNDP and the French Government outlined an initial program which highlighted some of the needs of the Public Administration\. This initial planned was subsequently refined and eventually constituted the basis of the National Administrative Rehabilitation Program (NARP)\. This program, which was to be implemented over a 5 year period, called for rehabilitation of information technology and office equipment, personnel training and review of procedures and regulations\. In support of this initiative, the Bank developed the Revenue Enhancement Project (1994) - which focused on fiscal management, custom modernization and land management - and the Administrative Rehabilitation Project (ARP) - the project evaluated by this ICR\. The original drafters of the ARP envisioned a longer time frame for project implementation than what was eventually granted\. The evaluation ratings of the project are based on the recognition that in the post-conflict situations, characterized by a highly uncertain political environment and weakened coordination capacity, the implementation of reform and rehabilitation agenda is bound to take a long time\. Given the multi-dimensional nature of the project and the lack of easily monitorable indicators for some of the project components, the evaluation takes a more nuanced approach by considering the importance of adaptation to the difficult conditions of post-conflict society\. Objective ARP's primary role was to assist the government in the implementation of NARP while proceeding with the initial steps of administrative reform\. It focused on the core tasks of administrative rehabilitation and fostering reform dialogue\. In this process, the Bank's main interface was the Office of the Minister of Administrative Reform and the original length of the loan was three years\. Implementation was originally focused on a few agencies with very well defined and specific projects, which had been chosen and identified because of their urgency and their likely impact on the reconstruction\. In the course of implementation, such focus was redirected away from non performing projects, and extended to additional ministries as well as additional projects for the Ministry of Finance and the Ministry of Economy and Trade\. Beyond fulfilling the needs for key equipment and other infrastructural resources - as identified by NARP - the project assisted in preparing plans for streamlining procedures, designing and initiating longer term public administration and civil service reform, and encouraging participation and building consensus to foster sustainable reform process\. - 2 -  3\.2 Revised Objective: The basic objective of facilitating rehabilitation of public sector and encouraging administrative reform did not change but its focus was extended from just a few agencies to several more\. The project was amended six times with major restructuring occurring in 1997 and 1999\. 3\.3 Original Components: The components of the project supported key parts and were consistent with Government's NARP\. Table 1 presents the components of the project, a summary of their specific activities in relation to priority national issues and the outcomes\. All components were reflective of national priorities of rehabilitating urgently needed public sector infrastructure and initiating reforms\. Table 1: Administrative Rehabilitation Project Components Component Issues Addressed Planned Action Outcome Part Information Office Equipment Supply most public Telephones, faxes and copiers A Technology Office equipment is not administrations with were supplied to most public and Office available in most cases; office equipment\. agencies\. Equipment most public records are destroyed and those that are left are in need of computerization; Information Technology provide Information basic information technology service delivery is technology support to all tools available and used for inefficient because of ministries and core service delivery in most the lack of adequate agencies; administrations; technology; core IT personnel is recruited Train public sector in affected administrations\. public sector staff is not employees in office and trained; 1600 public trained in information technology, IT sector employees were trained technology; applications, and basic in office technology; 5000 network administration computers delivered and and maintenance; installed; technology standards were Make available prepared and published public agencies and information/ National E-government ministries are not telecommunication strategy was developed; legal linked together and do support systems to core commercial registry for the not share any online agencies and select private sector was communication to ministries for priority computerized and trade share information; public functions; develop information center was national IT plan; established; deploy a government Web sites with critical coordination and wide area network to information for public service - 3 -  communication is interlink all ministries delivery were developed for difficult; office and agencies while all administrations\. Public productivity is low\. offering single point of service information kiosks access to public citizens were created in many public and private businesses; agencies and universities; provide necessary communication infrastructure for e-government; Trade Info\. sys, commercial Complete absence of make available or assist and regulatory registry, reliable information in developing selected several admin\./decision systems for priority information systems, with support systems developed Gov\. functions; related training\. and utilized\. Part (i) Civil Lack of reliable Conduct civil service Civil service census was B Service information on the census which includes completed without field work Census number of civil service field inquiries to identify but through the use and employees; exactly the number of analysis of questionnaires; civil service personnel; large likelihood of the design and develop A basic database with presence of ghost consolidated human information on civil service workers and double resource management personnel was developed with dippers; high but database; which relates the assistance of USAID\. undetermined number the CSB, Ministry of Hundreds of double dippers of unqualified Education to MOF and and ghost employees were temporary contract payroll system; identified, but there is strong workers employed on a likelihood that more remain; daily laborers\. incorporate civil service A comprehensive and census data, taking into accurate national database account job profiles and linking various HR databases budgeted positions and providing relevant criteria\. information to concerned ministries does not exist\. (ii) Reviews, Main items to be studies & reviewed: workshops Poor service provision; Conduct a comprehensive A study on amending of the the public sector is slow review of the functions civil service regulation was to respond to new and mandates of all made and presented to the policy initiatives; ministries; Council of Ministers; basic procedures of implement a review of all Organizational/functional public administration civil service regulations studies of over 20 public established 35 years on recruitment, retention, agencies were conducted; Six ago or longer are evaluation, promotion, are presently under incapable of meeting mobility, retirement and consideration by the Council modern needs; discipline; Of Ministers; - 4 -  distorted compensation define new salary scale; Proposed new salary scale was scheme does not attract conduct a review of developed but political qualified local control and audit bottlenecks precluded its personnel; procedures; implementation; job description and evaluation was conducted for all employee groups; Low level of awareness organize a best practice 8 best practice workshops and public participation workshop series and were initiated and its findings on the issue of accessible to all incorporated in the Administration concerned individuals in administrative reform strategy Reform\. the public and private approved by the Council of sphere\. Ministers and new draft laws\. 3\.4 Revised Components: The project underwent two major amendments\. First, in 1997 the Public Service Improvement Fund (PSIF) was created to reallocate amounts away from poorly performing subcomponents\. PSIF enabled agencies to submit proposals to support reform and rehabilitation initiatives under strict selection guidelines\. In that instance, procurement functions for goods and services financed from the ARP Loan were transferred from CDR to OMSAR to expedite procurement and facilitate lagging disbursements\. The second amendment dates to 1999\. In this instance, $5\.4 m dollars of the 20\.0 total were reallocated away from some non performing components towards building policy-making capacity in some core sector ministries\. Responsibilities for these components were given directly to core ministries\. This part, from hereon referred to as Part C had several subcomponents: (a) Under the authority of the Ministry of Finance, the assistance sought to (i) improve tax administration, (ii) introduce the Value Added Tax, (iii) deploy a computerized communication framework and (iv) extend customs modernization; (b) Under the authority of the Ministry of Economy and Trade, the program was focused on assisting the program of the government for the WTO accession, (ii) supporting the policy unit within the Ministry and designing institutional framework for consumer protection; (c) Under the authority of the Ministry of Transport, the assistance focused on establishing an institutional framework for private participation in the ports of Beirut and Tripoli and developing and implementing the Civil Aviation Overall Strategy\. Component Issues Addressed Planned Action Outcome Part Institutional Low capacity to Study on the reform of Improved data collection by C Assistance to manage tax the Ministry of Finance\. the MOF\. Creation of an the Ministry of administration and Implement some of the economic research center; Finance budget preparation recommendations of the interlinked departments at (MOF) and expenditures; study, including: MOF at various locations supporting the through a single network; introduction of VAT, modernized budgetary, design and implement treasury and payroll WAN connecting various information systems in department within MOF place; - 5 -  providing the MOF with inadequate IT hardware, networking Computers and computerization; tools and training; telecommunication networks delivered and installed\. Basic software application for budget preparation and payroll applications in place\. Institutional No capacity exists to MOET: design legislative Strong contribution to Assistance to develop and act on and institutional building and modernization the Ministry of important economic framework for consumer of public sector capacity in Economy and policy choices; protection\. Assist the design and management Trade Lebanon in WTO of trade policy and in the (MOET) accession\. formulation of economic policy\. Helped design a new and improved legislative framework for consumer protection; it supported a trade policy team within the MOET to facilitate Lebanese accession to WTO\. unavailability of trade information to be provided by Develop a One-Stop-Shop Trade Information Center prospective for traders to facilitate was established\. Trade importer/exporters access of trading Information System (TIS) and trading community to was developed and is community; government regulations assisting traders in timely regulatory framework and market information access to market made it difficult for opportunities\. prospective exporters to identify procedures to be followed\. Ministry of Lack of capacity to Acquire capacity and Transport Regulatory Unit Transport develop strategy for prepare the regulatory (TRU) established, (MOT) privatization of framework for responsible for legal and Land/Sea and Air privatization\. policy advice; two studies transport were produced for parliamentary approval\. 3\.5 Quality at Entry: Quality at Entry is rated marginally Satisfactory\. The ARP objectives and design were consistent with Government of Lebanon's reform program as described in the National Administrative Rehabilitation Program (NARP)\. The project desing incorporated and adapted to the difficult post-conflict realities by keeping the focus narrowly on urgent rebuilding of public sector physical infrastructure while undertaking - 6 -  background work for administrative reform\. The Memorandum of the President (MoP) for ARP cited several risk factors which could affect timely policy execution\. They were (i) the potential lack of capacity of counterpart agencies to implement project components; (ii) the age and effectiveness of the civil service, (iii) the lack of qualified, motivated management staff and (v) the complexity of political situation after the war\. The project sought to mitigate the risk by keeping the design of the project simple, and focusing the largest part of the project on activities which could be undertaken independently by one agency and did not require massive background work or institutional reform\. Despite these precautions, the Bank underestimated the divisive nature of the political institutions which weaken the coordination capacity of the government and the ability to oversee and carry out implementation of projects\. Furthermore, project preparation would have certainly benefited from a more systematic and comprehensive interaction with the prospective implementing agencies, especially at the working level\. This could have assisted in identifying implementing agencies' real commitment and facilitated faster implementation\. It is important to recognize, however, that given the depleted state of the Lebanese Public Administration there were few staff with whom to have this dialogue and interaction\. Nevertheless, this lack of capacity should have at the very least, dictated a much longer implementation time frame\. The creation and support of a technically effective implementation agency that is not integrated in the regular civil service should be considered as a short-term solution to a limited set of problems\. Such agency cannot be charged with tackling larger issues of administrative reform because these tasks should involve the benefiting agencies from the outset\. The project could also have benefitted from the development of better monitorable indicators for launching administrative reform agenda, however it should be acknowledged that the project indicators were consistent with the operational quality requirements as they were stated in 1994\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective: The achievement of objectives is rated Satisfactory\. This rating is consistent with PSR ratings (see Table 1 in Annex), on progress in reaching Project Development Objectives\. The project clearly addressed the rehabilitation needs of the public administration, and provided important diagnostic base for a process of administration reform\. However, the project had a much longer implementation period than anticipated (almost 4 years longer than originally planned)\. The project was extended four times\. Table 2 lists and dates and durations of each of the four extension of ARP\. Table 2: Extension of ARP Extension From To 1 06/30/1999 12/31/2000 2 12/31/2000 06/30/2001 3 06/30/2001 06/30/2002 4 12/31/2002 06/30/2003 With respect to specific project components, performance was satisfactory in creating the basic capacity to address issues of public administration rehabilitation by providing equipment, information technology, and a basic knowledge base to support targeted reforms\. It improved technical capacity of OMSAR to support - 7 -  complex public sector projects through the creation of highly efficient body of technical experts\. The "info-structures" deployed with the assistance of OMSAR greatly helped in deploying a minimum capacity to deliver public services\. In addition, the workshops organized by OMSAR attracted a high level of participation from the top level government officials\. The workshops managed to provide an important forum for discussion in a highly divisive political environment serving as a backdrop for important legislative initiatives in the area of corruption, archiving and access to information\. The studies and reviews conducted by OMSAR served as a backdrop for development of draft laws and restructuring recommendations for ministries and public agencies\. Further detail regarding each individual component are found in section 4\.2 below\. 4\.2 Outputs by components: Though ARP is rated as satisfactory overall, there were difficulties with implementation of some original project components\. The rating for the project remains satisfactory since through project restructuring the project financed new useful activities which achieved the overall objectives of rehabilitation and reform launch\. Part A Information Technology and Office Equipment (Satisfactory) component supported training of 1600 government employees in office and information technology including 300 management staff\. The project procured delivery and installation of 5000 computers, in addition to equipping most public administrations with telephony, fax, copiers and other office equipment\. Priority information systems were made available to selected administrations , and intra and inter network infrastructures were installed in 35 public agencies\. OMSAR worked together with MOF to deploy a government wide area network (GovNet)\. Under the purview of the Ministry of Economy and Trade (MOET) and the approval of the Council of Ministers , a national IT committee (chaired by OMSAR, MOET, and the Ministry of Communication) was set up in 1998 to pursue the national IT agenda in promoting information technology in support of the Lebanese economy and public service delivery\. The national IT strategy and the Lebanese E-government strategy were developed by OMSAR in consultation of other agencies is currently under consideration by the CoM\. In addition to the installation of hardware and training, the IT component financed the configuration and installation of applications to simplify procedures and enhance efficiency within public agencies\. Automation of procedures was completed within the core public institutions such as the Ministry of Foreign Affairs, MOET, MOF, Office of the Prime Minister, and the Office of the President and Civil Service Board\. It developed and installed commercial registry at the Ministry of Justice simplifying procedures for tracking of registrations and commercial transactions\. The newly installed database on handicapped and disabled developed for the Ministry of Social Affairs reduced the time needed to process claims and expanded the database of social assistance recipients\. The ability to track transactions electronically has raised accountability and reduced corruption while enhancing the government's ability to monitor transactions\. The intranet network and library system established at the Lebanese University interlinking 21 different branches of the university through a single broadband network reduced the time needed for registration for courses\. In the MOF, modernization of tax system and customs administration reduced the clearance time and reduced opportunities for private gain allowing clearance to be done on a remote basis\. OMSAR directed the development and the deployment of a computerized system for the commercial and legal registry at the Ministry of Justice\. The system provides an easy access to registry to citizens through internet\. OMSAR also assisted the Ministry of Foreign - 8 -  Affairs in establishing a comprehensive management information system pertaining to international bi-lateral and multi-lateral agreements\. However, not all beneficiary agencies had the absorptive capacity to implement computerization\. Office Equipment component delivered office equipment, installed photocopiers, scanners printers, copiers, phone-systems, fax machines, calculators, binding machines and typewriters in cost-efficient and expedient manner\. Part B Civil Service Census (Unsatisfactory)\. This component was not implemented as originally designed\. Problems in cooperation between CSB and OMSAR on matter of civil service concerns presented early difficulties in implementing this project and resulted in the elimination of this action from those to be financed by the World Bank loan and the reallocation of these funds to PSIF\. A survey ­ with much different methodology was nonetheless conducted\. Yet the results of this exercised are not what had been anticipated\. While some important progress in collecting and systematizing databases has been achieved, the information base for the government on personnel remains cumbersome and highly speculative\. It is estimated that hundreds of ghost employees have been removed from the files, although it is anticipated that thousands more remain\. A committee has been formed in 2000 for consolidating the human resources databases\. The education census was also not completed\. The work on the establishment of schools/teacher/student management information systems experienced delays and eventually failed\. Reviews, Studies & Workshops (Satisfactory) OMSAR concluded reviews of 20 core public agencies in addition to conducting numerous studies on unit and sectroral restructuring\. On the average, the studies are considered of good quality\. The agency completed the review of job classification and grading systems for senior management and middle management category of civil servants\. It stopped short of developing a complete job description and position classification for all types of government employees, as this activity must rely on the input of the Civil Service Board\. Major studies on Trade Efficiency, Commercial Registry, and the MOF business process management regulations were conducted and served as a basis for the successful internal restructuring in a number of core public agencies ­ such as the Ministry of Finance\. Eight workshops were conducted on important topics of relevance to Public Administration with the purpose of raising awareness on reform issues\. These were: Administrative Reform, Corruption and Ethics in Civil Service, Archiving and Data Management, Y2K, Human Resources Management, the Role of Government and the IT policy workshop\. All were widely attended by key ministers and concerned agency heads, prominent members of academia and representatives of civil society\. The studies and workshops recommendation were integrated into two major strategy documents: Administrative Reform Strategy approved by the Council of Ministers in 1999 and the E-government strategy, drafted in 1999 and now updated and presented for consideration by the Council of Ministers\. Further important documents such as the Citizen's Charter (approved by the Council of Ministers in 2001) which outlines the citizens rights and obligations towards the state\. A code of conduct for Civil Servants directed specifically towards public sector employees was presented to the Council of Ministers, who approved it but refused to make it binding on Civil Servants\. It was nonetheless distributed to all public sector employees in 2002 and constitutes an important basis for additional reform\. Finally, a number of draft laws were prepared following the workshops\. A law on archives, which required - 9 -  civil servants to maintain accurate files and prescribed responsibilities for these ­ recommended by Archiving and Data Management Workshop in 1998 - was adopted by the parliament in 2001\. Moreover, a draft law creating an ombudsman (2001) and a draft law on combating corruption and access to information (2002) were drafted and presented to the Council of Ministers for action\. Both are still under consideration by the cabinet\. Workshops were important for a for consensus building within and outside public administration, and provided validation and feedback to the activities of OMSAR\. Institutional Assistance to MOF, MOET and MOT (Satisfactory) developed as a result of specific requests from the Ministry of Finance (MOF), the Ministry of the Economy and Trade (MOET) and the Ministry of Transport (MOT)\. This component contributed to the initial building and modernization of public sector capacity in the design and management of trade policy and in the formulation of economic policy at the MOF and MOET\. It assisted the Ministry of Economy and Trade in improving its data collection, creating an economic research center and designing legislative and institutional framework for consumer protection, privatization, competition and trade policy\. It additionally helped support a trade policy team within the MTOE to facilitate Lebanese accession to the WTO\. The MOET also strengthened its consumer protection department by expanding its staff and optimizing the workload\. Following the recommendation of the trade efficiency study, OMSAR helped MOET to develop "One Stop Shop"/Trade Information Center where all technical controls are handled electronically through Trade Information System (TIS)\. Trade Information Center currently supports electronic dissemination of commercial information to firms and individuals\. MOT has used its allocation to create a Transport Regulatory Unit (TRU), responsible for legal and policy advice\. TRU presented two studies for parliamentary approval: institutional framework for private participation in the ports of Beirut and Tripoli; and Civil Aviation Overall Strategy for the implementation of open skies policy\. The study was considered on the whole satisfactory, but follow up on this study has been inadequate\. The component with the MOF made a particular progress completing the design and installation of a fast and secure wide area network (WAN) connecting various departments and allows them to exchange data\. Regional offices within the Ministry of Finance are now able to connect to central office and to exchange information among the different services with regard to budget preparation, revenue administration and related matters\. The Ministry of Finance purchased configured and installed 600 new desktop PCs and upgraded 150 desktop computers\. It signed Enterprise Agreement with Microsoft licensing 1000 desktop and 50 servers, a contract was also signed with Oracle\. In addition to information technology support, personnel of different agencies within the MOF was trained in the preparation of the budget, using the software already developed and tested at the MOF, thus shortening the process of budget preparation and increasing its accuracy\. It also used the project to improve management of tax administration and introduced VAT which proved to be a success was implemented\. 4\.3 Net Present Value/Economic rate of return: Not applicable\. 4\.4 Financial rate of return: Not applicable\. 4\.5 Institutional development impact: - 10 -  Substantial\. ARP had a high and direct institutional development impact\. The project was implemented at a time when state institutions were severely weakened and government's program of reconstruction thoroughly dependent on the progress of public sector rehabilitation\. The project supported essential first steps to recovery by building up capacity through IT and equipment supply, comprehensive reviews of civil service practices and regulations and support of policy-advising units in key ministries\. However, while the gains in administrative rehabilitation are substantial, efforts along the path of administrative reform remain tentative, haphazard and piecemeal, lacking a committed strategy endorsed by all parties and clear lines of accountability and responsibility for its results 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of government or implementing agency: There were five different governments and ­ accordingly ­ five different ministers during the time of implementation of the subject project\. Upon each change of government, draft law proposals, and projects presented for the Council of Ministers approval are returned to the concerned agency ministry for review of the new concerned minister\. While for the most part, most ministers have tried to rely on the strategy and work of its predecessors, there have been some prolonged periods of inactivity as a result of political reshuffling, which have put the whole project of Administrative Reform at risk\. Secondly, the highly volatile geo-political situation in the region has also affected the environment under which the project was implemented\. This has contributed to redirecting the attention of policymakers away from Administrative Rehabilitation and has stunted any impetus for Administrative Reform\. 5\.2 Factors generally subject to government control: Lack of accountability within government for implementation of proposed reform initiatives\. The project and the involved agencies underwrote and conducted very important, often high quality background work to prepare and assist the process of reform\. Despite this background work, only few of the initiatives recommended have led to tangible reforms initiatives on the ground\. This is because the concerned ministries are not invested with the responsibility of implementing the reform plans which were conducted and undertaken\. The end result is that high quality studies remain unused, merely collecting dust, and occasionally being repeated when funding appears from different donors\. This raises concerns about prospects for reform\. There are many other examples of how the lack of implementation follow-up has stunted efforts at Administrative Reform and how very good technical work, conducted within the scope of this project by OMSAR and others has only had limited impact and little demonstration effect\. For example, the Administrative Reform Strategy was endorsed by the Cabinet, yet no indication was given by this body about how the strategy should be implemented, its timeframe or who is responsible for the actions contained in it\. As a result, the government has yet to make any progress in addressing the problems of the Administration\. Some of the recommendations of the workshops, such as the code of conduct for public sector employees were translated into laws and adopted by Government, but by not making this code binding, its achievement has been diminished\. When Reform does proceed in most cases it is in a haphazard and piecemeal manner, relying on the determination of individual ministers rather than a coordinated government strategy and commitment\. For - 11 -  instance, while the number of authorized posts was reduced by 5000 and the number of temporary workers was reduced to 10 % of total permanent positions in 1998, the government did not develop a long-term strategy of recruitment and retrenchment rejecting the policy proposals of Civil Service Board and OMSAR on retrenchment\. This has greatly hampered the ability of these two agencies to move towards management of human resources for the Civil Service Board, and a enabler for large scale Administrative Reform in the case of OMSAR\. Lack of clarity in the mandate of OMSAR OMSAR, has done an exceptional job as an agency responsible for providing know-how, advice and equipment to support the process of administration reform\. Yet it does not have the institutional mandate to follow up on the actions suggested by the restructuring and reengineering studies to be undertaken by other agencies or ministries\. While this issue per se does not constitute a stumbling block for reform, the fact that individual ministries do not have to undertake this responsibility either, does ensure that these reform actions will stall\. This has affected reform initiatives in many agencies, despite the fact that the reform recommendations are considered sensible and necessary to improve their performance\. It is clear that the lack of clear mandates for OMSAR encourages resistance from other agencies who consider OMSAR to be encroaching on responsibilities which are statutorily theirs\. These limitations have been clearly identified in the course of ARP's implementation\. On the whole, OMSAR made significant progress in conducting workshops, reviewing the structure of Ministries and agencies, and supporting agency-specific initiatives\. However, this political issue provided a clear limitation in making progress on the reform agenda\. As a result, OMSAR not as successful in leading the process of restructuring and reengineering for all agencies and to initiate reform\. 5\.3 Factors generally subject to implementing agency control: OMSAR was unable in the early stage to take into account the way other agencies such as CDR conducted their work\. This had some impact on the initial implementation of the program\. In 1997, the Council of Ministers transferred the responsibility for procurement of project financed goods and services fully from CDR to OMSAR\. The move greatly facilitated the process and improved implementation\. OMSAR implementation units built significant capacity to manage numerous donor demands and build technical capacity to implement them, but it required some time to find its niche in the complex Lebanese public administration\. This led to some friction with other important agencies necessary for the implementation of this program, such as the Civil Service Board or the Central Inspection agency\. 5\.4 Costs and financing: The total original loan amount was US$20\.0 million\. The loan was fully disbursed\. The credit was made at the IBRD standard variable interest rate, a 5 year grace period with a term of 17 years\. 6\. Sustainability 6\.1 Rationale for sustainability rating: The sustainability of ARP is rated likely especially in the IT component\. The capacity built in various agencies of the Government of Lebanon will be sustained in large part because the infrastructure rebuilding initiatives that they supported were implemented in the time of high demand and are essential for any - 12 -  functioning government institutions\. A large number of public sector employees trained in computer technology and office applications along with the training of the support staff makes sustainability more likely\. However, a greater financial commitment by the Government of Lebanon to maintenance of these equipments and training is required\. The various agency specific initiatives, specifically in the MOF and MOET, are not a matter concern\. These were demand-oriented programs designed with direct participation and commitment of beneficiary agencies\. To date, the government has not demonstrated the ability to maintain commitment for comprehensive public administration reform\. Through studies, workshops and reviews, the project provided background information necessary for initiation of a long term strategy however without a political commitment to administrative reform, the gains of preparatory work likely to be left underutilized\. 6\.2 Transition arrangement to regular operations: The effective transition to regular operation requires a political and financial commitment to administrative reform\. The lack of political consensus over the reform priorities does not bode well for the future of comprehensive public sector restructuring\. While some agencies mainstreamed project activities into regular operations, the government's overall commitment to reform is low\. While there is no indication that any of the ARP components will be reversed, the absence of action in itself is a threat to sustainability of gains made under the ARP\. 7\. Bank and Borrower Performance Bank 7\.1 Lending: Satisfactory\. The Bank pursued a wide ranging program to build administrative capacity that had been supported by this and several other projects including Revenue Enhancement and Fiscal Management TA and Emergency Reconstruction and Rehabilitation Project (NERP)\. The Bank was also effective in leveraging funds for TA from other donors including the Arab Fund, the EU and the UNDP and was careful in mitigating risks in the implementation into the project design\. The Bank, however, did not estimate properly that support for administrative reconstruction in a low capacity, post-conflict countries takes a long time\. The Bank envisioned that it would take less than 3 years to implement the project, while it actually took 8 years with several extensions\. Moreover, it should have done more comprehensive work in determining clear performance indicators and targets to focus the efforts of the implementing agencies\. 7\.2 Supervision: Marginally Satisfactory\. The Bank carried out supervision throughout the life of the project, and thoroughly documented progress and implementation development and issues\. If further demonstrated flexibility in revising the original components and endorsing the establishment of a demand-oriented instrument (the PSIF), capable of addressing changing demands and preferences of the Government\. This type of instrument is considered "best practice" in supporting the process of administration reform and creating demand for reform from below\. It managed to promptly resolve the issue of consultant reimbursement dispute following the Bank's policy change in 2001\. However, in an environment where indigenous capacity is low, as was clearly demonstrated in the very early stages of preparation of this operation, and the multi-dimensional nature of the TA required in a - 13 -  post-conflict situation required a more intensive supervisory assistance ­ especially in the early stages of the project - than what was provided by the Bank\. Moreover, supervision leadership of this project changed five times during the life of the project, disrupting continuity on the Bank side\. The supervision responsibility moved to the country office in the later states of project implementation but this would have had more impact had it taken place early on \. Finally, the project was extended several time for a shorter period of time\. While the extensions were instrumental in solidifying the results of the program, and that the majority of the Lebanese portfolio is prone to delays, in this circumstance, the project could have benefited from a more strategic view to these extensions, as it was evident very early on that implementation of even this modest program could have easily taken an additional three years from the original closing date\. 7\.3 Overall Bank performance: Bank performance is rated satisfactory based on lending and supervision ratings\. Borrower 7\.4 Preparation: Satisfactory\. The GoL was deeply involved in the design of the project incorporating it in the broader National Administrative Rehabilitation Program (NARP)\. The Borrower recognized early that "the first stage of the process must be the rehabilitation of basic physical structures and administrative capabilities\." The GoL also recognized that administrative rehabilitation has to focus on the introduction of simplified procedures and improved work methods, including the use of modern, labor-saving technology\. However, the government did not provide for the necessary political commitment for reform, exemplified by its willingness to resolve contentious issues and move along more decisively along the path of reform\. This affected the relationship between implementing agencies and the project beneficiaries and is demonstrated by the lack of tangible measures which could benefit the citizen\. The government could have also benefited from insisting on clear performance indicators for the project components and create a tighter relationship between the implementing agency and the executive\. 7\.5 Government implementation performance: Unsatisfactory\. The lack of governmental coordination continuously frustrated efforts to avoid delays in implementation and procurement\. Deeply entrenched vested interests and uncertain political commitments made implementation difficult even though some components performed satisfactorily\. The government did not do a good coordinating job linking the work of OMSAR with other implementing agencies never clearly defining its role vis a vis the Civil Service Board and other agencies responsible for reforms\. At the same time, it should be acknowledged that relative to other Bank project in Lebanon, ARP performed well on disbursement and overall institutional impact\. 7\.6 Implementing Agency: Satisfactory\. The PIU team performed well despite the negative external factors over which the agency had relatively little control, particularly in the beneficiary institutions which lacked qualified personnel and the political will at the top levels\. It has been largely successful in coordinating a large number of programs involving numerous public agencies and many donors, however, on a number of occasions, OMSAR - 14 -  appeared to lack leverage within the Government to accelerate implementation when it was needed\. There were also some internal problems at OMSAR in 1999 when the new leadership did not keep up keep with the agreed schedule of implementation\. Some of the project funds were consequently moved to the MOF and MOET\. 7\.7 Overall Borrower performance: Overall, borrower's performance is rated marginally satisfactory\. 8\. Lessons Learned Project Design Greater beneficiary agency involvement is necessary from the outset\. The ARP experience confirms that the willingness and capacity of beneficiary agencies to absorb project components depends directly on them having a stake in the project\. While in the case of Lebanon, there was no one to conduct these activities with, it is also a demonstration that in those instances, longer preparation is of the essence to train and inform new employees on the objectives of the reform and the process to be undertaken is a significant determinant in the overall success of the reform\. Clear performance indicators should be developed\. The effectiveness of studies, workshops and training can be measured better if clear impact targets are set from the outset\. This may include specifying the number of senior civil servants attending the workshop, or developing an action plan following the findings of a study to track the progress of implementation\. Project Implementation There is a clear correlation between lack of capacity and length of implementation\. No matter how simple the design and how well defined the activity, building capacity for institutional reforms may require a longer time frame than what is generally practiced\. The project extensions had to be either longer or the project needed to be closed completely\. Short-term 6 month extensions are not helpful to support complex project cycles\. This is especially true for countries in post-conflict situations\. In the post-war environment project design and implementation needs to account for fluid political circumstances and weakened policy-formulation capacity\. Donor-funded enclaves of technical excellence must be mainstreamed into the traditional civil service\. OMSAR has become an important source of technical expertise and know-how\. However, its lack of clear mandate, and the difficult relationship it has with the traditional civil service may have affected its effectiveness\. It is clear, that under this circumstance, these highly qualified, highly paid cadres must be mainstreamed into the fiber of the traditional civil service\. This lesson is being internalized in certain other ministries which have similar situations\. Project Supervision There is a clear correlation between the capacity at entry and the closeness of supervision to be provided\. The Bank needs to carry a closer supervision of TA projects in post-war reconstruction situations\. The supervision responsibility moved to the country office eventually but should have been done much earlier\. - 15 -  9\. Partner Comments (a) Borrower/implementing agency: Office of the Minister of State for Administrative Reform OMSAR OMSAR's Contribution to the Implementation Completion Report on a loan from the World Bank in the amount of US$ 20 million to the Lebanese Republic in support of the National Administrative Rehabilitation Program (NARP), SPECIFICALLY Agreement No\. 3930-LE: Administrative Rehabilitation Project Prepared on November 28, 20 Introduction The Lebanese Parliament approved the US$ 20 million loan Agreement between the Lebanese government and the International Bank for Reconstruction and Development (IBRD) (herewith referred to as the `World Bank') by law no\. 484 dated 8 December 1995\. The Agreement was intended to cover the launching of the first stage of National Administrative Rehabilitation Program (commonly known as NARP) with the government's first priority being the rehabilitation of the administration and its provision with the necessary office tools: computers, information systems, faxes, phone networks, as well as other institutional development projects covering review of mandates and organization structures of ministries, job descriptions and classifications in public administrations, new payrolls, and training of hundreds of civil servants\. Despite the difficulties it faced, and the numerous changes of governments, OMSAR managed to achieve a great part of the projects included in the loan program, such as the long-term administrative reform strategy that was adopted by the Council of Ministers, and the job descriptions project that was completed and officially submitted to the Civil Service Council for implementation\. This in addition to the implementation of large number of Information and Communication Technology (ICT) projects for most ministries ranging from network infrastructures, to office productivity tools, to specialized vertical applications in the areas of document management and workflow\. All of these ICT projects were accompanied by the required training for both usage and administration of the deployed solution\. The realization of these loan projects was facilitated by the core competencies developed at OMSAR namely in the areas of institutional development, ICT, procurement, and training\. These competencies formed OMSAR's two main implementation units: the Institutional Development Unit (or IDU) and the Technical Cooperation Unit (or TCU)\. And it is mainly due to the dedicated performance of these units under the World Bank loan as a first stage of the NARP that the Arab Fund for Economic and Social Development (AFESD) and the European Union (EU) provided the Government of Lebanon through OMSAR additional funding, US$ 20 million as a loan and 38 million as a grant, respectively\. The trust and support that the World Bank gave to our office also added to our resolve to effectively utilize loan - 16 -  funds for the rehabilitation and development of the Lebanese public administration\. Within this context, and taking into account the World Bank loan portfolio in Lebanon, we would like to make two relevant observations: 1\. The administrative reform project at OMSAR may be the only project that was entirely completed and whose allocated funds were entirely spent\. 2\. A new loan has become absolutely necessary, especially now that public administrations have become more responsive to reform initiatives, more confident in OMSAR, and more inclined to ask for help as well as participate in the design and implementation of reform projects\. 2\. Project background OMSAR started to work in 1995 on the execution of the NARP that aims at establishing a highly-qualified and smaller public administration able to deliver basic government services and enhance the administration's capacities, in view of providing a flexible institutional framework capable of supporting and accompanying the plans of economic and social development, and thus provide citizens with the best services at the least cost possible\. The primary cost for this program was estimated at approximately USD 125 million as per the following activities distribution: Training Technical 18% support &support services 28% Equipments Information systems and computers 12% 42% Figure 1: Distribution of National Administrative Rehabilitation Program Activities For implementing this sizeable program, two units were established at OMSAR to handle both aspects of administrative development: (1) administrative development from the institutional and legal point of view, and (2) administrative rehabilitation from the technical point of view\. These units were respectively named the Institutional Development Unit (or IDU) and the Technical Cooperation Unit (or TCU) with the following establishment dates and objectives: Institutional Development Unit (IDU) Date of establishmentOctober 9, 1994 based on an agreement between the Government of Lebanon and the United Nations Development Program (UNDP)\. Objectives of the IDU1\. Establishing comprehensive strategies for administrative development through a futuristic vision\. - 17 -  2\. Reviewing the administrative mandates and structure and setting out the objectives and tasks of the public administration\. 3\. Establishing a comprehensive project for job classification\. 4\. Assisting the public administration and supporting it in all regulatory issues\. 5\. Making the public administration closer to the citizen and supporting related projects (setting up reception offices, handling citizens' questions, simplification of procedures, etc\.) Technical Cooperation Unit (TCU) Date of establishmentMay 27, 1994 based on an agreement between the Government of Lebanon and the UNDP\. Objectives of the TCU1\. Translating basic technical needs for rehabilitation procedures into practical programs\. 2\. Supporting ministries and public institutions in the preparation and execution of the NARP with a focus on institutional development and Information and Communication Technology (ICT) projects\. 3\. Providing the necessary financial and human resources for the execution of the NARP\. 4\. Preparation of national IT policies and strategy with participation of both public and private sectors\. 5\. Acting as coordinator, intermediary, and catalyst in the support of the ability of the concerned parties to get a maximum benefit from the projects financed by the donors\. With these units established, additional financial resources for furthering the implementation of the program were mobilized bringing the total secured amount to US$ 80 million from loans and grants, as is shown in the following chart: Figure 2: External sources of funding for NARP The World Bank loan, again being the first to be secured, was put into effect in January 1996\. This was accompanied by some US$ 4 million in cost-sharing grant funds from the UNDP for the implementation units' operations support\. The Arab Fund loan was the second loan to be secured and was put into effect in April 1998\. And finally, the EU grant was the last financial resource to be mobilized and was put into effect in September 1999\. - 18 -  3\. Brief description of the World Bank loan The World Bank's administrative rehabilitation project was designed to contribute to the administrative rehabilitation of ministries and core agencies as part of the global NARP\. It covers providing the required technical assistance to around 28 ministries and the 3 core agencies and providing them with the required necessities from information systems, equipment and relevant training to raise their absorptive capacity and improve their individual performances\. 4\. Project elements Activities of the administrative rehabilitation project under loan 3930-LE can be broken down in to the following main elements: A- Information and Technology coordination among the various administrations and the establishment of a general national plan: Setting up the requirements and regulatory frameworks for the exchange of information through Information Technology (IT) networks inside and between administrations\. Setting up the necessary standards and measures for computer systems and IT networks to ensure compliance\. Holding awareness seminars about ICT best practices, developments and related programs\. Holding specialized ICT Workshops\. B- Information Systems: Purchasing and installing computer equipment and peripherals\. Designing and implementing information systems and related programs\. Training human resources for operating these information systems\. C- Equipments and Tools: Providing the necessary basic equipment for day-to-day operation of the public administration, including photocopiers, communication tools, and other office equipment\. D- Technical Assistance: Reforming administrative mandates and organization structures and developing a database for civil service employees as well as using the services of experts to assist the ministries and core agencies that benefit from the project, as well as managing the project's implementation\. E- Specialized workshops: Conduct thematic workshops that aim at creating awareness for modern management techniques and concepts in addition to gaining consensus on new initiatives\. 5\. Assessment of the loan program design The initial design of loan 3930-LE covered 2 core areas, namely: A\. Rehabilitation and modernization of administrative services through provision of office equipment, office technology, information systems and related training and services\. B\. Part 1) establishing a modern database for the civil service; and Part 2) designing and initiating a long-term strategy for administrative reform through (i) review of civil service regulations, salary levels, structure, mandates, and missions\. and (ii) workshops\. The US$ 20 million loan was spread over these core areas that were considered as priority areas in the administrative rehabilitation and reform agenda\. Yet, the large size of the identified projects for a limited number of beneficiaries proved difficult to implement due mainly to the limited absorptive capacity level at the targeted beneficiaries\. This limitation required a rethinking of the allocation of the loan funds so as to implement projects of the - 19 -  proper scope at beneficiaries that have absorptive capacity to ensure greater levels of sustainability\. Hence, a criteria-based selection process for new projects under this loan was agree to with the World Bank under the Public Service Improvement Fund (or PSIF) modality\. This agreement was reached with the bank in 1997 with the PSIF modality having the following project selection criteria: 1\. Project falls within the original scope of the activities of the World Bank Loan Agreement\. 2\. Project promotes simplification and streamlining of procedures and operations\. 3\. Cost of the project request is in the range of US$50,000 to US$500,000\. 4\. Proposed project is `services' oriented with the optimal combination of `goods' and `training'\. 5\. Demonstrated capacity on behalf of beneficiary to provide technical assistance in the form of qualified personnel to make project more sustainable\. This modality facilitated proper disbursement of the loan funds for a large number of projects, all within the cores areas of the initial World Bank loan design\. 6\. Project achievements After direct funds amounting to US$ 6 million were allocated from the total loan to the Ministry of Finance in 1999 and 2001, OMSAR spent the remaining US$ 14 million through 80 different contracts covering services and goods projects\. The Ministry of Finance spent the funds it took on projects for itself, the Ministry of Economy and Trade, the Ministry of Public Works and Transport and the Office of the Prime Minister\. The projects financed by the World Bank loan, in addition to those covered by the loan from Arab Fund for Economic and Social Development which mainly benefited autonomous agencies, constituted the basis of the administrative rehabilitation program that OMSAR was and is still implementing\. Accordingly, the main projects and achievements financed by the World Bank loan can be summarized as follows: A\. Institutional Development Activities: Organizational structure studies for a number of ministries including the Ministry of Finance where a revision and reform of procedures studies was conducted and for core agencies such as the Central Inspection Board\. Job descriptions documentation for the civil service cadre\. Trade Efficiency study for the Ministry of Economy and Trade through which all ministries and agencies associated with trade were assessed and recommendations for facilitating trade were made\. B\. Information and Communication Technology (ICT) Implementations and Services: Infrastructure and hardware: Establishing local network infrastructure in more than 30 public administrations ­ ministries and core agencies\. Completing the ICT infrastructure at the Presidential Palace\. Establishing a wide area network among 21 branches of the Lebanese University\. Delivering and assembling more than 2000 PCs with their peripherals for public administrations and agencies in addition to 400 photocopiers, 1700 telephone sets and 100s of other relevant office equipment utilities\. Off-the-shelf and customized software: Over 2000 PCs supplied with office productivity tools, benefiting most ministries and core agencies\. Commercial Registry system at the Ministry of Justice\. Student Information System for the Lebanese University\. Database system for the Ministry of Social Affairs for disabled persons and their rights\. Insurance Control Commission information system at the Ministry of Economy and Trade\. Legal Decision Support Database system for the Ministry of Foreign Affairs and Emigrants\. Decentralized Data Collection system for public schools\. - 20 -  Studies: Formulating a National ICT Strategy and Policy\. C\. Training and Capacity Building: Administrative and ICT training: ICT training to more than 1600 civil servants\. Administrative training to more than 300 civil servant Thematic workshops: Administrative Reform Held on June 11-12, 1996 under the auspices of H\.E\. the Minister of State for Administrative Reform and with the participation of the Minister of State for Financial Affairs and Lebanese and foreign experts\. Reform strategies in the Commonwealth member countries were presented during the workshop as well as practical cases concerning international experiences related to administrative reform\. Problems were defined and suggestions made concerning the cases related to administrative reform in view of establishing a reform program applicable in Lebanon\. Corruption and Ethical Behavior of Civil Servants Held on November 19-20, 1997 under the auspices of H\.E\. the Minister of State for Administrative Reform and with the participation of the Minister of State for Financial Affairs and Lebanese and foreign experts\. International experiences in fighting corruption were presented during the conference, and the participants adopted the recommendations of the participating task forces related to fighting corruption, enhancing transparency and work ethics, as well as activating the role of civil society to stop corruption and its negative effects\. Archiving and Records Management Held on March 18-19, 1998 under the auspices of H\.E\. the Prime minister and with the participation of the head of the parliamentary administration and justice committee, the UN representative in Lebanon, and Lebanese and foreign experts\. The methodology of establishing a national policy for archive management as applied in Algeria was presented\. The archiving status in public administrations and its connection to the Lebanese heritage were exposed, and a draft law for archiving in Lebanon was presented\. The participating task forces made recommendations concerning the role of archives and the necessity of setting up a structure and organizing information resources with modern mechanized and electronic methods\. The Y2K Problem Held on September 14-15, 1998 under the auspices of H\.E\. the Minister of State for Administrative Reform and in collaboration with the Central Bank of Lebanon\. The conference dealt with the Y2K or the Millenium problem and its national and international impact on embedded systems\. Lebanon's readiness to face this problem was discussed through emergency guidelines and methods\. Human Resources Management Held on July 18-20, 2000 under the auspices of H\.E\. the Minister of State for Administrative Reform and with the collaboration of the Civil Service Council and participation of the Syrian and Jordanian ministers of State for Administrative Reform and Lebanese and foreign experts\. The workshop presented the human resources management models applied in Jordan and Great-Britain, and the development of the human resources management in Lebanon was discussed\. In addition to the establishment of a modern system in public administrations and the activation of a performance evaluation system, the participating task forces made recommendations concerning the necessity of developing training programs in order to achieve efficient management of human resources in the public sector\. - 21 -  The Role of the State Held on May 21-23, 2001 under the auspices of H\.E\. the Prime minister and with the participation of a great number of ministers and deputies, the Syrian Minister of State for Administrative Reform, and Lebanese and foreign experts\. The workshop presented the Tunisian and Jordanian models of privatization and the related role of the government\. Among the matters discussed during this event also: public private partnerships, economic and social privatization impacts, defining a methodology for redesigning the public administration, the challenges of privatization, and organized monitoring in Lebanon\. 7\. Lessons learned The lessons learned from the implementation of the World Bank­funded Administrative Rehabilitation Project can be summarized as follows: The loan program evolved from being `donor-driven' to being `beneficiary-oriented' to being `citizen-oriented', with the latter two driven by policy and strategy\. Well staffed and multi-disciplined Project Implementation Units (or (PIUs) are a must to effectively handle loan programs\. The evolution of the OMSAR model is a testament in this regards\. End beneficiary involvement from the inception phase of a project is a core requirement for a sustainable project implementation\. This will ensure buy-in from the onset\. Implementing large scale projects in phases is advisable at times to ensure steady beneficiary capacity building and acceptance\. Transfer of knowledge from similar World Bank experiences globally helps in expediting the project lifecycle workflow\. Establishing `Communities-of-Practice' between PIUs in a country or in different countries should reduce the overload on World Bank and PIU staffs involved in loan programs and ensure better efficiency of resource utilization\. Having a national or regional World Bank office involved in loan program management further reduces delays in program implementation\. Short duration closing date extensions (6 months or less) have proven to be inefficient for loan performance\. Performance indicators or benchmarks are recommended before the implementation of a project\. This will yield a better impact assessment\. 8\. Impact of projects implemented The impact of projects implemented under this loan can be stated as follows\. Increased civil service productivity in intra-government work and in delivering services to the citizen\. This was facilitated in large by ICT productivity tools and solutions and related training\. Higher level of efficiency and effectiveness in obtaining required government information made possible by the ICT solutions\. Loan projects on infrastructure, databases and information systems facilitated this\. Enhanced civil service capacity through diverse training programs and workshops\. Over 3,000 end-users were trained on ICT, some 150 advanced users were trained on ICT administration and some 5 thematic workshops were provided to a large group of civil servants (350 attendees on average per event)\. Modernizing the organizational structures of a number of government ministries and agencies\. Modern institutional recommendations for the core agencies, namely the Civil Service Council, the Central Inspection Board and the Court of Accounts\. Realization of multi-disciplined PIUs at OMSAR, the Ministry of Finance and the Ministry of Economy and Trade with national domain experts to assist in and advance the administrative reform program\. 9\. Evaluation of the Bank's performance The Bank acted as a partner to OMSAR and the government in its efforts to rehabilitate the public administration from the very beginning\. The Bank actively participated in the design of the administrative rehabilitation program and has demonstrated significant flexibility in helping OMSAR meet the - 22 -  required dynamism for the implementation of the administrative rehabilitation program\. The various missions by bank staff to assess progress on this loan program and to facilitate better dialogue between the bank and the concerned loan beneficiaries played a major role in advancing the administrative rehabilitation program and in turn disbursing the loan funds\. With the successive changes in the government of Lebanon (some 5 government changes during the period of this loan), and after an understanding of the national agenda of the new governments, the Bank was willing to grant this loan several extensions to keep matters on track\. However, these extensions were granted at times for short periods of six months which proved to be ineffective and sometimes counterproductive because they did not give OMSAR the proper time to scope terms of references, prepare tender documents, launch and implement projects of longer-term prospects that are usually characterized by higher impact\. In retrospect, the Bank could have done an in-depth review of the loan performance in the year 2000 and came up with a strategic plan accompanied by a loan extension period of at least two years\. The presence of a World Bank office in Lebanon since 4 years ago led to more frequent interaction with bank staff and provided for timely feedback on issues pertaining to procurement and finance\. 10\. Evaluation of OMSAR's performance Within the constraints represented by its limited mandates and the several changes of governments, in addition to the new appointments of director generals at most ministries and agencies over the last 6 years, OMSAR was able to prove its ability to efficiently implement projects related to technical assistance, Information systems and ICT infrastructure\. This ability was in part the result of transfer of information and knowledge acquired from lessons learned by domains experts (procurement, finance and ICT) from the bank\. In particular, OMSAR was able to build a procurement capacity that was frequently commended by the bank for being the first to use the latest bank procurement guidelines for services, goods and information systems tenders\. OMSAR was able to develop a vision for administrative reform that was approved by the cabinet in September 2001\. Complementing this achievement, OMSAR prepared several national ICT strategy documents, the last of which is the Lebanese e-Government Strategy which is currently awaiting Council of Ministers approval\. Several circulars were also issued by the Prime Minster requesting all government ministries and agencies to coordinate with OMSAR on institutional development and ICT matters\. A central repository for all studies made on behalf of the government over the last 20 years was also established at OMSAR and supported by a circular mandating all government ministries and agencies to check this repository before launching new studies\. On the other hand, it is clear that OMSAR was not able to build a higher commitment to endorse all of its initiatives in a comprehensive plan to rehabilitate the public administration\. This was due mainly to the successive changes of government which disrupted sustainable progress towards this end\. For example, in the 1998-2000 timeframe, OMSAR was not allowed to employ domain specialists to further advance its administrative rehabilitation program and expand its outreach to help the government ministries and agencies\. To address these and other issues, OMSAR is in need of a clear executive mandate with the required level of power to institutionalize its programs with minimal level of council of minister interferences\. Such a mandate will be the main catalyst to continue the administrative rehabilitation work achieved through loan 3930-LE in a more consistent and methodical manner\. 11\. Future prospects OMSAR will continue to launch vital strategic projects and finance them through the Arab Fund for Economic and Social Development loan and the European Union grant as well as other new loans, according to a demand-driven approach within the framework of the administrative development plan which was recently set up with the UNDP based on one specific mission and four national objectives divided into 30 activities (see chart below), thus constituting a complete program for the coming three years\. This program was approved by the Council of Ministers (CoM) in January 2003 and has since constituted the blueprint for our national - 23 -  administrative reform agenda which includes over 130 individual activities\. The realization of the national objectives and related activities within this agenda will be guided by two central strategy documents: Administrative Reform Strategy (approved by CoM in September 1999) Lebanese E-Government Strategy (approved by Ministerial ICT committee in January 2003 and currently awaiting final CoM approval) (b) Cofinanciers: N/A (c) Other partners (NGOs/private sector): N/A 10\. Additional Information Table 3\. Project Status Report Ratings for 3930-LE Category 12/1998 6/1999 12/1999 06/2000 12/2000 06/2001 12/2001 12/02 6/02 12/2002 PDO s s s s s s s s s s Implementation s s s s s s s s s s Components s Administrative s s s s s s s s s s Reform Information/Office s s s s s s s s s s Technology Project/Program s s s s s s s s s s Implementation Public Service s s s s s s s s s s Improvement Fund Source: Project Status Reports for ARP - 24 -  Annex 1\. Key Performance Indicators/Log Frame Matrix A\. Outcome Indicators Outcome Indicator/Matrix Projected in last PSR Actual/Latest Estimate Meet Information Technology No functioning information IT infrastructure, training, and needs to include training in technology equipment or equipment were delivered to office technology and network operating in the vast majority of public sector equipment country\. institutions\. Design and initiate an Civil service regulations are Administrative Reform process Administrative Reform process outdated; service provision is poorwas designed through studies and aimed at building a more service and regulation is cumbersome andreviews of regulations\. oriented, transparent and efficient inefficient\. Comprehensive reform strategy on public service\. Administrative Reform was developed but the process itself has not been initiated\. Encourage participation and Little consensus exists on Participation and consensus consensus building to support strategies for public sector building was encouraged the reform and help ensure its reform\. through workshops and sustainability\. inter-governmental committees\. B\. Output Indicators Output Indicator/Matrix Projected in last PSR Actual/Latest Estimate Civil Service Census Completion of questionnaires withSome, 80 percent of Done, partially through modules common to CSB andquestionnaires were completed\. USAID\. Ministry of Education Completion of manual data entry Some Not done Computerized civil serviceNot done Not done database established\. Database verified against MinistryNot done Not done of Finance payroll Irregularities removed fromSome Some payroll Assistance to administrative reform Completion on schedule of workDone Done plans and interim and final reports for major studies Launching Workshops on Done Done, 8 workshops with high established schedule; maintenance level of participation\. of high-level and wide participation Information Technology Agency-wide information Done Done; IT standards were coordination prepared and published, National E-Government strategy developed\. Agency-wide technology Done\. Done; 5000 computers - 25 -  deployment\. provided; 1600 employees trained; IT personnel was recruited and trained\. Transparency of central inspection Not done Not done function through "case" tracking Computerization of Public Audit Not done Not done Function Computerization of Done Done legal/commercial registry Establishment of Trade Done, through MOET Done, through MOET Information Center Database on teachers Not done Not done Car Registration/Inspection Not done Done but partially and through System other donors Office Equipment Delivery and installation of office Done Done equipment Project Implementation Effective Operation of TCU/IDU Done Done Progress in capacity-building in Some Some participating ministries and agencies Progress in facilitating training Done Done proposals Amendments and Extensions of ARP PSIF and Agency Projects Facilitate demand-driven Done Done and implemented since projects under strict selection 1997 guidelines Build capacity in MOET, MOF Done Done and implemented since and MOT 1999 Note: Original outcome and output indicators are from Attachments of Memorandum of the President\. - 26 -  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 Civil Service Census 0\.80 Studies and Workshops 1\.70 1\.32 78 Information Technology 14\.60 8\.95 61 MOF, MOET & MOT 5\.84 Office Equipment 2\.40 2\.23 93 PIU operating expenses 0\.50 1\.45 290 Total Baseline Cost 20\.00 19\.79 Total Project Costs 20\.00 19\.79 Total Financing Required 20\.00 19\.79 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 16\.50 0\.00 0\.50 0\.00 17\.00 (16\.50) (0\.00) (0\.50) (0\.00) (17\.00) 3\. Services 0\.00 0\.00 2\.50 0\.00 2\.50 (0\.00) (0\.00) (2\.50) (0\.00) (2\.50) 4\. Implementation 0\.00 0\.00 1\.76 0\.00 1\.76 (0\.00) (0\.00) (1\.76) (0\.00) (1\.76) 5\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) 6\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) Total 16\.50 0\.00 4\.76 0\.00 21\.26 (16\.50) (0\.00) (4\.76) (0\.00) (21\.26) 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 8\.89 3\.64 0\.72 0\.56 13\.81 (8\.89) (3\.64) (0\.72) (0\.56) (13\.81) 3\. Services 0\.00 0\.00 4\.78 0\.00 4\.78 (0\.00) (0\.00) (4\.78) (0\.00) (4\.78) 4\. Implementation 0\.00 0\.00 1\.76 0\.00 1\.76 - 27 -  (0\.00) (0\.00) (1\.76) (0\.00) (1\.76) 5\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) 6\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) Total 8\.89 3\.64 7\.26 0\.56 20\.35 (8\.89) (3\.64) (7\.26) (0\.56) (20\.35) 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 IDA Govt\. CoF\. Bank Govt\. CoF\. Bank Govt\. CoF\. Civil Service Census 0\.80 0\.0 Studies & Workshops 1\.70 1\.32 77\.6 Information Technology 14\.60 0\.45 8\.95 0\.45 61\.3 100\.0 MOF, MOET & MOT 5\.84 0\.60 Office Equipment 2\.40 0\.05 2\.24 0\.05 93\.3 100\.0 PIU Operating Expenses 0\.50 1\.45 290\.0 - 28 -  Annex 3\. Economic Costs and Benefits Not applicable\. - 29 -  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 Appraisal/Negotiation 05/31/1995 9 MISSION LEADER (1); LEGAL COUNSEL (1); INFORMATION OFFICER (1); PROCUREMENT ADVISOR (1); LT CONSULTANT (1); SR\. PUB\. ADMIN\. SPECIALIST (1); CHIEF ADMIN\. OFF (1); SR\.INFORMATICS\.SPC\. (1); CONSULTANT (1)\. Supervision 11/11/1995 7 SR\. TECH\. ASSIST\. OFF\. (1); S S DISBURSEMENT OFFICER (1); PROCUREMENT ADVISOR (1); INFORMATION OFFICER (1); TASK MANAGER (1); SR\. PROJECTS OFFICER (1); SR\. INFORMATICS SPC\. (1) 05/31/1996 4 SR\. INFORMATICS SPC\. (1); S S DISBURS\./PROCUR\. ASST\. (1); TASK MANAGER (1); SR\. PROJECTS OFFICER (1) 12/07/1996 4 SR\. INFORMATICS SPEC\. (1); S S TASK MANAGER (1); PSM SPECIALIST (CON) (1); PROGRAM ASSISTANT (1) 03/27/1997 2 SR\. INFORMATICS SPEC\. (1); S U TASK MANAGER (1) 12/04/1997 5 SR\. INFORM\. SPECIALIST (1); S S TASK MANAGER (1); ACCOUNTING SPEC\. (1); SR\. PROCUREMENT SPEC\. (1); CONSULTANT (1) 05/23/1998 3 TASK MANAGER (1); S S PROCUREMENT SPECIALIST (1); INFORM\. TECHNOLOGY SPC (1) 10/15/1998 1 SR\. INFORMAT\. (1) S S 10/11/1999 1 SR\. INFORMAT\. SPEC (1) S S - 30 -  04/15/2000 2 TEAM LEADER (1); SR\. S S INFORM\. SPECIALIST (1) 11/10/2000 1 TEAM LEADER (1) S S 06/14/2001 2 TEAM LEADER (1); S S FINANCIAL MANAGEMENT (1) 12/21/2001 2 TEAM LEADER (1); S S INFORMATION SPECIALIST (1) 6/12/2002 2 TEAM LEADER (1), S S INFORMATION SPECIALIST 1) ICR 11/19/2003 3 TEAM LEADER (1); CONSULTANT (2)\. (b) Staff: Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks US$ ('000) Appraisal/Negotiation N/A 238,000 Supervision N/A 628,000 ICR N/A 20,000 Total N/A 886,000 - 31 -  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 - 32 -  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 - 33 -  Annex 7\. List of Supporting Documents The following documents pertaining to the Project were utilized in the completion of Implementation Completion Report: (i) Memorandum of the President; (ii) Loan Agreement; (iii) Amendments to the Loan Agreement; (iv) Back-to-Office Reports including Mission Aide Memoires and Project Status Reports; (v) Project Progress Reports; (vi) Financial Statements; (vii) Various Studies and Reviews of Sector Ministries\. - 34 -  - 35 -

REVIEW

P160570

Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00005181 IMPLEMENTATION COMPLETION AND RESULTS REPORT ON A LOAN IN THE AMOUNT OF US$ 120 MILLION TO THE UNITED MEXICAN STATES FOR A GRAIN STORAGE AND INFORMATION FOR AGRICULTURAL COMPETITIVENESS PROJECT July 14, 2020 Agriculture and Food Global Practice Latin America And Caribbean Region  CURRENCY EQUIVALENTS (Exchange Rate Effective January 31, 2020) Currency Unit = USD MXN 18\.78 = US$ 1\.00 MXN 1\.00 = US$ 0\.05 FISCAL YEAR July 1 - June 30 Regional Vice President: Carlos Felipe Jaramillo Country Director: Pablo Saavedra Regional Director: Anna Wellenstein Practice Manager: Preeti S\. Ahuja Task Team Leader(s): Katie Kennedy Freeman, Svetlana Ognianova Edmeades ICR Main Contributors: Erika Ruth Felix, Lucia Veronica Amiri-Talesh Ramirez  ABBREVIATIONS AND ACRONYMS AF Additional Financing AGD All Purpose Warehouse (Almacén General de Depósito) AM Aide Memoire AMSYS Social and Sustainable Agro-markets Program (Programa de Agromercados Sociales Sustentables) ASERCA Agency for Services for the Commercialization and Development of Agricultural Markets (Agencia de Servicios a la Comercialización y Desarrollo de Mercados Agropecuarios) ASIS FAO’s Global Agricultural Stress Index System BCR Borrower Completion Report CIMA Center of Agriculture Market Information (Centro de Información de Mercados Agroalimentarios) CD Warehouse Receipt (Certificado de Depósito) CDI National Commission for the Development of Indigenous Communities (Comisión Nacional para el Desarrollo de los Pueblos Indígenas) CIMMYT International Maize and Wheat Improvement Center (Centro Internacional para el Mejoramiento de Maíz y Trigo) CONEVAL National Council for the Evaluation of Social Development Policy (Consejo Nacional de Evaluación de la Política de Desarrollo Social) CPF Country Partnership Framework CPS Country Partnership Strategy DGFA General Directorate for Promotion of Agriculture (Dirección General de Fomento a la Agricultura) EA Environmental Assessment EMP Environmental Management Plan EPO Eligible Grain Producer Organizations FAO Food and Agriculture Organization of the United Nations FIRA Agricultural Shared Risk Trust (Fideicomisos Instituidos en Relación a la Agricultura) FIRCO Shared Risk Trust (Fideicomiso de Riesgo Compartido) FM Financial Management FND National Financier for Agrolivestock, Rural, Forestry, and Fishing Development (Financiera Nacional de Desarrollo Agropecuario, Rural, Forestal y Pesquero) FOCIR Rural Sector Capitalization and Investment Fund (Fondo de Capitalización e Inversión del Sector Rural) FPMA Food Prices Monitoring and Analysis Platform GDP Gross Domestic Product GHG Green House Gas GoM Government of México IBRD International Bank for Reconstruction and Development ICR Implementation Completion and Results Report IFR Interim Financial Report IICA Inter-American Institute for Cooperation on Agriculture (Instituto Interamericano de Cooperación para la Agricultura) IPMP Integrated Pest Management Plan IPP Indigenous Peoples Plan IRR Internal Rate of Return ISR Implementation Status and Results Report MasAgro Program for the Sustainable Modernization of Traditional Agriculture (SAGARPA) (Programa de Modernización Sustentable de la Agricultura Tradicional) Morena National Regeneration Movement MCRP Multi-Climatic Risk Platform M&E Monitoring and Evaluation MX$ Mexican Peso NAFIN National Financier Development Bank (Nacional Financiera) NDP National Development Plan NPV Net Present Value PAD Project Appraisal Document PCN Project Concept Note PDO Project Development Objective PIU Project Implementation Unit POM Project Operation Manual PRI Institutional Revolutionary Party PROCOSECHA Strengthening Key Agricultural Infrastructure Project RAD Rapid Application Development SADER Ministry of Agriculture and Rural Development (Secretaria de Agricultura y Desarrollo Rural) SAGARPA Ministry of Agriculture, Livestock, Rural Development, Fishing and Food (Secretaria de Agricultura, Ganadería, Desarrollo Rural, Pesca y Alimentación) SDG United Nations Sustainable Development Goals SFP Ministry of Public Administration (Secretaría de la Función Pública) SHCP Ministry of Finance and Public Credit (Secretaria de Hacienda y Crédito Público) SICOP Accounting and Budget System (Sistema de Contabilidad y Presupuesto) SIGE Management, Monitoring and Evaluation System (Sistema de Gestion, Monitoreo y Evaluación) SME Small and Medium Enterprise SUMA Unique Agricultural Market System (Sistema Único de Mercados Agrícolas) TA Technical Assistance TESOFE National Treasury (Tesorería de la Federación) ToC Theory of Change USD/US$ US Dollar  TABLE OF CONTENTS DATA SHEET \. I I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES \. 1 A\. CONTEXT AT APPRAISAL \. 1 B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION \. 5 II\. OUTCOME \. 6 A\. RELEVANCE OF PDOs \. 6 B\. ACHIEVEMENT OF PDOs (EFFICACY) \. 6 C\. EFFICIENCY \. 10 III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME \. 13 A\. KEY FACTORS DURING PREPARATION \. 13 B\. KEY FACTORS DURING IMPLEMENTATION \. 14 IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME \. 15 A\. QUALITY OF MONITORING AND EVALUATION (M&E) \. 15 M&E Design \. 15 B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE \. 17 C\. BANK PERFORMANCE \. 18 D\. RISK TO DEVELOPMENT OUTCOME \. 20 V\. LESSONS AND RECOMMENDATIONS \. 20 ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS \. 22 ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION \. 33 ANNEX 3\. PROJECT COST BY COMPONENT\. 35 ANNEX 4\. EFFICIENCY ANALYSIS \. 36 ANNEX 5\. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS \. 40 ANNEX 6\. SUPPORTING DOCUMENTS \. 53 ANNEX 7\. PROJECT RELATED SUPPORTING INFORMATION AND DATA \. 54 ANNEX 8\. MAP \. 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name Grain Storage and Information for Agricultural P160570 Competitiveness Country Financing Instrument Mexico Investment Project Financing Original EA Category Revised EA Category Partial Assessment (B) Partial Assessment (B) Organizations Borrower Implementing Agency Secretaria de Agricultura y Desarrollo Rural (SADER), United Mexican States Agencia de Servicios a la Comercialización y Desarrollo de Mercados Agropecuarios (ASERCA) Project Development Objective (PDO) Original PDO Improve access to grain storage and information for agricultural producers in Mexico Page i of iv  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 120,000,000 4,455,279 4,455,279 IBRD-87290 Total 120,000,000 4,455,279 4,455,279 Non-World Bank Financing 0 0 0 Total 0 0 0 Total Project Cost 120,000,000 4,455,279 4,455,279 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 24-Mar-2017 13-Dec-2017 24-Mar-2022 31-Jan-2020 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 04-Feb-2020 4\.06 Change in Loan Closing Date(s) KEY RATINGS Outcome Bank Performance M&E Quality Unsatisfactory Moderately Satisfactory Modest RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No\. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 29-Jun-2017 Satisfactory Satisfactory 0 02 12-Jan-2018 Satisfactory Satisfactory 0 03 22-Jul-2018 Satisfactory Satisfactory 0 Page ii of iv  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) 04 12-Feb-2019 Satisfactory Satisfactory \.08 Moderately 05 29-Jan-2020 Moderately Unsatisfactory 4\.06 Unsatisfactory SECTORS AND THEMES Sectors Major Sector/Sector (%) Agriculture, Fishing and Forestry 21 Public Administration - Agriculture, Fishing & Forestry 21 Industry, Trade and Services 79 Agricultural markets, commercialization and agri- 79 business Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Private Sector Development 21 ICT 21 ICT Solutions 21 Finance 100 Finance for Development 100 Agriculture Finance 100 Public Sector Management 21 Data Development and Capacity Building 21 Data production, accessibility and use 21 Urban and Rural Development 100 Rural Development 100 Rural Markets 21 Rural Infrastructure and service delivery 100 Page iii of iv  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Environment and Natural Resource Management 10 Climate change 10 Mitigation 10 ADM STAFF Role At Approval At ICR Regional Vice President: Jorge Familiar Calderon Carlos Felipe Jaramillo Country Director: Gerardo M\. Corrochano Pablo Saavedra Director: Juergen Voegele Anna Wellenstein Practice Manager: Preeti S\. Ahuja Preeti S\. Ahuja Katie Kennedy Freeman, Task Team Leader(s): Svetlana Ognianova Edmeades Svetlana Ognianova Edmeades Lucia Veronica Amiri-Talesh ICR Contributing Author: Ramirez Page iv of iv  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A\. CONTEXT AT APPRAISAL Context 1\. At the time of project preparation and appraisal (2016-2017), Mexico’s economy had expanded at a moderate annual rate of 2\.6 percent (2015), with a slow down to approximately 2 percent in 2016 and to 1\.8 percent in 2017, due to a monetary and fiscal policy response to adverse external shocks impacting aggregate demand\. The poverty rate was 46 percent (2015), with a higher prevalence in rural and semi-urban areas\. Poverty was more intense in rural areas (61\.6 percent rate) as compared to urban (40\.6 percent rate)\. Poverty was concentrated in the central and southern states\. Five states (Chiapas, Mexico, Oaxaca, Puebla and Veracruz) accounted for 56 percent of the extreme poor (2014)\. Rural areas were home to Mexico’s extreme poor (20 percent of the rural population)\. 2\. Importance of the agriculture sector in Mexico’s economy\. At appraisal, the agriculture sector accounted for approximately 8 percent of Mexico’s gross domestic product (GDP), employing an average of 13 percent of the country’s formal labor force\. About 25 percent of Mexicans lived in rural areas and depended largely on agriculture for their livelihood\. Agricultural land represented 55 percent of the total land area of the country with approximately 5\.5 million agricultural units dedicated to the production of cereals such as maize, wheat and sorghum\. Agriculture also played an important role for food security in southern states, supporting an estimated 73 percent of subsistence and semi- subsistence agricultural producers\. In the North, agriculture had been a key driver of economic development through commercial, export-oriented agriculture\. One half of the agricultural land was under communal ownership – ejido, often fragmented and too small to farm beyond subsistence level\. The average farm size in Central and Southern Mexico was less than four hectares, almost half the size of those in the northern states\. 3\. The agriculture sector faced important challenges in improving agricultural productivity and competitiveness\. To this end, the Government of Mexico (GoM), in collaboration with the International Maize and Wheat Improvement Center (CIMMYT), was implementing the Ministry of Agriculture, Livestock, Rural Development, Fishing and Food (SAGARPA)’s Sustainable Modernization of Traditional Agriculture Program (MasAgro) 1 to help small and medium-sized grain farmers increase on-farm productivity\. However, there were limited attempts to link post-harvest grain management and market linkages with increased production efforts\. Three important gaps were distorting the grain sub-sector: (i) Storage infrastructure for agricultural commodities in Mexico was insufficient and/or inadequate\. Traditional storage structures contributed to high levels of grain losses\. Post-harvest losses in maize, wheat and beans ranged between 5 and 25 percent of total production, due to grain humidity and related fungal and pest problems 2\. Moreover, disparities in storage facilities among Mexican states created market distortions\. Most of the storage infrastructure was located in the north (modern storage facilities/warehouses), while the central and southern states showed a lack of or obsolete storage capacity with limited grain conservation to meet the demands set by market conditions; (ii) Limited access to finance for small and medium-sized producers given the heterogeneous agrarian structure linked to land tenure patterns, relying on non-traditional and informal financial services\. Integrating financial products into existing agricultural commercial systems was identified as a tool to improve the socio-economic conditions of small and medium-sized producers; and (iii) Transparent information for many agricultural commodities was scarce, fragmented, and not readily available within and across regions or on a daily basis to support policy and farm decision-making\. 1https://panorama\.solutions/en/solution/masagro-cimmyt-and-mexicos-partnership-sustainable-maize-production 2According to the Food and Agriculture Organization of the United Nations (FAO)\. Postharvest losses - in addition to on farm losses - ranged between 13 percent and 28 percent\. These overall losses represented an important constraint on food security\. Page 1 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) 4\. The Project complemented the World Bank’s efforts to improve productive and financial inclusion in rural areas of Mexico, including through other projects active at the time of appraisal - the Sustainable Rural Development Project (P106261), the Savings and Credit Sector Consolidation and Financial Inclusion Project (P123367), the Expanding Rural Finance Project (P169156), and the Sustainable Production Systems and Biodiversity Project (P121116)\. The Bank had also recently carried out analytical work, including reimbursable advisory services, on (i) agricultural risk at the request of the Mexican Government (Ministry of Finance and Public Credit (SHCP)) and the Agency for Services for the Commercialization and Development of Agricultural Markets (ASERCA) under the Agricultural Risk Programmatic Approach (“Agriculture Risk Management in Mexico (P132987)”); and, (ii) on storage systems undertaken collaboratively with the GoM and the Food and Agriculture Organization of the United Nations (FAO) 3\. 5\. Rationale for Bank support\. The Project was anchored in the World Bank’s Country Partnership Strategy (CPS 2014- 2019) (Report N° 104752), specifically as it related to its strategic theme on unleashing productivity\. The Project focused on increasing the competitiveness of small and medium agricultural production units in Central and Southern Mexico, where large populations of indigenous peoples were located, and poverty was prevalent\. Main activities were related to providing access to transparent pricing information on agricultural commodities, increasing access to financial mechanisms in the sector while strengthening the warehouse system, and supporting investments in human capital to reduce post-harvest losses\. 6\. Alignment with the Government’s Strategy\. The Project responded to the Government’s priority objective of improving productivity, including the promotion and strengthening of entrepreneurship, small and medium-sized businesses, and promotion of investments and competitiveness of the agriculture sector as stated in the Mexican National Development Plan (NDP) 2013-2018\. Objective nine of the NDP referred to improving rural producers’ incomes by increasing Mexican presence in global markets and linking producers with value-added processes\. The NDP also aimed to increase the share of domestic production in the supply of main grains and oilseeds from 58 percent (2011) to 75 percent (2018), to meet the growing demand for grain (yellow corn and sorghum) for animal feed and reduce the agri-food trade balance from a deficit to zero\. While aligned with the Agricultural Sector Plan 4, the Project aimed to advance these targets by investing in infrastructure and support systems to help agricultural production units become more competitive and promote financing and capitalization of the rural sector\. Theory of Change (Results Chain) 7\. The Project was approved before presentation of a Theory of Change (ToC) in the Project Appraisal Document (PAD) became mandatory, and consequently, the PAD did not contain a diagrammatic representation\. The ToC (Figure 1) was retroactively constructed for the Implementation Completion and Results Report (ICR) based on appraisal information\. Three core objectives underline the ToC: (i) improve competitiveness and economic opportunities of small and medium agricultural producers in economically lagging states in Central and Southern Mexico; (ii) increase food security by boosting storage and reducing post-harvest grain losses; and, (iii) increase access to transparent information systems for better decision-making\. The Project proposed to address these objectives by removing barriers to competitiveness and promoting financial inclusion through two specific kinds of investment: increased storage facilities and access to transparent pricing information of agricultural commodities, especially maize prices, to make markets more equitable for small and medium-sized grain producers\. 3“Almacenando Granos para la Seguridad Alimentaria y Competitividad: Un Estudio Comparativo”, World Bank, 2017\. 4 The plan includes five goals: boost food production through investment in physical, human and technological capital; promote partnerships that generate economies of scale and add value in food production; safeguard the food supply through risk-management mechanisms; encourage the sustainable use of natural resources; and reduce the risk of food shortages in rural areas\. Page 2 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Figure 1: Theory of Change Project Development Objectives (PDO) 8\. The Project Development Objective (PDO) was to “improve access to grain storage and information for agricultural producers in Mexico”\. Key Expected Outcomes and Outcome Indicators 9\. The key expected Objective Outcomes as stated by the PDO were to (i) improve access to grain storage infrastructure (component 1), and (ii) improve access to agricultural information (component 2) for agricultural producers in Mexico\. 10\. The PDO Outcome Indicators (PAD): (i) Outcome 1: Number of beneficiaries using project-supported grain storage facilities (disaggregated by gender); (ii) Outcome 2: Number of beneficiaries accessing project-enabled grain market information (disaggregated by gender)\. These outcomes were expected to be achieved through investments in grain storage facilities, provision of technical assistance (TA) and development of transparent information systems; (iii) Outcome 3: Share of grain sold from project-supported storage facilities\. Outcome 1 and 3 indicators measure improved access to grain infrastructure while the Outcome 2 indicator measures the improved access to agricultural information 5\. Table 1: Outcome Indicators Number of beneficiaries using project- Measured the participation of grain producers in the first stage of the grain market\. “Use” measured by the supported grain storage facilities physical delivery of grains to a project-supported grain storage facility\. Number of beneficiaries accessing Measured the access to the key variables (such as price, volume, grain quality, etc\.) that the project was to make project-enabled grain market publicly available\. “Access” measured by the number of producers receiving the information either through direct information access to the information platform, or by other means/through other sources\. Links to higher level objective on improving competitiveness (reduction of transaction costs and information asymmetries)\. Share of grain sold from project- Measured the turnover of stored grain and hence its integration further up the value chain\. It internalizes the supported storage facilities development of infrastructure (including financing) as well as management and quality aspects of the infrastructure investments but focuses on the result – their use\. Links to higher level indicator on market integration and competitiveness\. 11\. Targeted beneficiaries\. At appraisal, the Project sought to directly benefit 12,500 small and medium semi- commercial and commercial agricultural grain producers (including women) who: (i) produced on less than 50 hectares of land on average 6, with capacity to generate marketable surpluses and benefit by storing excess grain production for 5 The Results Framework does not divide the Objective Outcomes into two\. However, there were clearly two Objective Outcomes and the ICR has divided these for better conceptualization of the outcomes\. 6 The area of 50 ha or less referred to rainfed conditions\. The area of irrigated producers was limited to up to 12\.5 ha (operations manual)\. Page 3 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) commercialization; and (ii) were organized into Eligible Grain Producer Organizations (EPOs) 7 in the seven selected states: Estado de Mexico, Michoacán, Veracruz, Guanajuato, Chiapas, Oaxaca and Puebla\. The Project also sought to benefit all producers in Mexico, small and large, by investing in the establishment of a transparent public information platform displaying key information at the national level on grain prices, production volumes, storage facilities and inventories, and climate among other variables\. Components 12\. Component 1: Grain Storage Infrastructure and Operation (Estimated total cost US$170 million of which IBRD US$95 million, Bank 8 US$60 million and Producer US$15 million\. Actual total cost: US$6\.13 of which IBRD US$3\.43, financing through development/private Bank US$1\.72 million and Producer US$0\.98 million)\. This component sought to improve grain storage infrastructure and strengthen organizations’ capacities for the operation and application of grain quality norms and standards, through: (a) Support infrastructure for grain storage investment subprojects in selected states to finance: (i) rehabilitation and/or upgrading of existing grain storage facilities, including collection and trade centers, or (ii) construction of new grain storage facilities, including collection and trade centers, and purchase and installation of required equipment; and, (b) Support capacity building activities required to improve the long-term sustainability of infrastructure investments and include: (i) the preparation of business plans; (ii) capacity building of grain storage facilities operators and EPOs on the operation, control and maintenance of grain storage facilities, use of required equipment under grain storage subprojects, financial and administrative aspects and application of relevant grain quality norms and standards; and (iii) the certification of grain storage facilities\. 13\. Implementation of this component applied an innovative matching grant mechanism whereby up to 50 percent of the cost was supported by grants linked to ASERCA’s existing Commercialization Support Program, where subproject incentives for grain infrastructure requiring a credit of 40 percent or higher and a contribution from the beneficiaries of at least 10 percent\. Grants were strategically used to mobilize private investment financing for grain storage infrastructure, which was then intended to help facilitate new forms of financing, such as warehouse receipt systems and support improve access to credit to producer organizations\. 14\. Component 2: Information for Grain Management, Markets and Monitoring (Estimated total cost US$24\.7 million of which IBRD US$24\.7 million\. Actual total cost: US$735 thousand)\. This component sought to improve access to information to empower agricultural producers in their decision-making\. This was to be done through: (i) the development, operation and maintenance of an information system for grain markets and management, including data collection and integration, capacity building activities on the use of such system as well as data collection; and, dissemination activities to promote the use of the system; (ii) strengthening the commercialization linkages of grain storage facilities through the following activities, including the participation of EPOs in agricultural fairs and other relevant sector events; pertinent analysis on, inter alia, new market opportunities, market segmentation potential, and other strategic needs to improve grain commercialization; and, capacity building activities to improve market access of EPOs; and, (iii) the provision of support for the preparation, implementation, monitoring and evaluation of the Project\. 15\. Cost difference: The difference in costs between what was projected at Appraisal and what was actually disbursed at project closing was related to: (i) late budget allocation to ASERCA in 2019; and, (ii) the early closing and cancellation of the Project\. Given the expressed demand of potential beneficiaries in the first call for proposals under Component 1 and substantial work to develop the information instruments under Component 2, it is expected that the Project would have implemented the project in full if allowed the originally envisaged budget and timeframe\. 7 The Loan Agreement defines Eligible Grain Producer Organization as a legally established grain producer organization which operates in Mexico and meets the eligibility criteria set forth in the Project Operational Manual for implementing a Grain Storage Subproject\. 8 Development banks: National Financier for Agriculture, Rural, Forestry, and Fishing Development - FND and/or Agricultural Shared Risk Trust - FIRA (not borrower)\. Page 4 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION Revised PDOs and Outcome Targets 16\. The PDO was not revised during the project intervention period\. Revised PDO Indicators 17\. The PDO Indicators were not revised during the project intervention period\. Revised Components 18\. Components were not revised during the project intervention period\. Other Changes 19\. Proposed Additional Financing: At the request of the GoM, an Additional Financing (AF) was proposed early in 2019, in response to the incoming Government’s desire to scale-up the Project to an additional 9 states where corn is grown and include investments in storage infrastructure for beans, another staple food of Mexico\. However, despite the original interest, the AF was never approved and, instead, the Project was cancelled in January 2020\. 20\. Early Cancellation of the Project: Due to Presidential elections in 2018, project implementation was delayed after effectiveness (December 2017) and continued at a slow pace during the Government transition in 2019\. With the new Administration beginning its activities in December 2018, a process of reform focused on fiscal austerity was adopted culminating in early project closure and cancellation on January 31, 2020\. The reasons are explained below\. Rationale for Changes and their Implication for the Original Theory of Change 21\. First, due to the fiscal austerity measures of the incoming GoM, the non-additionality of external financing to the Ministry of Agriculture and Rural Development (SADER)’s budget in combination with budget cuts across line ministries, SADER was not able to allocate the required resources for the approval and implementation of an AF and despite government’s original interest, it was never approved\. Second, budget limitations affected all sectors in the economy in 2019, including agriculture\. With the loan being non-additional to the national budget and the limited fiscal space for operation within SADER, the flow of resources for implementation of project activities was significantly affected\. The novel implementation model of the Project (a combination of public support, private capital, and bank loans to producer associations/organizations) also took time to set up and become operational\. Added to this was the proposed change in the structure of SADER, which included the closure of ASERCA\. As a result of all these factors, on July 17, 2019, the World Bank received a letter from SHCP informing of the intention of SADER to close the current operation, citing budget limitations and recalibration of farm programs to focus support on small producers as key factors\. On January 8th, 2020, a letter from SHCP to the World Bank confirmed the request for project closure and the project was officially cancelled on January 31st, 2020 (see Section III B)\. Cancellation of the Loan balance rendered the ToC non-viable in practical terms, especially as it was reflected in a specific project design which could not be implemented because of budget limitations and shifts of resources from SADER to attend other priorities as a response to the new administration’s National Development Plan (NDP)\. Page 5 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) II\. OUTCOME A\. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating 22\. The PDO maintained High relevance to strategic themes of the World Bank Group’s Mexico 2014-2019 Country Partnership Strategy (CPS, Report No\. 104752) and the World Bank Group’s Mexico 2020-2025 Country Partnership Framework (CPF Report No\. 137429-MX)\. It specifically responded to the 2014-2019 CPS Objective 2 “unleashing productivity” through a focus on improving the competitiveness and economic opportunities of small and medium agricultural producers in poor areas of the country by: (i) removing barriers to competitiveness and promoting financial inclusion, focused on Small and Medium Enterprises (SMEs); and, (ii) improving innovation within the private sector and supporting investments to boost productivity\. At the time of closing, the PDO remained aligned with the new 2020-2025 World Bank CPF under Objective 2 to reduce regulatory and competition barriers to economic growth\. The PDO also remained consistent with Mexico’s key economic and sector policies and strategies as reflected in the 2013-2018 NDP, focusing on national prosperity and productivity as well as small and medium-sized businesses/producers, as well as in the more recent NDP 2019-2025 with regards to facilitating credit and supporting farmers through priority programs\. 23\. After the 2018 elections, while the Project’s higher-level objective remained aligned with the new Government’s priorities, these were pursued through a different set of activities\. 9 Project objectives were aligned with government’s goals by increasing the competitiveness of small and medium-sized private agricultural production units in the Center and South of the country, providing access to transparent pricing information for agricultural commodities, increasing access to financial mechanisms in the sector, strengthening the warehouse system, and supporting investments in human capital to reduce post-harvest losses\. The new administration overhauled the agricultural programs and introduced institutional changes to concentrate resources in four key programs\. 10 This, however, left SADER with limited budget to execute the Project, further compounded by: (i) austerity measures which further reduced SADER’s budget (see above) and (ii) elimination of ASERCA as a deconcentrated entity of the Ministry of Agriculture, with its programs and actions being transferred to a new unit created within the Ministry - the Social and Sustainable Agro-markets Program (AMSYS) 11 – also with a very limited budget\. Thus, the non-viability of the Project cannot be attributed to loss of relevance of its objectives but rather to external political, institutional, and budgetary factors\. 24\. In fact, the Project demonstrated that demand for grain storage and information investment continues to be a strategic priority for Mexico\. Its successful implementation was constrained by the limited budget situation in the country\. At the request of the GoM, the Bank is assessing the possibility of continuing supporting investments in grain storage and information in Mexico through a credit line instrument, leveraging the experience with the National Financier for Agriculture, Rural, Forestry, and Fishing Development (FND)\. B\. ACHIEVEMENT OF PDOs (EFFICACY) Assessment of Achievement of Each Objective/Outcome 9 New programs have a more social orientation\. Important to note that AMSYS will continue to support market intelligence information and has continued to finance the completion of some of the activities related to component 2\. New programs such as guarantee prices and production for well-being (Produccion para el Bienestar) also incorporated elements supported by ASERCA and relevant to the project including the provision of TA related to grain management, grain buying and storage support to small producers\. 10 Livestock credit; guaranteed minimum prices for small producers; subprogram on fertilizers subsidies; and area-based payment\. 11 ASERCA 2018 budget was MXN$10 billion while in 2019 AMSYS received MXN$6\.7 billion\. https://www\.gob\.mx/cms/uploads/attachment/file/447132/Lineamientos_de_Operacion_del_Programa_de_Agromercados_Sociales_y_Sustentables_2019\.pdf Page 6 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) 25\. Extensive analytical work identified two crucial market distortions in the Mexican grain sector: lack of storage infrastructure and transparent information\. Furthermore, the analytical work highlighted the need to link investments in infrastructure with targeted capacity building and TA activities to ensure their operationalization\. To address these issues, the Project proposed an innovative approach to improve the competitiveness and economic opportunities of small and medium agricultural producers in an integrated manner\. On one side, the Project complemented on-farm productivity actions with post-harvest grain operations while also enabling farmers to link to markets, providing them with TA to enhance their access to finance and making information available to strengthen their decision-making\. The infrastructure supported by the Project was the vehicle linking all these other elements\. It was this integration that permitted a multi- dimensional approach to addressing the challenges\. Unfortunately, external political, institutional and budgetary circumstances affecting implementation led to early cancellation of the Project (Section III)\. 26\. Despite the implementation delays due to a moratorium on public activities in the months leading up to the 2018 elections 12, some investments in grain infrastructure were achieved\. The first and only call for proposals received 96 expressions of interest from producer groups in the eligible states\. Some 25 met all requirements, 13 19 organizations were pre-selected for support, and 17 proceeded to prepare business plans\. Of these, 12 subprojects were approved, and the Project ultimately funded six subprojects 14, demonstrating the ability of SADER and the development banks - FND and the Agricultural Shared Risk Trust (FIRA) - and the private sector, to collaborate effectively in addressing agriculture sector challenges\. Even so, the gap between the 96 presentations of interest and six subprojects funded also demonstrated the pressing need for more up-front, targeted TA to help organizations prepare quality business plans to present to financial institutions\. The approved subprojects showed that the level of development (organizational and entrepreneurial) of farmer organizations is important to secure credit and meet all subproject requirements\. 27\. While the project was not intended as a pilot, it’s achievements by closing essentially re-defined it as such in practice\. The Project successfully piloted the model of financing and technical support to improve commercialization and drive competitiveness\. It also demonstrated the large unmet demand for grain storage and the desire of producer organizations for this type of infrastructure investment\. The Project also developed new products to make information more transparent, accurate and accessible throughout Mexico\. The information platform as proposed was not completed, but important progress was made in a number of its components\. At project closing, these modules were in various stages of completion: the agro-climatic components had been launched as standalone, the tool on spot prices was completed and ready to be launched and the products on grain quality norms and volumes had been started but the software had not yet been completed\. Objective Outcome 1: “Improve access to grain storage for agricultural producers in Mexico”\. Rated: Negligible 28\. Two PDO Indicators focus on measuring this: (i) number of beneficiaries using project-supported grain storage facilities (disaggregated by gender); and (ii) share of grain sold from project-supported storage facilities\. 29\. A total of 1,442 beneficiaries were using project-supported grain storage facilities by closing against a target of 12,500 (achieved 11\.5 percent)\. Of those using project-supported grain storage facilities at project closing, 332 were women (against a target of 3,800, achieving 8\.7 percent)\. The results were lower than expected due primarily to: (i) shortened length of project intervention; and, (ii) implementation and budget constraints\. The Project showed that beyond providing support to EPOs to prepare their business plans, they also needed support in processing their credit 12 A 3-month moratorium on all promotional activities (“propaganda”) was enforced between March 30, 2018 and July 1, 2018\. 13 23 cancelled the process, 43 failed to provide documentation, and 11 did not meet some of the requirements stipulated by the Project\. 14 Delays in project execution due to budget constraints in 2019 discouraged the participation of two organizations\. One organization refunded the money and two other organizations were unable to secure financing from the development banks\. Ultimately seven projects received funding; however, one was cancelled given that the beneficiary failed to comply with its obligations under the Subproject Agreement\. Verification occurred after the final project ISR and thus, the final project Aide Memoire and ISR report the achievement of seven subprojects\. Page 7 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) applications with the development and private banks\. A standardized process for supporting business plan formulation along with credit processing to secure the credit requirement for subproject approval was needed\. The implementation team identified this issue during a supervision mission in early 2019 and had a plan to address it during a second call for proposals, which never materialized before project closure (see Lessons Learned section)\. 30\. A total of 71 percent of grain was sold from project-supported storage facilities\. Although this indicates an achievement of 89 percent of target, it is based on just six subprojects compared to the targeted 300, rendering it negligible due to scale\. This indicator measured the turnover of stored grain in project-supported facilities and hence its integration into the value-chain\. It was meant to demonstrate the quality of the infrastructure investments by showing that grain stored in project-supported facilities was reaching the market\. It is an industry norm to keep 20 percent of stored volumes of grain as a strategic reserve for food security\. The measurement of this indicator was estimated based on information available in the Management, Monitoring and Evaluation System (SIGE)\. Achievement of this indicator demonstrates that in the six subproject-supported facilities, linkages to market as verified by grain sales into the value- chain were strengthened\. 31\. Other promising results (Intermediate Outcomes): Despite the Project’s short implementation period, some promising results at the Intermediate Outcome level can be highlighted: • Facilities in six grain storage subprojects are currently well-equipped and operating (target 300, 2 percent achieved)\. These subprojects, while well short of the scale envisaged, added 20,000 tons of new storage capacity (target 500,000) and improved management of approximately 51,500 tons of grain\. Three subprojects are in Michoacán and three in Guanajuato, with a total approximate investment value of US$6\.13 million\. Furthermore, the subprojects supported around 833 direct and indirect jobs\. The implementation of these subprojects also served to demonstrate and validate the Project’s investment model\. They showed how, with project support (grant plus TA), beneficiary groups were able to access financing from the Mexican development Banks (FND, FIRA) and private banks to fund key agricultural infrastructure gaps\. The 96 expressions of interest also demonstrated the significant unmet demand from producer organizations to finance this type of infrastructure investment\. • Technical assistance and capacity building activities were effective\. Approximately 2,180 people participated in training and workshops delivered by CIMMYT, FAO and ASERCA\. CIMMYT delivered 88 capacity building training events and workshops covering 15 topics including training in the operation and management of grain infrastructure, commercialization, organization and entrepreneurial management as well as support for the preparation of business plans\. Approximately 12 15 (target was 250) organizations benefited from specific TA offered by CIMMYT\. FAO also carried out 19 dissemination and training activities with participating beneficiaries on topics including price monitoring, use of agro-climatic information platforms, and grain certification schemes for small collection centers\. The Project also generated key information, training and knowledge materials on various topics including guidelines for grain management, grain quality assessments for native varieties, and drought monitoring and agroclimatic reports\. Despite falling significantly short on training targets, it is important to note that the documentation created by partners to implement the training activities remains and can be useful to other institutions, projects or organizations in the future\. The Project also demonstrated the need for targeted TA to support the investment mechanism\. • Support for a better grain conservation mechanism in small grain collection centers\. The Project also supported activities to develop a grain storage certification mechanism to strengthen commercial participation of small grain storage collection centers (centros de acopio) 16\. FAO together with ASERCA designed a certification mechanism based on national conditions including typology of storage facilities, storage models, most relevant characteristics, and limitations\. 15 According to the ASERCA Client completion report, 19 organizations received TA support to prepare business plans\. A total of 15 business plans were completed and 4 were incomplete due to lack of interest or documentation from organizations\. 16 Collection centers did not qualify to be certified by the ADGS (“habilitados”) to participate in the certified deposits schemes due to their small scale and ADGS’s otherwise stringent requirements\. Page 8 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Information was collected from 74 grain storage facilities in the Center and South of the country and seven workshops were held\. Knowledge exchanges based on experiences from Brazil, Chile and India were promoted\. Currently, SADER is continuing to finance this work and FAO is validating the mechanism in the field\. This alone is critical for the development of the grain market in Mexico and the inclusion of small-scale producers in the grain value chain\. Objective Outcome 2: “Improve access to information for agricultural producers in Mexico”\. Rated: Negligible\. Linked PDO Indicator: Number of beneficiaries accessing project-enabled grain market information (disaggregated by gender)\. 32\. This PDO Indicator registered negligible achievement as there are no results\. The information system was not completed even though stand-alone modules on an early warning system and a food prices platform were available and significant advances were made in the design and development of the overall information systems\. Key components of the systems were developed, and several were formally launched at the time of project closing\. The information generated by the early warning system and food prices platform were operational at project closing and combined had recorded 1901 visits\. During project implementation (under Component 2), CIMMYT, FAO and the Inter- American Institute for Cooperation on Agriculture (Instituto Interamericano de Cooperación para la Agricultura, IICA) played important roles in the collective goal of developing a comprehensive agricultural information and monitoring system for grain markets\. At project closing, the construction of two related information systems: Unique Agricultural Market System (Sistema Unico de Mercados Agricolas (SUMA)) and SIGE)) was still active with substantial progress made\. It is important to recognize that given the significant progress made by the project on content and elements for the information systems, SADER has continued to provide resources to complete key elements left pending and is financing the continued operation of the existing online modules\. These systems are discussed below\. 33\. The goal of SUMA was to develop an integrated platform and a one-stop shop for grain information to support the tracking of digital inventories (volumes), prices (spot, tradable certificates, consumer) and quality, as well as agro- climatic and climate risk information\. The platform would be part of and complement the existing ASERCA market information system (Center of Agriculture Market Information, CIMA)\. The Project prepared thematic submodules to integrate into SUMA involving multiple tasks to standardize and homologate information, to establish methodologies and data collection protocols, strengthen inter-institutional dialogues and information sharing protocols, develop software, field test and validate with experts\. The key results of these efforts are as follows: • Strengthened inter-institutional coordination and homologation of existing information: Strong collaboration between governmental and non-governmental was established with the participation of key institutions 17\. The working group developed data-sharing protocols used to consolidate, standardize and homogenize key databases, permitting the systematic integration of relevant variables including grain prices, inventories, quality and climate\. • Spot Pricing Tool developed: IICA developed and validated a methodology for collecting spot prices for maize\. This tool makes real-time price information available for grain at the first point of sale and fills a key information gap in Mexico where maize prices are set based on Chicago trading\. Also, transport cost and lack of local information distorts the market whereby sellers receive sub-optimal prices and make sub-optimal trades\. This tool helps reduce information asymmetries by providing inter-temporal and inter-locational arbitrage for producers, especially when storage options are available\. It was also intended to help boost national food security by removing pricing asymmetries and encouraging production and storage\. At the time of project closure, IICA had completed the methodology, validated it in the field, written implementation protocols and created a software (online/phone)\. • Multi-Climatic Risk Platform (MCRP) operational: The MCRP consists of agro-climatic information based on FAO’s global Agricultural Stress Index System (ASIS) contextualized to Mexico’s conditions\. This information provides early 17National Institute of Geography and Statistics, National Banking and Securities Commission, the Ministry of Economy, the Information Service for Agriculture and Fisheries (Servicio de Información Agroalimentaria y Pesquera, SIAP) within the Ministry of Agriculture at the time (SAGARPA), and the Association of General Deposit Warehouses\. Page 9 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) warning on drought development in the country and its impacts on key staple crops\. It also projects drought impacts on production to support policy decision-making to reduce potential risks for food security\. The agro-climatic information is complemented with analysis of other climatic risks including hydro-meteorological risks (hail, wind, freeze, floods, heat waves etc\.) and pest and plant disease, to provide a more holistic overview of climatic risks to the sector\. Information is now available online for drought monitoring (ASIS Mexico, launched on November 24, 2019), agricultural production monitoring reports and geospatial data\. From December 2019 to May 15th, 2020, the ASIS-Mexico site has been accessed 824 times\. It was also used to monitor the 2019/2020 drought impact on bean production and to alert policy makers to better inform their decision making 18\. At project closure, the MCRP platform was 80 percent completed, and SADER has continued to provide financial resources for its completion\. • Food Price Monitoring and Analysis platform (FPMA) available online\. This tool (http://www\.fpma\.aserca\.gob\.mx) allows the GoM to closely monitor food prices and agricultural market responses to internal and external shocks\. It supports identification of policy responses to price anomalies and reduces risks to producer and/or consumers\. The tool is also used as an input for calculating the monthly food price anomaly Indicator to comply with the United Nations Sustainable Development Goal on SDG 2 End hunger achieve food security and improved nutrition and promote sustainable agriculture 19\. This tool was launched June 2019 on the CIMA site and was accessed 1077 times in 2019\. • Information system developed for grain collection centers needing only completion of software\. CIMMYT conducted a diagnosis and prepared a design for information collection at grain storage centers\. An information system was designed for project-supported storage facilities to report on key variables for grain storage (i\.e\. volumes of grain stored, quality, humidity, distance and access, demand, prices, yields)\. This information was to complement the information collected through the All-Purpose Warehouse (Almacences Generales de Depósito AGD) and to be housed in CIMA\. The proposed design is based on RAD (Rapid Application Development developed by James Martin, 1991)\. A prototype system was designed, and documentation and software language generated\. • The Project has strengthened the information systems capacity at ASERCA/SADER both in terms of the installed capacity and building technical experience to manage information to continue supporting the availability and use of relevant market information internally within ASERCA and externally to other institutions\. Justification of Overall Efficacy Rating 34\. Overall Efficacy is rated Negligible\. Factors considered in determining this rating were the following: (i) The Project was cancelled after just two years of implementation, compared to the five-year intervention period anticipated at appraisal\. The many challenges faced in those two years limited implementation achievements; and, (ii) Early cancellation meant data was available to measure only two of the Outcome Indicators, and four of 11 Intermediate Outcome Indicators showed negligible achievement\. The PDO Indicator 1 access to storage achievement was only 11\.5 percent, and the 89 percent for PDO Indicator 2 is based on just six subprojects (vs targeted 300 = 2 percent)\. No results are available for PDO Indicator 3 (See Annex 1A and 1B)\. C\. EFFICIENCY Assessment of Efficiency and Rating 18 https://www\.cima\.aserca\.gob\.mx/es_mx/cima/Sequia 19 https://www\.sdg\.org/datasets/955a1e3390614dff8c628521f02ee011_0 Page 10 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) 35\. To assess the efficiency of the Project’s investments, a standard economic cost-benefit analysis was performed\. This ex-post analysis suggests that the Project made good economic sense from the perspective of society as a whole, despite being cut short\. The estimated net present value (NPV) was around US$ 1\.1 million, while the economic internal rate of return (IRR) was estimated at 13 percent\. The latter represents the maximum discount rate at which the project investments would still make economic sense\. In other words, any alternative public investment would need to have returns higher than this rate to be preferable to the Project\. From a different perspective, but along the same line, the results suggest that for every current US$ 1\.00 spent by the Project, society is expected to receive US$ 1\.16 in benefits\. Although these results are positive, it is important to keep in mind that the streams of economic benefits and costs used to compute the mentioned indicators are largely based on expectations of “normal” circumstances over a relatively long period\. Table 2\. Summary Results of Economic Cost-Benefit Analysis Indicator Ex-ante (PAD) Ex-post (ICR) Discounted Gross Benefits (USD)* 207,495,972 7,614,795 Discounted Costs* 167,052,199 6,540,047 Net Present Value (NPV)* 40,443,774 1,074748 Internal Rate of Return (IRR) 17% 13% B/C 1\.24 1\.16 *Discount rate 10 percent and 20-year period of analysis\. 36\. To get a sense of eventual implications to unexpected deviations to the projected “normal”, switching values with respect to increases in costs and to reductions in benefits were estimated\. A switching value is the maximum increase in costs or reduction in benefits that the Project could withstand without turning non-viable\. The results of this sensitivity analysis suggest that total project costs could increase by as much as 14 percent, and benefits could decline by as much as 16 percent, without the Project becoming economically unfeasible\. 37\. When compared to the results of the economic cost-benefit analysis at appraisal, the results are relatively in line with expectations, particularly those that are expressed in relative terms\. For instance, the ex-post IRR (13 percent) was several percentage points lower than the ex-ante analysis (17 percent), and both are significantly higher than the assumed discount rate of 10 percent\. The benefit-cost ratio at appraisal was 1\.24, compared to 1\.16 in the ex-post analysis\. In the case of NPV, the difference is significant, but in general, maintaining a coherent proportion to the actual investment amounts\. 38\. In terms of financial feasibility, each subproject financed had a positive NPV, and an IRR above the discount rate\. This suggests that beneficiary organizations would have enough financial incentives to carry out their activities as per their business plans throughout the period of analysis\. Additional details of analysis are presented in Annex IV\. 39\. Administrative efficiency\. The Project faced implementation delays due to the political cycle, changing government priorities and budgetary limitations – specifically the restructuring of SAGARPA to SADER and the insufficient and late budget allocation to ASERCA (see Section III\.B)\. Additional government-wide austerity measures and restrictions around international debt further complicated this situation and led to a request for the early cancellation of the Project\. In addition, despite the Project’s close collaboration with development banks FND and FIRA on business plan development, producer groups faced significant challenges accessing credit and the verification of credit history of each of the producer organizations took longer than expected, further delaying implementation\. Diagnosis and plans formulated by the Bank and counterpart teams to address these constraints could not be launched before the project was cancelled\. 40\. Efficiency rating: Efficiency is rated as Modest\. This rating is based on the strong economic and financial results from the six subprojects that were completed under the Project, while also considering that the Project fell significantly short of its ex-ante targets\. The rating also considers the positive measures taken to ensure the sustainability of project interventions, despite the difficult challenges faced by the implementing agency due to budget allocation for 2019 and the early cancellation of the Project\. Page 11 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) D\. JUSTIFICATION OF OVERALL OUTCOME RATING 41\. Overall outcome is rated Unsatisfactory due to the effects of premature cancellation and late budget allocation for ASERCA in 2019 limiting implementation progress\. Although the PDO still remains highly relevant and the six subprojects that were completed had a positive NPV and IRR above the discount rate, achievement of key targets was negligible, and others could not be measured\. The rating is based on the following: (i) High relevance of the PDO\. This is based on its initial and sustained alignment with Bank strategy documents for Mexico and Government Priorities demonstrated by the Government’s request to the Bank to continue exploring alternative investment model/instruments in grain storage infrastructure after this Project cancellation; (ii) Negligible rating for Efficacy\. Based on the low level of achievements at closing (Components 1 and 2); and (iii) Modest rating for Efficiency\. Based on the economic and financial outcomes and demonstrated potential of the subprojects in terms of financial feasibility, tempered by issues of scale and the implementation experience\. E\. OTHER OUTCOMES AND IMPACTS Gender 42\. The Project aimed to contribute to closing the gender gap in economic opportunities by involving women in farmer organizations’ storage facility activities and ensuring that women could take advantage of new storage technologies, could access inventory-based credit, and were aware of the information available to increase their market opportunities\. To this end - and bearing in mind the truncated implementation period - the Project supported the participation of 163 women in training, capacity building and stakeholders’ consultations\. The highest level of women’s participation was in topics related to drought and food prices and on strengthening and certification of small and medium grain collection centers in the southern states\. Approximately 113 women directly benefited from investments in subprojects, 33 were shareholders and 88 were commercial associates in the producer organizations\. Institutional Strengthening 43\. ASERCA, jointly with FAO, CIMMYT and IICA, worked closely to train and build the capacity of beneficiary organizations, while also strengthening the capacity of all actors participating in the Project, including the implementing agency\. Training covered many aspects of the Project including environmental safeguards, the use of agro- meteorological systems and analysis of agri-food prices and markets\. Important activities included: (i) two global exchanges 20 on grain certification organized by FAO, demonstrating use of the drought early warning system and the food prices tool to inform responses to the 2019 drought impacting beans; (ii) ASERCA strengthened its M&E capacity through work with the National Council for the Evaluation of Policy for Social Development (CONEVAL - Consejo Nacional de Evaluación de la Política de Desarrollo Social) to develop the methodology and design the instruments for data collection for impact assessment; and (iii) FAO provided tools and training to build capacity on drought monitoring and price impacts to support policy decisions on food security\. 21 Mobilizing Private Sector Financing 44\. Grain producer organizations with approved business plans to implement and/or improve grain storage facilities were financed up to 50 percent from loan resources, 10 percent with their own resources and 40 percent from commercial or development banks\. At project closing, US$6\.13 million were allocated as financing resources, from which US$3\.43 million were financed by the project, US$1\.72 million by financial institutions (FND/FIRA), and US$0\.98 million by producer organizations themselves\. The Project’s carefully designed financial model allowed for the government International Seminar held in Mexico City with participation from FAO, USA, India, Brazil and a video conference with Chilean Experts\. 20 Workshops targeting SADER, ASERCA and other government institutions’ personnel included: Launching of the FPMA tool June 24-28, 2019; 21 Monitoring and Price Analysis November 19-20, 2019; and, Knowledge transfer on installation and maintenance of FPMA to CIMA Programmers\. Page 12 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) support of 50 percent to leverage a private investment of 50 percent in the grain facilities, while also mobilizing resources from development and commercial Banks in Mexico\. Poverty Reduction and Shared Prosperity 45\. The Project had an implicit focus on poverty, seeking to remove barriers to competitiveness and promote financial inclusion of small and medium-scale private agricultural production through two specific investment: (i) increased storage facilities, including the strengthening of grain storage systems, for small and medium maize producers, encouraging maximization of grain production and increasing food security in the country; and, (ii) access to transparent pricing information of agricultural commodities especially maize prices to make markets more equitable for small grain producers, increasing access to financial mechanisms, and supporting investments in human capital to reduce post- harvest losses\. Premature closure meant that the Project could not measure its poverty reduction impacts, but analysis of the efficiency of six completed subprojects suggests that poverty reduction potential was positive\. III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A\. KEY FACTORS DURING PREPARATION 46\. The Project objective was clear and its technical and operational rationale was well described in the PAD\. The M&E agenda and deliverables were clear and realistic\. The Results Framework was aligned with the operational objectives, and indicators were also technically sound and realistic\. Targets were appropriate\. Targeted beneficiaries were clearly described in the PAD and mentioned in the PDO\. 47\. Design was done based on in depth analytical work to assess grain storage gaps in Mexico\. According to the 2016 World Bank Storage Study 22, there was a clear need for investments in improved storage infrastructure, inclusive financial mechanisms and aggregated and transparent information\. 48\. Institutional Strengthening of ASERCA/SADER\. The Project aimed to build the capacity of ASERCA and SADER in two fronts: (i) implementation of agricultural infrastructure projects 23 and (ii) strengthen its market information systems by integrating information from multiple sources and developing missing information components into a single platform and building the technical capacity of ASERCA’s staff to analyze and generate information to inform citizens\. • Project preparation undertook a variety of consultations with many different key actors to assess validity of the design\. During design, the team met with representatives from producer organizations, NGOs, local government, government Ministries, other bi-lateral and multi-lateral partners and the private sector\. From the consultations, the team prepared a strategy and action plan to ensure there were no barriers to entry for any groups\. The team also validated the technical design, including technology types, with these key stakeholders\. During Appraisal, the design team visited all seven of the intervention states to seek feedback and disseminate information about project activities\. • Project design reflected the lessons learned from experiences in Mexico as well as other countries related to storage systems, storage financing mechanisms and national-level agricultural information systems\. Design also referenced lessons learned from project work on matching grant mechanisms (productive alliances), increasing competitiveness, and building large-scale transparent agricultural information systems\. Analysis showed the need to complement infrastructure investment with capacity building, mobilization of private investment and bank financing for grain storage infrastructure\. It also demonstrated the important role of TA to help matching grant beneficiaries prepare business plans and proposals, and to help banks to understand the Project\. The importance of new 22“Almacenando Granos para la Seguridad Alimentaria y Competitividad: Un Estudio Comparativo”, World Bank, 2017\. 23Support to “Commercialization Program” under ASERCA included a component on incentives to commercialization with a subcomponent to support grain storage infrastructure with limited implementation\. Prior experiences/lessons learned from the implementation of SAGARPA’s Fortalecimiento de Infraestructura para la Movilización y Acopio de Granos y Oleaginosas (FIMAGO) through FIRCO (2005- 2014) were built into the Project\. Page 13 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) technologies such as mobile financial services, access to commercial grain markets to help create a pull-though effect, price discovery to improve producer’s certainty where to sell, and increasing the availability of affordable information communication technology tools, were also heeded in project design\. B\. KEY FACTORS DURING IMPLEMENTATION Factors Subject to Government and/or Implementing Entities’ Control Beginning March 2018, project implementation was impacted by a series of endogenous factors that ultimately led to the early cancellation of the Project\. Key factors affecting the course of project implementation include the following: • Political changes had an impact on project implementation\. On July 1st, 2018 presidential elections were held in Mexico 24\. The electoral process took place from March to July 2018 during which a moratorium on governmental activities (this included project promotional activities, printed project publications and others) was strictly imposed\. The general elections brought a significant political leadership change which had major implications for the Project\. The new government introduced changes that directly impacted project implementation, such as structural changes within SADER which included the dismantling of ASERCA, and reshaping public sector policies and programs, all of which combined with austerity measures to limit the Project’s ability to operate\. • Defunding of the implementing agency\. In 2019, ASERCA was defunded\. Based on the Bank’s intervention to address this issue in August 2019 based on legal obligations, ASERCA ultimately received enough budget to complete activities and retroactively pay commitments but was unable to function as an institution\. This impacted the credibility of the Project\. Two organizations with approved subprojects withdrew from the process\. • Delays ensued in subproject implementation\. The Project had only one-year (2018) to start its implementation with the caveat that for three months (March to July 2018) no implementation activities could be carried out due a moratorium on public activities prior to presidential elections\. The pre-election moratorium necessitated adjustments in the 2018 calendar for calls for investment proposals\. Further, the overall timeframe needed for approval, revision and submission of business plans and overall credit processing impacted disbursements\. Ultimately, only a small portion of the 2018 assigned budget was used to finance three producer organizations\. The remainder of the approved organizations depended on the 2019 budget allocation which further constrained implementation\. • Ministry of Agriculture, Livestock, Rural Development, Fishing and Food (SAGARPA) was restructured to SADER and priority programs were realigned 25\. SAGARPA’s restructuring and conversion to SADER compounded the negative impacts on project implementation\. ASERCA’s autonomy changed and its core programs and activities were assigned to SADER through AMSYS, under responsibility of SADER’s General Directorate of Promotion of Agriculture (DGFA)\. SADER’s programmatic priorities were redirected to respond to the new administration’s mandates to increase food self-sufficiency\. Four strategic programs were defined: expanding the basic food basket, facilitating credit for small livestock farmers, fertilizer production, and creating food self-sufficiency in cereals and milk\. • Austerity measures\. The new administration introduced restrictive fiscal policies and stringent austerity measures\. Reductions in budget took place across the GoM\. SADER’s budget was reduced by almost 14 percent from 2018 to 2019, affecting its ability to execute the Project\. • Constraints on ASERCA’s budget allocation 2019\. In 2018, ASERCA assigned MX$280\.3 million to project implementation\. However, due to delays in issuing the first call for proposals following the elections, subproject execution was delayed and ASERCA was only able to execute MX$68\.98 million\. For 2019, there was no budget assigned to ASERCA for the first three semesters\. In September 2019, ASERCA assigned a budget of MX$50 million to the project of which MX$40\.4 million was executed, to retroactively pay ASERCA’s costs, investments and TA for subproject proposals, supervision of commitments with FAO, IICA and CIMMYT, and re-hiring of the Project Implementation Unit 24 Andres Manuel Lopez Obrador (AMLO) won the presidential elections for a period of six years starting December 2018\. 25 From December 2018, SAGARPA changed its name to Ministry of Agriculture and Rural Development (SADER)\. Page 14 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) (PIU) team\. (See Section IIIB\.) • Request for a cancellation of the Project\. In January 2020, the GoM requested an early cancellation of the Project due to the new Government’s changed priorities in terms of sector programs and because neither SADER nor ASERCA had the budgetary space to properly execute Project activities\. The Project closed on January 31st, 2020 with a Loan balance of US$115\.5 million\. Factors Subject to World Bank Control • The Project was the first World Bank operation with ASERCA which, along with the PIU, needed time to acquire the skills and experience to run an operation of this complexity\. They were essentially learning by doing\. Lack of familiarity with World Bank procurement rules in particular, caused some initial administrative/operational delays\. However, the World Bank team together with the National Financier Development Bank (Nacional Financiera – NAFIN) provided close support to the project team to build its fiduciary capacities (including safeguards) and engaged proactively with the GoM to overcome execution issues\. • The Bank team engaged with the new SADER authorities soon after elections\. The Bank team met with counterparts at the highest levels of the Ministry to present the structure of and rationale for the Project and obtained reassurances on the willingness of the Ministry to go forward with its implementation\. • The Bank team actively supported implementation and proactively sought solutions to address major issues\. Initial signals of inability by the client to allocate sufficient resources to project implementation were received in May 2019 as line Ministries’ budgets were beginning to be executed and internally (within each Ministry) distributed across programs\. This led to an immediate technical mission where the Bank team was informed of their efforts to obtain additional allocation for the Project and that the Project continued to be a priority of the Ministry\. • The WB worked proactively with SADER to identify options for maintaining the Project\. In August 2019 as the budget situation continued to negatively impact the Project, SADER expressed its intent to close the project earlier\. The SHCP officially requested the Bank to evaluate potential options before deciding the Project’s fate\. Based on this assessment, the Bank presented four options to the GoM: (i) cancelation knowing that the Project was aligned to sector priorities specifically SADER’s Production for Well Being (Production para el Bienestar) program; (ii) continuing the project with SADER under a revised disbursements scheduled to address the limitations in budget in the short term; (iii) project execution through Development Banks and restructuring of the project; and, (iv) continuing the Project under SADER’s leadership but under Development Bank execution\. Despite the Bank team’s efforts, the GoM ultimately opted for an early cancellation of the Project as the budgetary constraints outweighed SADER’s capacity to continue with the Project\. IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A\. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 49\. Key features of M&E design were as follows: (i) The PDO was clearly stated, based on well-defined challenges, specified the targeted beneficiaries and was set at an appropriate level\. The PDO outcome indicators captured the Project’s objective of improving access to grain storage as well as information for Mexican agricultural producers\. The impact was to be measured by the total number of beneficiaries using the project-supported storage facilities and the share of grain sold from such facilities, as well as by the total number of beneficiaries accessing grain market information enabled by the Project\. Both were gender disaggregated to measure the number of women using grain storage facilities and grain market information (but did not include disaggregation for youth or indigenous peoples as direct beneficiaries)\. Targets for each outcome indicator were reasonable and reachable within the project lifetime, although some indicators could have been better-defined to capture progress at the mid-term, especially under Page 15 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Component 2\. The indicators were designed to address sustainability by reducing post-harvest losses and therefore improving food security\. The ToC, while not presented in diagram form in the PAD, was clearly explained through the Project’s objectives, key activities and strategies; and (ii) The M&E agenda and deliverables were realistic, and responsibilities were defined\. The scope of the M&E framework was broad, designed to track and measure the Project’s implementation, introduce any midcourse corrections if needed, and demonstrate results for the PDO and outcomes\. Most project-related information would be collected in the following moments: (i) at the beginning of the Project (baselines); (ii) at the time of the Midterm Review (midterm impact evaluation); and (iii) at closing with a final evaluation and impact assessment (impact evaluation and Borrower Completion Report (BCR))\. The PAD specified that the implementing agency was responsible for carrying out monitoring activities and collection of relevant project data, with CIMMYT’s support on the monitoring of key safeguards information\. The design also called for ASERCA to prepare semi-annual progress reports to record project activities throughout project implementation\. M&E Implementation 50\. Progress in the preparation of the M&E system for the project was detailed from technical mission presentations, aide memoires (AM), back to office reports and semi-annual reports\. By April 2018, the Project had the support of a highly qualified M&E specialist\. SIGE began to be prepared but was never completed due to late budget allocation in 2019\. The objective of this system was to support overall project management including subproject processes and M&E\. SIGE consisted of six sections: the first was to manage the call for proposals, the second guided the procurement following WB commercial practices, and the subsequent sections were focused on monitoring of subproject implementation, the Project’s general reporting and monitoring and compliance with safeguards\. At project closure only the first two modules were operating\. These modules incorporated various databases to facilitate the processing and control of subproject applications including a service providers’ registry, catalogue of equipment and capturing of key information for future reporting\. The tool was also used to train producer organizations in the submission of expressions of interest, applications and the selection of suppliers\. The platform was used to process the first call for proposals and 58 producer organizations used it\. Furthermore, although the M&E module was not operational, CIMMYT completed the design of the methodology to monitor the safeguards indicators\. 51\. The ASERCA team with support of CIMMYT, FAO and IICA monitored the implementation of the Project using data from business plans, financial data from FIRA, FND and private sector, and key conversations with the institutions developing information instruments\. ASERCA prepared semi-annual progress reports recording project activities in a consistent manner by collecting and analyzing key datasets, coordinated several studies and analyses, and showed satisfactory compliance with fiduciary reporting requirements\. 52\. One important element that this Project brought forward is the first baseline analysis to be carried out in the agricultural sector in Mexico for public investments\. This work was initiated in collaboration with CONEVAL and was going to be launched for the second call for proposals where the treatment and control groups would be identified based on received and selected grant applications\. This would have enabled the World Bank and SADER to adequately evaluate the impact of project interventions, which has never been done previously in the sector in Mexico\. 53\. Despite these efforts, M&E fell short in several ways: (i) Due to budgetary constraints and delays in project implementation, the planned baseline was not conducted\. The Project had started working on preparing the methodology and defining the instruments for the baseline data collection with the guidance of CONEVAL\. However, these activities came to an abrupt stop given the late allocation of resources and uncertainties surrounding the Project in early 2019; (ii) Due to early project cancellation, there was no Mid-term review, impact evaluation, final impact evaluation at closing or any other evaluation study done to reflect project performance and results; and, (iii) Although a project subcomponent was dedicated to supporting implementation and monitoring, the late allocation of budget made it difficult to implement the planned monitoring system, SIGE\. Even though the M&E management system was Page 16 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) designed, it was never completed\. However, data on indicator progress was collected, tracked and analyzed in a sound manner\. M&E Utilization 54\. Project monitoring data and periodic progress reports were solid inputs to reporting deliverables\. These included Implementation Status and Results Reports (ISRs), the BCR, the project economic and financial analysis, supervision missions and AMs, training to producer organizations, and the partial operation of the monitoring system (SIGE)\. Even though the latter was not finalized, it provided important oversight to track progress on project implementation\. ASERCA’s bi-annual reports were well-presented in a consistent and comprehensive manner that kept the Bank informed on the progress of project implementation\. This information was in turn reflected in Bank supervision mission AMs\. Justification of Overall Rating of Quality of M&E 55\. Performance on M&E is rated Modest for the following reasons: (i) Completion of the baseline analysis, Mid-term review, impact evaluation and operating M&E system was prevented by budgetary and institutional difficulties and by early project closure; and, (ii) Despite the M&E limitations, the Project hired an M&E specialist and was still able to track key indicators for Component 1 and monitor the progress made on the information tools under Component 2\. B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Environmental Safeguards Compliance 56\. Environmental Safeguards Compliance\. Environmental safeguards compliance was rated Satisfactory throughout the Project’s life\. The Project triggered the following policies: (i) environmental assessment (OP/BP 4\.01), (ii) natural habitats (OP/BP 4\.04), and (iii) pest management (OP/BP 4\.11)\. ASERCA prepared an Environmental Assessment and an Environmental Management Plan (EMP)\. No eligible activities generated significant risk or irreversible/adverse environmental impacts\. Safeguards oversight was conducted by the PIU with support from CIMMYT\. The EMP established four monitoring stages during the project: registration in response to call for proposals, preparation of the business plan, construction and equipping storage infrastructure and operation of storage infrastructure\. Safeguards supervision was carried out during the January 2019 Bank supervision mission and was focused on the first stage\. All subsequent missions were technical in nature\. A request to close the project was received before another safeguards supervision could take place\. The oversight was done at closure of each sub-project by ASERCA under their safeguards commitment responsibility\. Until closure, activities supported by the project did not impact any conversion or degradation of critical forest areas or other natural habitats associated with forests or loss/degradation of natural habitats (including protected areas)\. These issues were clearly mentioned in the subproject registration requirements\. Social Safeguards Compliance 57\. Social safeguards compliance was rated Satisfactory throughout the Project’s life\. The Project sought to increase the participation of small agricultural producers, with a special effort to include indigenous beneficiaries through tailored interventions\. ASERCA prepared a Social Assessment and Indigenous Peoples Plan (IPP) in consultation with indigenous peoples and with the approval of the Bank\. The Project triggered OP4\.10, consequently elements on indigenous peoples were incorporated into Project design to safeguard potential participation of indigenous beneficiaries\. In addition, the Project triggered OP4\.11 on physical cultural resources even though it was of low risk that the project activities would affect adversely features of cultural significance\. Until closing, there was no evidence of physical cultural resources being discovered or affected\. Provisions in this regard were made in the operations guidelines and in the registration requirements (component 1)\. Fiduciary Compliance Page 17 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) 58\. Financial management (FM)\. Through the early implementation stage, FM performance was generally Satisfactory, but was reduced to Moderately Satisfactory towards the end of the Project\. Project interim unaudited financial reports were generally submitted to the Bank on time and deemed acceptable\. The Bank approved an extension for the period to be covered by the first audit from November 13, 2017 (signing of loan agreement) to December 31, 2018, and the corresponding audit report was submitted to the Bank on time and included an unmodified (clean) opinion\. This audit report included an emphasized explanation disclosing that through the 2018 fiscal year, the modified budget 26 for the Project was under-executed (approximately 23 percent of the Project’s modified budget for 2018 was not executed, as the auditor reported) 27\. 59\. The main aspects that had an impact on FM performance and risk (observed mainly towards the end of the implementation period) were related to the untimely budget allocation and execution, inadequate staffing for the PIU and Subproject execution\. Through 2019, the budget to complete ongoing activities (which were committed before the decision to cancel the Project was made) was allocated late (September 2019), consequently having to amend the Subproject agreements and consultancy contracts to extend their implementation schedule\. Key Project staff (including FM responsible staff) were not contracted in a timely fashion and payments were delayed\. 60\. Procurement\. Procurement performance was rated Satisfactory throughout the Project\. Procurement was conducted within the Bank’s procurement regulations and Bank oversight was continuous, comprehensive and benefited from having the same procurement specialist for the Project’s duration\. Procurement activities were duly undertaken by ASERCA\. At the onset of the Project, ASERCA required additional support to become familiar with the Bank’s procurement rules\. NAFIN and Bank staff worked proactively with ASERCA to strengthen its capacity and the PIU hired a procurement specialist\. The Project Operations Manual (POM) included supervision arrangements and simplified templates for procurement plans, contracts, and requests for quotations which provided useful support for procurement management\. Some 84 percent of the activities of the Procurement Plan were awarded or ongoing by January 2019\. The procurement section of the POM was approved by the Bank\. C\. BANK PERFORMANCE Quality at Entry Quality at entry was characterized by the following: • The Project had high strategic relevance and its objectives were clear\. The Bank identified, facilitated and prepared a timely, complex and transformative operation with important implications (medium and long-term) for the grain sector\. The Project was innovative, sound, well-conceived and managed to effectively link incentives and financing to promote investments for grain storage facilities and support generation of public goods through grain information systems\. • The Project built on accumulated experience and additional knowledge\. Its design and operational methodology benefited from previous experiences in Mexico and other countries in storage systems, storage financing mechanisms and national level agricultural information systems, and relied on studies (as part of project preparation and in support of project design) on storage investments, storage infrastructure, inclusive financial mechanisms and transparent and aggregated information\. It also tailored the design based on inputs from key stakeholders\. • Environmental, social, fiduciary, procurement aspects and safeguards were adequately assessed\. ASERCA conducted environmental and social assessments, including mitigation plans and procurement and fiduciary capacity assessments\. 26 ASERCA reduced its 2018 initial budget allocated for the Project after the first phase of Subproject identification and selection\. From the initial identified demand for Subprojects, only 19 of 96 potential beneficiaries were assessed as viable\. Towards the end of the Project, only 7 Subprojects continued implementation, from which one was cancelled\. The initial budget for the Project for an amount of MXN$270 million, was reduced to MXN$70 million (modified budget)\. 27 The project’s final audit, covering January 1, 2019 to January 31, 2020, has not yet been submitted to the Bank\. Page 18 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Appropriate risk ratings were applied, action plans and training designed, safeguards addressed adequately and required assessments/plans prepared\. Positive environmental and social impacts were expected\. • M&E arrangements were clearly set out in the PAD\. This included beneficiaries, PDO, results framework, disaggregation of indicators by gender, and institutional roles and responsibilities\. • Political risks are challenging to predict at appraisal but given the proximity between elections and project approval, these were underestimated\. The risks posed by the elections, the change in Government and transition period were much larger than anticipated and beyond the mitigation measures put in place to safeguard the Project\. Quality of Supervision 61\. The World Bank worked proactively with the ASERCA team to address the challenges faced by the Project during the government transition\. In the context of the austerity measures and delayed budget in 2019 to execute the Project, the project team demonstrated their commitment by focusing considerable time and effort on trying to secure budget and promote the continuity of the Project\. Quality of supervision was highlighted by: • Bank supervision focused on development impact and performance reporting was high quality\. The analyses and documents created during the implementation period were strong sources of evidence to support the ICR\. • Regularly scheduled supervision missions routinely included appropriate specialists\. Supervision missions were conducted regularly\. Five missions were undertaken, including three (2019) to address critical budget and other issues affecting progress\. Missions included appropriate Bank specialists (FM, procurement, social, environmental safeguards and agriculture specialists)\. Partner organizations, CYMMIT, FAO and IICA, complemented the supervision by providing specialists (grains/grain information) and in the design of the information and monitoring systems SUMA and SIGE\. • The Bank team included a team member with expertise in financial markets in Mexico to oversee the development bank and private sector elements of the Project\. • Continuous communication was maintained with the ASERCA and then SADER teams throughout project implementation, and between missions\. This also included communication with NAFIN, the financial intermediary\. • The Bank team engaged proactively in exploring opportunities to avoid termination of the project\. Meetings were held at the highest level early on after elections to present the Project with the new authorities to secure commitment\. Given the problems arising from the closing of ASERCA and the budget constraints to operate the problem, the Bank team was engaged in an active dialogue with SHCP, ASERCA, SADER and FND to explore various options including specific proposals to restructure the project\. In addition, the Bank team worked with the ASERCA project team to ensure orderly project closure, which included ensuring the timely delivery of the BCR\. • Project objectives remain relevant to the NDP and, given demonstrated demand, the Government continues to have interest in investing in grain storage infrastructure\. The GoM and the Bank team have continued an active dialogue to explore alternative financial instruments to meet the country’s needs under the current austerity measures\. Justification of Overall Rating of Bank Performance 62\. On this basis, and considering key characteristics of Bank supervision performance discussed in Section III under Factors affecting Implementation, the World Bank’s overall performance is rated Moderately Satisfactory\. This takes into account the multiple consultations and extensive analytical work done to support project design and Quality at Entry, along with the strong supervision – technical, financial and operational - for Quality of Supervision\. It also considers the sustained efforts that were made by the World Bank team to save the Project in the face of country-wide budget austerity measures and the particularly hard-hit project implementation agency\. Following the project cancellation request, the GoM immediately followed-up with a request to the Bank to continue exploring the same types of measures and investments, but through a different implementing agency (thereby bypassing the budget issues)\. This demonstrates the quality of the Project at entry, its continued relevance to Mexico and the strenuous Page 19 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) efforts made by the World Bank team to maintain a flexible, constructive and open dialogue with Mexican authorities and the sector\. D\. RISK TO DEVELOPMENT OUTCOME 63\. The risk to development outcome is assessed as substantial based on the following: (i) The main risk to development outcome flows from the lack of budget allocation in 2019 that limited the Project’s ability to develop key activities designed to ensure sustainability of the Project (operational capacity of staff and the resources to support beneficiaries through subprojects)\. Also, the relatively small number of successfully supported producer groups limited the project’s demonstration impact for other regions at the national scale\. Even so, the Project contributed to a deeper understanding of the risks associated with external events, as well as providing a base to highlight the importance of supporting grain storage facilities and grain information in Mexico; (ii) The legal and policy environment in Mexico for the agricultural sector, and specifically for the grain market remains favorable\. The new government continues to support the improvement of competitiveness and economic opportunities for small and medium agricultural/grain producers\. The key challenge faced by the Project was the choice of instrument to respond to these priorities which could no longer be realized through the budget of a line ministry like SADER, given the austerity measures; and (iii) The Project demonstrated strong existing demand for grain infrastructure\. The Project continues to be strategic for GoM priorities on improving the productivity of key crops (including maize, a staple food crop)\. Additional grain storage will be needed to respond to the increased volumes of production\. The budget situation limited opportunities to operate the Project under existing implementation arrangements, but the GoM has continued to demonstrate interest in investing in grain storage facilities with the Bank’s support and using alternative financial instruments\. V\. LESSONS AND RECOMMENDATIONS 64\. Technical assistance was crucial for the preparation of subproject proposals and business plans\. More specifically, producers’ organizations needed assistance to process bank credit applications to secure the financing required by the Project to access its incentives\. This required specific financial guidance that only the development banks and private sector could provide\. Evidence suggests that over half of the producer organizations experienced difficulties submitting their subproject business plans online in the SIGE platform in 2018\. The fact that out of the 96 organizations that submitted proposals, only 19 fulfilled all the requirements and only 9 proposals were ultimately submitted to FND and FIRA for credit approval, illustrates this point\. Future operations should not underestimate the need for capacity building: the project demonstrated that producer organizations need close accompaniment and TA for issues such as accessing the online platform all the way to the financial documents required to access credit\. 65\. Investment approaches for subprojects that support the improvement and use of grain storage facilities take time to consolidate and require capacity building at all levels\. The experience from the subproject proposals and their implementation confirmed that investments require a period of preparation and assimilation by the implementing agency as well as by the producer organizations and the development banks\. Implementing officials and beneficiaries need time and training to support, mature and develop ideas into actual subproject proposals\. For future projects, teams need to ensure that participating banks are able to provide significant TA for the business plan preparation and approval cycle\. 66\. Partnership with technical partners with political presence in the country is an asset\. The Project’s strong collaboration with key institutions in the country (CIMMYT, FAO and IICA) strengthened the operation through the key knowledge and expertise each contributed to the design and implementation of the Project\. These institutions will continue to have political presence and are in a position where they can build upon the project activities in their future Page 20 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) cooperation agreements with the Government\. 67\. Open dialogue with multiple government partners is necessary when the Project’s future is in jeopardy\. Given the uncertainty around the future of the Project in the face of the restructuring of SAGARPA and budget austerity, the World Bank team opened dialogue with partners across the agriculture sector\. Instead of limiting conversations to just the ASERCA team, the team, in collaboration with SHCP, explored partnerships with and potential budget allocations to both of the newly created sub-secretaries under SADER, as well as the development banks\. 68\. The Bank should harness its successful experience working with development banks (FND) in Mexico through credit line instruments to overcome budget limitations\. As the Project remains relevant to national priorities and has demonstrated the demand for this type of investment, it is essential that the Bank continues to promote achievement of this Project’s development objectives\. Thus, a credit line instrument combined with alternative implementation arrangements through development banks offers an opportunity to continue supporting the GoM to achieve a common objective\. One takeaway is that this new mechanism will likely influence the typology of beneficiaries to small and medium-sized, commercially viable organizations that are able to meet the financial sector limit conditions without \. a grant incentive\. Page 21 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS A\. RESULTS INDICATORS A\.1 PDO Indicators Objective/Outcome: Improve access to grain storage and information for agricultural producers in Mexico Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of beneficiaries Number 0\.00 12500\.00 1422\.00 using project supported grain storage facilities 14-Apr-2017 13-Nov-2017 30-May-2020 Number of women Number 0\.00 3800\.00 332\.00 beneficiaries using project supported grain storage 14-Apr-2017 13-Nov-2017 30-May-2020 facilities Comments (achievements against targets): Negligible achievement\. 11\.5% due to an early cancellation of the project (shortened length of project implementation)\. This indicator measured the participation of grain producers in the first stage of the grain market\. "Use" was measured by the physical delivery of grains to a project supported grain storage facility\. While the final ISR showed 1,520 beneficiaries (of which 344 were women), updated information shows that due to one sub-project being withdrawn for fiduciary reasons, the actual number of supported beneficiaries is 1,422 (which 332 were women)\. Page 22 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of beneficiaries Number 0\.00 12500\.00 0\.00 accessing project enabled grain market information 14-Apr-2017 13-Nov-2017 31-Jan-2020 Number of women Number 0\.00 3800\.00 0\.00 beneficiaries accessing project enabled grain 14-Apr-2017 13-Nov-2017 31-Jan-2020 market information Comments (achievements against targets): Not achieved\. Due to an early cancellation of the project this target was not achieved\. The information system was under preparation at the time of the early closing\. This indicator was intended to measure the access to key variables that the project was to make publicly available\. "Access" was to be measured by the number of producers receiving information (direct access to information platform or any other mean)\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Share of grain sold from Percentage 0\.00 80\.00 71\.00 project supported storage facilities 14-Apr-2017 13-Nov-2017 31-Jan-2020 Comments (achievements against targets): Modest achievement: 89%\. This indicator measured the turnover of stored grain and integration in the value chain\. Although the achievement looks substantial, this is measured only for the six subprojects completed and as such, is only a modest acheivement\. (It is an industry norm to keep 20% of stored volumes of grain as a strategic reserve for food security reasons)\. This indicator was measured by using information available in SIGE\. The Page 23 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) achievement of this indicator shows that within the project supported facilities, linkages to markets were strengthened by means of the grains sales into the value-chain\. A\.2 Intermediate Results Indicators Component: Grain Storage Infrastructure and Operation Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of project supported Number 0\.00 300\.00 6\.00 grain storage facilities that are equiped and in use 14-Apr-2017 13-Nov-2017 30-May-2020 Comments (achievements against targets): Modest achievement of 2% due to an early cancellation of the project and late budget allocation to the implementing agency in 2019\. While the final ISR showed seven sub-projects, updated information shows only six sub-projects due to one being withdrawn for fiduciary reasons\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Volume of grains stored by Metric ton 0\.00 500000\.00 10000\.00 project supported storage facilities 14-Apr-2017 13-Nov-2017 31-Jan-2020 Comments (achievements against targets): Page 24 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Modest achievement of 2% due to an early cancellation of the project and a late budget allocation to the implementing agency in 2019\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of producer Number 0\.00 250\.00 12\.00 organizations trained to operate storage facilities and 14-Apr-2017 13-Nov-2017 31-Jan-2020 use grain quality standards Comments (achievements against targets): Modest achievement: 4\.8% due to an early cancellation of the project\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of project Number 0\.00 12500\.00 1422\.00 beneficiaries using technical services for grain storage 14-Apr-2017 13-Nov-2017 30-May-2020 Number of project women Number 0\.00 3800\.00 332\.00 beneficiaries using technical services for grain storage 14-Apr-2017 13-Nov-2017 30-May-2020 Comments (achievements against targets): Page 25 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Modest achievement: 11\.5% While the final ISR showed 1,520 beneficiaries (of which 344 were women), updated information shows that due to one sub- project being withdrawn for fiduciary reasons, the new number of beneficiaries is 1,422\. (of which 332 were women)\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Loan recovery rate of Percentage 0\.00 95\.00 0\.00 investments financed by commercial banks 14-Apr-2017 13-Nov-2017 31-Jan-2020 Comments (achievements against targets): Not achieved\. Due to an early cancellation of the project this target was not achieved\. Component: Information for Grain Management, Markets and Monitoring Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of unique users of Number 0\.00 20000\.00 0\.00 the integrated information platform 14-Apr-2017 13-Nov-2017 31-Jan-2020 Comments (achievements against targets): Not achieved\. Due to an early cancellation of the project this target was not achieved\. Page 26 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Average number of trade Number 0\.00 3\.00 0\.00 agreements between a project supported producer 14-Apr-2017 13-Nov-2017 31-Jan-2020 organization and market agents (per year) Comments (achievements against targets): Not achieved\. Due to an early cancellation of the project\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Percentage of beneficiaries Percentage 0\.00 95\.00 0\.00 satisfied with the access to grain storage and the quality 14-Apr-2017 13-Nov-2017 31-Jan-2020 of services received Comments (achievements against targets): Not achieved\. Due to an early cancellation of the project\. Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Formally Revised Completion Page 27 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Target Grievances registered related Percentage 0\.00 100\.00 0\.00 to delivery of project benefits that are actually 14-Apr-2017 13-Nov-2017 31-Jan-2020 addressed Comments (achievements against targets): Not achieved\. Due to an early cancellation of the project\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Share of project supported Percentage 0\.00 30\.00 0\.00 storage facilities that use warehouse receipts 14-Apr-2017 13-Nov-2017 31-Jan-2020 Comments (achievements against targets): Not achieved\. Due to an early cancellation of the project\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of local areas where Number 0\.00 14\.00 0\.00 grain price information is generated daily and 14-Apr-2017 13-Nov-2017 31-Jan-2020 Page 28 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) disseminated Comments (achievements against targets): Not achieved\. Due to an early cancellation of the project\. Page 29 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) A\. KEY OUTPUTS BY COMPONENT Objective/Outcome 1: Improve access to grain storage for agricultural producers in Mexico\. 1\. Number of beneficiaries using project supported grain storage facilities\. Target 12,500 / Results 1,442 (11\.5%) 2\. Number of women beneficiaries using project supported grain Outcome Indicators 1 storage facilities\. Target 3,800 / Results 332 (8\.7%) 3\. Share of grain sold from project supported storage facilities\. Target 80 / Results 71 (89%) Component 1: Grain Storage Infrastructure and Operation: Improve the grain storage infrastructure and strengthen the capacity for the operation and application of grain quality norms and standards 1\. Number of projects supported grain storage facilities that are equipped and in use\. Target 300 / Results 6 (2%) 2\. Volume of grains stored by project supported storage facilities\. Target 500,000 / Results 10,000 (2%) Intermediate Results Indicators 3\. Number of producer organizations trained to operate storage facilities and use grain quality standards\. Target 250 / Results 12 (4\.8%) 4\. Number of project beneficiaries using technical services for grain storage\. Target 12,500 / Results 1,422 (11\.5%) 5\. Number of women project beneficiaries using technical services for grain storage\. Target 3,800 / Results 332 (6\.6%) 6\. Loan recovery rate of investments financed by commercial banks\. Target 95 / Results 0 (0%) Key Outputs by Component 1\. Number of CYMMIT trainings courses on business plans, proposals (linked to the achievement of the Objective/Outcome 1) and grain storage\. (no target / result 57) Page 30 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) 2\. Number of organizations that use a capability diagnostic tool for business plans (no target / result 19) 3\. Number of subproject proposals submitted\. (no target / result: 96) 4\. Number of subproject proposals submitted to FND/FIRA (no target / result: 9) 5\. Number of interested providers in participating in the development of producer organizations’ business plans\. (no target / result 39) 6\. Number of grain quality methodologies validated for blue grain\. (no target / result 5) 7\. Number of grain quality methodologies validated for pozolero maize (no target / results 13) 8\. Number of technical advisers trained on the elaboration of business plans, associativity and grain storage\. (no target / result 9) 9\. Number of direct and indirect jobs from subprojects (no target / result 833) Objective/Outcome 2: Improve access to information for agricultural producers in Mexico\. 1\. Number of beneficiaries accessing project enabled grain market information\. Target 12,500 / Results 0 (0%) Outcome Indicators 2 2\. Number of women beneficiaries accessing project enabled grain market information\. Target 3,800 / Results 0 (0%) Component 2: Information for Grain Management, Markets and Monitoring: Improve access to information to enable the borrower’s agricultural producers in their decision making\. Intermediate Results Indicators 1\. Number of unique users of the integrated information platform\. Target 20,000 / Results 0 (0%) 2\. Average number of trade agreements between a project supported producer organization and market agents (per year)\. Target 20,000 / Results 0 (0%) Page 31 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) 3\. Percentage of beneficiaries satisfied with the access to grain storage\. Target 95 / Results 0 (0%) 4\. Grievances registered related to delivery of project benefits that are actually addressed\. Target 100 / Results 0 (0%) 5\. Share of project supported storage facilities that use warehouse receipts\. Target 30 / Results 0 (0%) 6\. Number of local areas where grain price information is generated daily and disseminated\. Target 14 / Results 0 (0%) Component 2\. Information for Grain Management, Markets and Monitoring: Improve access to information to enable the borrower’s agricultural producers in their decision making\. 1\.Number of capacity-building training events and workshops (no target / result 88)\. 2\. Number of training for technicians and small producers (no target / result 29) 3\. Number of seminars on grain storage certification\. (no target / result 1) Key Outputs by Component 4\. Number of trainings for producer organizations (no target / result (linked to the achievement of the Objective/Outcome 2) 57) 5\. Number of trainings for technical advisors (no target / result 4) 6\. Number of grain storage facilities visited to collect information\. (no target / result 74)\. 7\. Number of producer organizations that used SIGE platform to upload proposals\. (no target / result 58) 8\. Number of visits to the ASIS system during the project (no target / result 824) 9\. Number of visits to the Early Warning System and Food Prices Platform (no target / result 1,901 visits) Page 32 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A\. TASK TEAM MEMBERS Name Role Preparation Svetlana Ognianova Edmeades Task Team Leader(s) Francisco Rodriguez Procurement Specialist(s) Luis Barajas Gonzalez Financial Management Specialist Panayotis N\. Varangis Team Member Jose C\. Janeiro Team Member Angel Alberto Yanosky Environmental Specialist Juan Carlos Serrano-Machorro Team Member Elena Segura Labadia Team Member Roy Parizat Team Member Ifeyinwa Uchenna Onugha Team Member Katie Kennedy Freeman Team Member Arelia Jacive Lopez Castaneda Social Specialist Erika Ruth Felix Team Member Supervision/ICR Katie Kennedy Freeman, Svetlana Ognianova Edmeades Task Team Leader(s) Francisco Rodriguez Procurement Specialist(s) Luis Barajas Gonzalez Financial Management Specialist Lucia Veronica Amiri-Talesh Ramirez Team Member Ashwini Rekha Sebastian Team Member Arelia Jacive Lopez Castaneda Social Specialist Sofia Keller Neiva Team Member Page 33 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Gabriela Grinsteins Team Member Ifeyinwa Uchenna Onugha Team Member Diana Gabriela Jimenez Cruz Team Member Mario I\. Mendez Team Member Dora Patricia Andrade Environmental Specialist Jose C\. Janeiro Team Member Angelica Calderon Procurement Team Panayotis N\. Varangis Team Member Erika Ruth Felix Team Member Anna F\. Roumani 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 FY17 54\.052 360,883\.93 FY18 0 0\.00 Total 54\.05 360,883\.93 Supervision/ICR FY18 21\.437 145,402\.89 FY19 26\.100 167,334\.93 FY20 17\.625 111,245\.56 Total 65\.16 423,983\.38 Page 34 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) ANNEX 3\. PROJECT COST BY COMPONENT Components Source of Amount at Actual at Project Percentage of Financing Approval Closing (US$M) Approval (US$M) (per component) (US$M) Grain Storage Total 170\.00 6\.13 3\.60% Infrastructure and IBRD 95\.00 3\.43 3\.61% Operation Bank* 60\.00 1\.72 2\.87% Producer 15\.00 0\.98 6\.53% Information for Grain Total 24\.70 \.73 2\.96% Management, Markets and Monitoring IBRD 24\.70 \.73 2\.96% Front End Fee 0\.30 0\.30 100% Subtotals IBRD 120\.00 4\.46 3\.71% Bank* 60\.00 1\.72 2\.87% Producer 15\.00 0\.98 6\.53% Total 195\.00 7\.16 3\.67% * (Financing institution – FND/FIRA) * The final project disbursement was US$4\.45 million\. The datasheet restructuring/additional financing section records the amount that was disbursed at official project closing, US$ 4\.06 million on February 4th, 2020\. The discrepancy between these two numbers is accounted for by the different dates they were recorded\. Page 35 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) ANNEX 4\. EFFICIENCY ANALYSIS Introduction 1\. Among other issues, the ICR attempts to assess how economically were resources and inputs converted into results\. In other words, were the costs involved in achieving the operation’s objectives reasonable in comparison with both the benefits and with respect to recognized benchmarks, as appropriate\. This annex presents the details of the efficiency analysis whose results are summarized in the ICR Section C\. “Efficiency”, including the underlying assumptions on costs and benefits, and any other relevant supporting information of the ex-post efficiency analysis\. Summary of results Table 1\. Summary Results of Economic Cost-Benefit Analysis Indicator Ex-ante (PAD) Ex-post (ICR) Discounted Gross Benefits (USD)* 207,495,972 7,614,795 Discounted Costs* 167,052,199 6\.540\.047 Net Present Value (NPV)* 40,443,774 1,074,748 Internal Rate of Return (IRR) 17% 13% B/C 1\.24 1\.16 *Discount rate 10 percent and 20-year period of analysis\. 2\. To assess the efficiency of project investments, a standard economic cost-benefit analysis was undertaken\. The results of this ex-post analysis, presented in the above table compared to the analogous indicators of the ex-ante analysis, suggest that the investments made by the project made good sense from the perspective of society as a whole, despite the project being cut short\. Accordingly, the investments made would yield a net present value (NPV) of around US$ 1\.1 million, while the economic internal rate of return (IRR) was estimated at 13 percent\. The latter represents the maximum discount rate at which the project investments would still make economic sense, or alternatively, that only public investments with returns above this rate would be preferable to society\. From a different perspective, the results suggest that, for every current US$ 1\.00 actually spent by the project, society is expected to receive US$ 1\.16 in benefits\. Although these results are positive, it is important to keep in mind that the streams of economic benefits and the incremental recurring costs used to compute the mentioned economic viability indicators, are largely based on expectations of “normal” circumstances over a relatively long period\. 3\. To get a sense of eventual implications of risk, switching values with respect to increases in costs and to reductions in benefits were estimated\. The results of these sensitivity analysis suggest that total project costs could increase by as much as 14 percent, and benefits could decline by as much as 16 percent, without the project turning economically unviable\. 4\. When compared to the results of the cost-benefit analysis at appraisal, the aforementioned results are relatively in line with expectations, particularly those that are expressed in relative terms\. For instance, the ex-post IRR (13 percent) is a few points lower than the one in the ex-ante analysis (17 percent), and both are higher than the assumed discount rate of 10 percent\. The difference could be explained by the higher Page 36 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) proportion of investments whose benefits are not accounted for in the ex-post cost-benefit analysis, compared to the ex-ante cost-benefit analysis, the benefit-cost ratio at appraisal was 1\.24, compared to 1\.16 in the ex- post analysis\. In the case of NPV, however, the difference is significant, but in general, maintaining a coherent proportion to the actual investment amounts\. While total investment and recurrent costs 28 were estimated at over US$ 167 million at appraisal, those for the ex-post analysis were estimated at only US $6\.5 million\. Given the cancellation of the project, public investments to be sourced from the World Bank loan, originally planned at US$ 120 million to be disbursed over 6 years, were reduced to around US$ 4\.6 million disbursed in around two years, resulting, as could be anticipated, in a significant reduction to expected returns\. Thus, the difference between the NPV at appraisal (US$ 40\.4 million) and that in the ex-post analysis (US$ 1\.1 million)\. Relevant Project Background 5\. At appraisal, the Project’s total budget was estimated at US $195 million, of which US$ 120 million were to be financed through a World Bank loan and the balance by private funds from beneficiary organizations, as counterpart financing towards the implementation of business plans supported by the project under Component 1\. The project was to be implemented over 6 years\. 6\. The project was approved at the end of 2017, but only started meaningful implementation late in 2018, and through the beginning of 2020, when it was cancelled by request of the GoM\. During the short implementation period, of the US$ 120 million World Bank loan the project only spent approximately US$ 4\.6 million\. In addition, of the counterpart financing from beneficiary organizations that was originally estimated at US$ 75 million, only about US$ 0\.98 million were actually leveraged\. In total, the project financed only 6 of 300 subprojects that it intended to finance under Component 1\. Methodology Aspects of the Economic Cost-Benefit Analysis 7\. As in the ex-ante analysis of the PAD, the efficiency of the project investments was assessed through a standard economic cost-benefit analysis\. The ex-post analysis used the same basic parameters used in the ex- ante analysis, to ensure comparability\. Both cases used a 20-year period of analysis, and 10 percent discount rate\. 8\. As in the PAD, the project costs that were accounted for in the ex-post analysis included: (i) all project implementation expenses financed by the World Bank loan; (ii) all storage infrastructure and equipment expenses and other subproject implementation costs financed by beneficiary organizations; and (iii) estimated incremental recurrent expenses (i\.e\. likely operation and maintenance expenses for the equipment and storage infrastructure to be rehabilitated or built under Component 1), throughout the 20-year period of analysis\. 9\. The economic benefits accounted for in the cost-benefit analysis were: (i) the estimated value of grain losses that would be averted by expanding storage capacity and use, and by the enhancement of grain handling by small and medium scale producers; and (ii) the estimated net reduction in Green House Gases (GHG)\. There are several economic benefits that would be expected from the project’s investments that were not taken into account in the ex-ante analysis, mainly due to the complexity to quantify them\. These were also unaccounted for in the ex-post analysis\. The present value of the sum of the expected investment costs and the incremental recurrent costs, covered by both public 28 and private sources over the 20-year period of analysis, using a 10-discount rate\. Page 37 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) 10\. The main expected economic benefits that were not accounted for, include: (i) increased expected net revenues to participating producer organizations due to greater access to more remunerative markets through improved grain storage (Component 1), in excess to the economic benefits from the averted grain losses that were already accounted for, and the eventual better access to market information for decision making (Component 2); (ii) increased economic efficiency achieved through the systematization and democratization of market information (Component 2); and (iii) local economic growth resulting from increased demand for local goods and services during construction/rehabilitation and the operation of storage facilities\. 11\. In addition, as in the ex-ante analysis, the economic benefits from averted storage losses that were included in the analysis are only those related to maize\. In states like Guanajuato and Michoacán, where the six actual subprojects were financed, the facilities used for maize could be used to store wheat, as both grains grow in different seasons\. Thus, in as much as storage facilities are used to store wheat or other grains during the maize-storage off-season, incremental economic benefits could be generated without additional investment costs\. Both the ex-ante and ex-post analyses assume a storage turnover ratio of 1\.0\. All these assumptions make the results of the cost-benefit analysis relatively conservative\. 12\. In both analyses the ex-ante and the ex-post economic cost-benefit analysis, no market restrictions were assumed other than taxes to inputs and outputs, which were removed from the estimations\. Other assumptions 13\. In the ex-ante analysis, the reduction in grain losses (for the Sates of Michoacán and Guanajuato where the actual subprojects were financed) resulting from the project were assumed to be 19 percent of the stored volume\. For the ex-post analysis, however, with specific information obtained from the approved and financed business plans, the assumed reduction in storage losses as a result of the project was revised down to 11 percent\. With respect to the economic benefits of the expected net reductions in GHG emissions, the ex-post analysis uses the same shadow price for Carbon used in the ex-ante analysis, while the volume is reduced proportionally to the difference in actual subproject investment totals\. 14\. The operation and management costs represented the main incremental recurrent costs accounted for in the analysis\. As in the ex-ante analysis, they were assumed at 3 percent of the value of the original investment per year\. 15\. The residual value of infrastructure and equipment at the end of the period of analysis was estimated proportionally to those in the ex-ante analysis\. Financial Feasibility of Financed Subprojects 16\. As previously mentioned, the project financed six subprojects under Component 1\. In order to get approved by the project, these subprojects were required to present a full business plan with all the typical contents, including a financial cost-benefit analysis\. These business plans were used by the project, but also by financial institutions that co-financed the subprojects to assess the proposed investments\. 17\. The following table summarizes the investments amounts and the indicator of the financial-cost benefit analysis in the business plans of the six subprojects that were financed by the project\. As shown in the table, all individual subprojects had a positive NPV, and an IRR above the discount rate used in each business plan, and above a 10 percent discount rate used to standardize the NPV to be able to compare the expected Page 38 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) performance of the individual subprojects among themselves\. These results provide indications that Beneficiary Organizations will have sufficient financial incentives to carry-out their activities as planned throughout the period of analysis\. Table 2\. Summary results of Financial Cost-Benefit Analysis of Subprojects Total Standardized Project Discount Subprojects Investment IRR NPV (USD) NPV (USD) (USD) Rate (USD) @10% Michoacán 1 880,476 285,713 43\.32% 3,220,078 5\.55% 2,581,366 Michoacán 2 3,753,261 288,971 25\.59% 2,302,659 8\.31% 1,929,723 Guanajuato 1 336,867 87,000 16\.71% 265,680 5\.23% 126,375 Guanajuato 2 1,050,011 429,714 19\.75% 2,138,990 4\.53% 1,603,102 Guanajuato 3 1,690,786 496,676 12\.87% 2,644,823 5\.06% 1,972,867 Michoacán 3 674,071 327,210 32\.87% 1,430,458 4\.67% 889,644 Total 8,385,473 1,915,284 12,002,689 9,103,078 Mean 1,397,579 319,214 2,000,448 1,517,180 Weighted Average 24\.38% Source: Individual business plans\. Page 39 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) ANNEX 5\. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS A\. Executive Summary of Borrower Completion Report Presentation 1\. Below is a translated summary of the Project’s final report submitted by the Borrower to the World Bank in May 2020\. This document complies with the obligation of the Borrower to present a Final Report to evaluate the project’s results as reflected in the Loan Agreement November 13th, 2017, under point 5\.08 of the General Conditions for Loans\. Background 2\. On November 13th, 2017, SHCP and the World Bank signed the loan agreement No\.8729-MX entitled “Project for Grain Storage and Information Services for Agricultural Competitiveness”\. The loan became effective on December 13th, 2017 with an original closing date of March 24th, 2024\. The Project was closed earlier than the closing date on January 31st, 2020 at the request of the government due to changes in Government priorities and lack of resources to execute the Project given fiscal austerity reforms\. 3\. The overarching objective of the Project was to contribute to global poverty reduction\. It was specially aligned with the GoM vision aimed to reduce economic inequality and information asymmetries to promote agricultural competitiveness\. The Project was coordinated with SADER through its decentralized agency ACERCA\. Multiple actors, including Regional Offices, other federal and local government institutions, farmers, producer organizations and other relevant actors actively participated in the design and implementation of the Project\. 4\. The main objective of the Project was to “improve access to grain storage and information for agricultural producers in Mexico”\. An important part of the project aimed to support producer organizations in the construction of new and/or rehabilitation of grain storage infrastructure in six Mexican States: Chiapas, Mexico, Guanajuato, Michoacán, Oaxaca, Puebla and Veracruz\. These investments were accompanied with capacity development on grain storage operations, commercialization, and, the identification of business opportunities\. The Project also aimed to improve access to information systems on grain market prices, quality and support management of grain inventories\. 5\. The key expected Objective Outcomes as stated by the PDO were to improve access to grain storage infrastructure and to improve access to agricultural information for agricultural producers in Mexico\. Components 6\. The Project had two main components: • Grain Storage Infrastructure and Operation • Information for Grain Management, Markets and Monitoring Component 1: Grain Storage Infrastructure and Operation 7\. This component aimed to improve grain storage infrastructure and strengthen organizations’ capacities for the operation and application of grain quality norms and standards\. This component contemplated o this end, Page 40 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) investment support on grain storage infrastructure through subprojects in the above mentioned seven states\. It targeted the financing of either rehabilitation or upgrade of existing grain storage facilities, including collection and trade centers or the construction of new grain storage facilities, including collection and trade centers and the purchase and installation of required equipment\. It also supported capacity building activities that were required to improve the long-term sustainability of infrastructure investments, including the preparation of business plans; capacity building of grain storage facilities operators and EPOs on the operation, control and maintenance of grain storage facilities, use of required equipment under grain storage subprojects, financial and administrative aspects and application of relevant grain quality norms and standards, and the certification of grain storage facilities\. 8\. The results of Component 1\. At closing, 1,442 beneficiaries (332 women) were using project-supported grain storage facilities out of 12,500 (original target)\. The results were low due to the short implementation period and budget constraints faced by the Project\. Some 96 subprojects were received during the first and only call for proposals\. From these, only 6 subprojects (original target 300) were approved and financed by the Project\. These are currently well-equipped and operating and provide around 833 direct and indirect jobs\. The implementation of these subprojects demonstrated and validated the Project’s investment model, showing that beneficiary producer groups with support from the Project were able to access financing to meet their grain storage needs\. The 96 expressions of interest also demonstrated the existing unmet demand to finance this type of infrastructure investment\. 9\. Technical assistance and capacity building activities were effective\. More than 2,180 people participated in training and workshops delivered by CIMMYT, FAO and ASERCA\. CIMMYT delivered 88 capacity building training events and workshops, including training in the operation and management of grain infrastructure, commercialization, organization and entrepreneurial management, and support for the preparation of business plans\. FAO carried out 19 dissemination and training activities with participating beneficiaries in areas of food price monitoring, use of agro-climatic information platforms, and grain certification schemes for small collection centers\. 10\. The Project generated key information, training and knowledge materials on various topics including grain management guidelines, grain quality assessments for native varieties drought monitoring and agroclimatic reports\. The training materials prepared for this Project remain available to benefit other institutions, projects or organizations in the future\. 11\. The Project also supported activities to develop a grain storage certification mechanism to strengthen commercial participation of small grain storage collection centers\. FAO and ASERCA designed a certification mechanism based on national conditions such as: typology of storage facilities, storage models, other key characteristics, limitations and opportunities to meet needs\. Information was collected from 74 grain collection centers located in Central and Southern regions of Mexico\. SADER has continued to finance this work with FAO beyond the Project closure to validate the certification mechanism in the field\. Component 2: Information for Grain Management, Markets and Monitoring 12\. Component 2 aimed to improve access to information to support agricultural producers in their decision- making on grain storage and commercialization\. This component contemplated the development, operation and maintenance of an information system for grain markets and management\. Activities included data collection and integration, as well as consolidation of data acquisition at grain storage centers\. It also aimed to support Page 41 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) capacity building and dissemination activities to promote the use of the information system; considered support to activities to strengthen commercialization linkages of grain storage facilities through participation of EPOs in agricultural fairs and other relevant sector events; pertinent analysis on new market opportunities, market segmentation potential, and other strategic needs to improve grain commercialization; capacity building activities to improve market access of EPOs\. It also incorporated resources to support the preparation, implementation, monitoring and evaluation of the Project\. 13\. The information system was not completed; however significant advances were made in the design and development of the overall information systems\. Key components of the systems were developed, and several were formally launched at the time of project closing\. The information generated by the early warning system and food prices platform were operational at project closing\. Both platforms combined had recorded 1901 visits\. During the life of the project, CIMMYT, FAO and IICA contribute in developing a comprehensive agricultural information and monitoring system for grain markets\. At project closing, the construction of two related information systems: SUMA and SIGE was still active\. Given the significant progress made, SADER has continued to provide resources to complete key elements left pending and is financing the continued operation of the existing online modules\. 14\. Among the key results for component 2 are: (i) the strengthened inter-institutional coordination and homologation of existing information and data-sharing protocols were developed, permitting the systematic integration of relevant variables including grain price, inventories, quality and weather-related; (ii) development of a Spot Pricing Tool by IICA, validating a methodology for collecting spot prices for maize and making real-time price information available for grain at the first point of sale\. This tool helps reduce information asymmetries by providing inter-temporal and inter-locational arbitrage for producers\. At closing, IICA had completed the methodology, validated it in the field, written implementation protocols and created a software; (iii) Multi- Climatic Risk Platform (MCRP) operational, which consisted of agro-climatic information based on FAO’s global Agricultural Stress Index System (ASIS) contextualized to Mexico’s conditions\. The information provides early warning on drought development and its impacts on key staple crops\. The agro-climatic information is complemented with analysis of other climatic risks including hydro-meteorological, pest and plant disease\. Information is available online for drought monitoring (ASIS Mexico), agricultural production monitoring reports and geospatial data\. Data shows that for the last six months, the ASIS-Mexico site has been accessed 824 times\. At project closing, this platform was 80 percent completed, and SADER has continued to provide financial resources for its completion; (iv) Food Price Monitoring and Analysis platform (FPMA) is available online allowing the monitoring of food prices and agricultural market responses to internal and external shocks\. This tool was launched in June 2019 on the CIMA site and has been accessed 1077 since 2019; and, (v) Information system developed for grain collection centers which only pending the completion of the software\. CIMMYT conducted a diagnosis and prepared a design for information collection at grain storage centers\. An information system was designed for project-supported storage facilities to report on key variables for grain storage\. The information was to complement the information collected through the All-Purpose Warehouse to be housed in CIMA\. A prototype system was designed, and documentation and software language generated\. Monitoring and follow up actions 15\. The Project started the creation of a Management, Monitoring and Evaluation System (SIGE)\. It was not completed due to late budget allocation in 2019 and the early cancellation of the Project\. SIGE was planned to support overall project management, including the management of call for proposals, procurement following the World Bank’s commercial practices, monitoring of subprojects implementation, reporting and monitoring Page 42 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) and compliance with safeguards\. At closing, only the first two parts were operating\. The platform was used to process the first call for proposals where 58 producer organizations used it to submit their expressions of interest\. CIMMYT completed the design of the methodology to monitor the safeguards indicators\. Moreover, the PIU team with support from CIMMYT, FAO and IICA monitored the implementation of the Project using data from business plans, financial data from FIRA, FND and the private sector, and key conversations with the institutions developing the information instruments\. Safeguards 16\. Based on the World Bank Environmental and Social Framework, the Project was classified as low risk\. The investments contemplated by the Project triggered safeguards on natural habitats, pest management, physical cultural resources and Indigenous Peoples\. ASERCA with the support from the World Bank prepared an environmental and social assessment for the Project clearly identifying a series of potential risks, preventive actions, expected results and indicators to monitor compliance with safeguards\. ESA includes an environmental and social management plan and a guide for infrastructure service providers\. Indicators to were prepared for each phase under the grain storage infrastructure construction process to monitor compliance with safeguards\. ASERCA prepared an Indigenous Peoples Plan in consultation with IP which was approved by the Bank\. 17\. The Project also had to report on the following social requirements: social evaluation and local consultation with Indigenous Peoples, participation of indigenous organizations in the Project, existence and relevance of landrace maize, midterm evaluation, scope of audiovisual dissemination materials, dissemination material of the Project objective and the importance of maize, collaboration agreement for the use of the network of indigenous radio broadcasters and operating units, complaints and suggestions mechanism established and reporting the number of complaints received and responses to the number of complaints / suggestions\. The measurement environmental and social safeguards indicators was based on the information obtained from subproject documentation submitted from each of the subproject financed by the Project\. The documentation includes, application files, work contracts, training evidence and other relevant supporting documentation\. In addition to the use of these documentation, the Project had planned to work with technical personnel at CIMMYT to carry out technical visits to each of the subproject sites to make field verifications\. The objective was to combine a desk information and field verifications to document the environmental and social performance of subprojects at different construction phases\. Lessons learned 18\. The Project was able to verify the benefits from complementing infrastructure investment in grain storage infrastructure for small and medium-sized producer organizations, through capacity development: (i) management and operation of grain storage infrastructure, (ii) administrative and financial management, (iii) development of business plans, and (iv) commercialization, to ensure long-term sustainability of investments\. 19\. An assessment of the original 96 Producer Organizations participating in the first and only call for proposals, helped identify the technical needs of these organizations\. Based on this, CIMMYT identified two groups: (i) Semi-formal groups that are not legally constituted\. Producers in this group are practicing conservation agriculture at an intermediate or advanced level\. They are either interested in or are already in the process of establishing associations\. Producers were proactive teamwork and plots were less than 20 km apart\. It was considered that these groups could eventually be beneficiaries of the Project in 2020\. For this group of organizations, courses and workshops aimed to strengthen their competencies in association, by having Page 43 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) technicians worked directly with the producers in a scheme of trainer of trainers\. These technicians would oversee train and promote association with their respective producers and make them aware of the advantages and opportunities of being organized\. (ii) Legally constituted organizations, for which two areas of grain operations knowledge needs were identified: (i) Grain handling: Reception of grain, Quality management during storage, Management of information systems, Inventory management, Teamwork, Procedures manuals and General storage principles, and (ii) Marketing and organization, such as Value Chains, Business models and business management, and consolidation of suppliers\. 20\. The Management System for Monitoring and Evaluation (SIGE) was essential to start the operation of the Project\. The establishment of this system has to be contemplated as one of the first actions of the Project\. 21\. The technical accompaniment to the Organizations is important\. Based on the experience of this Project, it should be considered at least in the following phases: (i) Promotion and dissemination of the Project and its characteristics using illustrative and didactic elements such as posters or other instructive materials that facilitate understanding; (i) Establishing a registry of Organizations that are informed about the components and subproject requirements to access the incentive; (iii) Providing support to enter information and meeting the requirements to access the Program;(iv) Preparation of the Business Plan (includes financial runs for the credit application); and (v) Selection process of service providers (commercial practices)\. It was also important emphasize during the dissemination phase not only on the eligibility of the beneficiaries, to access the government incentive, but also on the credit eligibility requirements (credit history, land ownership, guarantees, etc\.)\. 22\. Based on observations from the preparation of the Producers' Organizations' Business Plans, technical advisors assisting Producers' Organizations needed to be trained and get to know the Project sufficiently in advance and in depth in order to optimize their participation\. 23\. The supervision of the Grain Storage Subprojects must be strict and on-site\. This, accompanied by constant technical advice, is a fundamental to successfully achieve the goals set forth in the terms and according to the conditions established in the Business Plans\. 24\. Regarding the Certification of collection centers, FAO found that it is necessary to adapt a more inclusive Certification System, since most of the small and medium producers do not qualify for the formal certification with ADGs\. Moreover, many producers have not even tried to pursuit due to the number of requirements that need to be met to achieve it\. 25\. The certification process should be done in stages to gradually make progress and reach benefits at each stage\. In this way, only when all the stages of the certification are in place, the organization would be in a position to pursue the qualification (“habilitacion”) of the warehouse\. 26\. To improve the administrative, financial and operational efficiency of Grain Collection Centers, operators need to participate in continuous training to build their knowledge and capacity\. In addition, training should be included the grain production phase since good practices must be implemented from the field to avoid unnecessary losses\. 27\. Along with the certification of warehouse and/or collection centers, the operating personnel must also be certified in terms of their job skills\. This will ensure that collection centers have qualified human capital and Page 44 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) support good operational performance\. The participation of female staff should be encouraged so that these Centers in favor gender equality\. 28\. Some opportunities for improvement during the development of the subprojects are: (i) Integration of records with complete information; (ii) Broad dissemination using illustrative and didactic elements and clearly informing eligibility requirements of beneficiaries, (iii) Align the proposal’s preparation process (technical aspects) with the consolidation process of the credit file (financial aspects) to ensure that the documentation is ready and updated at the time of applying for credit; and, (iv) Provide financial managers (project consultants) to support Producer Organizations in the consolidation of their proposals and who also carry out some capacity- building activities on financial aspects so that the producer organizations are able to understand their credit options and those that are more beneficial in each case\. 29\. Ensure the participation of development banks (FND/FIRA), private banks and non-bank intermediaries in the dissemination phase of the project\. These entities play an important role in disseminating the Project among their potential clients\. 30\. Pursue closer coordination between the executor and the financial entities (in the case of this Project, FIRA and FND), to help facilitate early identification of bottlenecks that Producer Organizations may face and together find timely solutions to help them access credit\. 31\. Technical assistance to help beneficiaries of the incentives in the preparation of the Business Plans and proposals is key not only for successful implementation of the subproject, but also to facilitate access to financing\. 32\. The credit evaluation process implies that once the consolidated credit file is available, which includes the Business Plan and other necessary documentation (guarantees, verification that organization is not on any negative list, verification from the Credit Bureau, etc\.), the credit review process begins, for example with FND, this takes between 4 and 12 weeks on average, depending if the credit amount threshold needs to be approved at the regional or national level\. 33\. The agro-climatological and price systems developed by FAO constitute an asset that enables decision- making in the public and private sectors in a timely manner, particularly in relation to the possible impacts of agricultural droughts on the supply and prices of basic grains\. 34\. In the preparation of the agro-climatological and price information systems, it was considered that the use of information technologies would be very beneficial to bring information in real time to small and medium producers\. This could also be extended to include financial services\. The impact of this would likely be a higher volume of commercialization of basic food production from small producers\. 35\. During the development and presentation of the climate information systems, prices and certification of collection centers, it was identified that to enhance the scope of these systems, it was necessary to carry out institutional agreements to guarantee technical alliances\. During the technical workshop on agroclimatic information and early warning held on March 13, 2019, FAO identified the participation from the following strategic institutions: Comisión Nacional del Agua (CONAGUA), Gerencia de Aguas Superficiales e Ingeniería de Ríos (GASIR), Irrigation Districts, Servicio Meteorológico Nacional (SMN), Instituto Nacional de Investigaciones Forestales, Agrícolas y Pecuarias (INIFAP), Instituto Nacional de Estadística y Geografía (INEGI), Servicio de Page 45 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Información Agroalimentaria y Pesquera (SIAP) and Comité Nacional para el Desarrollo Sustentable de la Caña de Azúcar (CONADESUCA)\. 36\. As next step to strengthen the analysis of food prices from the platform installed in CIMA, it is important to identify possibilities to focus attention on the development of quantitative analyzes and to give greater emphasis to qualitative analyzes of prices\. Specifically, efforts should be focused on identifying in a timely manner price anomaly that are outside the standard variance of the seasonality of the product and analyzing its main causes and conclusions to inform public policy decision-making\. Three areas and proposals for the use and application of the FPMA were identified within the framework of the Agri-Food Table: (i) Integrate the databases that are analyzed in the Agri-Food Table in the FPMA; (ii) Incorporate the indicator of price anomalies in the traffic light scheme of the Agri-Food Board and identify critical situations in the markets in a timely manner; and (iii) Strengthen the qualitative analyzes of identified critical markets for better monitoring and decision making\. 37\. During 2018, the presidential election process was carried out, which meant, among other things, the establishment of a period of electoral closure from the beginning of the electoral campaigns that ran from March 30, 2018 until the time when elections were held on July 1st\. During this period, the dissemination of government propaganda was suspended in all media, such as publications in bulletins, brochures, posters, radio and television messages, posters, networks, among others\. Moreover, the change in Government administration meant the reformation of public policies in the different sectors, as well as administrative changes in Government structure\. In the case of the agricultural and livestock sector, the Ministry of Agriculture, Livestock, Rural Development, Fisheries and Food (SAGARPA) changed its name to the Ministry of Agriculture and Rural Development (SADER), which had immediate and important repercussions on the operation of the Project\. In fiscal year 2019, ASERCA had a late budget allocation and its main programs and actions were absorbed by the AMSYS Program (Social and Sustainable Agro-markets), currently under the responsibility of the General Directorate for the Promotion of Agriculture (DGFA) of SADER\. Both elements impacted the execution of the Project\. In 2018, due to a moratorium of government activities set forth before the election, ASERCA was forced to adjust the Project execution schedule, and only started the promotion of the call for investments proposals between August 3rd and September 6th\. This shorten the period for receiving requests, reviewing them, preparing business plans, managing and securing credit and for the overall administrative support\. 38\. Finally, another important lesson is that both, the World Bank and the authorities in charge of the Project supervision must monitor and ensure that the implementing agency has the budget to execute the activities and commitments related to the project\. B\. Client’s Letter commenting on the Bank’s final draft ICR Page 46 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Page 47 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Translated into English: Comments from the Agency for Services for the Commercialization and Development of Agricultural Markets (ASERCA) ASERCA believes that the Grain Storage and Information Services for Agricultural Competitiveness Project (the Project) has allowed it to successfully develop a model to meet the needs for technical and financial assistance to support small and medium producers' organizations in two vital areas: 1) to address the Page 48 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) existing deficit in grain storage infrastructure and 2) to improve access to information to correct certain market distortions to promote greater competitiveness\. The Project's objective is appropriate\. Based on implementation experience and results obtained, the Project as designed provides a mechanism to positively impact on increasing grain storage, strengthening competitiveness in marketing and establishing information channels to assist in decision-making by producers, as well as by authorities and institutions involved in the sector, mainly in the neediest states located in the central-southern part of the country (Table 1\. Presents the Main products achieved by the Project)\. The actions implemented by the Project have highlighted the existing unsatisfied demand for grain storage and the willingness of producers' organizations to participate in this type of infrastructure investment, among which the development of the Monitoring and Evaluation System (SIGE) stands out\. In addition, two new products were developed to make information more transparent, accurate and accessible throughout Mexico: the information platform for price monitoring and analysis and the platform for monitoring agro-climatological-based irrigation, both of which were part of the Unique Agricultural Market System (SUMA)\. Both are in the completion phase as of June 2020 (Table 2\. Components and Inter- institutional coordination for the construction of SUMA and SIGE)\. The deficiencies that gave rise to this project continue to persist and open new possibilities in the face of conditions and shortcomings that make it necessary to work on eliminating barriers to competitiveness and promoting the financial inclusion of agricultural production by small and medium-scale producers\. Undoubtedly, it will be necessary to continue promoting initiatives aimed at creating more and better infrastructure for grain storage, and also to deliver technical assistance to strengthen small and medium- sized producers, as well as to develop methodologies for the certification of grain storage and the promotion of grain productivity and competitiveness\. It will also be important to continue working on access to transparent information on prices of agricultural products, especially prices of maize and other basic grains, production and storage (inventories), in order to make markets more equitable for small producers\. Finally, as highlighted from this work with producer organizations, there is an urgent and a priority need to increase their access to financial mechanisms and support investments in human capital to reduce post-harvest losses\. SADER will keep this project model as a tool to support generate in the future public goods in favor of poverty reduction and food security in Mexico\. Besides the implications that led to the closing of the Project, the institution was always aware of its obligations as an executor and was attentive to fulfilling the commitments made to the World Bank and the participating institutions through the Project Coordination Unit, and other relevant institutional areas that participated in its execution\. Page 49 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) Tabla 1\. Principales productos obtenidos por el Proyecto CATEGORÍA DE GASTO / PRINCIPALES RESULTADOS OBTENIDOS SUBCOMPONENTE 1\. Bienes y obra bajo Subproyectos de almacenamiento de granos bajo la parte 1\.1\. del Proyecto\. i\. Realización de una evaluación ambiental y social en la zona de intervención del Proyecto\. ii\. Realización de eventos de promoción y difusión del Proyecto\. iii\. Lanzamiento de la primera y única convocatoria para Subproyectos de almacenamiento de granos el agosto de 2018\. iv\. Resultados de la convocatoria: - Recepción de 96 expresiones de interés, de los 7 estados del Proyecto: Chiapas, Guanajuato, México, Michoacán, Oaxaca, Puebla y Veracruz\. - 25 solicitudes cumplieron con todos los requisitos iniciales\. - 19 cubren las características para recibir el apoyo\. - 17 Organizaciones de Productores desarrollaron su Plan de Negocio\. 1\.1\. Mejoramiento de la infraestructura - 12 Organizaciones firman Convenio de Concertación\. para el almacenamiento de granos\. - En 2019, 4 Organizaciones se desisten por la tardanza en la entrega del incentivo\. - Participan 39 proveedores en la proveeduría de equipamiento e infraestructura, mediante el método de prácticas comerciales utilizado por las mismas Organizaciones de Productores\. - 7 Organizaciones firman Convenio Modificatorio en el mes de septiembre de 2019 para recibir el incentivo\. - 1 Organización hace mal uso del incentivo y se le solicita devolución\. - El Especialista de infraestructura de la UCP hace supervisiones a las 7 Organizaciones con Subproyectos en ejecución\. - 1 Organización incumple con los términos del Convenio de Concertación y su Modificatorio\. - 6 Organizaciones de Productores terminan su Subproyecto al cierre de 2019 y cumplen con los compromisos legales\. 2\. Bienes, servicios de consultoría, desarrollo de capacidades y costos incrementales bajo la parte 1\.2\. y 2 del Proyecto CIMMYT i\. Participó en el desarrollo de un levantamiento de información para el fortalecimiento de capacidades, determinando actores clave y metodología\. ii\. Elabora un plan de capacitación de asesores técnicos de las Organizaciones para la elaboración de PdN, y para las Organizaciones en temas técnicos y administrativos\. iii\. Llevó a cabo un total de 88 cursos y talleres de capacitación (concentrados en 15 temas), 29 corresponden a capacitaciones a técnicos y pequeños productores, 57 a las organizaciones participantes y beneficiarias, entre los meses de octubre de 2018 a julio de 2019\. También llevó a cabo 4 eventos de capacitación e integración para sus asesores técnicos, con la participación del personal de ASERCA\. iv\. Participó en el diseño y construcción de los mecanismos para el seguimiento de las salvaguardas ambientales y sociales, que serían insertados a la base concentradora del Sistema Integral de Seguimiento y Cumplimiento de Salvaguardas Ambientales\. v\. Elaboración de documento de conceptualización y metodología de operación y mantenimiento de centros de acopio y centros de almacenamiento\. vi\. Elaboración de normas o guías de calidad de grano manejado en la operación, administración y manejo de los centros de acopio y centros de almacenamiento 1\.2\. Mejoramiento de las operaciones de apoyados con el proyecto\. almacenaje y control de calidad de granos\. vii\. Desarrollo 4 documentos sobre la calidad y manejo de maíz: Determinación de Calidad de Maíz Pozolero, Determinación de Calidad de Semilla, Manual de Maíz Azul, y Normas o guías de calidad de grano manejado en los centros de acopio y centros de almacenamiento\. viii\. Conceptualización y diseño de un sistema de información, operación, administración y monitoreo de indicadores para el sistema de información para centros de acopio y centros de almacenamiento\. ix\. Elaboración de un documento con flujos de información para centros de acopio y centros de almacenamiento, trazabilidad y usuarios\. FAO i\. Adaptación del Agricultural Stress Index System (ASIS), sistema para el monitoreo y estimación de eventos climatológicos y predicción de su efecto en las cosechas de granos\. ii\. Análisis MultiRIesgos ClimÁticos (sistema AMeRICA)\. Junto con ASIS, este sistema coadyuvará al cálculo de eventos climáticos extremos y su impacto en la agricultura\. Page 50 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) iii\. Elaboración de base de datos con Sistema de Información Geográfica (SIG) para caracterizar “hot spots” de impacto por eventos dinámicos extremos\. iv\. Herramienta para el análisis de precios y mercados para el monitoreo y la alerta de precios agropecuarios (FPMA por sus siglas en inglés)\. Los beneficiarios directos e indirectos del proyecto cuenten con una propuesta conceptual consensuada de un mecanismo de certificación viable para atender a las necesidades de los centros de acopio de pequeña y mediana escala (infraestructura y gestión de calidad del grano)\. 2\.1\. Desarrollo, operación y mantenimiento i\. Integración de los primeros pasos para el desarrollo del SUMA\. de un sistema de información para el IICA mercado de granos y el manejo, incluyendo la recolección de datos y su integración, así i\. Metodología para recabar y sistematizar la información de fuentes institucionales\. como actividades para el desarrollo de ii\. Recomendaciones para que ASERCA mejore el acceso a la información de inventarios en almacenes de depósito\. capacidades que permitan el uso y iii\. Metodología e instrumentos para el levantamiento en campo de los precios al productor\. recolección de datos\. iv\. Herramienta informática para capturar y organizar la información de fuentes institucionales\. v\. Herramienta informática para capturar y organizar la información de precios levantada en campo\. - Contratación del personal de la UCP\. - Avance de un 75% en el desarrollo del SIGE\. - Desarrollo de un plan para el monitoreo y evaluación de salvaguardas ambientales y sociales que no logró implementarse\. - Avance de 50% en el proceso de desarrollo de un estudio de línea base del Proyecto\. - Atención del 100% de los compromisos: informes técnicos, informes financieros, adquisiciones, auditoría del Proyecto\. 2\.3\. Acciones para la preparación, CIERRE DEL PROYECTO: implementación, monitoreo y evaluación del - Informe de actividades final del Proyecto\. No objeción: 12 de mayo de 2020\. Proyecto\. - Cierre finiquito de los 6 subproyectos elegibles, terminados\. - PAC de cierre\. No objeción: fecha 11 de junio de 2020\. o Plan de cierre del Proyecto\. o PAC de cada uno de los subproyectos, cartas solicitud y cuadros comparativos de proveedores\. - Estados financieros para el cierre del Proyecto: i\. Del 1 de enero de 2019 al 31 de enero de 2020 (No objeción: 28 de mayo de 2020), ii\. Del 1 de febrero de 2020 al 31 de mayo de 2020 (No objeción: 28 de mayo de 2020), y iii\. Del 1 de enero de 2020 al 31 de enero de 2020 (No objeción: 3 de junio de 2020)\. - Auditoría de cierre del Proyecto\. Al 23 de junio, ésta se está llevando a cabo por el BDO Despacho Castillo Miranda y Cía, S\.C\. Tabla 2\. Elementos y vinculación inter-institucional para la construcción del SUMA y el SIGE) Organismo o Producto Vinculación Institución Acción transversal - Operación SUMA (Sistema Único de Mercados Agropecuarios) i\. Agricultural Stress Index System (ASIS)\. Sistema para el monitoreo y estimación de eventos climatológicos y predicción de su efecto en las Desarrollo y puesta en marcha del SUMA\. cosechas de granos\. ii\. Análisis MultiRIesgos ClimÁticos (sistema AMeRICA)\. Junto con ASIS, este sistema coadyuvará al cálculo de eventos climáticos extremos y su Sistema de información agroclimatológica y de impacto en la agricultura\. alerta temprana a través de una plataforma de FAO iii\. Elaboración de base de datos con Sistema de Información Geográfica (SIG) para caracterizar “hot spots” de impacto por eventos dinámicos uso público a disposición de los productores CIMA extremos\. agropecuarios\. iv\. Herramienta para el análisis de precios y mercados para el monitoreo y la alerta de precios agropecuarios\. (FPMA) v\. Los beneficiarios directos e indirectos del proyecto cuenten con una propuesta conceptual consensuada de un mecanismo de certificación viable Sistema de precios, análisis y alerta de precios para atender a las necesidades de los centros de acopio de pequeña y mediana escala (infraestructura y gestión de calidad del grano)\. de mercado, levantamiento de precios del i\. Metodología para recabar y sistematizar la información de fuentes institucionales\. productor e institucionales\. ii\. Recomendaciones para que ASERCA (o la institución que se defina) mejore el acceso a la información de inventarios en almacenes de depósito\. IICA iii\. Metodología e instrumentos para el levantamiento en campo de los precios al productor\. Conceptualización y metodología de operación iv\. Herramienta informática para capturar y organizar la información de fuentes institucionales\. y mantenimiento de centros de acopio y centros v\. Herramienta informática para capturar y organizar la información de precios levantada en campo\. de almacenamiento, que incluya un mecanismo Page 51 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) i\. Documento de conceptualización y metodología de operación y mantenimiento de centros de acopio y centros de almacenamiento\. de certificación viable\. ii\. Normas o guías de calidad de grano manejado en la operación, administración y manejo de los centros de acopio y centros de almacenamiento apoyados con el proyecto\. Sistema de información, operación, iii\. Conceptualización y diseño de un sistema de información, operación, administración y monitoreo de indicadores para el sistema de información administración y monitoreo de indicadores para CIMMYT para centros de acopio y centros de almacenamiento\. el sistema de información para centros de iv\. Documento con flujos de información para centros de acopio y centros de almacenamiento, trazabilidad y usuarios\. acopio y centros de almacenamiento\. Capacitación y asistencia técnica\. SIGE (Sistema de Información y Gestión para el Monitoreo y Evaluación del Proyecto) i\. Asistencia técnica para la formulación de planes de negocio de las organizaciones de productores interesadas en presentar propuestas de infraestructura y equipamiento para el almacenamiento de granos\. CIMMYT ii\. Metodología para monitorear y observar la atención de las salvaguardas, con base en el documento de planeación desarrollado por el Desarrollo y puesta en marcha del SIGE\. proyecto\. Seguimiento de los planes de negocio\. iii\. Reporte de monitoreo y observación de salvaguardas\. Capacitación\. INFOTEC i\. Planeación, arquitectura y desarrollo de los módulos que componen el SIGE\. Page 52 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) ANNEX 6\. SUPPORTING DOCUMENTS - Project Appraisal Document (PAD2242) - Loan Agreement N 8729MX\. November 13th, 2017 - Implementation Supervision Reports (ISR) - Technical Supervision Reports - Semester Progress Reports - Financial Management Supervision Reports - Aide Memoires - BCR 2020\. Borrower’s Completion Report\. Ciudad de México: ASERCA\. - CPF 2020-2025 – World Bank 2020\. Country Partnership Framework Mexico 2020-2025\. Report 137429-MX\. Washington DC: World Bank\. - CPS 2014-1019 – World Bank 2014\. Country Partnership Strategy Mexico 2014-2019\. Report N° 104752-MX\. Washington DC: World Bank - EMP\. Environmental Management Plan\. Ciudad de Mexico: ASERCA\. - Oficio 2019\. Oficio No35\.232/2019 Solicita análisis para terminación anticipada del Proyecto de Almacenamiento de Granos y Servicios de Información para la Competitividad Agrícola – ALGRANO-SI del 17 de julio de 2019\. Ciudad de México: Secretaria de Hacienda y Crédito Público\. - Oficio 2020\. Oficio No305-005/2020\. Sobre solicitud terminación anticipada del Proyecto de Almacenamiento de Granos y Servicios de Información para la Competitividad Agrícola – ALGRANO-SI del 8 de enero de 2020\. Secretaria de Hacienda y Crédito Público\. - PND 2019-2014 – Gobierno de México 2019\. Plan Nacional de Desarrollo 2019-2024\. México DF: Presidencia de la República de los Estados Unidos Mexicanos\. Page 53 of 55 The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) ANNEX 7\. PROJECT RELATED SUPPORTING INFORMATION AND DATA Approved and Financed Subprojects Producer Organization Productores Agrícolas del Rio Lerma SPR de RL Graneros San Jorge SPR DE RL DE CV El Granero del Rio Eufrates SPR DE RL Servicios Agrícolas de Briseñas SPR DE RL Comercializadora de Granos Vista SPR DE RL Agricultores Unidos Región Guayangareo SPR DE RL Source: https://www\.gob\.mx/cms/uploads/attachment/file/527273/Listado_de_Beneficiarios_Infraestructura_Corte_al_31_de_Diciem bre_2019\.pdf Page 54 of 55  The World Bank Grain Storage and Information for Agricultural Competitiveness (P160570) ANNEX 8\. MAP Map - Producer organizations subprojects\. *Map shows all seven subprojects that were initially financed by the project\. Page 55 of 55

REVIEW

P111849

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) Report Number : ICRR0020815 1\. Project Data Project ID Project Name P111849 LB - ESPISP 2 Country Practice Area(Lead) Lebanon Social Protection & Labor L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) TF-92582,TF-97692 31-Mar-2012 6,000,000\.00 Bank Approval Date Closing Date (Actual) 05-Sep-2008 31-Dec-2016 IBRD/IDA (USD) Grants (USD) Original Commitment 7,765,094\.00 7,765,094\.00 Revised Commitment 6,787,800\.43 6,787,800\.43 Actual 6,787,800\.43 6,787,800\.43 Prepared by Reviewed by ICR Review Coordinator Group Hjalte S\. A\. Sederlof Judyth L\. Twigg Joy Behrens IEGHC (Unit 2) 2\. Project Objectives and Components a\. Objectives The original Project Development Objective (PDO), as set out in the Grant Agreement, was to improve the administration, delivery, financial sustainability, and targeting of social insurance, social safety net, health, and public education services\. The PDO as set out in the Emergency Project Paper (EPP) was to improve the administration, delivery, financial sustainability, and targeting of social services through implementation of new systems and the adoption of new policies in the National Social Security Fund (NSSF), the Ministry of Labor (MOL), the Ministry of Public Health (MOPH), the Ministry of Social Affairs (MOSA)/Council of Ministers (PCM), and the Page 1 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) Ministry of Education and Higher Education\. The PDO was revised in March 2013 in a Level 1 restructuring due to lack of progress on the social insurance objective, which was replaced by a youth employment objective\. At the same time, the PDO was reformulated to provide more specific sector objectives\. The revised PDO was to (i) strengthen the capacity of the MOL to promote youth employment; (ii) rationalize public health expenditure; (iii) establish a national poverty targeting system for social safety net programs; and (iv) increase availability of education data for decision making in the Ministry of Education and Higher Education\. Some key outcome indicators were also revised\. A split evaluation will be undertaken, with project outcomes being assessed against both the original and revised project objectives\. The two original PDOs are materially consistent, and the version in the Grant Agreement will be used for assessing efficacy under the original objectives\. 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-Mar-2013 PHEVALUNDERTAKENLBL c\. Will a split evaluation be undertaken? Yes d\. Components The Second Emergency Social Protection Implementation Project (ESPIP2) had five original components: Component 1: Modernization of the social insurance system (estimated total cost at appraisal US$ 2\.25 million; actual cost US$ 0\.70 million)\. The component aimed at improving financial stability and administration in the NSSF\. It included three sub-components: Sub-component 1: further development of policies and systems to increase revenues and control expenditures in the health insurance branch of the NSSF; Sub-component 2: improve administrative and business processes in NSSF; and Sub-component 3: advisory services to strengthen MOL's monitoring function as custodian to the NSSF\. Component 2: Rationalizing public sector health expenditures (estimated cost at appraisal US$ 1\.55 million; actual cost US$ 0\.66 million)\. The component was to improve efficiency in MOPH expenditures\. It included the creation of a modern utilization management function and the design of modern indicator- based hospital contracts, supported by necessary information technology (IT) and human resources investments\. Page 2 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) Component 3: National poverty targeting program for social safety nets (NPTP) (estimated cost at appraisal US$ 9\.34 million; actual cost 3\.76 million)\. The component was to establish a national targeting system for the delivery of social transfers and services\. It included the national roll-out of the NPTP based on the implementation of the following sub-components: Sub-component 1: establishment of the NTPT database on the poor and vulnerable population; Sub-component 2: preparation and implementation of a public information campaign; Sub-component 3: capacity building for monitoring and evidence-based policy making to ensure performance of the targeting mechanism; and Sub-component 4: setting up the institutional structure in the PCM to manage the NPTP\. Component 4: Education sector performance and quality enhancement (estimated cost at appraisal US$ 2\.05 million; actual cost US$ 0\.99 million)\. The component was to institutionalize performance-based and quality-focused approaches in the MEHE and at the school level\. It included three sub-components: Sub-component 1: development of an educational SWAp framework for a second phase of education sector reform, including a medium-term expenditure framework (MTEF) and key performance indicators; Sub-component 2: adoption of performance based principles and practices in the general education system; and Sub-component 3: implementation of quality-oriented tools in the MEHE and the introduction of school- based management practices\. Component 5: Fiduciary operations (estimated cost at appraisal US$ 0\.77 million; actual cost US$ 1\.09 million)\. The component was to support a Fiduciary Operations Team (FOT) responsible for procurement and financial management under the project\. Revised components The first component was revised in March 2013 due to slow progress on its implementation stemming from internal resistance to the reforms in the implementing agency (the NSSF), and all activities relating to the component were dropped\. A new component was introduced to support a pilot program to improve employability of first-time job seekers, essentially youth between the ages of 16 and 30\. The new component combined training and intermediation with employer incentives to encourage the hiring of program participants\. The program was to be managed by MOL, with NGOs contracted to undertake recruitment, training, placement, and monitoring of the program\. Activities included life skills training; job search techniques and counseling; practical on-the-job training in private enterprises; and job vouchers and wage subsidies\. The new component also included a strategic planning unit in MOL, and a technical feasibility study to automate MOL\. With the exception of the first component (social insurance, and subsequently, employability), the components remained largely unchanged, with only minor adjustments\. e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project cost and financing: Total project costs at appraisal were estimated at US$ 15\.96 million; actual costs were US$ 15\.95 million\. The Bank provided a grant of US$ 6 million from a Trust Fund for Lebanon Page 3 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) (TFL), established by the Bank at a donors’ conference in 2006 to assist in the reconstruction of Lebanon in the aftermath of hostilities in the region\. Canada provided a US$ 2 million grant, and Italy provided a US$ 0\.6 million grant, both to support Component 3, the national poverty targeting program\. Borrower contribution: The Borrower provided US$ 6\.75 million for Components 2, 3 and 4; while local hospitals provided US$ 0\.6 million for Component 2\. Dates: The project was approved on September 5, 2008, and it became effective on January 27, 2009\. The Closing Date, initially set for March 31, 2012, was extended three times to reflect three project restructurings: • A first, Level 2, restructuring occurred on September 30, 2011, postponing the Closing Date from March 31, 2012, to March 30, 2013\. The restructuring reflected delays in implementation due to a volatile political situation that slowed the decision making process on the project\. • A second, Level 1, restructuring occurred on March 27, 2013, postponing the Closing Date a second time by 17 months to August 31, 2014\. The postponement was due to delays in implementing NSSF reforms, and led to a revision of the PDOs and Component 1 of the project\. • A third, Level 2, restructuring occurred on July 14, 2014, postponing the Closing Date a third time by 16 months to December 31, 2016, when the project closed\. This last restructuring was needed to adjust implementation plans and schedules due to a political stalemate in the country\. 3\. Relevance of Objectives & Design a\. Relevance of Objectives The original as well as the revised PDOs are consistent with Lebanon’s current development priorities in social protection and education, and in line with the Bank’s current country and sector strategy\. At the same time, targets set for knowledge transfer in the social sectors do not always seem commensurate with the country’s absorptive capacity (see Section 4)\. That said, the PDOs support the country’s comprehensive social reform program that initially was introduced at a donor conference in the early post-conflict stage (in 2006) to reduce economic and social risk among the population, and to serve as a means to strengthen national identity\. The program, which was approved by donors, including the Bank, continues to provide the basis for the Government’s economic policy making and reform efforts\. The PDOs also reflected Bank priorities for Lebanon as set out in an Interim Strategy Note developed on the basis of Bank economic and sector work around the time of the conference\. Since then, a Country Partnership Strategy (CPS) for the FY2017-22 period has been developed\. One of its two focus areas (Focus Area 2) emphasizes job creation and skills development, continued strengthening of the health sector, and further developing the safety net\. These elements take on particular importance with the ongoing crisis in Syria and the influx of Syrian refugees into Lebanon\. Page 4 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) Rating Revised Rating Substantial Substantial b\. Relevance of Design The project, in its original and revised form, built on prior projects, with a view to subsequent, more sector- specific support\. (The project would be followed by sector specific projects in the lending program\.) The original results framework had a broad statement of objectives that were consistent with, although not explicitly addressing, the multiple objectives sought in each case – improved administration, delivery, financial sustainability, and targeting of services\. For instance, better claims processing and specific criteria for facility entry and exit, combined with facility-level performance monitoring, were to help rationalize hospital sector expenditures and improve administration, delivery, financial sustainability, and targeting of hospital services\. The theory of change does not specify further how each of those objectives were to be achieved, although their achievement over time is plausible with the activities that were being introduced\. The same is valid for the other services supported under the project – social insurance, safety nets and education\. The revised objective was more specifically linked to project components: for instance, the theory of change sets rationalization of the hospital sector as the sector objective to be achieved by implementing the measures indicated above\. Likewise, objectives for other sector interventions were also more specifically defined, allowing for a well-defined causal chain between funding and outcomes\. In both its original and revised version, the design may have been ambitious, as reflected in the difficulties encountered in implementing health insurance modernization and youth employment measures (see Section 4)\. Rating Revised Rating Modest Substantial 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective improve the administration, delivery, financial sustainability, and targeting of social insurance Rationale No outputs or outcomes\. The MOL began preparing reforms aimed at improving its administrative systems and financial flows in NSSF\. However, progress was stalled, as priorities at the political level changed\. Consequently, no outputs or outcomes were reported for this objective\. Page 5 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) Rating Negligible PHREVDELTBL PHINNERREVISEDTBL Objective 1 Revision 1 Revised Objective Strengthen the capacity of the MOL to promote youth employment Revised Rationale Outputs • A competitive selection process was initiated with five NGOs to help launch component activities (not completed)\. • A competitive selection process was initiated to conduct a baseline survey (not completed)\. • A project coordinator was hired\. • A communications campaign was designed (not implemented)\. • An IT system for registering and tracking beneficiaries was developed\. • An operating manual was drafted for the program\. Outcomes The new project component aimed at facilitating entry into work for first-time job seekers\. While some activities were initiated, completion was affected by a tight implementation schedule and a lack of urgency on the part of the national authorities\. Consequently, the Bank decided not to further extend project closing, and no outcomes related to this objective are reported\. Revised Rating Negligible PHEFFICACYTBL Objective 2 Objective Improve the administration, delivery, financial sustainability, and targeting of social safety net services Rationale Outputs • A national poverty targeting program (NPTP) based on proxy means-testing was developed and is being used to target services to poor households\. • A data base on poor households was established\. • A central management unit for the program was established and is operational at the time of the ICR\. • An information campaign was undertaken\. Page 6 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) Outcomes The project aimed at establishing an operational national poverty targeting program (NPTP)\. As of the time of the ICR, key elements are in place: an administrative structure underpinned by a registry and a targeting mechanism based on proxy means-testing\. While only administration and targeting objectives are explicitly addressed, these elements are likely also to have a direct and favorable impact on facilitating service delivery and supporting financial sustainability of programs\. Rating Substantial PHREVDELTBL PHINNERREVISEDTBL Objective 2 Revision 1 Revised Objective Establish a national poverty targeting system for social safety net programs Revised Rationale Outputs See Original Objective 2, above Outcomes The national roll-out of the NTPT is underway: as of the time of the ICR, some 102,000 beneficiary households have been identified and are receiving benefits under the program, compared to a target of 60,000\. Revised Rating Substantial PHEFFICACYTBL Objective 3 Objective Improve the administration, delivery, financial sustainability, and targeting of health services Rationale Outputs • An automated claims processing system was put in place and is operational\. • Admissions criteria for 40 high-cost, high-volume conditions, and monitoring of conditions that were prone to misuse in admissions and use of inpatient resources, were established\. Outcomes Page 7 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) • At the time of the ICR, 90 percent of individual claims are processed and paid within 2 weeks as compared to several months previously\. • The average number of days for processing a hospital bill was reduced from 35 days in 2008 to 5 days in 2014\. • The share of admissions according to standard admissions criteria rose from zero at the start of the project (when the criteria still did not exist) to 83 percent in 2014, compared to a target of 75 percent\. • Hospital admissions became more appropriate, as reflected in: (a) a case mix index that increased from 1\.14 to 1\.18 (i\.e\. towards more complex cases); and (b) an average number of cases per month and average cost per case that decreased by 22\.7 percent and 5\.1 percent, respectively\. While the documentation does not explicitly relate outputs/outcomes to objectives, it is reasonable to assume that, when correctly pursued, the introduction of a modern hospital utilization management function into the relationship between MOPH and hospitals will translate into improved administration, improved efficiency in MOPH spending (financial sustainability), and horizontal efficiency (targeting) in delivery\. Rating Substantial PHREVDELTBL PHINNERREVISEDTBL Objective 3 Revision 1 Revised Objective Rationalize public health expenditures Revised Rationale The outputs and outcomes reported under Original Objective 3, above, point to substantial achievement of the objective to rationalize public health expenditures\. Revised Rating Substantial PHEFFICACYTBL Objective 4 Objective Improve the administration, delivery, financial sustainability, and targeting of public education services Rationale Outputs • An education management information system (EMIS) was established\. • An education sector development secretariat (ESDS) was established in the MEHE and is responsible for policy, planning, and information functions in the Ministry\. • A medium-term expenditure framework (MTEF) was introduced to provide a framework for developing Page 8 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) education sector performance-based budgets\. • A first national round table was held in 2010 to analyze international learning assessment tests, including training of staff in analyzing such tests\. Outcomes • With the 2011 education budget being implemented using performance-based budgeting, MEHE operations are increasingly being undertaken using a performance-based management approach; where the EMIS increasingly is being used for evidence based decision making (ICR pp\. 22-23)\. The interventions focus on improving the administration of public education services through better budget planning and management, and a comprehensive management information system\. While none of the interventions are flagged as specifically addressing objectives of financial sustainability, delivery, or targeting, it is reasonable to assume that financial sustainability and service delivery over time will improve as a result of new institutions\. Better targeting of education services was achieved by drawing on information in the NPTP to decrease education costs and improve access for children from poor households\. Rating Substantial PHREVDELTBL PHINNERREVISEDTBL Objective 4 Revision 1 Revised Objective Increase availability of education data for decision making in the Ministry of Education and Higher Education Revised Rationale While outputs and outcomes under the original and revised project were the same (see above under original Objective 4), the formulation of the more specific revised objective allows for a more direct link between outputs and outcomes than is the case in the original version\. Revised Rating Substantial PHREVISEDTBL 5\. Efficiency Neither economic nor fiscal analysis was undertaken in the PAD or the ICR\. The team argued that SEQAP mainly was a technical assistance project, and that relevant data that would contribute to such an analysis was scarce\. The ICR does not report any analysis or estimate of whether the costs involved in achieving project objectives were reasonable in comparison with other similar technical assistance Page 9 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) projects\. Juxtaposing the speed, flexibility, and simplicity of emergency assistance with the reigning political situation, it is appropriate to question whether costs were reasonable, especially since the project produced fewer benefits and did not deliver on key outputs that were anticipated in the original project and subsequently under restructuring\. 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 The relevance of the original and revised PDO are both rated substantial, as they responded to country needs, and Government and Bank policy\. Relevance of design under the original objectives is rated modest, reflecting weaknesses in linking planned activities and intended outcomes; relevance of design under the revised objectives is rated substantial, as the tighter formulation of the reformulated objectives better reflected the plausible results of the planned activities\. Under the original objectives, efficacy is rated negligible for social insurance in the absence of recorded outcomes; and substantial for safety nets, health and education, reflecting plausible links of project outcomes to administration, delivery, financial sustainability and targeting\. Efficacy ratings for the revised objective were negligible for youth employment in the absence of recorded outcomes; and substantial for safety nets, health, and education, reflecting steady progress towards the more specific objectives in those areas\. Efficiency is rated modest under both the original and revised objective, reflecting lack of economic or financial analysis\. Based on these ratings, the outcome ratings under the original and revised objectives are both Moderately Satisfactory\. According to OPCS/IEG guidelines for restructured projects, the final outcome rating is determined by the ratings for the original project and the restructured project, weighted by the percentage of the grant that disbursed before and after the restructurings\. As both ratings were moderately satisfactory, the overall rating is also moderately satisfactory a\. Outcome Rating Page 10 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating Drawing on the discussion in the ICR (p\. 11), the geo-political risk may be moderate to high, although the domestic political situation is deemed better than at start-up and implementation of the project under review, stakeholder familiarity with the Bank is higher, and agency capacity is likely to have improved through this project and related projects under implementation\. Still, risk would still appear to be substantial, although moderated by an active Bank lending and advisory services portfolio in the sectors covered by this project, including education, poverty analysis, social insurance, and employment, which would tend to reduce the non- political risk elements in the future\. a\. Risk to Development Outcome Rating Substantial 8\. Assessment of Bank Performance a\. Quality-at-Entry At appraisal, the project team emphasized the strategic importance of early Bank intervention in the Lebanese post-conflict situation – in maintaining the momentum gained in earlier Bank projects, and for building and restoring key social policy institutions; that urgency is reflected in the risk assessment at project start-up\. This approach led to an intervention on a broad scale with an unclear statement of objectives and a weak causal chain\. The preparation approach also may have overestimated implementation capacity – political and technical – at the national level, resulting in revisions to the project\. At the same time, follow-up engagements with Lebanon in the social policy area point at least to partial success in moving forward in a risky situation\. Quality-at-Entry Rating Moderately Unsatisfactory b\. Quality of supervision Reflecting the risk assessment, supervision was intense and hands-on, managed by a country-based task manager and a team of specialists\. This approach resulted in a redesign of the results framework, and successful implementation of the revised project\. Challenging political economy considerations meant that the redesign occurred relatively late during the project period\. Page 11 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) Quality of Supervision Rating Moderately Satisfactory Overall Bank Performance Rating Moderately Satisfactory 9\. Assessment of Borrower Performance a\. Government Performance The main government agencies – the Council of Ministers and the Ministry of Finance – remained supportive of the project throughout preparation and implementation, although stronger focus might have helped avoid some of the failings under component 1\. Here, disruptions due to government changes may have prompted some of the problems experienced\. Government Performance Rating Moderately Satisfactory b\. Implementing Agency Performance The project had six implementing agencies – the NSSF, the MOL, the MOSA, the MOPH and the MEHE, as well as a Fiduciary Operating Team (FOT)\. Based on component performance, the MOSA, MOPH and the MEHE performed well, as did the FOT\. Weak results in the social assistance and youth labor components appear to have reflected some resistance on the part of the agencies concerned, as well as capacity constraints, as new activities were being introduced\. Implementing Agency Performance Rating Moderately Satisfactory Overall Borrower Performance Rating Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization a\. M&E Design The results framework under both the original and revised PDO was coherent, albeit with more specific links between outputs and outcomes in the revised project\. Indicators were well-defined and focused on institutional improvements (better processes, information systems, etc\.), reflecting the technical-assistance nature of the project\. In some instances (financial sustainability, poverty targeting), quantitative targets were set; and, where feasible, baselines were introduced\. Monitoring, and evaluation functions for each component were to be undertaken by a designated project implementation team within each beneficiary agency, supported by the Page 12 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) Bank supervision team located in Beirut\. In some cases, impact assessments were envisaged (essentially under the dropped components); in others management information systems designed under the project were to be drawn on for evidence-based adjustment to beneficiary agency processes\. b\. M&E Implementation Monitoring was implemented by a designated project implementation team in each participating agency with assistance from the Bank team\. All indicators included in the Results Frameworks were reported as part of the supervision process\. Weaknesses in design, including adjustments to indicators as objectives were revised, were corrected during implementation, and are reflected in in the revised Results Framework and in closing date postponements\. c\. M&E Utilization With frequent interaction between the agency monitoring teams and the Bank team, the M&E data was used for decision making on the institution building on an ongoing basis\. This served to inform interventions to adjust processes as they were being implemented\. M&E Quality Rating Substantial 11\. Other Issues a\. Safeguards ESPISP 2 was rated as environmental category C, and no safeguard policies were triggered\. b\. Fiduciary Compliance As noted in the ICR (p\. 15), a fiduciary operations team (FOT), hosted in the Presidency of the Council of Ministers (PCM) and composed of a Coordinator, two Procurement Specialists, one Financial Management Specialist, and one Project Assistant, carried out the procurement and financial management functions of the project\. It provided support to the Project’s implementing agencies\. In general, fiduciary compliance was found to be adequate and satisfactory\. The following issues were highlighted: (a) the Government’s original decree approving the grant mentioned that it was funded from the TFL, when in fact it was funded from the interest accrued to the TFL\. This delayed approval of the March 2013 restructuring\. This error was ultimately resolved only in April 2016, and resulted in halting implementation from February 2015 to April 2016; (b) occasional changes in staffing in the FOT and the need to provide training on World Bank procedures; (c) delays in contracting auditors in 2014 pending cabinet approval; and (d) minor recommendations resulting from Page 13 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) procurement post reviews, such as those relating to the need to publish contract awards\. Audit reports were submitted regularly and contained minor recommendations\. The audit for the last three years was combined, given the low levels of disbursements, as all activities except for Component 1 had been completed\. c\. Unintended impacts (Positive or Negative) None reported\. d\. Other --- 12\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Moderately Moderately Outcome --- Satisfactory Satisfactory Risk to Development Substantial Substantial --- Outcome Moderately Moderately Bank Performance --- Satisfactory Satisfactory Moderately Moderately Borrower Performance --- Satisfactory Satisfactory Quality of ICR Modest --- 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 Lesson drawn by IEG: A favorable political environment is a prerequisite for effective reform\. A major lesson from the project, and especially the restructuring, is the need to invest only when the political economy in the sector is favorable for reform and for ensuring national ownership of reforms across all political parties\. During periods when there is insufficient commitment to reform in a sector, it may make sense for the Bank to focus instead on continued Page 14 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) policy dialogue with the Government through analytical work and outreach\. Lessons drawn from the ICR (pp\. 29-31): Emergency projects include a wide spectrum of responses to crises, but political uncertainty adds to the complexity of emergency assistance\. Emergency assistance, as provided for under OP/BP 8\.00, is meant to comprise speed, flexibility, and simplicity\. Normally, in emergency situations, governments are united in their commitment to the objectives of emergency assistance\. An environment of political uncertainty adds a further dimension to responding to emergency situations and can have a potentially detrimental impact on the components of emergency assistance\. This was evident under this project, as the NSSF lost commitment to the reforms it was to implement\. Multi-sectoral projects, with several implementing agencies, are notoriously complex, all the more so in an emergency mode\. Detailed procedural manuals and guidelines along with regular training can enhance the efficiency and quality of a project’s implementation\. Further, having a separate unit to handle fiduciary matters may well be the most efficient way of handling aspects that could otherwise stall implementation\. While this project was unconventional in that it had a higher level objective of building a pipeline of subsequent human development projects in support of the Government’s Social Action Plan, normally, in emergency situations, it would be preferable to have more simply structured projects, with fewer implementing agencies and sectors\. It is possible, in a post-conflict environment, to achieve concrete institutional reforms\. This project was successful in achieving significant institutional reforms in health, education, and social protection\. Most of these are notable and can be considered difficult even in more stable environments\. Reforming the hospital contracting system, establishing a comprehensive safety net program relying on a single data base of the poor, and objective targeting mechanisms are institutional reforms that many countries struggle to achieve\. 14\. Assessment Recommended? Yes Please explain To provide greater clarity and complement the analysis of project efficacy\. 15\. Comments on Quality of ICR The ICR provides an adequate basis for assessing the program\. However, the quality of the evidence and the analysis could have been stronger\. While the discussion is results-oriented, it does not sufficiently address the mixed results orientation, and the presentation makes it difficult to distinguish achievements under the original project from those of the revised one\. Still, the document is internally consistent, and consistent with OPCS Page 15 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LB - ESPISP 2 (P111849) guidelines\. a\. Quality of ICR Rating Modest Page 16 of 16

REVIEW

P087716

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) Report Number : ICRR0020456 1\. Project Data Project ID Project Name P087716 LA-Khammouane Development Project Country Practice Area(Lead) Additional Financing Lao People's Democratic Republic Agriculture P127176 L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IDA-H4040,IDA-H7560,TF-92394 31-Mar-2014 19,611,700\.00 Bank Approval Date Closing Date (Actual) 17-Jun-2008 31-Mar-2016 IBRD/IDA (USD) Grants (USD) Original Commitment 9,000,000\.00 985,000\.00 Revised Commitment 17,600,000\.00 800,973\.05 Actual 16,384,170\.18 800,973\.05 Prepared by Reviewed by ICR Review Coordinator Group Francesco Cuomo J\. W\. van Holst Christopher David Nelson IEGSD (Unit 4) Pellekaan 2\. Project Objectives and Components a\. Objectives The Project Appraisal Document (PAD) states that the project development objective (PDO) for the Khammouane Development Project (KDP) is “To strengthen the planning process and public financial management associated with the decentralized delivery of services and infrastructure, including irrigation development, in Khammouane Province” in Laos PDR (PAD, para 26)\. The Financing Agreement (FA) for the project states: “The objective of the Project is to strengthen the Recipient’s capabilities with respect to the planning process and public financial management associated with the decentralized delivery of public services and infrastructure, including irrigation development, in Khammouane Province” in Laos PDR (Financing Agreement, Schedule 1)\. 3/13/2017 Page 1 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) For the purpose of this evaluation, as per IEG guidelines, the objective in the Financing Agreement is used to assess the project’s achievements\. b\. Were the project objectives/key associated outcome targets revised during implementation? No PHEVALUNDERTAKENLBL c\. Will a split evaluation be undertaken? --- d\. Components Component 1: Support for Local Development and Provincial Capacity Building (appraisal cost: US$6\.87million, actual cost US$9\.35 million)\. The reason for the increase in cost was additional financing for the project provided by IDA\. The component provided support to: (i) pilot and adopt more transparent and participatory procedures for public investments in particular for improving rural livelihoods and (ii) strengthen key provincial departments to implement and sustain this approach\. It consisted of three subcomponents\. Subcomponents 1 and 2 respectively created and supported the District and Provincial Development Fund, along with the required capacity building to implement complementing district and provincial level public investments\. The District Development Fund (Subcomponent 1) was based on a community driven development model and focused on investments evenly distributed between sectors: (i) education and water supply; (ii) rural roads, including bridges; and (iii) health\. Component 2: Support for Irrigation Development along Namtheun 2 (NT2) Downstream Channel and Lower Xebangfai (appraisal: US$4\.17 million, actual cost US$6\.17 million)\. The reason for the increase in cost was additional financing for the project provided by IDA\. The component aimed to support the development of irrigation in Gnomalat District and the Lower XBF River by using water discharged from the NT2 hydropower station\. It consisted in 5 subcomponents\. 3 subcomponents focused on rehabilitating and building irrigation infrastructure, one subcomponent addressed the preparation of a strategic plan for sustainable development of irrigation with water flowing through the NT2 downstream channel, and one supported the management unit in the Department of Irrigation (DOI) and the Provincial / District Agriculture and Forestry Office of the Ministry of Agriculture and Forestry (MAF) to plan and implement the development of irrigation in the Province\. Component 3: Support for Rural Livelihoods and Agricultural Development (appraisal: US$0\.00 million\. actual cost: US$3\.00 million)\. The reason for the increase in cost was additional financing for the project provided by IDA\. A third component was added in 2011 at the first Additional Finance, for activities that at the time were being implemented under component 1\. It included a scaled-up Agriculture Livelihood Grant scheme (extended to an additional 33 poorest villages), a new pilot Agriculture Entrepreneur Grant scheme, and an increased support for institutional strengthening of Provincial/District Agriculture and Forestry Office by expanding the support to XBF Agriculture Extension Center and strengthening the capacity of Provincial/District Agriculture and Forestry Office to implement extension activities for farmers in connection with Agriculture Livelihood Grant and Agriculture Entrepreneur Grant schemes\. 3/13/2017 Page 2 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project cost: At appraisal the total project cost was US$11\.4 million equivalent; actual cost was US$20\.33 million equivalent\. This difference is due to two additional financing\. Financing contribution: At appraisal, the project was estimated to cost US$11\.4 million equivalent, of which the Bank was to finance US$9\.00 million (86%)\. The Japan Policy and Human Resources Development Fund (PHRD) was expected to contribute roughly US$1 million (9\.5%) and the Government of Laos (including the Hydropower Company contribution) roughly US$1\.05 million (9%)\. At completion, following one additional financing and two other restructuring, the project totaled US$20\.33 million, of which the Bank financed US$17\.6 million, the PHRD fund roughly US$1 million and the Borrower roughly US$1\.35 million in cash and US$0\.66 million in in-kind contribution\. The actual use of the project financing was US$19\.6 million (96%), of which US$16\.4 million of Bank financing (93% of Bank financing used)\. Borrower Contribution: The contribution of the Kammouane Province was US$1\.35 in cash and US$0\.66 million in in-kind contribution\. Dates: The project was approved by the board on June 17th, 2008, and effective on September 8th, 2008\. The project was restructured 3 times on February 29th, 2012, October 15th, 2013 and April 27th, 2015\. The original closing date was extended by 2 years from March 31st, 2014 to March 31st, 2016\. The two-year delay was due to unforeseen significant up-front investments for basic training and institutional set up of the District and Provincial Development Funds and poor coordination with UNCDF on the costs for the services the project required (ICR, para 36)\. Restructuring: Rural livelihood and agricultural development activities pursued under component one were incorporated into a new third component after the additional finance in 2011\. Three PDO indicators were added at the Additional Finance level to better capture the outcomes from improved irrigation in terms of increased agricultural production, and poor villages that experienced income increases directly related to the livelihood activities, and include the mandatory corporate indicator on the number of direct project beneficiaries\. The 2013 project restructuring revised 3 outcome indicators\. The indicator of “more equitable access to services” (Indicator 1) was replaced by indicators reporting the number of investments in specific infrastructure (Indicator 1 through 4)\. Indicator 4 that reported on the outcome of improved irrigation was modified into output indicators reporting on the area provided with irrigation and drainage services, and livelihood grants indicator (Indicator 5 at AF) that reported on poor villages which experienced income increases were changed to report on the number of Agricultural Livelihood Grand recipients (clients) who adopted an improved agricultural technology promoted by the project\. Activities regarding the Support for Pilot Downstream Irrigation Development in Tha Thot Area were dropped in April 2015 following a decision by the hydropower company based on a feasibility study which identified a risk of damage to the regulating dam of NT2\. This review will not provide a split rating because there were no changes in the Project Development Objective, and all the restructuring were Level 2 concerning budget allocations and outcome indicators\. There were no significant changes in the level of performance expected from the project, and the changes in in the Results Framework and Outcome indicators were made to better reflect the realities of the project, increase precision, and retrofit the core sector indicators in the Results Framework 3/13/2017 Page 3 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) 3\. Relevance of Objectives & Design a\. Relevance of Objectives The project objectives were highly aligned with pillar 1 of the Government’s development strategy (promote people’s participation), pillar II (focus on rural development) and Pillar IV (strengthen the effectiveness of public administration) (PAD, para 10-11; CPS, para 62)\. The project was also consistent with the World Bank strategy at appraisal\. Specifically, it supported objective one (regional integration and rural development) and objective two (strengthened public financial management and service delivery capacities (CAS FY 2005, para vi)\. The objectives were very relevant as they addressed weak governance and capacity related to public financial management at the district and provincial level through the establishment and implementation support of two funds, as well as a more accountable, transparent and responsive decentralized infrastructure delivery mechanism using a community driven development system\. Furthermore, the impacts stemming from these activities were expected to address the increasing rural-urban divide because the District Development Fund and the Provincial Development Fund were expected to finance the construction of infrastructure in rural areas (PAD, paras 31, 33, 36)\. The World Bank Country Partnership Strategy (CPS) at the project’s close was consistent with the project objectives at appraisal\. For example, the project is clearly aligned with the cross-cutting theme of stronger public sector management (CPS, FY 2012-2016, para 73, outcome 4\.2-3)\. The Country Partnership Strategy indicates that (i) budgeting in Laos is not strategic and based on the short term, and (ii) the budget is not well reported and monitored leading to an ineffective and inefficient use of public finances (CPS, para 99)\. This project is aimed at addressing these issues\. Conclusion: The project objectives were highly relevant to the Government and World Bank strategies relating to the planning process and public financial management associated with decentralization\. Rating High b\. Relevance of Design The project activities at appraisal and as re-arranged through restructuring were relevant to achieve the project objectives by implementing a series of actions to strengthen the planning process and public financial management associated with infrastructure development and service delivery in Khammouane Province\. However, the results framework did not provide clear causal chains linking project activities to project outcomes\. Stating outcomes and outcome indicators as is done in the PAD’s results framework (Annex 3) does not help an understanding of the project’s theory of change\. On the other hand, other sections of the Project Appraisal Document and the Implementation Completion Report (ICR, paras 55, 62) provide more information on the casual chains and these are described more in detail below\. The planning process was designed to improve at two levels: • At the district level, the community driven development approach was intended to ensure that delivery of 3/13/2017 Page 4 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) infrastructure is therefore “decentralized”, as well as more transparent, clear and accountable to the community needs of as the priorities are set by the communities (an example would be the adoption of a participatory planning process at village/kum ban/district levels that reflects community aspirations) • At the provincial level, the planning process was to be strengthened by building technical capacity within the Khammouane Province administration, as well as supporting the strategic planning for Irrigation Development along Downstream Channel The public financial management was designed to improve due to: • The establishment of the District Development Fund and Provincial Development Fund • The alignment of the Provincial budget with the planning processes • The inclusion of recurrent costs for the Province and District Development Funds investments into the Provincial budget • The technical assistance provided to assist in implementing the two funds\. Specifically, the PAD states that “Particular attention would be given to: (i) proper consultation and priority setting, (ii) overall resource allocation, (iii) public disclosure of information, (iv) reporting and oversight, and (v) fiduciary management (particularly procurement and financial management)” (PAD, para 37)\. Conclusion: The design of the activities in this project were substantially relevant to the improvement of the planning process and a strengthened public financial management associated with decentralization although the project would have benefitted from a more clearly stated results framework on which to build an adequate M&E system\. Rating Substantial 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective To strengthen the Government's capabilities with respect to the planning process associated with the decentralized delivery of services and infrastructure, including irrigation development, in Khammouane Province\. Rationale Outputs: Capacity building and training • Several trainings were held with District and Provincial Agriculture and Forestry Office, the Department of Planning and Investment and the Department of Irrigation for a total of 1,377 trained 3/13/2017 Page 5 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) staff\. Some of these training were also conducted by the Department of Irrigation to District and Provincial Agriculture and Forestry Office and focused on planning and implementing irrigation schemes (ICR, Annex 2, para 10, 24, table 2\.6)\. A further 43 Provincial Agriculture and Forestry Office staff were trained by the XBF Agriculture extension center in participatory community planning and project management (ICR, para 52)\. • A total of 5,543 Water User Associations (WUAs) committee members and farmers were enrolled in 315 trainings that provided assistance to 38 Water Users Associations and technical advice to farmers to improve their management of the new/rehabilitated irrigation schemes (ICR, para 24, table 2\.10)\. This resulted in WUAs recruiting a (part-time) technician to manage the pumping station and opening a village bank account to collect water fees and finance the necessary operational expenses and repairs (ICR, Annex 2, para 24) • The District and Provincial Agriculture and Forestry Office were able to deliver training and hands-on technical support to production groups as well as support villages in establishing the revolving fund, after the basic block grant was released (ICR, Annex 2, para 35) • The Xe Bang Fai (XBF) Agriculture Extension Center produced 20 tons of certified seeds in 2014, significantly increasing its capacity to produce registered and certified seeds (ICR, Annex 2, para 48)\. There were no references as to whether these seeds were distributed or sold\. • There is no evidence of any evaluation of the value of these capacity building activities and trainings\. However, the ICR states that: “There appears to be among the farmers that participated in agriculture training programs a greater adoption of technologies promoted by extension staff” (ICR, Annex 2, para 53)\. Also, information provided by the project team during the preparation of this Review advised that there were increases in technology adoption (900%) and paddy yield (128%)\. Planning processes and procedures • The province and districts were able to award 10 provincial and 185 district investments, financed by Provincial and District Development Funds respectively, in areas previously relatively underserved in terms of public investments (ICR, para 57)\. • The project established rigorous procedures for selecting beneficiaries for training to build provincial and district capacity to adopt participatory approach\. It also conducted two stakeholder consultation workshops in February and March 2016 to discuss lessons learned from the training and share experiences from the project (ICR, paras 62, 70)\. • Provincial and District Agriculture Office staff were provided extensive training on selecting and awarding beneficiaries for the Agriculture Livelihood Grant (ALG) and the Agriculture Entrepreneur Grant (AEG)\. The Agriculture Entrepreneur Grant process required 10 months and selected 8 candidates from the first batch of 1,019 applications; while it is unclear how many applications the committee went through, the ICR states that: “a similar process was used to select the other 9 candidates” (ICR, Annex 2 para 40)\. By the end of 2015, 51 Agriculture Livelihood Grant block grants of $10,000 each were disbursed to 1,624 households in 51 villages (ICR, Annex 2, para 35, 36, 38)\. • The province adopted guidelines for public investment planning and budgeting that the District Development Fund implemented in all ten districts (ICR, Intermediate Indicator 4; ISR #10)\. These guidelines were developed under the Project for Capacity Building in PIP Management (PCAP) supported by JICA during 2004-2011, aimed at building capacity of sector ministries and provincial 3/13/2017 Page 6 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) sector departments to effectively and efficiently implement public investment planning on schedule and in accordance with planned budget execution under an upgraded sector program (ICR, para 50) Outcomes While there was no evaluation of the capacity building impact of the training of officials in the District and Provincial Agriculture and Forestry Office, Department of Planning and Investment, and in the Department of Irrigation, the following impacts point to strengthened processes with regard to service and infrastructure delivery because of the project's activities\. These processes represented an improvement compared to the previous infrastructure delivery method, which the project team advised consisted of the central government or donors designing the investments with little participation of provincial and district authorities\. The positive outcome of the training is arguably reflected in the capacity of the project staff to implement and adhere to improved planning processes and procedures\. The following are some significant examples: • Staff is now able to efficiently implement the new, decentralized and participatory approach to the delivery of public investments and services (ICR, para 68)\. Information provided by the project team also confirms that staff skills and capabilities have improved, and asserted that the high number of provincial and district subprojects was evidence that an improved level of planning capacity was achieved\. • Two ministries and one district adopted established standards for (i) the format for public investment planning for decentralized investment planning procedures (ICR, para 80); (ii) preparation of implementation guidelines for the Sam Sang Program (ICR, para 80); and (iii) planning and management of the Social and Environmental Remedy Fund (ICR, para 50)\. • The project guidelines developed for the implementation of the District Development Fund were adopted by two other projects in Laos, namely (I) Phase III of the JICA-financed project for enhancing the capacity for public investment planning; and (ii) by the Project “Effective Governance for Small- Scale Rural Infrastructure and Disaster Preparedness in a Changing Climate” implemented by the Ministry of Natural Resources and Environment in collaboration with the Governance and Public Administration Program under the Ministry of Home Affairs and supported by the GEF Least Developed Countries Fund (ICR, para 50)\. • The planning of water management and irrigation was improved by strengthening of 38 Water Users Association (WUA), which resulted in a 24% - 58% increase of irrigated areas depending on the season (ICR, para 59; Annex 2, paragraph 23)\. By project end, WUAs collected higher irrigation fees which covered 80% of the operations and maintenance costs, hired a technician to manage pumping stations, and were able to finance necessary operational expenses and repairs with records open for review (ICR, para 59, Annex 2 para 24)\. • There were improvements in the capacity of the districts to plan, select and award grants to small businesses following extensive capacity building and training under Agricultural Livelihoods Grant (ALG) and the Agricultural Entrepreneurs Grant (AEG)\. For the ALGs the beneficiary households were selected through a participatory process; For the AEGs, a comprehensive competitive selection process overseen by a seven-member steering committee was used (ICR, paras 51, Annex 2 para 40-41, Annex 3 para 15)\. Conclusion: There is evidence that an enhanced level of planning capacity in local government institutions was substantially achieved as reflected in the considerable number of examples of improved 3/13/2017 Page 7 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) planning of activities and projects in Khammouane province\. Rating Substantial PHREVDELTBL PHEFFICACYTBL Objective 2 Objective To strengthen the Government's capabilities with respect to the public financial management associated with the decentralized delivery of services and infrastructure, including irrigation development, in Khammouane Province Rationale Outputs: • The project trained many staff and provided technical assistance to the Provincial Department of Finance in financial management\. 198 district and provincial staff (compared with a target of 195) were trained on the District and Provincial Funds procedures covering financial management, procurement, safeguards, and consultation (ICR, Intermediate Outcome indicator 7)\. 179 staff were trained on project financial management and procurement standards, although it is unclear if these 179 were a subgroup of the 198 or a different group (ICR, para 16, Annex 2 table 2\.6)\. • According to the ICR the PHRD Grant successfully contributed to develop provincial and district capacities for decentralized planning and financial management\. Specifically, through technical assistance, training, on-the job coaching, and knowledge exchanges, the PHRD Grant supported: (i) the adaptation to the Lao context of the District Development Fund approach for the direct transfer of financial resources to districts; (ii) the piloting of block grant transfers and implementation by all ten districts of Khammouane Province; and (iii) the development of technical capacities of provincial and district public servants on participatory planning and financial management\.(Annex 8) • Detailed financial management and procurement procedures and manuals were prepared under the District Development Fund and the Provincial Development Fund, including clear downward accountability mechanisms and reporting requirements at each implementation level and intensive training programs delivered with the participation of the Ministry of Finance central services\. Dedicated units were established in the project steering committee with the recruitment of senior project FM specialists (ICR, paras 33, 47)\. • Budget procedures used by the Provincial and District Development Funds were adopted by the province and all districts (ICR, PDO indicator 5)\. Consequently, compared with the past, by the project's close annual provincial and district budgets included recurrent costs such as wages of teachers and medical personnel, and operation and maintenance of the assets (ICR, Intermediate Outcome Indicator 3)\. 3/13/2017 Page 8 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) Outcomes: The following evidence on achievements in the area of public financial management in the Khammouane province and its districts was provided in the ICR: • Annual Provincial budget plans were aligned with a priority planning process, and budget execution reports were prepared comprehensively and timely (ICR, PDO Intermediate Outcome indicator 5)\. • Information provided by the project team highlighted that financial management of Water Users Associations improved as they were able to increase the collection of irrigation fees from 584 million Kips to 758 million Kips (80% of the operations and maintenance costs)\. The ICR adds that: “It is reasonable to expect that most schemes will be able to cover their full cost O&M within two or three years after KDP closing” (ICR, para 59)\. Conclusion: Evidence in the ICR on the extent to which the Government's capacity for public financial management was strengthened was weak and not evaluable\. The achievement of this objective was therefore rated modest\. Rating Modest PHREVDELTBL PHREVISEDTBL 5\. Efficiency Even if the economic rate of return (ERR) was estimated for selected “tangible’ sub-investments (ICR, Annex 3, para 1), a quantitative assessment with which improved planning and public financial management were achieved cannot be assessed without much more information on the details of staff enhancements and own achievements\. Particularly important is the absence of any measurement for the training / capacity building programs (ICR, Annex 3, para 1)\. Nevertheless, the ICR concludes that some training activities were successful and staff regularly used the skillset acquired (ICR, para 53), and information provided by the project team agrees with this conclusion\. There was a 2 ½ year delay in project implementation due to (a) unforeseen considerable up-front investment for institutional set up and basic training, and (b) choice of a different service provider than UNCDF as originally planned due to disagreements on the costs and technical expertise required (ICR, para 36)\. The project management costs increased from US$1\.8 million to US$4\.46 million, or about 103% of projects costs including additional financing and restructurings because of the addition of Component 3, of which project management cost represented 49% by project end, and the unaccounted strong coaching role the Bank team had to assume due to limited local capacity (ICR, para 76)\. Conclusion: It is understood that some sub-investments were efficient\. However, although associated objectives, these were not the core objectives of the projects\. Therefore, the overall efficiency is rated as 3/13/2017 Page 9 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) 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 Relevance of objectives was high, and relevance of design substantial\. The achievement of objective 1 (to strengthen the Recipient’s capabilities with respect to the planning process) was rated substantial, while the achievement of objective 2 (to strengthen the Recipient’s capabilities with respect to the public financial management) was rated modest because of weak evidence\. Efficiency was rated modest because of absence of data on the efficiency of the improved recipient’s capabilities with respect to regard to planning process and public financial management, the absence of an evaluation of the capacity building activities, and significant implementation delays compared to the project design\. In the context of the importance of strengthened planning for decentralized delivery of services and infrastructure this Review concluded that the overall achievements of this project had moderate shortcomings and therefore its outcome is rated Moderately Satisfactory a\. Outcome Rating Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating Risk to Government commitment to decentralized planning : Substantial The current Government policy in promoting devolution and strengthening local capabilities to improve the planning process and the public financial management is strong, but there is no assurance that this policy will be sustained or that Khammouane Province would maintain the District and Provincial Development Funds approach to implement its rural development strategy after project closure (ICR, para 71)\. Furthermore, in 3/13/2017 Page 10 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) according to the ICR, there is a risk of decreasing staff skills in case the decentralization process slowed down, which is also heightened by the high turnover of staff during project implementation (para 71)\. A positive note that supports the Government’s intent has been the adoption by the Nakai district in Khammouane Province of the District Development Fund approach to planning and managing its Social and Environmental Remedy Fund (ICR, para 50)\. Risk to financial sustainability: Substantial According to the ICR the risk to financial sustainability is high unless budget resources are available in the future: • Water User Association cost recovery was not achieved by project end, and progress is not certain, even if the ICR states that “it is reasonable to expect cost recovery within two years of KDP closing" (paras 59, 72) • There is no institutional mechanism for funding big repairs should a scheme suffer severe damage (para 72)\. • There is limited budget to scale up the Agriculture Entrepreneur and Livelihoods Grant schemes by the Government of Khammouane Province, and therefore, unless additional resources are brought in, the risk of these two grant schemes being discontinued is substantial (para 71-73)\. a\. Risk to Development Outcome Rating Substantial 8\. Assessment of Bank Performance a\. Quality-at-Entry As mentioned in section 3a, the project was highly relevant to Laos’ political and economic context and its efforts to introduce decentralization\. The activities were also consistent with the project's development objective, as noted in section 3b\. Fiduciary risks as assessed in the PAD were substantially addressed at the design stage (PAD, para 78 and following)\. There were moderate shortcomings in the design of Monitoring and Evaluation, which will be discussed further in Section 10\. • The project incorporated lessons learned from other projects in Laos as well as those gained through the Poverty Reduction Fund and the Governance and Public Administration Reform, a project jointly funded by UNCDF, UNDP and the EU (PAD, para 47-48)\. • As described in Section 3, project objectives were highly relevant and project activities were well designed\. • Soon after project approval poor coordination with UNCDF resulted in UNCDF not being chosen as partner by the project team, adding delays to the implementation (ICR, para 36)\. • The M&E system and design of PDO indicators suffered from original outcome indicators that were not implementable and had to be restructured\. As noted in section 3b, many PDO indicators measured outputs instead of outcomes, and there was a lack of a clear causal chain between project inputs, 3/13/2017 Page 11 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) intermediate outcome and final outcomes in the results framework\. • The design of the project's implementation arrangements was weak\. For example, the planned early recruitment of financial management and procurement specialists was not achieved\. Also, the establishment of a computerized accounting system was delayed for two years\. As the ICR points out (para 48) the reasons for these delays were that there was no account of the lack of local capacity and technology\. These issues, together with a subsequent high turnover of staff, eventually resulted in 2\.5 years delay as discussed in the section 5 of this Review\. Quality-at-Entry Rating Moderately Satisfactory b\. Quality of supervision According to the ICR the World Bank supervision provided extensive support during 15 mission, with systematic field visits and guidance on financial Management and procurement (Annex 2 para 76)\. Further, the ICR highlights the high attention to safeguard compliance, and quick reaction times when procedures were not followed (ICR, Annex 2 para 77)\. The Implementation Status and Results reports were detailed and frank, and provided a good picture of the overall status of the project (Annex 2 para 77)\. The analytical work performed by the team during implementation support missions was the basis for the changes introduced under the additional financing (Annex 2, para 77)\. However, as noted in the ICR, the project team could have been more proactive in suggesting dropping infeasible activities related to the Support for Pilot Downstream Irrigation Development in Tha Thot Area under Component 2 at an earlier stage; nonetheless, these activities were, with Government approval, dropped in April 2015 (Annex 2, para 16)\. Considering the extensive supervision with minor shortcoming, the Quality of supervision is rated Satisfactory Quality of Supervision Rating Satisfactory Overall Bank Performance Rating Moderately Satisfactory 9\. Assessment of Borrower Performance a\. Government Performance Evidence from the ICR points to a satisfactory Government performance\. The Government was fully engaged at appraisal and remained engaged in the Khammouane Development Project throughout its duration\. Government ministries were active in supporting the project implementation (particularly the Department of Irrigation), and the Ministry of Planning and Investment as well as the Ministry of Home Affairs used the project’s guidelines of planning procedures and implementation in other projects (ICR, para 80)\. 3/13/2017 Page 12 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) Government Performance Rating Satisfactory b\. Implementing Agency Performance There were several implementing agencies involved with the project\. The Steering Committee was led by the Government of Khammouane Province and included representatives from four central government ministries (Planning and Investment, Agriculture and Forestry, Home Affairs and Finance) and four provincial government departments\. The Committee was supportive of the project and very responsive to the World Bank’s recommendations\. However the provincial departments suffered from subpar performance in procurement, delays in delivering quality unaudited financial reports and high staff turnover (ICR, paras 36, 81, 82; ISR#11)\. In addition, according to the ICR, the scoping study and strategic plan for irrigation development (prepared by the technical advisor to the provincial government) was of relatively low quality because it did not include all the required information to take informed decisions on irrigation development (ICR, Annex 2, para 19)\. In light of this assessment the performance of the implementing agencies had moderate shortcomings and therefore was rated Moderately Satisfactory\. Implementing Agency Performance Rating Moderately Satisfactory Overall Borrower Performance Rating Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization a\. M&E Design According to the PAD (para 64) the Project Coordination Section in the Khammouane Provincial Government was responsible for monitoring and evaluation\. The project design required baseline and follow up surveys for sample districts, kum-banhs and villages to be carried out at the beginning, mid-term and at the end of project (PAD, para 65)\. Nonetheless, the project would have benefitted from a more relevant M&E design to better capture the strengthening of the planning process and specific measures of achievements of public financial management\. Specifically, the M&E design presented several challenges: • The objectives were not clearly specified, and interim objectives in the results framework at appraisal were not in line with the Project Development Objective\. • The results framework did not provide a clear causal chain linking project activities to project outcomes\. Two of the three outcome indicators were output indicators; the remaining outcome indicator was too high a level to guide data collection, and had to be restructured • The design of the M&E did not account for limited local capacity, which required further training and this contributed to a 2½ years delay, together with unforeseen considerable up-front investment for institutional set up (such as installing an computerized system for accounting), and disagreements with 3/13/2017 Page 13 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) UNCDF on the cost for certain project activities (this was already discussed in detail in 5)\. Overall, the design of M&E was weak - particularly for objective 2 b\. M&E Implementation M&E was performed by Khammouane Provice; the ICR and the ISRs confirm that the province was responsive to World Bank comments and established a task force including technical staff from provincial line agencies to monitor project activities after technical audits of the District Development Fund highlighted significant issues with project’s sub-projects (ICR, para 38; ISR #11)\. The ICR notes that the quality of data collection varied by component\. For component 1, collection of information improved following the additional finance and 2013 restructuring\. For component 2, collection and monitoring of data were comprehensive (ICR, para 41)\. Finally, M&E for Component 3 was limited to a baseline survey, and collection focused on investment proposals, but it included little useful information about beneficiaries or impact of the agricultural grants on their activities and income (ICR, para 41)\. c\. M&E Utilization The ICR states that the M&E was used by the project team to follow the progress on the implementation of the different activities, and the Mid-Term Review was able to identify and address implementation difficulties (ICR, para 38; para 42)\. Nonetheless, the utilization of M&E had significant shortcomings for the following reasons: • The M&E did not focus adequately on indicators appropriate for assessing whether the objectives were achieved\. This lack of indicators was attributable to the lack of a clear theory of change in the results framework that linked inputs with intermediate outcomes and with final outcomes\. • The indicators often confused outcomes and output indicators\. • While the ICR stated that the M&E informed changes in capacity building activities and the need to reallocate funds, it was unclear how the project team came to this conclusion given the lack of objective- oriented indicators\. M&E Quality Rating Modest 11\. Other Issues a\. Safeguards The project had an environmental category B classification and triggered 5 safeguards policies: Environmental Assessment, Pest Management, Indigenous Peoples, Involuntary Resettlement, and International Waterways\. The project team was attentive to safeguard issues and was very responsive when it found violation of the planned safeguard screening procedures under the District Development Fund (ICR, 3/13/2017 Page 14 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) para 43)\. The project addressed these areas in the following ways (ICR, para 44): • An Environment and Social Safeguard Framework (ESSF) was developed to provide the overall procedures and technical guidelines during the planning and implementation of project activities\. A Compensation and Resettlement Policy Framework and the ESSF were developed to be applied to sub- projects that may involve resettlement or land acquisition\. • An Indigenous Peoples’ Development Framework was prepared to ensure adequate consultation with and participation of minority ethnic groups\. • An Initial Environment Assessment was carried out for rehabilitation of the Tha Thot irrigation perimeter\. • The potential increase of chemicals and pesticide use was estimated negligible and the project excluded the procurement of any pesticides\. Mitigation and preventive measures included chemical prohibition list, extension agents and farmers training on integrated pest management\. • In accordance with OP 7\.50 on International Waterways, the letter of notification on development of irrigation along XBF River (one of Mekong’s tributaries) was sent out to the neighboring riparian zones in Thailand, Cambodia, and Vietnam\. There was no involuntary resettlement and no issue with ethnic minorities associated with the project\. Despite the high attention to safeguards, the World Bank downgraded the Overall Safeguards rating to Moderately Unsatisfactory in 2014 after it found irregularities in the planned safeguard screening of DDF investments\. A detailed safeguard review of 2010-2012 DDF subprojects was carried out, and an environmental code of practice was developed and applied by all DDF contractors\. Further training on safeguard issues, including on integrated pest management, was provided to the project staff\. The ICR as well as the project team (when consulted by IEG) confirmed that compliance was achieved for all subprojects by the end of the project (ICR, para 46)\. b\. Fiduciary Compliance According to the PAD, fiduciary risk was anticipated to be high in the Lao PDR because of weak internal control systems and an acute shortage of financial management (FM) or procurement skills\. As a result, a comprehensive action plan was designed to ensure adequate basic FM implementation and accountability systems and training (PAD, paras 77-79)\. However, weaknesses persisted as there were difficulties in recruiting FM and procurement specialists, and accounts were maintained “by hand” for the first two years (ICR, paras 47-48)\. Fiduciary aspects improved after February 2011, when the Project Steering Committee and the Downstream Irrigation Management Unit were eventually fully staffed (ICR, paras 47-48)\. The ICR does not, however, mention the yearly unqualified financial audits, and only one technical audit of the District Development Fund subprojects is mentioned\. Upon IEG’s request, the project team advised that all the annual financial audits were unqualified, and shred other technical audits that highlighted some problem area\. Financial management of the project improved over time, as noted by the independent financial audit reports (all unqualified) and three comprehensive reports on the project’s internal controls and other issues, which highlighted significant improvements between 2012 and 2016\. In 2012, the auditor found 14 weaknesses, of 3/13/2017 Page 15 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) which six were assigned a risk rating of “High”, seven of “Medium” and one of “Low”\. While in 2014 several issues persisted, by 2016 (project end), there were only five weaknesses, with only one “medium” and the rest “low”\. A high risk rating is defined as “significant weakness that could compromise internal controls and/or operational efficiency\. It should be urgently addressed\.” A medium risk rating is defined as “A weakness that could undermine the system of internal controls and/or operational efficiency\. It should be addressed with a lower priority than a high-risk weakness\.” These audits were prepared by PricewaterhouseCoopers (PWC) in accordance with International Standards on Auditing\. c\. Unintended impacts (Positive or Negative) No unintended impacts were found\. d\. Other --- 12\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Moderately Outcome Moderately Satisfactory --- Satisfactory Risk to Development Substantial Substantial --- 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\. 13\. Lessons Summary of lessons from ICR • When decentralizing the PFM system, process and capacity building activities alone are not enough 3/13/2017 Page 16 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) to ensure success\. Devolving the public financial management system to decentralized units is a long and difficult process that involves strategic and political issues\. • Line agencies are good partners to implement complex programs when provided with appropriate training\. When provided with appropriate training, supervision and guidance, line agencies were able to efficiently establish and supervise a fully decentralized, participatory mechanism for the delivery of public investment and services\. • Beneficiaries should be involved at all stages of the project to ensure buy-in in project activities\. Key stakeholders strongly supported project activities (i\.e\. DDF investments, the satisfactory functioning of the restructured Water Users’ Associations, cost recovery from members of the irrigation perimeters etc\.) due to the involvement and commitment of beneficiaries in all aspects of an activity, from planning to implementation and monitoring\. • Plans to reform public agricultural research and extension centers need to balance pro-market objectives with the public nature of many goods\. The plan to reform the XBF Center would have benefitted from acknowledging its public role and need for public funding\. The Plan’s institutional objectives of establishing a service institution driven by market demand and financially autonomous were not achieved and at completion, it was clear that initial assumption regarding non-salary operating costs was overly optimistic to cover its (non-salary) operating costs in the near future\. Further lessons identified by this review: • An evaluation of trainings and capacity building activities is essential to the project\. An evaluation of trainings and capacity building activities is essential to support project conclusions on the achievements and impact of the training on staff capacity\. 14\. Assessment Recommended? No 15\. Comments on Quality of ICR While the ICR was consistent with OPCS guidelines and reasonably concise, this Review finds that the ICR has some shortcomings: • The ICR was not sufficiently results oriented because it analyzed the contribution of strengthened planning and financial management to the achievements of the components, rather than analyzing the contribution of the components to achievement of strengthened planning and public financial management (paragraphs 55 to 62) \. • The quality of evidence presented in the ICR is inadequate to support the claim in paragraph 54 of the achievement of strengthened financial management • There were internal inconsistencies, and, for example, it is not clear how many sub-investments were 3/13/2017 Page 17 of 18  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LA-Khammouane Development Project (P087716) awarded: the ICR refers at different points to 185 District Development Fund projects and 10 Provincial Development Fund projects (ICR, para 57), 175 District Development Fund Projects and 10 district wide investments (ICR, Annex 2 para 4), and 184 District Development Fund sub-projects (Annex 2, Table 2\.2)\. a\. Quality of ICR Rating Substantial 3/13/2017 Page 18 of 18

REVIEW

P057818

 ICRR 12158 Report Number : ICRR12158 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 07/26/2005 PROJ ID : P057818 Appraisal Actual Project Name : Financial Sector Project Costs 15\.0 17\.2 Adjustment Credit (FSAC) US$M ) (US$M) Country : Albania Loan/ Loan US$M ) 15\.0 /Credit (US$M) 17\.2 Sector (s): Board: FSP - Banking Cofinancing (54%), Non-compulsory US$M ) (US$M) pensions insurance and contractual (31%), General industry and trade sector (15%) L/C Number : C3669 Board Approval 2 FY ) (FY) Partners involved : Closing Date 03/31/2004 12/31/2004 Prepared by : Reviewed by : Group Manager : Group : Elliott Hurwitz Jorge Garcia-Garcia Laurie Effron OEDCR 2\. Project Objectives and Components a\. Objectives The objective was to support the Government of Albania's program to consolidate and take reforms in the financial sector beyond achievements to date to foster better engagement of the financial sector in the development of the Albanian economy\. b\. Components 1\. Continued reform of the banking sector including privatization of the Savings Bank (SvB) and further strengthening of banking regulation and supervision; 2\. Enhancement of the bankruptcy and debt resolution framework; 3\. Reform of the non-bank financial sector, including further development of the regulatory and supervisory framework for the insurance sector and privatization of the Insurance Institute of Albania (INSIG)\. c\. Comments on Project Cost, Financing and Dates The credit consisted of 2 tranches of SDR6 million each, with the first disbursed upon effectiveness and the second upon completion of specified conditions \. The difference between appraisal and actual expenditures is due to exchange rate fluctuation\. The original closing date was extended by 9 months to allow additional time to make changes in insurance legislation, as well as because of delay in developing an implementation plan for a bankruptcy framework\. The latter was caused by the lack of timely provision of donor funding (parallel funding by GTZ)\. The FSAC was implemented in parallel with a financial sector TA loan, the Financial Sector Institution Building and Technical Assistance Credit\. 3\. Achievement of Relevant Objectives: All relevant objectives were met, with the FSAC making a major contribution to strengthening and deepening the financial sector\. All project outcome and output indicators were fully met \. Macroeconomic performance was satisfactory : Real GDP growth was 8% in 2001, 5% in 2002, and 6% in both 2003 and 2004\. Inflation was moderate over the same interval --with the GDP deflator ranging from 1 to 2%\. The current account balance was problematic, however, at -6% in 2001, -10% in 2002, -8% in 2003, and -7% in 2004\. (Source: SIMA\. Data not provided in ICR) 1\. Continued banking sector reform including privatization of the SvB and further strengthening of banking regulation and supervision: Achieved\. SvP was privatized (see sec\. 4); a fully-functional Deposit Insurance Agency was established; bank supervision was improved (sec\. 4), and the skills of bank supervision staff were enhanced; the Banking Law was updated and amended, and the Bank of Albania (BoA) issued the necessary implementing regulations; the necessary framework for a payment system was enacted, and a real time gross settlement system was installed and is operational \. 2\. Enhancement of bankruptcy and debt resolution framework : Achieved\. Progress was made implementing the Institutional Development Program (IDP) for bankruptcy enforcement, incorporating improvement of the judicial infrastructure, licensing requirements for insolvency practitioners, strengthening capacity for court application of bankruptcy rules, and an education and public awareness program \. In addition, courts have acted on 3 bankruptcy cases, which has demonstrated the efficacy of the new framework; the Bank Asset Resolution Trust (BART) has satisfactorily implemented its business plan (sec\. 4); a satisfactory Accounting Law was enacted, substantially in line with EU norms, which requires full implementation of IAS for banks, insurance companies, and other firms \. 3\. Non-bank financial sector reform, including further development of the regulatory framework for the insurance sector: Achieved\. New laws on insurance and other non -bank financial institutions were enacted as required by FSAC (but not yet the implementing regulations ), and in most areas adequate data are being reported to the Insurance Supervision Agency (ISA); ISA is in operation, and is adequately funded; however, more comprehensive reporting and better compliance are needed for ISA to be fully effective; 39% of the shares of the Insurance Institute of Albania were purchased by IFC and EBRD, with the remainder of shares planned to be offered for sale in the near future\. 4\. Significant Outcomes/Impacts: All shares of SvB were sold (on the second attempt) to a foreign bank, and 100% of the banking sector is now privately owned\. Bank supervision was significantly strengthened, mainly through implementation of the Supervisory Development Plan (SDP) for banking supervision, which improved risk analysis, management evaluation, and supervisory plans\. Credit to the private sector increased from 5% of GDP in 2001 to 8% in 2004, with loans to households and the private sector rising 65% from 2002 to 2004\. In 2003 and 2004, 38% of BART’s portfolio was divested\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): While new insurance legislation was enacted, implementing regulations have not yet been promulgated \. ISA is not yet fully carrying out its role as insurance supervisor, in part because of frequent staff turnover \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev \.: High High \. Sustainability : Highly Likely Highly 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: Technical assistance greatly enhances reform progress, especially when it is available prior to the inception of a policy -based operation --The provision of timely TA through the Financial Sector Institution Building and Technical Assistance Credit was extremely helpful in preparing the up -front conditionality of the FSAC\. The availability of TA also helped get the government involved early \. Clear and monitorable performance indicators facilitated achievement of the project development objectives 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: The ICR is of good quality, frank, and provides ample data by which to judge project performance \. However, the report does not provide data on macroeconomic performance --a standard conditionality in adjustment loans, and Annex 5 rates macro performance as Not Applicable \. It should be noted that a stable macroeconomic environment is particularly important with regard to a financial sector operation \.

REVIEW

P001212

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 19540 IMPLEMENTATION COMPLETION REPORT REPUBLIC OF COTE D'IVOIRE PRIVATE SECTOR DEVELOPMENT ADJUSTMENT CREDIT (PSDAC) (Credit No\. 28430-IVC) June 30, 1999 Private Sector Finance Group 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\.  ABBREVIATIONS AND ACRONYMS ASAC Agricultural Sector Adjustment Credit AGEP Employment Promotion Agency APEX-CI Export Promotion Agency CAS Country Assistance Strategy CCIA Government Export Promotion Agency CEPICI Investment Promotion Agency CPA Certified Public Accountant ERC Economic Recovery Credit FNICI Ivorian Industries Association GDP Gross Domestic Product HIPC Heavily Indebted Poor Countries ICR Implementation Completion Report IDA International Development Association LDP Letter of Development Policy OHADA African Organization for Harmonization of Business Law OIC Shippers' Council OMOCI State Employment Agency PAGE Economic Management Project PASCO Regulatory Framework and Competitiveness Adjustment Loan/Credit PASFI Financial Adjustment Loan/Credit PSDAC Private Sector Development Adjustment Credit SDR Special Drawing Rights SITRAM State Owned Shipping Line SME Small and Medium Enterprises TA Technical Assistance TSAC Transport Sector Adjustment Credit VAT Value Added Tax CURRENCY EOUIVALENTS Currency Unit = CFA franc (CFAF) US$1\.00 - CFAF 612 (March 1999) CFA franc 1 million = US$1,680\.50 WEIGHTS AND MEASIJRES Metric System FISCAL YEAR OF BORROWER January 1-December 31 Vice President Jean-Louis Sarbib, AFR Acting Country Director Chantal Dejou, AFC 11 Acting Technical Manager: David Cook, AFTP 1 Task Team Leader : Elke Kreuzwieser, AFTPl  FOR OFFICIAL USE ONLY TABLE OF CONTENTS PREFACE \. I EVALUATION SUMMARY \.II PART 1- PROGRAM IMPLEMENTATION ASSESSMENT \.1 A\. BACKGROUND \.1 B\. PROGRAM OBJECTIVES AND DESIGN\. 3 C\. PROGRAM IMPLEMENTATION\. 7 D\. ACHIEVEMENT OF PROGRAM OBJECTIVES \. 8 E\. BANK AND BORROWER PERFORMANCE \. 13 F\. ASSESSMENT OF OUTCOME AND SUSTAINABILITY \. 13 G\. FUTURE OPERATIONS \. 15 H\. LESSONS FROM EXPERIENCE \. 16 PART II -- STATISTICAL TABLES \. 17 TABLE 1: SUMMARY OF ASSESSMENTS \. 17 TABLE 2: RELATED BANK LOANS/CREDITS \. 18 TABLE 3 : PROJECT TIMETABLE \. 19 TABLE 4: CREDIT DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL \. \. 19 TABLES 5 : KEY INDICATORS FOR PROJECT IMPLEMENTATION (NOT APPLICABLE) \. \. 20 TABLE 6: KEY INDICATORS FOR PROJECT OPERATION (NOT APPLICABLE) \. 20 TABLE 7: STUDIES INCLUDED IN THE PROJECT (NOT APPLICABLE) \.,\.,\.20 TABLE 8-A: PROJECT COSTS (NOT APPLICABLE) \. \. \. \. 20 TABLE 8-B: PROJECT FINANCING (NOT APPLICABLE) \. 20 TABLE 9: ECONOMIC COSTS AND BENEFITS (NOT APPLICABLE) \. 20 TABLE 10: STATUS OF LEGAL COVENANTS \. 21 TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS (NOT APPLICABLE) \. \. 22 TABLE 12: BANK RESOURCES: STAFF INPUTS \. 22 TABLE 13 : BANK RESOURCES: STAFF MISSIONS \. \. 22 APPENDIX A: MATRIX OF TRANCHE RELEASE CONDITIONALITIES \. \. 23 APPENDIX B: ICR MISSION'S AIDE-MEMOIRE \. 31 APPENDIX C \. 36 SUMMARY OF BORROWER'S CONTRIBUTION \. 37 BORROWER'S CONTRIBUTION TO THE ICR \. 39 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\.   IMPLEMENTATION COMPLETION REPORT REPUBLIC OF COTE D'IVOIRE PRIVATE SECTOR DEVELOPMENT ADJUSTMENT CREDIT (PSDAC) (Credit 28430, Credit 28431 and Credit 28432-IVC) PREFACE 1\. This is the Implementation Completion Report (ICR) for the Private Sector Development Adjustment Credit in the Republic of Cote d'Ivoire, for which Credit No\. 28430-IVC in the amount of SDR 123\.9 million (US$180 million equivalent) was approved on April 11, 1996 and made effective on April 25, 1996\. Two supplementary Credits (Nos\. 28431 -IVC and 28432-IVC) for a total of SDR 64 million (US$91\.2 million equivalent) were approved in November 1996 and December 1997, respectively, under the Fifth Dimension Program\. 2\. The credit closed on March 31, 1999, one year after the original closing date\. This was a six-tranche operation, which was fully disbursed by September 1998\. 3\. This ICR was prepared by Messrs\. J\. Chevallier and J\. Amprou and reviewed by the country team\. The Borrower's own evaluation of the credit is attached as Appendix C\. 4\. This ICR is based on material in the credit file and other related documents, discussions with World Bank staff and government officials currently or formerly charged with project implementation\. The Borrower contributed to this report by commenting on the draft ICR and evaluating the project's preparation and execution\. i   IMPLEMENTATION COMPLETION REPORT REPUBLIC OF COTE D'IVOIRE PRIVATE SECTOR DEVELOPMENT ADJUSTMENT CREDIT (PSDAC) (Credit 28430, Credit 28431 and Credit 28432-IVC) EVALUATION SUMMARY Introduction 1\. Since independence in 1960, Cate d'Ivoire has followed an export-oriented policy based on agricultural production, especially cocoa and coffee\. This policy was highly successful until the late 1970s, when a commodity boom generated excessive expectations and led to overspending and heavy borrowing\. In the late 1980s, Cate d'Ivoire pursued an internal adjustment strategy, which did not achieve its objective of restoring growth\. The devaluation of the CFA franc in January 1994 was a turning point for Cote d'Ivoire\. After seven years of recession, growth resumed and accelerated from 2 percent in 1994 to 7 percent in 1995/96 and 6 percent in 1997\. Renewed competitiveness and favorable terms of trade triggered a 50 percent growth of exports from 1994 to 1997\. The share of private investment in GDP increased from about 4 percent in 1994 to 11 percent in 1997, and manufacturing production increased by about 60 percent from 1993 to 1998\. Program objectives and description 2\. As part of the post-devaluation Country Assistance Strategy, centered on a series of sectoral adjustment operations to help Cote d'Ivoire fully reap the benefits of the change in the parity, the Private Sector Development Adjustment Credit (PSDAC) was designed in 1995-96, with the objectives of enhancing the business environment and reducing business costs through reforms in the legal and regulatory framework, improvement in the performance of key infrastructure (port and telecommunications), investment and export promotion and reduction of domestic arrears\. To address Cate d'Ivoire's substantial financing needs and frequent resistance to change, the credit was designed as an "omnibus operation," where five floating tranches would be released upon compliance with any one of the five core and five non-core conditions\. Satisfactory performance under the domestic arrears repayment plan was a general condition of disbursement for all tranches\. The credit was approved in April 1996\. Two supplementary credits were extended in November 1996 and December 1997 under the Fifth Dimension Program\. Implementation experience and results 3\. The Government has implemented the reform program supported by PSDAC, but with some delays\. Credit effectiveness and the release of the first tranche occurred two weeks after Board approval\. The second tranche was released in July 1996, three months ii  later\. There was a one-year delay thereafter, before conditions were met for the release of the third tranche\. One of the factors in the delay was the difficulty for the Government to demonstrate it had eliminated domestic arrears at end- 1996\. The fourth and fifth tranches were released in October and December 1997\. Finally the sixth tranche was released in August 1998\. 4\. To oversee program implementation, the Government established a Steering Committee including representatives from all ministries and public agencies concerned, and chaired by the Deputy Chief in the Prime Minister's Office\. The chairman and many members of the Committee stayed on during the entire duration of program implementation\. The private sector was not represented on the Steering Commnittee, however, and the technical committee established during program preparation to ensure close coordination between the public and private sectors no longer convened\. Ad-hoc meetings took place two or three times a year to solve pressing issues\. 5\. Overall, the outcome of the program is rated partially satisfactory\. Considerable progress was made in some areas, but little was achieved in others\. The areas where substantial progress was made include maritime transport liberalization, the port and customs operations, telecommunications, the investment code, the business laws, the settlement of domestic arrears, and the labor legislation\. The areas where little or no progress was achieved include the judicial system, the tax administration, and the competition committee\. There is a sensitive area where there was some backtracking, namely the dialogue between Government and the private sector\. The reforms in maritime transport liberalization, ports and customs operations, telecommunications, investment code, business laws and labor legislation are likely to be sustained, but the sustainability of reforms in elimination of domestic arrears is uncertain\. Not much was achieved in the area of institutional development\. The reform program has eliminated some areas of discretionary power granted to the administration, but more remains to be done in this respect\. Lessons from experience * To be successful, private sector adjustment operations require the continued commitment of all stakeholders concerned, including the private sector\. * Action plans or committees are no substitute for commitment\. * The "omnibus concept" served its purpose well\. * Clear and monitorable indicators should have been agreed upon among all parties concerned, and a monitoring and evaluation mechanism should have been put in place\. \.i\.i  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF COTE D'IVOIRE PRIVATE SECTOR DEVELOPMENT ADJUSTMENT CREDIT (PSDAC) (Credit 28430, Credit 28431 and Credit 28432-IVC) PART 1 - PROGRAM IMPLEMENTATION ASSESSMENT A\. BACKGROUND 1\. On January 12, 1994, CMte d'Ivoire, along with the other members of the CFA franc zone, devalued their common currency, the CFA franc, from its fixed parity of 50 CFA francs per French franc to a new parity of 100 CFA francs per French franc\. The devaluation took place after a prolonged period of economic recession in the 13 CFA member countries, resulting from a deterioration of the terms of trade and a significant appreciation of the CFA franc since the mid-eighties\. The devaluation was a turning point for C6te d'Ivoire\. After seven years of recession, growth resumed and accelerated from 2 percent in 1994 to 7 percent in 1995/6 and 6 percent in 1997\. Renewed competitiveness and favorable terms of trade triggered a 50 percent growth of exports from 1994 to 1997\. The share of private investment in GDP increased from about 4 percent in 1994 to 11 percent in 1997 and manufacturing production increased by about 60 percent from 1993 to 1998\. Chart 1: Gross Domestic Investment as % of GDP 18\.0% 1680% 14\.00% 12\.0% 8\.0% 6\.0% 4\.0% 2\.0% 02\.00% E Total Gross Dornestic Investn-ert M Gross Private Irwvestnrert 0 Foreign D)rect Irnvestment Source: World Bank, Africa Regional Database  Chart 2: Manufacturing Production Index 199 1994 , _ 9 1 1\.98 Souce Repbl, of, C,te- \.-Iaoir, Ministry of F-inac ad Economyi ndxfr1993 isetimSS5\.ate\.-W ,a\.sse\.WS'\.$ \.sZ ? : saa based on agriculturas,,,,s,l-s-s production, especially coco,,-2\. a a nd coffee,,SS-\.:a Thi poic was highly successfu until th Xlae17s w>\.'\.'a*'hen\.a\. a a< commoditys boomW gener \. 'ate excea\. '3ta ''ssiv xecain ~~~~~~X -\.'adjsten prgam\.:' supre by- ' i'' t the's Bank\. Good progress' was made bu,st arting'\.in 1985, th CFA franc, appecated shapl in\. reato to the US dollar\. Thi wa soo ~~~~~0\.}\.at th\.at tim\. an th abec of this opton to r-stablsh the comettienssa of is?aaa-- to~~~~~~~ sto ther ecnoi declin\. r During?? tat pe?r?iod the3333 B333 an extended aa series33 of?3? adjustment~2,a? loran?s,3a-\.fa includig the2 Reuatory; Framwrk an Coptiiens ?Adjsten 3\.~~~~~~~~~~~~~~~ \.::S PASCO' obetvs wer to re?\.-? ?store?? economic competitivener \.,, 2?E2\.ss:§55 ???\.s:\.?\.:sss thrug acin in2 ?s \. the~~~~~~~~~~R '2\.g\.tr?B? area ofs tax-s refrm export incentivs,a trnsot,?? ? logi::::BBstic?BBBBs,? lao marke flexibility broadly~~~~~~ th sam ,as thse covered bys th operatio unde reie (BDA) ands progress E Bs\., ,g\.sB ,ss gssss underASCourand lessonsc ofrCome expoie,MnsryoFieance wilba dsusd aspatofthnaayssyo 2\.AC Thne imdplemdentation Competio RoepdIoirt (ICR forlPASCO was exotoissued ino1995 'oased oailrpoco epilcoa cfe sucssu ntlte ae190,whnacomdiybomgnrae xcsie7xetain an edt oesenig n hayborwig I 91,CtedIvieintatda adjustmen~~t poga suprebyteBn\.Goprgeswsmd,btsatign 195 teCA rn apecae sapy nreain ote Sdolr Ti asso economy, Coureeulco te d'Ivoire , pusud inisteryfFnanc andjustmntoliymhchpoeynsfiin 2o stopnte indeomicdencline During C tha d pierisolow,ted Bank expot-oriednaterie polic sduccsstulentloas nldn the Rglate17swhnacmodit bomeork generte Cmetitveessiv expecttions LandCredito ovrPending and he4)avy boeFfoingnia Indjustmen doan/Crediiiate (PSF,nr 2303), btheF rn approved iate sharpl Floingrlto the deauto fthe USdllr ATi frasc soon aggravtandin balances collapse tofoo adjsmnd coansfere prices\.lred statio repalled with IA at thAtSCmeO'nth abjetvswene tof thisotion, economicalihh competitiveness truhaions its the aestop the reoorm,c dciexport ringetvs thatsperod, loithes Babor extenedt flerieslity adjutmentaloas inxencludn thmetiin Reudiciary Fraeworm and Coesmpetitivoe\.nTess adjustaren broan/rdiyth (PsCO, Crs 2324e anerdb the operancial Adustment reieo(SAnCredi PaSFI prores 2303er PASCO appovd iesns 1991m Followience thle devalussdationr of the CAfanc,si the theDArea\.o Tax Impefom,entatort ioplentives tRanport logitics laor mAC arke flsedxibility,  It rated its outcome satisfactory and its sustainability, likely\. PASFI's objectives were to stabilize the financial system and restore a healthy intermediation to enhance resource mobilization and help finance productive investments\. The ICR for this operation was issued in 1996\. It noted that, given the unfavorable circumstances prior to the devaluation, the program was surprisingly successful in attaining the objectives that had been set out, though some not in their entirety\. It contributed to the success of the devaluation\. 4 Following the devaluation, Cote d'Ivoire was declared eligible for IDA credits only\. The Government reformulated its adjustment program and a new Country Assistance Strategy (CAS) was presented to the Board in June 1994\. Its main priorities were to achieve macroeconomic stability, promote private sector development, and improve the efficiency of resources in the social sectors\. In view of C8te d'Ivoire's high indebtedness, including to the Bank, the CAS proposed an exceptionally high level of support, mostly through adjustment lending\. The first adjustment operation was a one- tranche Economic Recovery Credit (ERC) approved in October 1994\. It was to be followed by sectoral adjustment operations in agriculture, transport, private sector development and finance\. The Agricultural Sector Adjustment Credit (ASAC, Cr\. 2779) was the first sectoral operation to be approved (September 1995)\. It was followed by the PSDAC, which was approved in April 1996, and the Transport Sector Adjustment Credit (TSAC, Cr\. 3100), which was approved in June 1998\. B\. PROGRAM OBJECTIVES AND DESIGN 5\. Program objectives\. Building upon achievements under PASCO and PASFI, the PSDAC was designed to increase external and internal competitiveness and actively promote investment and exports by achieving a critical mass of structural improvements to the business environment through (i) reform of the legal and regulatory framework to improve productivity and reduce business costs and risks; (ii) reduction of specific costs and delays in the port/customs area and improvement of telecommunication services through privatization; and (iii) improvement of investment and export promotion\. The reform program was also aimed at increasing private sector confidence in Government through regular dialogue and the elimination of domestic arrears owed to the private sector\. 6\. Program design\. An innovative approach to tranche design and sequencing was proposed to address C6te d'Ivoire's substantial financing needs and frequent resistance to adjustment from vested interests\. The operation introduced the concept of an "omnibus operation," where the first tranche (US$80 million) was to be disbursed upon credit effectiveness on the basis of reforms already implemented before Board presentation, and five smaller tranches of US$20 million each were to be released as soon as a certain number of other conditions had been met\. Reflecting the reality that some conditions are more important than others, each tranche release was to be triggered by compliance with one core condition (or a package of related core conditions where it was necessary to ensure coherence through simultaneous implementation) and one non-core condition, in 3  addition to demonstrating satisfactory progress in the overall program as put forth in the letter of development policy\. The credit was approved in April 1996\. Two supplementary credits under the Fifth Dimension Program for a total of US$91\.2 million were approved in November 1996 and December 1997\. 7\. Reform program\. The policy reform areas below were supported by the credit\. 8\. Reform of the legal and regulatory environment a) Reform of business laws and judicial system\. Progress in legal reform was mixed under PASCO\. There was no conditionality in this area, which was supervised under PASFI and the Economic Management Project (PAGE, Cr\. 2503), a technical assistance project\. PSDAC's objectives under this component were to update the business laws, improve the functioning of the judiciary and support the establishment of an arbitration court for commercial cases\. A Technical Assistance project, planned to be a companion to PSDAC, was designed to help, among other measures, with the dissemination of the new business laws, a first set of which was approved by Cote d'Ivoire and 15 other (mostly French speaking) countries in 1996 under the so-called OHADA initiative\. This first set of business laws became effective in 1998\. The TA project was also expected to contribute to the effective functioning of the arbitration court established in 1995\. This project was approved with much delay in June 1998 only, but, in the meantime, alternative financing became available to contribute to achieving some of PSDAC's objectives\. Regarding improving the efficiency of the judiciary, the objective was to speed up the reform agenda initiated under a French legal support operation and PAGE\. Adoption of a short-term monitorable action plan was a condition of Board presentation for PSDAC, and its implementation a core condition for tranche release\. b) Revision of tax procedures and penalties\. Under PASCO good progress was made in the rationalization of the Ivorian fiscal system through reduction of profit taxes and extension of value added tax (VAT) eligibility\. Further progress was made in the property tax and the single tax system for small businesses in 1994 and 1995\. A major shortcoming remained in system implementation, however, with excess discretionary power of the tax administration\. PSDAC supported the revision of tax procedures to establish clear rules governing the respective rights and obligations of taxpayers and tax administration and introduce pre-set penalties for each type of infringement\. The publication of clear procedures and penalties in a separate section of the tax code was a non-core tranche release condition\. c) Labor legislation\. Under PASCO the Government agreed to introduce more flexibility to the Ivorian labor conditions\. A new labor code was approved by Parliament in 1995 and the hiring monopoly of the state employment agency (OMOCI) was eliminated\. The labor code did not become effective, however, in the absence of implementation decrees\. In addition, legislation was needed for the establishment of private recruitment and temporary job agencies\. The publication of at least five implementation decrees, which were to include private recruitment and temporary job agencies, was a condition of Board presentation for PSDAC, and the publication of the full set of 21 implementation decrees 4  for the labor code was a non-core condition of tranche release\. The ICR for PASCO noted that AGEPE, the new Government placement agency that replaced OMOCI, had a conflict of interest resulting from its regulatory powers over private sector agencies that it competed with\. This was not corrected under PSDAC, but it became irrelevant in practice because most private firms do not use the services of AGEPE\. d) Trade liberalization and internal competition\. Important changes were made during PASCO and pursued under the ERC in trade liberalization\. Under ASAC further progress was to be made with the removal of non-tariff barriers on agricultural products and inputs\. A new tariff structure with rates ranging from 10 to 35 percent was implemented in 1993/94\. Exceptions in favor of assembly industries were maintained, however\. They were to be removed in two steps under PSDAC, the first one as a Board condition and the second as a non-core condition for tranche release\. Despite the publication of a new competition law in 1991, barriers to entry subsisted in several sectors\. Elimination of these barriers was to be done in two steps, one as a Board condition, and the other as a non-core tranche release condition\. A specific barrier to entry concerned the accounting profession\. As a non-core condition for tranche release, the Government agreed to define clearly the conditions for equivalency of the CPA diploma\. Finally, the program sought to reinforce the Competition Committee through a set of changes, including drawing more members from the private sector, and the possibility for individual firms to submit cases to the Committee directly\. These changes were a non-core condition for tranche release\. 9\. Reduction of operating costs and improvement of quality of services a) Streamlining of port procedures\. Under PASCO several measures were taken to speed up the customs processing and the admission of merchandise arriving into CMte d'Ivoire\. Further progress in reducing clearance and delivery time was expected under PSDAC\. To improve dialogue among private operators and port authorities, the Port Competitiveness Committee was created as a condition for Board presentation\. As a core condition for tranche release, a set of performance indicators were to be met, covering both port and customs procedures\. b) Simplification of customs procedures\. The customs control system in the port of Abidjan was the source of severe congestion, as all containers used to be lined up in a special area awaiting control\. Under PSDAC, the customs administration was to switch to the concept of risk management, resulting in less inspections, and to eliminate many manual procedures, which served no purpose other than providing opportunities for "transaction costs"\. To improve the transparency in administrative regulations and penalties, a User's Guide was to be adopted and published as a non-core condition of tranche release\. c) Maritime transport\. In the past, restrictive practices in favor of the state-owned shipping line SITRAM had involved considerable cost and poor service for importers and exporters\. With support from the ERC, partial liberalization of specialized traffic took place in 1994, and the mandatory visa of Office Ivoirien des Chargeurs (OIC) for loading general merchandise from or to Cote d'Ivoire was abolished in 1995\. In the same year, 5  SITRAM was liquidated\. To ensure the full benefits of liberalization of maritime transport to private operators, however, three measures were deemed necessary, including a decree completing liberalization of bulk and refrigerated traffic, and another one establishing transparent criteria for chartering vessels\. Both decrees were enacted as conditions of Board presentation for PSDAC\. The shippers' council (OIC), which had become a Government agency in charge of freight allocation, was to return to its initial role of defending shippers' interests and supplying services to them, such as the use of OIC- owned bonded warehouses\. This required a change in its statutes and ownership\. The transfer of a majority share of its capital to the private sector, including small shippers, was a non-core condition of tranche release\. Finally the obligation for all freight to C6te d'Ivoire to be insured with an Ivorian insurance company was to be removed as a non- core tranche release condition\. This was expected to reduce the cost to importers\. Further reforrns in the transport sector, particularly in the road sub-sector, were expected to be carried out under TSAC\. d) Telecommunications\. In 1995, CMte d'Ivoire enacted a telecommunications law allowing competition for basic services and the creation of an independent regulatory body\. The next step was the privatization of the telecommunications company, CI- TELCOM\. This was a core condition for tranche release under PSDAC\. 10\. Investment and export promotion a) Simplification of investment procedures\. Following adoption of a new Investment Code in 1995, a one-stop window "Centre pour la Promotion de / 'Investissement en C6te d'Ivoire" (CEPICI) was established\. Its procedures needed streamlining to ensure that it would indeed be a one-stop window\. This was achieved through implementation of an action plan agreed upon under PSDAC\. As noted in the ICR for PASCO, the new investment code adopted in 1995 satisfies the criteria of simplicity, accountability and transparency, but gives bigger privileges to bigger companies, which runs contrary to the Govermnent stated policy of SME promotion\. In an annex to the letter of development policy (LDP), the Government outlined an action plan for streamlining procedures by eliminating or merging registration requirements with different public agencies\. Implementation of this action plan was to be supported by the parallel TA project\. b) Export promotion\. Under PASCO all export licenses were eliminated in 1992\. Many obstacles remained, however, for Ivorian exporters, including high cost of pre-financing, absence of export guarantees, and complexity and delays in foreign exchange procedures\. These issues were to be addressed with support from the parallel TA project\. Under PSDAC the Government agreed to liquidate the Centre de Commerce International d'Abidjan (CCIA), an inefficient public agency in charge of export promotion\. The creation of a privately run export development agency was a core condition of tranche release\. The agency was expected to operate on partial, but gradually increasing, cost recovery basis\. Initial funding was expected to be provided by the parallel TA project\. 6  11\. Increased Private Sector Confidence in the Government 0\. a) Settlement of domestic arrears owed to the private sector\. The persistence of large domestic arrears was one of the most contentious issues\. Good progress was made in reducing arrears from the equivalent of 8\.6 percent of GDP to 2\.5 percent during the two- year period from December 1993 to December 1995\. In May 1995, the Government announced the elimination of remaining arrears by the end of 1996\. Satisfactory performance under the repayment plan was a general condition for disbursement of all tranches\. b) Regular dialogue between the Government and the Private sector\. A ComiW de Liaison Secteur Public/Secteur Prive has existed since 1991, but the private sector contended that the Government called meetings only in crisis situations and took unilateral action without a real dialogue, and did not even inform the private sector of the reasons for its decisions\. Preparation of PSDAC was coordinated by a Technical Committee comprising private and public sector representatives\. Moreover, a Private Sector Development Committee chaired by the Prime Minister and comprising the Minister of Industry and Commerce, the Minister of Economy and Finance, the President of the Conseil National du Patronnat Ivoirien and the President of the Chamber of Commerce and Industry was to meet periodically to make decisions on important policy matters\. After Board approval, the Comite de Liaison was revived under more operational arrangements to follow up on the implementation of the reform program\. C\. PROGRAM IMPLEMENTATION 12\. The Government has implemented the reform program supported by PSDAC, but with some delays\. The credit was made effective on April 25, 1996, less than two weeks after Board approval, and the first tranche was released\. The second tranche was released three months later\. The core condition met was the dissolution of CCIA, the government export promotion agency, and the non-core condition was the publication of the remaining Labor Code implementation decrees\. It took a full year, however, before the third tranche was released in July 1997, following the privatization of CI-TELCOM (core condition) and the adoption by the National Assembly of the 1997 Budget, including revised tax procedures and penalties (non-core condition)\. The sale of 51 percent of CI- TELCOM was finalized in February 1997 and the 1997 Budget Law was approved in April 1997, but, only in July 1997 was the Government able to demonstrate that it had eliminated domestic arrears at end-1996, except for a small amount\. The fourth tranche was released in October 1997 following full implementation of the action plan for legal and judicial reform (core condition) and the publication of revised customs procedures and penalties in the 1997 Budget Law (non-core condition)\. The fifth tranche was released in December 1997 following the privatization of OIC (core condition) and the elimination of the requirement for importers to underwrite maritime insurance with companies established in Cote d'Ivoire (non-core condition)\. Finally, the last tranche was released in August 1998\. The last two conditions included the streamlining of port and customs procedures (core condition) and further liberalization of economic activities and reform of 7  the competition policy (non-core)\. At the time of tranche release, the arrears to the private sector amounting to the equivalent of US$1 million were deemed compatible with normal payment delays\. The closing date of the credit was postponed by one year to March 31, 1999\. 13\. To oversee program implementation, the Government established a Steering Comrnittee which included representatives from all ministries and public agencies concerned and was chaired by the Deputy Chief in the Prime Minister's Office\. The chairman and many members of the Committee stayed on during the entire duration of program implementation\. The private sector was not represented in the Steering Committee, however, and the Technical Committee and the sub-committees established during program preparation to ensure close coordination between the public and private sectors no longer convened\. The high level Private Sector Development Committee is documented to have met only once\. The Liaison Commnittee continued ad hoc meetings two or three times a year to solve pressing issues\. 14 The postponement of the parallel TA operation, which was expected to provide assistance in a number of areas, was a minor factor in program implementation delays\. This operation was eventually approved, but in June 1998 only, more than two years after PSDAC\. This delay was due mostly to disagreements between the Government and the Bank on the role and responsibilities of the new export promotion agency and on the qualifications of its general manager\. Initial Government proposals were found by the Bank to give too much weight to the public sector\. The recently approved TA project is expected to help with export and investment promotion and support further strengthening of the legal and judicial system, including the operation of the new arbitration court established by the Chamber of Commerce and Industry\. 15\. The major risk foreseen during preparation of the operation was that of uneven implementation, including backtracking in some areas\. It was felt that the departments in charge of implementation might be reluctant to relinquish their discretionary power, or that the elements of the private sector which had previously benefited from rents and lack of transparency would not support the reform agenda vigorously enough\. To mitigate these risks, close monitoring of program implementation by Bank staff was deemed necessary, and the broadening of the dialogue with the private sector beyond the official trade associations, which was initiated during program preparation, was to be pursued\. These risks materialized and program implementation suffered from the insufficient dialogue between the Government and the private sector, and from the resistance of some departments to relinquish their discretionary power\. D\. ACHIEVEMENT OF PROGRAM OBJECTIVES Macroeconomic stability 16\. The Government has controlled inflation following the parity change and has maintained the competitiveness gains from the devaluation\. It met its revenue and 8  expenditure targets and maintained primary surpluses of about 3\.1 percent of GDP in both 1996 and 1997\. This was achieved through tax reform and expenditure control\. The public sector wage bill fell from 11 percent of GDP in 1993 to 6 percent in 1997, and the number of civil servants has declined from 52,246 in 1993 to 42,778 in 1997\. With support from donors and creditors, the Government has managed its external debt effectively\. In March 1998, Cote d'Ivoire was declared eligible for support under the Heavily Indebted Poor Countries (HIPC) initiative\. Chart 3: Number of Civil Servants in CentralAdministration (excluding teachers) 60,000\. 50,000 6 40,000 30,000 1 1 lE 20,000 10 0 0\.-\. \., , \.9\.R>Z o-< i \. 1993 1994 1995 1996 1997 Source: Republic of Cote d'lvoire Reform of the legal and regulatory environment 17\. The ORADA reforms including enactment of new business laws for all the 16 countries involved and the establishment of a Regional Court of Appeals have been implemented\. The action plan for legal and judicial reform has been implemented, including (i) the reactivating of the General Inspectorate of judicial services with the appointment of three inspectors; (ii) the creation of an Arbitration Court at the Abidjan Chamber of Commerce; (iii) the reform of judicial procedures to shorten the duration of law suits; (iv) the acceleration of court procedures through opening of "stamp offices" within the courts of appeals; (v) the establishment of a national legal information center to improve access to legal information; (vi) the reform of the office of the clerks of court; (vii) the construction of a court building in Yopougon, a large suburb of Abidjan; (viii) the training of magistrates and clerks of court; and (ix) a communication campaign\. 18\. The implementation of the action plan has not improved the functioning of the judicial system, however\. Indeed, the deterioration has continued unabated\. Magistrates are poorly motivated\. Their operating budget is insignificant\. The reform did not clarify the role of the clerks of court, who collect fees paid by the plaintiffs, but are not accountable for the way these public revenues are spent\. Court rulings are 9  delivered with considerable delays, and may differ from the decisions made during court proceedings\. Often, well established businesses have no choice but to settle out of court when they are confronted with abusive legal actions, or when they try to enforce contracts\. A far reaching reform of the judiciary is essential for a healthy development of the private sector\. Such a reform cannot succeed, however, without a strong comnmitment from the Government\. 19\. The 1997 budget law included a separate section of the Tax Code detailing tax procedures and penalties, with the objective of guaranteeing the rights and obligations of both parties\. The draft of this section was discussed extensively with the private sector\. It provided for informing taxpayers in advance of an impending audit and proof of charges lying with the tax administration\. Penalties were set at different rates for fraudulent intention or for simple negligence\. A conciliation committee composed of administration and private sector members was established\. These reforms have not brought about any significant changes in administration practices, however\. The discretionary power of the administration is still considered a problem by the private sector\. Many agents have not changed their predatory behavior, responsibilities are unclear, and the texts need further clarification through implementation notes, reducing the scope for inconsistent interpretations\. The conciliation committee has not been convened during program implementation, and the taxpayers are deprived of real judicial recourse\. 20\. The publication of 21 implementation decrees of the Labor Code in 1996 was an important step in introducing more flexibility in labor relations and improved the operating conditions of private recruitment agencies\. The elimination of the hiring monopoly of OMOCI, the state employment agency, was a major step forward\. Most large firms now use the services of private recruitment agencies\. The sharp reduction in the discretionary power of the labor administration is a welcome change\. 21\. There remains, however, an issue with the role played by AGEPE, and a disagreement between the Government and the private sector concerning the hiring of foreigners\. AGEPE, which replaced OMOCI and was set up to monitor employment trends, tends to act increasingly as a regulatory body\. It delivers work permits for foreigners and charges a hefty fee, particularly for non Africans\. These fees are retained by the agency for funding its programs, including credit for employment creation\. These programs are a waste of resources\. The repayment rate under its credit schemes is less than 10 percent\. It is not monitoring employment satisfactorily\. Its analysis of employment in the modern sector for 1996 was not available in October 1998, at the time of the ICR mission\. The Government should commission an audit of AGEPE, and consider reallocating its resources (about CFAF 2\.5 billion a year, i\.e\. about one half of the budget allocated to the Ministry of Justice) to more useful purposes\. 22\. A number of measures were taken to improve the competition policy and further liberalize production and domestic marketing activities\. The 1991 law which established the Competition Committee was amended to extend to individual firms and 10  consumer associations the possibility to file complaints regarding competition matters and to give the Committee the right to take up cases itself\. A 1996 decree modified the composition of the Committee, increasing its membership from seven to nine, of which five from the private sector\. It also increased compensation of committee members\. These reforms have not enhanced the credibility of the Committee, however\. There is not much interest in Government or in the private sector in its functioning\. Annual reports of the Committee have not been published\. The private sector is more concerned with competition from informal activities, particularly illegal imports, which is not part of the Committee mandate, than from restrictive practices\. Consumers' associations have no clout\. There is a risk of increased concentration of economic powers in the hands of a few, and it is important for CMte d'Ivoire to revisit the institutional framework in charge of implementing its competition policy, including the role of the Ministry of Commerce and the role of the regulatory agencies established for the privatization of infrastructure\. 23\. An extensive review of restricted or regulated activities in Cote d'Ivoire concluded that out of 152 activities identified, access to 35 was not restricted administratively, but subject to qualification criteria and regulated by the profession itself Twelve activities were liberalized during program implementation (including private schools, travel agencies, consulting firms, car repair, restaurants, etc\.)\. Access to 38 activities will continue to be restricted, mainly for health and safety reasons, leaving 67 other activities for which further liberalization is under consideration\. Access to the accounting profession has been opened up by official recognition of the CPA diploma with the French expert-comptable diploma\. Reduction of operating costs and improvement of quality of services 24\. In July 1998 the Government furnished satisfactory evidence that the Abidjan port and customs office had complied with pre-set performance indicators over the preceding six-month period\. The most important aspect of this core condition for tranche release was to reduce the average port transit time for import containers to 7 days from an average of 16 days in early 1996\. The three-day target for export containers was achieved in 1997, taking into account the closing date requirement by shipping companies\. The change in customs office procedures resulted in achieving a 24-hour average processing time for "green circuit merchandise" (goods subject to automatic clearance) and 48-hour average processing time for "red circuit merchandise" (goods subject to systematic control)\. The performance of the two gantry cranes improved markedly\. The streamlining of transit procedures and increased technical performance were critical factors which helped the port of Abidjan, through which about 85 to 90 percent of Ivorian foreign trade transits, to cope successfully with a 50 percent increase in import volume from January 1994 to January 1998\. The improvement in port performance, combined with the maritime liberalization which took place as a Board condition for PSDAC, resulted in a reduction of freight rates ranging from 30 to 50 percent, according to private importers\. 11  25\. As indicated earlier, CI-TELCOM, the telecommunications company, was privatized in February 1997\. After international competitive bidding, 51 percent of its equity was sold to a private consortium led by France Cable et Radio\. The privatization of CI-TELCOM stopped a long process of decline\. The network was in need of rehabilitation, the accounts had not been properly kept since 1991, and all performance ratios were on the low side\. The cost of international communications was high to compensate for a low tariff on domestic communications\. Following the privatization, a rehabilitation program was initiated, and improved management led to a gradual change in performance indicators\. For instance, the ratio of revenue to staff increased by more than 50 percent from January 1997 (immediately before privatization) to October 1998\. At the same time the opening up of the cellular phone market to competition, which took place before PSDAC, led to an explosion in subscriptions\. The number of customers increased tenfold from 6,500 in January 1997 to 65,000 in October 1998\. The number of fixed lines increased from 115,000 to 170,000 during the same period\. A major problem which remains to be solved for CI- TELCOM is the payment of government bills, representing on average 5 to 6 percent of its turnover\. Arrears in October 1998 were higher than a full year of consumption\. Investment and export promotion 26\. Investment procedures were further simplified during PSDAC\. CEPICI, the investment promotion agency established as a one-stop window for investors in 1995, contributed to a considerable shortening of the period needed for obtaining approval of benefits under the investment code and for registering companies\. With support from the recently approved TA project, CEPICI will improve its targeting of investors and investment procedures will be further simplified, including the elimination of unnecessary reporting requirements to different government agencies\. 27\. Under PSDAC, CCIA, the ineffective government export promotion agency, was liquidated, and APEX-Cl, a new agency, was created in 1996 as a private sector, not-for-profit organization\. Initiation of its operations was delayed, however, pending effectiveness of the TA project, which was expected to provide support\. APEX-Cl will manage\. a cost sharing grant scheme to assist existing or potential exporters in obtaining professional services, and will supply exporters with information services and links to world markets\. Increased private sector confidence in Government 28\. The objective of increased private sector confidence in Government was to be achieved through the elimination of domestic arrears and an improved framework for dialogue between the Government and the private sector\. The arrears reduction program was successful, though at times difficult to implement\. However, the issue remains a serious one, as mentioned in the case of Cl-TELECOM\. As indicated earlier, the dialogue mechanisms established during the preparation of the program were not used during its implementation\. This objective of the program was not achieved\. 12  E\. BANK AND BORROWER PERFORMANCE 29\. The Bank performance in the identification, preparation, appraisal and supervision of the operation was satisfactory\. The design of the operation, with six floating tranches to be released at any time when two conditions were met, was an innovative way to help a severely indebted country move at its own pace on a number of important reforms, and, at the same time, meet its obligations under its debt payment schedule\. This design was intended to relieve the pressure to disburse, which is often found in traditional adjustment operations with fixed tranche conditionality\. The pairing of one core and one non-core condition for tranche release was a good feature, which reflected the reality that certain actions are more important than others, but also that the combination of all of them is critical for a program to succeed\. It is not clear, however, why the dissolution of CCIA (the export agency), to take just one example, was a core condition\. 30\. Supervision was intensive\. Combined with the preparation of the TA project, it allowed for a continuous dialogue with the authorities on private sector development\. The delay in preparing the parallel TA project was a negative factor in the implementation of the reform program, but a minor one\. Several activities that were expected to be carried out with financial support from the project were delayed\. Previous adjustment operations in Cote d'Ivoire had suffered from a weak implementation capacity, and it was felt that a companion TA project was needed to finance studies, training, initial support to private providers of business services, and information and communication activities\. 31\. The performance of the Borrower was highly satisfactory during the preparation of the program\. The private sector was heavily involved in the design of the reform program and expected a considerable improvement in the business climate during its implementation\. This did not happen, however, in the key areas of justice and tax administration\. It was also expecting that the proceeds from the credit would be directly channeled to private sector activities\. This misunderstanding was not cleared up front and contributed to a lingering atmosphere of distrust\. The dialogue structures established for program preparation were not allowed to properly function during implementation\. The private sector felt excluded from the decision making process\. The reform program was implemented, but in several areas more in the form than in substance, as indicated earlier\. Consequently, the performance of the Borrower during program implementation is rated as partially satisfactory\. F\. ASSESSMENT OF OUTCOME AND SUSTAINABEITY 32\. The expected benefits of the adjustment operation were cast in general terms in the project document\. Successful implementation of the program was seen as a critical condition for renewed private sector confidence, overall economic growth and 13  increased employment opportunities\. The improvement in the judicial and legal environment was expected to strengthen the enforceability of contracts, reduce the opportunities for graft, and boost investor confidence\. The reduction of operating costs and delays in infrastructure services was expected to improve the profitability of business operations\. No mechanism was set up to monitor and evaluate results\. 33\. During the ICR mission in October 1998, FNICI, the largest industrialist association, carried out a survey of its membership on the achievements of the reform program\. The questionnaire was filled out by 42 companies\. Its main results are in Box 1\. Also, FNICI organized three panels to discuss the issues related to labor legislation, tax procedures and penalties, and port and customs operations\. The assessment of the outcome of the program takes into account the results of the survey and the findings of the three panels\. 34\. Overall, the outcome of the program is rated partially satisfactory\. Considerable progress was made in some areas, but little was achieved in others\. The areas where substantial progress was made include maritime liberalization, the port and customs operations, telecommunications, the investment code, the business laws, the reduction of domestic arrears, and the labor legislation\. The areas where little or no progress was achieved include the judicial system, tax administration, and the competition committee\. There is a sensitive area where there was some backtracking, namely the dialogue between Government and the private sector\. Relations between the Government and the private sector did not improve during implementation of PSDAC\. They were undermined by pervasive corruption and fraud\. The reform program has eliminated some areas of discretionary power granted to the administration, but more remains to be done in this respect\. 35\. The reforms in maritime transport, ports and customs operations, telecommunications, investment code, business laws and labor legislation are likely to be sustained, but the sustainability of reforms in domestic arrears elimination is uncertain\. Not much was achieved in the area of institutional development\. Box 1: Results of the survey carried out by FNICI 1 4  G\. FUTURE OPERATIONS 36\. The operation of the regional institutions, which have been set up under the OHADA treaties, depend on the willingness of member countries to contribute\. The operation of the judicial system is not satisfactory\. It is unrealistic to expect the magistrates to perform according to widely accepted international standards when their operating budget is negligible and, more importantly, when corruption in all spheres of government continues unabated\. The operation of the tax authorities needs to become more transparent and business-like through a major effort, including intensive training of staff, publication of clear guidelines, and effective functioning of the conciliation committee\. AGEPE should be streamlined and its budget considerably reduced\. It should gear up to produce employment data on time and cease to interfere in regulatory matters or to act as a bank\. The Competition Committee should be redesigned in close consultation with the private sector\. Its mandate should be broadened to cover all aspects of unfair competition, except as concerns monopolies or oligopolies in the infrastructure sector, which are regulated by special agencies\. A streamlining of the ministry in charge of commerce should be considered, since many tasks it used to perform are no longer needed\. Savings would be used to fund the Committee and other regulatory bodies\. Further progress in port and custom operations would enhance CBte d'Ivoire's role as a regional hub\. The Port Competitiveness Committee should define common objectives and monitor implementation\. In the case of CI-TELCOM, it is important that government bills be paid on time\. This is an issue that needs to be solved rapidly\. It is also important that the newly-established regulatory authority monitor carefully the performance of the private operator\. 37\. Two institutions established under PSDAC did not start operating, mainly due to a lack of adequate funding (the arbitration court and the export promotion agency)\. The recently approved TA project provides for the funding of their operations on a declining basis\. The objective is to ensure that they are self sufficient over time\. No future operation is being considered for the moment in the private sector, but the serious problems left unresolved under PSDAC, particularly in the judicial system and in tax administration, should be addressed in close association with the private sector as a matter of urgency\. The dialogue mechanisms which worked well for the preparation of the adjustment operation should be re-established\. 38\. Private investment has almost doubled from 1994 to 1997, but it still represents a relatively small share of GDP, at about 11 percent in 1997\. To ensure a steady growth of the Ivorian economy at about 6 to 7 percent p\.a\., which is the Government's ambition, it is essential for private investment to increase substantially in the coming years\. In turn, this requires that further efforts be made to improve the business environment\. Over the past several years, the Government has made considerable progress in liberalizing the economy and privatizing public enterprises\. It 15  should now focus on key aspects of governance that are essential for a much needed diversification of private investment\. Justice is one of them\. Open dialogue with the civil society is another\. More generally, a sharp and credible focus on eliminating corrupt practices is essential for improving the business climate, H\. LESSONS FROM EXPERIENCE 39\. To be successful, private sector adjustment operations require the continued commitment of all stakeholders concerned\. Private sector representatives felt energized during program preparation and were expecting a new deal in their relations with the Government\. Their expectations were not met, however, as the Government failed to involve them in a meaningful way during program implementation\. The commitment of the Government to reform was strong overall, as demonstrated by the significant changes implemented under the program\. Its commitment, however, was weak in the key areas of judicial and tax administration reform where there was little or no progress\. 40\. Action plans or committees are no substitute for commitment\. The action plan for judicial reform was implemented, but it did not bring about any significant change in the functioning of the judiciary\. The Port Competitiveness Committee, including representatives of users, was created as a condition of Board presentation\. It is not working, but this did not prevent the port from making steady progress in its operations\. 41\. The so-called "omnibus concept" pioneered by this operation served well its purpose of providing funding at regular intervals to support the Government's reform program\. The concept took into account the fact that some reforms are more important than others, but that only the combination of all of them provides the critical mass for changing the business environment\. In retrospect, it would have been useful to eliminate many secondary conditions and focus on what was absolutely essential\. 42\. The private sector felt alienated during program implementation\. Its representatives had no say on the way conditions were met\. Their advice should have been solicited\. 43\. Clear and measurable indicators of outcomes and impact should have been defined and agreed upon among all parties concerned for all components of the program, as was done for the port and customs operations\. In areas where clear and monitorable indicators are difficult to establish, like the functioning of justice, an effort should have been made to measure the impact, and a monitoring and evaluation system, including client surveys, should have been put in place at the outset of the operation, with participation from the private sector and academia\. 16  REPUBLIC OF COTE D'IVOIRE PRIVATE SECTOR DEVELOPMENT - ADJUSTMENT - (Credit 28430-IVC) IMPLEMENTATION COMPLETION REPORT PART II -- STATISTICAL TABLES Table 1: Summary of Assessments A\. Achievement of Obiectives Substantial Partial Negligible Not Applicable Macroeconomnics policies EE O O Sector policies O el O O Financial objectives ° E ° E3 Institutional development ° E O Cl Physical objectives ° D E Poverty reduction ° 0 ° Gender concerns E 0 E Other social objectives a 0 a E Environmental objectives a3 o E Public sector management o E 0 O Private sector development B\. Project Sustainability Likely Unlikely Uncertain el 0 El C\. Bank Performance Highly Satisfactory Satisfactorv Deficient Identification O E O Preparation assistance 0 El ° Appraisal El 0 O Supervision OE O D\. Borrower Performance Highly Satisfactory Satisfactorv Deficient Preparation O E O Implementation O E l Covenant compliance O l O Operation El El E\. Assessment of Outcome Hlliy Satisfactory Unsatisfactory Highly Satisfactory Unsatisfactory l E 3 O 17  Table 2: Related Bank Loans/Credits Loan/Credit Title Purpose Year of Status l ~~~~~~~ ~ ~ ~~~~~~~~Approvall Competitiveness Enhancing competitiveness\. eliminate non-tariff Adjustment credit barriers\. Liberalize prices\. Study reforms in 1992 Completed (Cr\. 2324) maritime transport regulations\. Provide 1994 l ___________________ budgetary support\. (i) strengthen central Government finances Economic Recovery Credit through elimination of import tax exemptions 1994 Completed (Cr\. 2656) and improved investment programming, (ii) 1995 pursue trade liberalization through the l elimination of non-tariff barriers, (iii) further price liberalization, (iv) liberalize price and marketing policies for rice, and (v) increase competitiveness in maritime transport\. To support through studies, training, and Privatization Support supporting operating expenses, Govt\. objective to (Cr\. 2363) (I) reduce, through privatization, Got holdings in 1992 Active productive activities, (II) restructure and reduce CDI's foreign conunercial debt, and (III) strengthen Abidjan Stock Exchange Reinforcement of institutional capacity to Private Sector implement the Private Sector Development development/TA Adjustment Operation (Port/Customs, Legal 1998 Active (Cr\. 3104) Framework and Judiciary Arbitration Court) and support to Private Sector service providers (Export Promotion) To improve the efficiency, cost-performance and Transport sector service level in the transport sector in the context Adjustment of the general structural adjustment policy 1998 Active (Cr\. 3100) currently agreed upon by funding the Privatization of parastatals, institutional reforms, regulation reform, fiscal reforms, and managerial training for the public and private sectors\. (i) Targeting of public expenditures to social Structural Adjustment development using the indicators agreed under Grant the HIPC framework\. The key criteria are the in size and targeting of public spending in health, preparation education, and rural infrastmcture and services; (ii) complete liberalization of coffee (October 1, 1998) and cocoa (October 1, 1999) external marketing and restructuring of the export marketing agency as a significantly smaller entity with a greatly reduced role; and (iii) continued strengthening of the financial sector, including stronger enforcement of prudential norms\. 18  Table 3: Project Timetable Steps in Project Cycle Date Planned Date actual Identification Jan 95 31-Jan-95 Appraisal Sep 95 23-Sep-95 Negotiations Feb 96 26-Feb-96 Letter of Sectoral Development Policy Mar 96 Mar-96 Board presentation Apr 96 11-Apr-96 Signing Apr 96 12-Apr-96 Effectiveness Apr 96 25-Apr-96 Credit closing 31-Mar-98 31 -Mar-99 Table 4 : Credit Disbursements: Cumulative Estimated and Actual * US$ million Credit 28430 Cr\. 28431 Cr\. 28432 1996 1997 1998 1996 1997 Appraisal estimate 120 60 0 n\.a\. n\.a\. Actual 100 60 20 54\.4 35\.3 Actual as % of estimate 83\.3 100 100 100 Date of final disbursement: Aug\. 21, 1998 06-dec-96 30-Dec-97 * The amounts differ from the original amounts of the Credit in terms of US$ due to changes in the SDRJUS$ exchange rates\. 19  Tables 5: Key Indicators for Project Implementation and Operation (Not applicable) Table 6: Key Indicators for Project Operation (Not applicable) Table 7: Studies Included in the Project (Not applicable) Table 8-A: Project Costs (Not applicable) Table 8-B: Project Financing (Not applicable) Table 9: Economic Costs and Benefits (Not applicable) 20  Table 10: Status of Legal Covenants Credit Covenant Present Agreement Type Status* Description of Covenant Comments Section 3\.01 Monitoring, C (a) The Borrower and the Association shall review and from time to time, at the request of either party, reporting exchange views on the progress achieved inl carrying out the Program artd the actionsl specified in Schedule 2 of the credit Agreement; (b) Prior to each such exchange of views, the Borrower shall furnish to the Association for its review and comment a report on the progress achieved in carrying out the Program, in such detail as the Association shall reasonably request; (c) Without limitation upon the provisions of paragraph (a) of this Section, the Borrower shall exchange views with the Association on any proposed action to be taken after the disbursement of the Credit which would have the effect of materially reversing the objectives of the Program, or any action taken under the Program, including any action specified in Schedule 2 of this Agreement\. 3\.02 Accounts/ n\.a\. Upon the Association's request, the Borrower Audits shall: (a) have the Deposit Account audited in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (b) funish to the Association as soon as available, but in any case not later than six months after the date of the Association's request for such audit, a certified copy of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (c) furnish to the Association such other information concerning the Deposit Account and the audit thereof as the Association shall have reasonably requested\. * Present status: C = complied with CD = complied with after delay CP = complied with partially NC not complied with * The tranche release conditionalities are elaborated in Appendix A\. 21  Table 11 Compliance with Operational Manual Statements (Not applicable) Table 12: Bank Resources: Staff Inputs Stage of Project Cycle Actual Actual Staff Weeks US $ (000) Through appraisal 134\.60 453\.90 Appraisal 4 Board 47\.30 180\.50 Supervision through completion 40\.50 160\.20 Total 222\.40 794\.60 Table 13 : Bank Resources: Staff Missions =_________ ________ ________ |____ I __________________ Perfornance Rating I Stage of Month / Number Days Specialized Staff Skills Types of Project Cycle Year of in Represented Implementation Developmnent Problems Persons Field Status Impact Appraisal 12/96 4 11 -TL to Board 1 1 Sr\. Counsel 15 Consultant 11 Consultant Supervision TTh Sr\. counsel I 11/96 5 21 Op\. officer S S Consultant(legal) Consultant (customs) if 4/97 1 7 TTL l m 11/97 2 5 TTL Op\. officer Completion 10/98 2 1 Sr\. Economist I Economist Key to status as shown in Supervision Form 590: ratings are S (satisfactory) or from 1 (highest) to 4 (lowest)\. 22  APPENDIX A Matrix of tranche release conditionalities 23  Private Sector Development - Adjustment Project Id: CI-PE-1212 Credit No\. 28430 - 28431 - 28432 Implementation Completion Report CONDITIONNALITEES AREAS TRANCHE OBSERVATIONS L Board presentation 1\. Reform of the legal and iudicial system: 1\. reform of Ist adoption of a short-term monitorable action plan (annex 1 of the the legal and LDP) regulatory framework 2\. Modernization of the tax code: 1st adoption of the most urgent changes in the tax procedures in the 1996 budget laws\. 3\. Labor organization: 1st publication of 5 of the implementation decrees of the new labor code, including the decrees on private recruitment and temporary job agencies, part time job, obligations of employers and conciliation procedures in labor conflicts 4\. Liberalization and tariff reform: 1st 1\. elimination of the exemptions in favor of assembly industries (first tariff revision in the 1996 budget law), 2\. publication of the texts for the liberalization of the first set of activities identified (local sale of rice, cement, opening of bakeries and imports of used vehicles)\. 5\. Streamlining of investment procedures: 1st presentation of an action plan (cf 2nd tranche release memo) 6\. Streamlining of Port operations: 2\. Reduction 1st creation of the Port Competitiveness Committee, including of specific This Committee will be consulted for main decisions regarding representatives of the Port Authorities, Government departments, port operating costs Port management operators and users 24  CONDITIONNALITIES AREAS TRANCHE OBSERVATIONS 7\. Liberalization of maritime transports: (i) full liberalization of bulk and refrigerated traffic as of January 1st During a transition period extending until the end of December 1997\. 1996, the newly created national carrier COMARCO and other Ivorian shipping lines continued to benefit from a reservation of 50 percent of bulk and refrigerated traffic for bananas, pineapples, palm oil and wine\. Freight rates had to be negotiated by both parties, with arbitration by the chamber of commerce in case of (ii) Adoption of transparent criteria for chartering vessels\. disagreement\. (iii) implementation measure of the April 1995 decree eliminating Decree requires shipping lines and importers/exporters to supply the OIC visa\. statistical information not redundant with existing information sources\. IL Core conditions 1\. Implementation of the action plan for the reform and the legal and 1\. reform of 4th In the process of implementing the action plan the Ministry of judicial system the overall Justice has officially consulted all major players (magistrates and 1\. reactivation of the General Inspectorate ofjudicial services legal and bar associations) and has to a certain extent integrated their written * appointment of 4 inspectors general regulatory comments\. This constitutes a significant break with the former * distribution of a circular on concept and modalities of framework non-transparent tradition where dissenting opinions had no other inspection venue than opposition newspapers\. * two training seminars 2\. improvement of settlement of commercial cases through the The operating cost of the arbitration court during the first three creation of an Arbitration Court at CCI years will be co-financed by the Abidjan Chamber of Commerce * appointment of a secretary general in September 1996 and Industry and the Capacity Building/Technical Assistance * official opening of the Court in August 1997 project\. 3\. Improvement of the law-making process, including preparation and implementation of texts * creation of a task force to define the methodology of drafting laws and regulations; and recommendations of the task force * transformation of the OHADA commission into a permanent institution 4\. Reform of judicial procedures to shorten the duration of law suits * promulgation of the revised law on civil, conumercial and administrative procedures 25  CONDITIONNALITIESNN S * enactment of the law establishing the public prosecutor's office at the level of the Supreme Court 5\. Acceleration of court procedures through opening of "stamp offices" (centres d'enregistrement) within the courts of appeals * opening of a pilot office at Abidjan Court of Appeals 6\. Improved access to legal information (laws and regulations and court decisions) through the establishment of a national legal information center * opening of the information center to the public since September 1996 * publication of selected Supreme Court decisions * publication of selected Appeals Court decisions * publication of complete set of laws in different areas under preparation 7\. Communication campaign on OHADA business laws reforms * two-days seminar on OHADA business laws reforms 8\. Reform of the office of the clerks of court * introduction of computers in courts and training of clerks is in progress at the Abidjan Court of Appeals and Abidjan Circuit Court * Consultant report on reorganization of the office of the clerks-of-court submitted * Adoption by the Council of Ministers of a series of actions following the recommendations of the consultant report 9\. Construction of a new court building in a large suburb of Abidjan (Yopougon) to decongest the only existing court in the capital city is almost finished 10\. Training of magistrates and clerks-of-court * Adoption of a training plan and several training modules have been carried out in 1996 and 1997\. 26  CONDITIONNALITIES AREAS TRANCHE OBSERVATIONS 2\. Streamlining of the port/customs chain: 2\. Reduction 6th a) achievement of specific performance indicators for of specific - The availability of cranes had fallen short of the target, due to streanlining port operations: operating costs major repair problems\. Acquisition of two additional ship-to-shore - overall availability of the two loading/unloading cranes has to and gantry cranes under the Transport Sector Adjustment/Investment be brought to 90 percent, by reducing idle and repair time improvement Program, is expected to improve performance standards in the - the number of containers unloaded per hour will be increased of quality future\. from 12\.4 (in 1994) to 16 - The technical performance of criteria relating to the number of - average stay of containers in the port of maximum 7 days for containers unloaded had been attained\. imports and 3 days for exports for a continuous period of 6 - Average processing time fell steadily over a two year period, and months (customs clearance included) was down to 8\.5 days in early 1998, when a plateau was reached\. b) customs: implementation of an action plan (introduction of The 3 days target for export containers had already been achieved in concept of risk management) and compliance with specific 1997\. performance criteria for port transit (24 hours for green circuit - The Customs Authorities met the performance criteria\. A and 48 hours for red circuit) and for custom clearance\. computerized system to follow up on exemptions has been set up, but needs further improvements\. The requirement to set up a cumulative customs declaration for large exporters became redundant through the general acceleration of customs procedures\. 3\. Privatization of the telecommunications company CI-TELCOM: 2\. Reduction 3rd Authorization of the sale by Decree No\. 97-30 of January 22, 1997\. sale of 51% of the equity of the company to a private consortium of specific Sale contract awarded after international competitive bidding\. led by France Cable et Radio (sale contract dated February 1, operating costs 1997) 4\. Liquidation of Government export promotion agency (CCIA) and 3\.Investment 2nd creation of a privately run export promotion organization and export a) dissolution and liquidation of CCIA by decree No\. 96-487 of promotion June 25, 1996 published in the Official gazette of June 27, 1997\. Staff on the civil service payroll are returned to the Ministry in charge of Civil Service and contractual staff are terminated\. b) appointment of a liquidator by decree No\. 508 of June 25,1996\. c) creation of an export promotion association (Association pour la promotion des exportations de CMte d'Ivoire - APEX-Cl -) at The LDP stipulated that the Government should have at maximum the initiative of the private sector on June 14,1996\. The one third of representatives in the association\. association has 39 founding members and its board of 12 members includes 9 members from the private sector and 3 members from the government (25%) 27  CONDITIONNALITIES AREAS TRANCHE OBSERVATIONS 5\. Privatization of the Shippers' Council (OIC) 2\. Reduction 5th Issues to be monitored: The Borrower has sold 35% of its shareholding in OIC to a small of specific 1\. "Commission de rationalization", which in the past financed the group of shippers (Groupement des Chargeurs de C6te d'Ivoire) operating costs major part of OIC's budget will be put in an escrow account until a under the contractual obligation for them to retrocede the shares and decision about its continuation and level is taken to all Ivorian shippers\. The Government retains 15% and the Port improvement 2\. the Government has to determine the rent for the storage areas, of Abidjan 5% of shares\. Another 5% of shares are held by the of quality which in the past, had been put at the disposition of OIC free of parastatal cotton company (CIDT) which is in the process of services charge\. privatization\. After the sale, the aggregate shareholding of the 3\.determination of the final value of shares by independent borrower and public sector entities amounts to 25% which is evaluation, after an audit of the company\. below the threshold maximum of 35% set out in the Credit 4\. retrocession by the GCCI of shares to all Ivorian shippers on the Agreement\. following process (specified in the annex of the sales contract): - on the basis of their imports and exports shares as evidenced by customs statistics - within a period of 6 months - the cost of the retrocession will be financed out of the escrow account - any share not sold by the GCCI will revert to the Government which will organize their sale to the highest bidder within a 3 months period, in compliance with the privatization law of 1994\. Im\. Non core conditions 1\. Reform of tax administration procedures and penalties: 1\. reform of 3rd The draft proposal had been discussed extensively with the private adoption of a separate comprehensive section of the tax law by the the overall sector and constitutes an acceptable compromise between the national Assembly (law No\. 97-244 of April 25, 1997, published legal and requirements for efficiency of the tax administration and the rights in the Official Gazette of may 15, 1997) dealing with the regulatory of the taxpayers\. procedures for tax inspection, collection, penalties and litigation, framework with the aim of guaranteeing the rights and obligations of the tax administration and taxpayers\. The law contains provisions requiring e\.g\., that the tax administration inform taxpayers in advance of an impending audit and gives them the right to retain a counsel\. Proof of charges lies with the tax administration (a significant departure from the previous procedures where taxpayers had to prove their innocence)\. Penalties are set at different rates for fraudulent intention or for simple negligence or delay in filing of payment\. A conciliation Committee composed of Administration and private sector members has been created\. 28  CONDITIONNALITES AREAS TRANCHE OBSERVATIONS 2\. Reform of the customs administration regulations and penalties and 4th phasing out of special tariff provisions for assembly industries 1\. introduction of a schedule to the custom law, to categorize 2\. Reduction This condition was introduced with a view to eliminate the scope offenses and to set the corresponding "transaction fines"\. About of specific for non-transparent and rent-seeking behavior by customs officials 25 different categories of offenses were defined\. The schedule was operating costs distributed to customs officials and users by circular letter No\. 851 and of may 30, 1997, in which the Director General of customs improvement indicates that its intent is to ensure that, all over the customs of quality territory, the same definition of offense is used and identical services offenses receive identical fines\. 2\. publication of a User's Guide on customs procedures in March 1997, within a general user's guide for the tax, customs and treasury departments\. 3\. Presentation of a draft section of the 1998 budget law to 1\. reform of A first tariff revision was included in the 1996 budget law as a eliminate the remaining tariff exemptions for assembly industries\. the overall condition of Board presentation\. legal and At the time of the tranche release, the condition was considered as regulatory substantially fulfilled on the basis of the draft section and of the framework overall progress with tariff code revision since 1996\. 3\. Further liberalization of domestic markets and effective functioning 1\. reform of 6th - 12 activities had been liberalized since the beginning of the of the institutions overseeing competition: the overall program (including private schools, travel agencies, consulting 1\. liberalization of a second set of a least 3 more activities legal and firms, car repair shop, restaurants, \.)\. The conditions for 2\. reform of the Competition Comnmittee: regulatory liberalizing 67 other activities are under review\. Access to 38 - increase of the number of members from 7 to 9, of which framework activities continue to be restricted for the time being, mainly for at least 5 from the private sector health and safety reasons\. - adequate compensation for members' services - Decree No\. 96-288 of April 3, 1996, modified the composition of - possibility for individual firms to submit any the Competition Commnittee, increasing its membership from 7 to 9 competition matter directly to the Committee, without members of whom 5 represent the private sector\. Members are going through trade associations\. chosen on personal merit, not in their official capacity, and receive - strengthen the Committee's cooperation with the an adequate compensation for Comnuittee sessions\. relevant Govermment department (Direction de la - Law No\. 97-10 of January 6, 1997 extends to individual firms and Concurrence) consumer associations the possibility of filing complaints regarding 3\. access to accountant services of international quality: competition matters, and gives the Commission the right to take up definition of the conditions for equivalency of the CPA cases itself, thus increasing the effectiveness of the Institution\. diploma\. - Access to the accounting profession had been opened up by official recognition of the equivalency of the CPA diploma with the French expert-comptable diploma (decision No\.13 of January 120, 1998)\. 29  CONDITIONNALITIES AREAS TRANCHE OBSERVATIONS 4\. Publication of the decrees implementing the labor code: 1\. reform of 2nd After mandatory tripartite consultation process between a\. publication of the complete set of 21 implementation decrees in the legal and Government, employers unions and trade unions\. the Official Gazette of May 9, 1996\. regulatory framework 5\. Removal of obligation for importers to underwrite maritime 2\. Reduction 5th The former requirement of local insurance for importer created a insurance with local companies\. of specific rent situation for Ivorian insurance companies without any risk or By ordinance No 97-444 of August 8, 1997, published in the operating costs service\. Official Gazette of September 18, 1997, the Government has and maintained a general insurance requirement for import sea improvement freight, with repealing the law No 86-485 which required local of quality insurance\. Implementation decree No 97487 of August 8, 1997 services published in the same Official Gazette, contains further details on the insurance requirement\. IV\. General condition 1\. Entire clearance of domestic debt by the end of 1996 and no 4\. Increased each accumulation of new arrears\. Private sector tranche arrears due to the private sector at the end of confidence in December 1995: CFAF 174 billion the June 1996: CFAF 107 billion Govermuent December 1996: CFAF 30 million Thus the Government has met the target of elimination for end of 1996, except for a small amount of claims which need additional supporting documents, and no news arrears has been accumulated as of end of November 1997\. 30  APPENDIX B ICR Mission's Aide-Memoire CREDIT D'AJUSTEMENT POUR LE DEVELOPPEMENT DU SECTEUR PRIVE (PAS priv6) 1\. Une mission de la Banque mondiale composee de MM\. Jer6me Chevallier, responsable de l'unite de soutien operationnel, et Jacky Amprou, consultant, s'est rendue a Abidjan du 12 au 23 Octobre 1998, afin de preparer le rapport d'achevement du programme d'ajustement pour le developpement du secteur prive, connu sous le nom de PAS prive\. M\. Gaston Gohou du bureau d'Abidjan, a participe activement a la mission, a qui Mine\. Christiane Tenda-Lasme a apporte son soutien logistique\. La mission a eu une seance de travail avec le comite de suivi du PAS prive sous la presidence de M\. Feh K6ss6, directeur adjoint de cabinet a la Primature\. Elle a aussi rencontre les responsables des differents volets du programme et les representants des organisations professionnelles\. Elle remercie tous ses interlocuteurs pour leur attention et cooperation\. 2\. Le PAS prive avait pour objectif d'accroltre la competitivite externe et inteme et de promouvoir activement les investissements et les exportations, en mettant en oeuvre une serie de reformes visant a ameliorer l'environnement des affaires\. Ces reformes comprenaient: (i) une refonte du cadre juridique et reglementaire pour diminuer les couts de transaction et les risques, (ii) une reduction des cofits et des delais de passage portuaire (proc6dures douanieres et de transit) et une amelioration de la gestion des infrastructures, notamment dans le domaine des transports et des telecommunications, (iii) une amelioration de la promotion des exportations et des investissements et (iv) la reduction des arrieres interieurs de l'Etat pour accroiitre la confiance du secteur prive\. 3\. Des reformes avaient deja ete engag6es avant la presentation du credit au conseil d'administration de la Banque\. Les principales mesures ont consiste en: (i) l'elimination des exemptions en faveur des industries d'assemblage (budget de 1996), (ii) la lib6ralisation de certaines activites (dont les ventes locales de riz, l'industrie du ciment, l'importation des vehicules d'occasion et l'ouverture des boulangeries), (iii) la publication de decrets d'application du nouveau code du travail, dont ceux sur les agences de travail interimaire, le travail a temps partiel et les procedures de conciliation concernant les differends collectifs du travail, (iv) la reforme du code des investissements, (v) la creation du comite de competitivite du port et (vi) la liberalisation des transports maritimes\. 4\. Le credit d'un montant de 180 millions de dollars a ete approuve en avril 1996\. Deux credits supplementaires pour un montant total de 91,2 millions de dollars ont ete approuves en novembre 1996 et en decembre 1997 au titre de la cinquieme dimension\. Le 31  credit initial etait con,u selon le principe de l'omnibus, une premiere tranche de 80 millions de dollars a ete decaissee lors de la mise en vigueur du credit en 1996 et 5 tranches de 20 millions de dollars chacune ont 6te decaissees entre 1996 et 1998, chaque fois qu'au moins deux conditions etaient remplies, une principale et une secondaire\. La derniere tranche a ete deboursee le 21 aout 1998, pres de cinq mois apres la date initiale de cl6ture du credit (31 mars 1998)\. 5\. Au cours de la seance de travail que la mission a eue avec le comite de suivi du PAS prive le 19 octobre 1998, il a ete convenu que chacun des responsables des differentes composantes du programme ferait un bilan critique de sa composante en mettant l'accent sur les resultats et insuffisances, et en analysant les impacts par rapport aux objectifs initiaux du programme\. Ces bilans seraient remis au plus tard le 28 octobre 1998 au Bureau National d'Etudes Techniques et de Developpement (BNETD), qui effectuerait une synthese des travaux\. Le bilan d'ensemble, une fois valide par le gouvernement serait envoye a la Banque mondiale et servira de base a la preparation du rapport d'achevement par la mission\. Le projet de rapport sera envoye pour commentaires aux autorites ivoiriennes, avant finalisation et soumission au conseil d'administration de la Banque vers la fin de decembre 1998\. 6\. Au cours de la mission, la Federation Nationale des Industries de CMte d'Ivoire (FNICI) a bien voulu organiser a son intention des reunions de travail sur les themes de la legislation du travail, des procedures et penalites fiscales et enfin du port et de la douane\. Le compte rendu de ces reunions figure en annexe a cet aide-memoire\. 7\. Sous reserve des analyses en cours de preparation par les responsables des differentes composantes, la mission estime que des progres importants ont ete effectues dans les domaines du port et de la douane, de la l6gislation du travail, du code des investissements et des services de telecommunications\. Par contre, des progres importants restent encore a faire dans les domaines de la justice, de la fiscalite, de la concurrence et de la concertation entre les pouvoirs publics et le secteur prive\. Peut-on considerer le PAS prive comme un succes? Oui et non\. II est difficile de porter un jugement sans equivoque sur cette operation\. II est clair cependant que des actions energiques sont necessaires pour renforcer les acquis du programme\. 8\. L'environnement des affaires s'est sensiblement ameliore depuis la devaluation du franc CFA en janvier 1994\. Les investissements ont presque double et les emplois se sont accrus a un rythme soutenu dans le secteur formel\. Le taux d'investissement prive est cependant encore trop faible pour generer une croissance durable de l'economie a un rythme de 6 a 7% par an, ce qui est un minimum pour ameliorer de fa9on significative le niveau de vie de la population dans les annees a venir\. Des efforts importants doivent 8tre engages pour reduire les obstacles a l'investissement prive\. Ces obstacles sont bien connus\. Il s'agit de l'ampleur de la fraude et de la corruption, des lenteurs de la justice, du couit eleve de l'intermediation financiere et des contraintes specifiques au developpement des petites et moyennes entreprises\. 32  9\. La mission recommande que les autorites ivoiriennes formulent, en etroite concertation avec les representants du secteur prive, un programme ambitieux de reformes qui aurait pour objet de lever les obstacles mentionnes au paragraphe precedent\. II conviendrait que des indicateurs de performance soient etablis dans chacun des domaines mentionnes et que toutes les parties en cause s'engagent a les atteindre\. Ce programme mis au point par les ivoiriens eux-m8mes pourrait faire l'objet du soutien des bailleurs de fonds si necessaire\. ANNEXE PROJET D'AJUSTEMENT POUR LE DEVELOPPEMENT DU SECTEUR PRIVE PANEL SECTEUR PRIVE Livre des procedures fiscales\. procedures douanieres et penalit6s\. 1\. Une quinzaine de representants du secteur priv6 ont participe a une rencontre avec la mission de la Banque Mondiale, chargee de preparer le rapport d'achevement du PAS prive, a la mission residente le mardi 20 octobre\. Le theme de cette rencontre etait l'impact du livre des procedures fiscales et de la reforme douaniere\. 2\. L'adoption du livre des procedures fiscales a ameliore les verifications de comptabilite, mais il y a encore trop de controles sur pieces, dont letendue depasse le cadre prevu par la loi\. De I'avis g6ndral, le comportement de I'administration fiscale vis a vis des contribuables n'a pas connu de profondes modifications\. Cette situation est due aux facteurs suivants: - le manque de formation des agents, qui ne sont pas toujours au courant des textes; - le comportement des agents qui ne va pas souvent dans le sens du dialogue; - le livre fiscal donne lieu a des interpretations, souvent sous forme de notes de services\. Ces interpretations finissent par constituer un corps de doctrine qui n'est pas necessairement en conformite avec la loi; - le r6le et les fonctions des differentes unites de I'administration fiscale sont mal definis; et - la commission paritaire n'existe que sur le papier et de faqon generale le contribuable est sans recours\. 3\. Les participants ont reconnu que l'administration doit pouvoir disposer de moyens pour controler et lutter contre la fraude et ont propose un certain nombre d'ameliorations pour etablir un veritable partenariat: 33  - la definition precise de 1'etendue des differents types de controles et des delais a observer; - l'institution de possibilites de recours aupres d'une instance independante et objective; - un programme de formation continue des agents de l'administration fiscale; et - la publication d'un guide pratique permettant de vulgariser les droits et obligations du contribuable\. 4\. En ce qui concerne le bareme des penalites douanieres, il est inconnu des operateurs et semble rarement appliqu& La regle reste la procedure de transaction\. Liberalisation des transports maritimes et facilitation du vassa2e vortuaire 1\. Une quinzaine de representants du secteur prive ont participe a une rencontre avec la mission de la Banque Mondiale, chargee de preparer le rapport d'achevement du PAS prive, a la mission residente le mardi 20 octobre\. Le theme de cette rencontre etait l'impact de la liberalisation des transports maritimes et la facilitation du passage portuaire\. 2\. La lib6ralisation des transports maritimes a permis une diminution significative des taux de fret, de l'ordre de 30 a 50% selon certains intervenants et une amelioration de la qualite moyenne des services\. L'elimination du visa de l'OIC a permis d'accroTitre la rapidite des operations a l'exportation\. En ce qui concerne les temps de passage portuaire a l'importation, la mise en place des Bons a Enlever Automatique (BAE) et du circuit vert (controle sur documents uniquement) a reduit considerablement les durees de dedouanement\. Cependant, le temps necessaire pour la saisie des manifestes reste important et constitue la cause principale des retards\. Tant que la duree de cette etape n'est pas reduite, il semble difficile de raccourcir d'avantage le temps necessaire pour le d6douanement\. 3\. Quelques ameliorations restent a apporter en ce qui concerne: - le deroulement du circuit rouge (difficultes pour reunir les trois douaniers necessaires, contr6le de la cargaison au port et a destination); - la diffusion de l'information aux douaniers a propos de l'6volution de la reglementation (elimination de l'obligation d'assurance maritime locale, par exemple); - l'utilisation syst6matique de la proc6dure dite du "travail suppl6mentaire" qui revient a demander des frais supplementaires aux operateurs pour permettre un dedouanement plus rapide; et - campagne d'information sur la composition et les attributions du Comite de Competitivite du Port qui vient d'etre mis en place et dont beaucoup ignorent 1' existence\. 34  Marche du travail 1\. Une quinzaine de representants du secteur prive ont participe A une rencontre avec la mission de la Banque Mondiale, chargee de pr6parer le rapport d'achevement du PAS prive, a la mission residente le lundi 19 octobre\. Le theme de cette rencontre etait l'impact de la reforme du code de travail sur le fonctionnement des entreprises\. 2\. De I'avis general des participants, le nouveau code du travail a constitue un progres important dans le sens d'une plus grande flexibilite du marche du travail\. Les principales avancees de la reforme incluent: - la disparition du monopole de l'OMOCI; - la reduction des possibilites de deisions arbitraires A 1'encontre des entreprises; - la definition d'un cadre juridique pour les agences temporaires de travail\. 3\. Dans l'ensemble, les firmes representees font appel A des bureaux de placement\. Le travail A temps partiel n'existe pratiquement pas\. Le recours au travail temporaire est general, mais les travailleurs temporaires representent une faible proportion des effectifs totaux\. Les relations de travail sont dans l'ensemble bonnes et les relations avec l'inspection du travail plut6t cordiales\. 4\. Les am6liorations souhaitees portent sur les domaines suivants: - le remplacement des registres manuels par un syst6me electronique; - la levee des contradictions entre le nouveau code du travail et les conventions collectives qui datent d'avant le code; - une solution au probleme des travailleurs non ivoiriens: cofit excessif des formulaires, duree de deux mois, contradictions entre la duree specifiee dans le contrat de travail (duree indetermin6e) et la duree inscrite dans les formulaires de l'AGEPE (2 ans maximum); - la diffusion des rapports d'activites de I'AGEFOP et du FDFP faisant 6tat de l'utilisation des fonds generes par la taxe d'apprentissage (0\.4% des salaires) et de la taxe de formation professionnelle (1\.2% des salaires); et - une campagne d'information et de diffusion des nouvelles dispositions du code aupres de la population\. 35  APPENDLx C Borrower contribution to the ICR (with Summary in English) 36  COTE D'IVOIRE PRIVATE SECTOR DEVELOPMENT ADJUSTMENT Credit 28430-IVC Summary of Borrower's Contribution to the Implementation Completion Report 1\. The report prepared by the Government provides a detailed description of the actions taken under the reform program\. 2\. Justice\. The Government has implemented the action plan including (i) the reinforcement of the General Inspectorate; (ii) the establishment of an Arbitration Court at the Abidjan Chamber of Commerce; (iii) the reform of judicial procedures to shorten the duration of law suits; (iv) the opening of a pilot "stamp office" within the court of appeals of Abidjan with positive results; (v) the establishment of a legal information center to improve access to legislation and legal decisions with the help of France; (vi) public information on OHADA reforms through seminars; (vii) the reform of the office of the clerks of court; (viii) the construction of a court building in Yopougon; and (ix) the training of magistrates with the help of France\. The Government contribution mentions the lack of operating funds as a serious constraint to the proper functioning of the Inspectorate and the legal information center\. 3\. Port\. The objective of this component was to improve the performance of the port of Abidjan\. A set of performance indicators were agreed upon\. The difficulties encountered during program implementation included the insufficient knowledge of the sector, the lack of funding to cover additional costs of the program, the change in conditionalities during implementation, and the tension created by the tendency of the Bank to seek information directly from private operators\. These difficulties are developed in great detail in the report\. 4\. Implementation of the port component has improved the cohesion among actors in the port sector, facilitated the work of the customs office, enabled each participant to make an assessment of its own shortcomings, made the use of gantry cranes much more efficient, and contributed to the development of common performance indicators\. 5\. Customs\. This component of the program included the introduction of the automatic clearance system, the computerization in the management of customs exemptions, the elimination of manual procedures, the revision of the Customs Code, and the preparation of a manual for private operators\. The program has enabled the Customs Office to improve its procedures and its relations with the private sector\. 6\. Export Promotion\. CCIA, the export promotion agency, was liquidated and a new Agency has been established with support from the TA project\. 37  7\. Tax Procedures and Penalties\. This component allowed for the consolidation of a number of texts\. An ordinance was adopted in March 1996 to address urgent issues and give comfort to tax payers\. A Manual on Tax Procedures was issued as part of a law enacted in April 1997\. This manual provides guidelines for inspections (need to inform the tax payer in advance, inspection not to exceed 12 months, taxpayer's response within 30 days, and burden of the proof on Government), for the creation of a conciliation committee (not yet operational because some ministries concerned have not yet appointed their representatives), for tax collection, and penalties (reduction of the rates from 200 percent to 50 percent)\. 8\. The Government contribution indicates that it is too early to evaluate the results of the changes made, and that a seminar will be organized soon for the benefit of government agents and taxpayers\. 9\. Labor legislation\. A new Labor Code was adopted in 1995 and 25 decrees were approved\. Three decrees concerning the quality of the work environment, the operating conditions for social services, and wages have not yet been approved\. All decrees have been discussed extensively with private sector representatives\. 10\. Maritime Transport\. The liberalization of maritime transport has resulted in the liquidation of SITRAM, the national shipping company\. A private monopoly has replaced the national company for the transport of fruits\. OIC, the shippers' council, was privatized\. The impact of these reforms needs to be carefully evaluated\. 11\. Deregulation\. The Government contribution gives a detailed description of the decrees which liberalized a series of economic activities in two phases\. The liberalization of the import of second hand vehicles has resulted in a considerable increase of such imports, with a negative impact in terms of pollution and accidents\. Accordingly, the Government has decided to ban the import of vehicles more than 7 years old\. The liberalization of bakeries and rice trade has resulted in an increase of private operators\. This has not been the case in the cement sector, in which three companies are active\. The Government contribution indicates that it is too early to evaluate the impact of the second phase\. 12\. Maritime Insurance\. It is too early to assess the impact of the liberalization of maritime insurance, which took place in August 1997\. 13\. Recommendation\. An independent evaluation should be carried out by a private consultant\. 38  CONTRIBUTION DE L'ADMINISTRATION A L'ELABORATION DU RAPPORT D'ACHEVEMENT DU CREDIT D'AJUSTEMENT SECTORIEL POUR LE DEVELOPPEMENT DU SECTEUR PRIVE (CAS-DSP) INTRODUCTION GENERALE Le present rapport se propose de faire le bilan de toutes les reformes mises en ceuvre pour ameliorer l'environnement des affaires en Cote d'lvoire dans le cadre du Programme d'Ajustement pour le D6veloppement du Secteur Prive\. 11 apparait de fa9on generale que des efforts importants ont 6te accomplis par )es differentes composantes malgre certaines contraintes favorisees par la procedure des tranches flottantes\. I / LA JUSTICE Dans le cadre de l'amelioration du fonctionnement de l'appareil judiciaire, les mesures et les actions suivantes ont et6 prises et executees\. 1\. Renforcement et valorisation de la fonction de contr6le de la Justice par la r6activation de l'lnspection Generale des Services Judiciaires 11 a ete etabli : - des canevas-types d'inspection pour chaque cat6gorie de juridiction: Cour d'appel, Tribunal de Premiere Instance, Section de Tribunal et pour chacune des professions judiciaires dont la discipline et le controle relevent du Ministere de la Justice: notaires, huissiers et commissaires priseurs; - une circulaire rappelant les attributions de l'Inspection G6n6rale, determinant une inspection du tiers des juridictions chaque annee et fixant une methodologie nouvelle de ces inspections; - une fiche individuelle de fonctions pour permettre de definir, dans chaque service, les fonctions, les taches ex6cutees par chaque agent et leurs liaisons avec d'autres postes ou fonctions; Ces mesures sont appliqu6es depuis la rentree judiciaire 1997-1998 et les inspecteurs sont satisfaits des resultats obtenus\. II reste cependant a mettre a la 39  disposition de l'Inspection Generale les moyens adequats lui permettant d'effectuer ses missions aupres des juridictions de l'interieur du pays\. Par ailleurs, de nouveaux magistrats-inspecteurs ont ete nommes et deux (2) greffiers-inspecteurs sont en voie de nomination pour completer l'equipe actuelle\. 2\. Amelioration des realements des conflits Aconomipues Par la mise en place de la Cour d'Arbitraae au sein de la Chambre de Commerce et d'lndustrie Les mesures contenues dans ce volet ont toutes ete realisees\. Le Secretaire General et le President de la Cour ont ete nommes, la Cour est dejA ouverte au public; une assistance technique pour son dAmarrage a ete mise en place depuis juillet 1997\. Cependant les efforts de promotion de la Cour doivent etre poursuivis et renforces\. 3\. Amelioration du Drocessus d'elaboration et de mise en couvre des textes I6aislatifs et r6elementaires Deux mesures ont ete prises: la creation d'un groupe de travail destine a Alaborer un manuel de methodologie et la transformation de la Commission Nationale OHADA en une Commission Permanente\. La Commission OHADA a ete transformee en une Commission Permanente chargee d'apprecier les textes A caractere economique\. Cependant, elle ne dispose, a ce jour, d'aucun financement pour son fonctionnement\. Un manuel de methodologie a ete confectionne qui, faute de financement, n'est pas encore publie et diffuse\. 4\. Reformes l6aislatives et reallementaires en vue d'acc6l6rer le realement des litices devant les iuridictions Les deux textes retenus comme conditionnalites de cette action ont ete votes le 4 septembre 1997 et publies au Journal Officiel de la Republique de Cote d'lvoire du 18 septembre 1997\. 11 s'agit d'abord des modifications de la loi no 72-883 du 21 decembre 1972 portant code de procedure civile, commerciale et administrative dont les plus importantes qui datent du 4 septembre 1997 comportent les dispositions nouvelles suivantes: 40  - possibilite pour la Cour Supreme d'evoquer apres cassation: cette possibilite permet a la Cour Supreme de se prononcer sur le fond et d'eviter la navette entre elle et les Cours d'Appel qui conduisait a allonger les proc6dures; - instauration du principe de la collegialite au niveau des juridictions de premier degre: les audiences sont tenues par trois magistrats au lieu d'un seul auparavant et cette coll6gialite fonctionne effectivement depuis la rentree judiciaire 1997- 1998; - obligation pour les chefs de juridictions de presider en personne les audiences au cours desquelles sont evoqu6es des affaires dont l'int6ret du litige excede 100 millions de francs; - reduction du nombre des renvois a un seul devant les Cours d'Appel et la Cour Supreme; - institution d'un juge des ref6res au niveau des Cours d'appel et de la Cour Supreme en vue d'instaurer la c6lerite au niveau de 1'ex6cution des decisions, le juge des r6fer6s etant le juge de l'urgence et de I'evidence; - allegement de la proc6dure de defense a execution provisoire: cette procedure permet aux premiers presidents et au pr6sident de la Cour Supreme de se prononcer en urgence sur les difficultes d'execution des d6cisions rendues, et d'6viter de mettre en place une formation de jugement\. 11 s'agit ensuite de la loi instituant un parquet gen6ral pres la Cour Supreme dont l'objectif est de renforcer I'Etat de droit, ameliorer la celerite des proc6dures et lutter contre les mesures dilatoires\. 11 convient de noter que les procureurs g6neraux pres la Cour Supreme ne sont pas encore nommes\. 5\. Acc6leration des procedures iudiciaires par l'ouverture de centres d'enreaistrement aupres des Cours d'Appel En vue d'accelrer les formalites de 1'enregistrement des decisions judiciaires, un centre d'enregistrement pilote a 6te construit au sein du palais de justice d'Abidjan\. II est ouvert au public depuis mai 1997 et permet un gain de temps aux justiciables\. L'ouverture de centres aupres des autres formations de l'interieur n'est pas encore faite\. 41  6\. Assurer un meilleur acc6s aux textes 16cislatifs et r6glementaires et la Publication svst6maticue des arr6ts L'execution de la Convention FAC n° 92014300 s'est concretis6e a travers trois grandes composantes parmi lesquelles figure le Centre National de la Documentation juridique (CNDJ) dont l'objet est de rassembler et de mettre sous forme de base de donn6es informatis6e, en vue de leur consultation et de leur diffusion sur tout support, tous les textes juridiques\. Inaugur6 le 29 mai 1996, ce centre est ouvert au public et connait un certain succes\. II ambitionne de devenir la premiere banque de donnees en matiere de collecte et de traitement de textes juridiques dans la sous-r6gion\. Le principal handicap du centre reside dans l'insuffisance des fonds alloues pour son fonctionnement et son 6quipement\. 7\. Promotion de la communication Cette action qui vise a faire mieux connaltre la justice aux justiciables est a l'origine des seminaires et tables rondes sur les actes uniformes OHADA\. Elle se trouve 6galement a l'origine des journees a portes ouvertes sur la justice )) qui sont l'occasion de pr6senter aux op6rateurs 6conomiques cette institution\. 8\. Reformes des areffes Le premier aspect de ce volet est constitue par l'informatisation des greffes, financ6e par la Cooperation Francaise\. Les applications developpees n'ont pas connu un grand succes et des corrections sont a faire dans le cadre de la nouvelle convention FAC signee le 23 mai 1998 entre le Gouvernement fran9ais et le Gouvernement de Cote d'lvoire\. Outre l'informatisation, la r6forme des greffes a fait l'objet d'une communication en Conseil des Ministres en date du 12 juin 1997 adoptant les diff6rentes mesures suivantes: - l'institutionnalisation des greffes en tant qu'organes de juridictions et leur r6organisation: la Loi no 61-155 du 18 mai 1961 ne reconnait pas le greffe en tant qu'organe de juridiction\. Elle ne reconnalt que l'autorite du greffier en chef\. La r6forme institue donc au niveau des juridictions trois (3) organes: le siege, le parquet et le greffe, ce qui est conforme au fonctionnement actuel des juridictions; - la redefinition du statut du greffier; - l'institution de la procedure de transaction et d'acquiescement en mati&re penale afin de parvenir au reglement rapide des a petits litiges >> dans le but de desencombrer les tribunaux; 42  - la prise d'un arrete relatif a la conservation des archives judiciaires; - I'adoption de nouvelles modalit6s de recouvrement des frais de justice criminelle et des amendes\. Le retard accuse dans la r6alisation de la plupart de ces mesures est do au fait que l'Assemblee Nationale tarde a voter les lois qui les sQus-tendent et que, le Gouvemement ne s'est pas encore prononce en faveur de la suppression du droit proportionnel d'enregistrement\. 9\. Demarraae de la construction du tribunal de Yooounon Le programme de la decentralisation des juridictions a d6marr6 avec la construction du tribunal de Yopougon qui est achevee et qui ouvre ses portes a cette rentree judiciaire 1998-1999\. Les autres composantes de ce programme (les tribunaux d'Abobo, de Port- Bouet et de certaines ville de l'interieur) n'ont pas encore connu un debut d'ex6cution\. 10\. Formation continue des maQistrats Une formation continue permanente des magistrats est envisagee\. L'apport de la Cooperation Fran,aise sur la nouvelle convention signee le 23 mars 1998 devra etre complete par d'autres financements a trouver\. L'ensemble de ces mesures constituent des avancees certaines en vue d'ameliorer le fonctionnement de la justice\. Cependant les mesures et actions necessaires a la moralisation de la justice restent timides et des efforts doivent etre poursuivis afin de rendre aux justiciables les decisions acceptables et au dessus de tout soup,on\. II/ L'AMELIORATION DES PROCEDURES PORTUAIRES 1\. Obiectifs Le volet portuaire du Programme avait pour objectif principal I'amelioration de la competitivite du Port Autonome d'Abidjan\. Cette am6lioration a 6te recherch6e a travers certains indicateurs de performance portant notamment sur: * Le temps de passage des conteneurs au Terminal de Vridi; * L'activit6 des portiques\. 43  Au niveau du temps de passage des conteneurs au Terminal de Vridi, il--etait demande d'observer un sejour moyen de trois (03) jours a l'exportation et sept (07) joars a l'importation\. Concernant les portiques, les performances exigees portaient sur la cadence commerciale (16 TEU / heure) et le taux de disponibilite (90 %)\. Ces performances ont 6te realisees mais quelques difficultes ont 6t6 mises en 6vidence au cours de 1'execution du Programme\. Difficult6s et contraintes de mise en application Elles s'articulent autour des points suivants: * prise en compte insuffisante des realit6s du secteur; * d6faut de prise en compte des coOt generes par la mise en aeuvre du Programme; les modifications de conditionnalit6s pendant l'ex6cution du Programme; \. les difficult6s engendrees par les informations collectees par la Banque Mondiale aupres de certains operateurs prives\. a) La prise en compte insuffisante des r6alites du secteur Les obstacles a la bonne ex6cution du Programme sont Mies a certaines r6alites du secteur portuaire\. Les principales sources de difficultes ont port6 sur: - la meconnaissance des procedures d'importation par les chargeurs; - le manque de professionnalisme de certains transitaires et consignataires dans la conduite des op6rations relatives aux conteneurs; - I'utilisation abusive de 1'espace portuaire par les receptionnaires de la marchandise comme une aire d'entreposage bon marche; - le manque de moyens financiers pour couvrir les couts de passage portuaire, notamment les droits de douane - la reticence des chargeurs a payer les p6nalit6s pour retard d'enlevement des marchandises\. 44  b) Le d6faut de prise en compte des couts a6n6r6s par la mise en muvre du Proaramme Dans la recherche de solutions pour satisfaire les criteres dans les delais fixes par le Gouvernement, le Port Autonome d'Abidjan a ete amene A realiser d'importants investissements non prevus a son budget, notamment l'amenagement de deux (2) parcs ext6rieurs a la zone sous douane: - Le parc MOBIL de 2,2 ha pour accueillir les conteneurs vides qui stationnaient au Terminal de Vridi : 218 millions de francs; - Le grand parc de 6 ha sis en zone industrielle de Vridi pour accueillir une partie du trafic des conteneurs: 1,7 milliards de francs; - Accroissement du coCit de passage portuaire des conteneurs, do aux frais suppl6mentaires de leur transfert sur les parcs exterieurs (Terre-plein 15 et parc MOBIL)\. Ce supplement de cout s'eleve a 88\.440 F CFA pour un conteneur de 20' et a 166\.730 F CFA pour un conteneur de 40'\. c) Les modifications de conditionnalit6s pendant I'ex6cution du Proaramme Les criteres de performance, tels que specifies dans l'accord de credit, ont connu des modifications au cours du Programme\. Ainsi, I'Accord de credit sp6cifiait que les criteres de performances devaient etre << satisfaits au cours des six (6) demiers mois en moyenne ))\. Dans I'aide memoire de la mission d'evaluation du 28 avril au 20 mars 1997, cette donnee avait evolue comme suit: les criteres de performance portuaire devraient etre satisfaits sur six (6) mois cons6cutifs >> Concernant le s6jour des conteneurs A l'importation, il est a noter que l'idee de creation du 1 er parc exterieur, bien que suggeree par la partie ivoirienne, a ete recommandee par la Banque Mondiale qui a d'ailleurs fait remarquer que ceUte pratique a cours a l'iIe Maurice\. Mais la Banque Mondiale, lors de sa mission de supervision du Programme du CAS-DSP, n'a pas pris en compte cette solution et a decide de calculer le sejour moyen en additionnant les delais calcules au Terminal de Vridi et au TP15 (parc exterieur sous douane)\. Dans l'accord de credit, ce critere portait uniquement sur le sejour moyen des conteneurs au Terminal de Vridi\. 45  d) Les difficult6s enaendr6es Par les informations collect6es Par la Banque Mondiale auprbs de certains op6rateurs pnv6s Tout au long de l'ex6cution du Programme, bien que le Port Autonome d'Abidjan soit son interlocuteur privil6gi6, la Banque Mondiale avait tendance a donner plus d'importance aux informations communiquees par les operateurs prives\. De ce fait, les pr6occupations de la partie ivoirienne ne paraissaient pas avoir toujours et6 suffisamment prises en compte\. 2\. R6sultats obtenus D'une maniere g6n6rale, 1'ex6cution du Programme du CAS-DSP a permis: * de renforcer la cohesion des principaux acteurs portuaires dans leurs efforts communs d'am6lioration des performances portuaires\. En effet, ia quasi totalite des membres de la communaut6 portuaire a d6sormais bien integr6 l'id6e que la recherche de la competitivite ne saurait se faire sans I'apport de chacun d'eux; * aux administrations impliquees dans les prestations portuaires relatives aux conteneurs, notamment I'administration des douanes, d'accomplir des efforts notables de simplification et de facilitation des proc6dures; * a chaque intervenant dans la chaitne de passage portuaire de deceler les faiblesses inherentes A son propre systeme et d'engager en harmonie avec les autres intervenants les actions correctives n6cessaires; • d'utiliser desormais les portiques de fa,on plus rationnelle en am6liorant la qualit6 de service offert aux usagers (disponibilite accrue, cadences de manutention satisfaisantes); * d'appliquer le closing date qui permet aujourd'hui de disposer de plus de 95 % de la cargaison totalement appretee avant l'arrivee du navire; * de disposer au sein de la communaute portuaire, de reperes susceptibles d'aider a une meilleure appreciation des prestations portuaires (mesures et autres engagements definis de fa,on consensuelle par les intervenants)\. Tous ces acquis, et certainement beaucoup d'autres moins perceptibles, ont permis de respecter les criteres de performance portuaire fixes par la Banque Mondiale\. Le dialogue entre tous les operateurs economiques, le Port Autonome d'Abidjan et I'Administration devra se poursuivre au sein de la Commission de Competitivite du Port, cadre de concertation et de decision entre le Secteur Priv6 et I'Administration\. 46  111/ RATIONALISATION DES PROCEDURES DOUANIERES Ce volet comportait plusieurs points: 1 - Bon A enlever automatique (B\.A\.E\.) La mise en cauvre de cette conditionnalite s'est traduite par l'institution du B\.A\.E\. automatique; cette procedure qui concerne 80 % de l'ensemble des declarations, permet l'enlevement des marchandises dans les 24 heures\. Seules 20 % des declarations empruntent le circuit traditionnel avec d6livrance du Bon A Enlever dans les 48 heures\. Le B\.A\.E automatique a effectivement acc6lere les operations de d6douanement\. Toutefois, il a donne lieu a des abus ayant entrainM notamment des sous evaluations et des fausses declarations d'espece de marchandises\. Pour faire face a cette situation, I'Administration des Douanes a do proceder a un redeploiement de son personnel dans le sens d'un renforcement des services de deuxieme ligne (contr6le a posteriori)\. 2\. Gestion informatis6e des exonerations Le Programme, en insistant sur cette mesure, a permis au service de maitriser, sur tout mouvement, les donnees statistiques liees aux exonerations: manque A gagner, types d'exoneration, beneficiaires etc\. Mais pour des raisons budgetaires la mise en r6seau du systeme, n'est pas encore op6rationnelle\. 3\. La suppression des ecritures manuelles A l'occasion de la mise en cuvre du B\.A\.E\. automatique, les registres ont ete supprimes au profit des listings elabores par le SYDAM\. 4\. La proc6dure de declarations d6cadaires a I'exportation Sur ce point, I'Administration des Douanes a toujours soutenu que cette procedure est inadaptee dans le contexte actuel\. Ce qui explique que l'Administration n'ait pris aucune disposition pour sa mise en ceuvre\. En effet, ['Administration des Douanes considere que le systeme de declaration provisoire resout convenablement le probleme des operateurs economiques concernes\. Cette option est d'ailleurs soutenue par les operateurs economiques eux-memes\. 47  5\. Convention T\.R\.I\.E\. La Convention ayant 6te ratifiee, le Gouvernement en a concede la gestion A la Chambre de Commerce et d'Industrie, qui doit mettre en place le Fonds de Garantie devant permettre le fonctionnement de la Convention\. Le secteur priv6 ne s'est pas encore acquitte de cette tache qui lui incombe\. 6\. Mise A jour et revision du Code des Douanes Certains articles du Code des Douanes ont ete modifies pour tenir compte de certaines 6volutions\. En ce qui concerne la revision proprement dite, elle est intervenue dans le cadre de l'UEMOA qui a mis en place un Tarif Exterieur Commun pour l'ensemble des pays de l'Union\. Cependant, I'Administration des Douanes a pris une mesure d'harmonisation des sanctions douanibres dans le souci d'introduire plus de transparence\. Cette mesure diffus6e aupres du Secteur Prive, permet A tout operateur de connaitre la nature des sanctions qui lui sont applicables en cas d'irregularit6s constatees\. 7\. Guide A l'usage des operateurs economiques L'Administration a confectionne des depliants sur les divers aspects de la reglementation douanibre, dans le but d'informer les operateurs 6conomiques\. Conclusion Le Programme du Credit d'Ajustement Sectoriel pour le Developpement du Secteur Prive a donn6 l'occasion A la Direction Generale des Douanes d'ameliorer ses procedures notamment par l'exploitation efficiente des potentialites du SYDAM\. L'Administration entend maintenir les acquis de ce Programme qui a am6liore considerablement les rapports entre ]'Administration des Douanes et les operateurs 6conomiques, A en juger par sa participation effective et appreciee aux organismes mis en place a l'occasion du CAS-DSP, tels que la Communaute Portuaire et la Commission de competitivite\. Malheureusement, certains operateurs 6conomiques profitent du systeme mis en place pour s'adonner encore a des pratiques frauduleuses; ces pratiques ont pour noms la sous evaluation ou minoration de valeur, la fausse declaration d'espece, l'usage de faux documents, le tout ayant pour objectif de payer des droits et taxes minores\. 48  L'Administration des Douanes, quant a elle, continue de mettre en aeuvre des mesures susceptibles de juguler les fraudes\. IV/ PROMOTION DES EXPORTATIONS En raison de l'6troitesse du march6 national et de l'ouverture de l'6conomie ivoirienne a la concurrence internationale, le d6veloppement des exportations apparait comme une necessite pour le secteur priv6\. A cet 6gard, le Gouvernement, non seulement s'est engage a une r6forme institutionnelle visant a confier la promotion des exportations a un organisme dans lequel le secteur prive est majoritaire, mais a l'occasion du recent remaniement minist6riel un Ministere de la Promotion du Commerce Ext6rieur a ete cre6 dont les activites visent a apporter une nouvelle dynamique aux exportations\. Le d6cret de dissolution et de liquidation du Centre de Commerce International d'Abidjan (CCIA) a 6te pris; un Liquidateur nomm6 et le Personnel limite au minimum necessaire pour realiser la liquidation\. Le nouvel organisme charg6 de la promotion, I'Agence pour la Promotion des Exportations de C6te d'lvoire (APEX-Cl) a ete cree conform6ment au paragraphe 111\.10 de la Lettre de Politique de Developpement du Secteur Priv6\. Sa mise en place se poursuit dans le cadre du projet d'appui au renforcement des capacites du Secteur Prive\. Le cr6dit IDA relatif a ce projet a 6t6 mis en vigueur\. WI REVISION DES PROCEDURES ET SANCTIONS FISCALES Ce volet a permis une r6vision des procedures et sanctions fiscales qui assurent en pratique l'efficacit6 du dispositif fiscal\. II a fallu regrouper, completer, homog6n6iser et reformer un ensemble de textes disperses au sein du Code G6n6ral des Imp6ts et de divers textes particuliers\. Cette d6marche a abouti a l'adoption: de l'Ordonnance n° 96-214 du 9 mars 1996 pour regler les questions urgentes et securiser davantage les contribuables dans leur rapport avec l'Administration fiscale; 49  - de la Loi n° 97-244 du 26 avril 1997 portant Livre des Procedures Fiscales dont il convient de donner l'economie du dispositif et de fournir un bilan apres quelqtes mois d'application\. 1\. L'economie du dispositif du Livre de Proc6dures Fiscales Le Livre de Proc6dures Fiscales concu comme un document distinct mais complementaire du Code G6n6ral des Impots est subdivise en six parties: - le recouvrement de l'imp6t; - les sanctions; - le contentieux; - le domaine d'application; - les dispositions finales\. Les principales caracteristiques du Livre de procedures Fiscales se presentent comme suit: a) - Au niveau du controle de l'imp6t Outre les dispositions generales sur le contr6le, ce chapitre comporte les garanties essentielles accordees aux contribuables, notamment dans le domaine sensible des controles sur place\. II s'agit notamment: - avant tout controle sur place, de l'obligation pour le verificateur de remettre au contribuable un avis de verification precisant les periodes et les impots soumis a contr6le, et l'informant de son droit de se faire assister d'un conseil de son choix; - de la duree de la verification qui ne peut exceder douze mois, sauf cas exceptionnels; - du d6lai imparti au contribuable pour repondre a une notification de redressement qui ne saurait etre inferieur a trente (30) jours; - de la generalisation de la proc6dure de redressement contradictoire qui met la preuve a la charge de l'Administration\. Cette partie institue egalement une Commission Mixte Paritaire chargee de connaltre des litiges survenant entre l'Administration fiscale et les contribuables a 50  I'occasion d'une proc6dure de redressement contradictoire cons6cutive a une verification sur place de comptabilite\. La Commission Mixte Paritaire n'est pas encore fonctionnelle en raison du fait que tous ses membres n'ont pas encore 6t6 design6s par les structures concern6es que sont le Ministere de la Justice et des Droits de I'Homme, la Direction G6nerale des Imp6ts, la Chambre de Commerce et d'Industrie et le Conseil National du Patronat Ivoirien\. Par ailleurs, la prescription d'assiette en ce qui concerne les differentes natures d'imp6ts est pr6cisee, ainsi que les regles tenant au droit de communication, au secret professionnel et a la proc6dure de repression des abus de droit\. b) - Au niveau du recouvrement de l'imp6t Les proc6dures de recouvrement de I'imp6t sont unifiees et les garanties accord6es aux contribuables precisees et renforc6es\. Le sursis a paiement est en effet introduit au benefice des contribuables qui contestent le bien fonde des sommes qui leur sont reclam6es\. c) - Au niveau des sanctions Le r6gime des sanctions fiscales est harmonise dans le sens d'une baisse considerable des taux, en moyenne de 200 % a 50 %, sur la base des principes de hierarchisation selon la nature des imp6ts, la procedure de taxation, le degre de sinc6rite du contribuable et le montant des droits compromis\. Le dispositif de repression penale reprend pour 1'essentiel les dispositions du Code Penal relatives respectivement a la rebellion et a la r6sistance a l'imp6t\. Dans ces differents cas, les d6linquants sont passibles d'amendes et de peines privatives de liberte\. d) - Au niveau du contentieux de l'imp6t Le contentieux de l'assiette ne comporte pas d'innovations majeures par rapport au dispositif pr6cedent sauf en ce qui concerne le delai de r6clamation qui est porte de 1 a 2 ans\. Par contre, le contentieux du recouvrement quasi inexistant dans la legislation ant6rieure, fait l'objet de dispositions specifiques\. Cette innovation s'inscrit dans le sens de l'un des objectifs du Livre de Procedures Fiscales qui consiste a accorder des droits et des garanties etendus aux contribuables\. 51  2\. Le bilan de l'application du Livre de Proc6dures Fiscales Le Livre de Procedures Fiscales qui vise les elements de fiscalit6 contenus dans le Code G6n6ral des Imp6ts, ou dans tout autre texte est d'application recente\. II ne peut par consequent etre etabli un veritable bilan de l'application dudit Livre\. Toutefois, des difficultes d'application et deux saisines de ia Commission Mixte Paritaire ont ete enregistrees\. Un s6minaire sera prochainement organis6 conjointement par la Direction G6n6rale des Impots et la Direction G6n6rale de la Comptabilit6 publique et du Tr6sor a l'attention des diff6rents utilisateurs (agents de I'Etat, contribuables\.)\. Une evaluation plus pr6cise de l'impact du Livre de Procedures Fiscales sera alors possible\. VI/ ASSOUPLISSEMENT DE LA REGLEMENTATION DU TRAVAIL La reforme de la Iegislation du Travail qui a abouti a l'adoption en 1995 d'un nouveau Code du Travail a permis d'une part, d'adapter les textes a l'6volution de 1'entreprise et au march6 du travail, aux methodes et moyens de production et, d'autre part, de marquer la preponderance de 1'entreprise afin de favoriser l'investissement productif, facteur de cr6ation d'emploi\. Dans le cadre de l'application effective de ce nouveau Code vingt cinq decrets d'application ont ete pris, qui traitent des questions essentielles relatives a l'emploi, aux conditions de travail, aux relations professionnelles ainsi que l'hygi6ne, la s6curite et la sante du travail\. Par ailleurs, il faut relever que trois avant-projets de decrets ont ete soumis \. Ia Commission Consultative du Travail pour avis\. II s'agit des avant-projets suivants: 1 Avant-projet de d6cret relatif a la qualit6 du milieu du travail; 2 Avant-projet de d6cret portant fixation des conditions d'ouverture, de fermeture des economats et des services sociaux\. 3 Avant-projet de decret relatif aux salaires; Si les deux premiers avant-projets sont actuellement sur le point d'etre adoptes par les prochains Conseils des Ministres, le dernier relatif aux salaires est en cours de discussion avec le Minist6re de la Justice et des Droits de l'Homme, suite a I'avis de la Commission Consultative du Travail qui a recommande une telle d6marche pour tenir compte de certains aspects juridictionnels comme la procedure de saisie- arret sur salaire\. 52  Malgre les observations des Organisations professionnelles de travailleurs en ce qui concerne I'adoption du nouveau Code, il convient de noter que la reforme de- la l6gislation du travail ne fait pas l'objet de difficultes particulieres dans la mesure ou les textes d'application sont discutes au sein de la Commission Consultative du Travail regroupant le patronat (CNPI, UNEMAF, SCIMPEX, SEICI, FIPME, UNIPL) et les organisations syndicales (UGTCI, FESACI, DIGNITE)\. Au total, il convient de noter que I'assouplissement de la reglementation du Travail a fait l'objet d'une attention soutenue du Gouvernement qui a le souci de promouvoir un secteur prive dynamique\. Vill TRANSPORT MARITIME Introduction Au titre des transports maritimes, le Programme devait servir de cadre a I'achevement de la lib6ralisation initi6e par le CARE\. 11 en resulte qu'une 6valuation des deux programmes s'impose pour tirer les enseignements susceptibles de fonder une appr6ciation objective\. Les dispositions pr6vues dans le CAS-DSP, s'agissant du transport maritime apparaissent marginales\. La periode transitoire, prevue pour permettre au pavilion national de s'adapter a travers 1'exploitation de 50 % des droits de trafic specialises, a ate marquee par la disparition de l'armement public SITRAM et l'impossibilite pour la COMARCO qui lui a succ6d6 au niveau de ce trafic, de faire demarrer ses activit6s\. L'evaluation devra permettre de situer: - le niveau des coCits; - le niveau de la concurrence\. En effet, devenue elle meme exploitant de navire, a la faveur de la lib6ralisation, l'Organisation de Commercialisation des Fruits (OCAB) a fait signer a ses membres un contrat d'exclusivite de transport en faveur de sa filiale transport (SITROCAB) cr6ant ainsi un monopole prive, contraire a l'objectif de concurrence recherche par le Programme\. Le volet transport maritime du CAS-DSP comportait enfin la reforme de I'OIC dans le sens d'une reorientation de ses missions, de la restructuration de son capital et de la refonte progressive de son mode de financement\. 53  Pour ce qui est du premier aspect, la r6orientation des missions s'est traduite surtout par une red6finition des missions de la structure et par la suppression- de la mission de service public r6mun6r6e par la commission de rationalisation\. S'agissant de la restructuration du capital, conformement aux engagements pris, la part de I'Etat a et6 ramenee a moins de 35 % des actions avec droit de vote\. La privatisation a entrain6 quelques difficultes notamment dans la procedure et la formule du portage, de sorte qu'un faible nombre d'operateurs du commerce ext6rieur sont aujourd'hui pr6sents dans le capital\. En ce qui concerne la refonte du mode de financement, la suppression de la commission de rationalisation n'est pas conforme a I'accord regional conclu avec la Banque Mondiale dans le cadre de ia Table Ronde de Cotonou\. L'ex6cution du programme n'a pas suffisamment pris en compte l'environnement international marque notamment par 1'echec de I'OMC sur la question de la lib6ralisation des services maritimes\. L'impact global de cette r6forme devra etre mesure dans le cadre de l'evaluation du Programme CARE\. VIII/ ASSOUPLISSEMENT DE L'ACCES AUX PROFESSIONS REGLEMENTEES 1\. Conditionnalites La conditionnalite du Programme relative a l'assouplissement de I'accbs aux professions reglementees prevoyait deux phases: Phase n°1 lib6ralisation des ouvertures de boulangeries, de distribution locale de riz, du commerce de ciment et de l'importation des vehicules d'occasion; Phase n02 - recensement exhaustif des autres activit6s dans le cadre de reglementations etVou de conventions conferant des monopoles; - realisation d'etudes permettant d'appr6cier l'opportunit6 et la faisabilite de la liberalisation des activit6s qui auront et6 recensees; - sur la base des resultats des etudes, d6termination des activites a liberaliser et mise en ceuvre, en ce qui concerne ces activites, de la liberalisation (definition des cadres reglementaires prevoyant les conditions 54  d'acces A ces activites, lib6ralisation d'au moins trois (3) de ces activit6s en 1997 et publication de d6crets ou arret6s pertinents relatifs a ces activites)\. 2\. Resultats Phase n°1 - ouverture de boulangerie: le Decret n° 96-211 du 09 mars 1996 a consacre la lib6ralisation des ouvertures de boulangeries en CMte d'lvoire\. - commerce de riz: le Decret no 95-373 du 30 mars 1995 a dissout la Caisse Gen6rale de P6requation des Prix des Produits et Marchandises de Grande Consommation qui d6tenait le monopole des importations et celui de la distribution du riz de grande consommation sur le territoire national\. Cette lib6ralisation des importations et de la distribution du riz a 6t6 consacree respectivement par i'arrete interminist6riel (MIC, MINAGRA, MEFP) no 062 du 30 mai 1995 qui a precis6 les modalites de la liberalisation des importations et la circulaire no 095/MIC/DMCRF du 23 janvier 1996 portant liberalisation de la distribution du riz sur toute l'6tendue du territoire national\. - commerce de ciment: le commerce de ciment a ete liberalise depuis I'arrete n' 008 du 23 janvier 1996 portant lib6ralisation de la distribution du ciment sur le territoire national\. - importation des v6hicules d'occasion: les v6hicules de tourisme usages sont liber6s a l'importation depuis le Decret n° 96-01 du 03 janvier 1996\. Phase n°2 L'etude d'opportunite et de faisabilit6 de la liberalisation des activites reglementees et monopolistiques en Cote d'lvoire a ete confiee au Bureau National d'Etudes Techniques et de D6veloppement (BNETD)\. Le recensement exhaustif effectu6 dans le cadre de cette 6tude a r6vele 1'existence de 153 activit6s r6glement6es etVou monopolistiques qui se presentent de la facon suivante: - 11 activit6s liberalisees ou dont les conditions d'acces ont et6 assouplies; - 35 activites d'acc6s libre; - 20 activit6s liberalisables a court terme; 55  - 49 activit6s lib6ralisables a moyen et long termes; - 38 activites non liberalisables\. Bien que la conditionnalite prevoyait la liberalisation ou l'assouplissement des conditions d'acces d'au moins trois de ces activites, 11 activit6s ont et6 concern6es par ces mesures de lib6ralisation\. 3\. Conclusions Phase I La liberalisation de l'importation des vehicules d'occasion a eu un impact favorable sur ce secteur d'activite qui connalt actuellement un veritable boom\. En effet, plus de 70 % des importations de vehicules en Cote d'lvoire sont constituees de vehicules usages et 85 % de ceux-ci sont destin6s au transport en commun de personnes ou de marchandises\. Cependant, cette lib6ralisation s'est accompagnee: - d'une nette regression du secteur de la vente des vehicules neufs; - d'une forte hausse des taux de pollution et d'accidents de la circulation due au mauvais 6tat d'entretien de ces v6hicules usag6s\. Cette situation a conduit le Gouvernement ivoirien a prendre une mesure de limitation de l'age des vehicules d'occasion import6s a moins de 7 ans\. La lib6ralisation a 6t6, a un degre moindre, favorable aux secteurs de la boulangerie et du commerce de riz qui ont connu une installation relativement importante de nouveaux operateurs economiques prives\. Ces deux tendances favorables contrastent cependant avec le statu quo observe dans le secteur de la distribution de ciment ou les operateurs economiques sont toujours les memes\. Ce statu quo peut trouver son explication dans deux raisons essentielles: - le ciment est un produit pondereux dont l'importation et la distribution requierent d'importants investissements financiers; - les trois (3) soci6tes ivoiriennes productrices (SCA, SICM et SOCIM) ont un reseau de distribution fortement integre\. 56  Phase 2 Les mesures de lib6ralisation et d'assouplissement des conditions d'acces ayant ete prises en 1997 et 1998, if serait premature de faire une evaluation de l'impact desdites mesures sur les activites concernees\. Une periode d'observation d'au moins trois ans est necessaire pour rendre fiable toute evaluation de l'impact\. IX/ LIBERALISATION DE LA DOMICILIATION DE L'ASSURANCE DES FACULTES MARITIMES A L'IMPORTATION La conditionnalit6 du PAS Priv6 relative A la lib6ralisation de l'assurance transport maritime a ete realisee par l'Ordonnance no 97-444 du 08/08/97\. Par consequent, les premiers effets de cette loi sur le secteur des assurances ne se feront ressentir que sur les operations de l'ann6e 1998 dont les comptes rendus ne seront connus qu'en 1999\. A ce moment, des esquisses d'evaluation des effets pourront btre r6alis6es\. Pour l'instant, if est donc pr6mature de tirer un bilan de la liberalisation de la domiciliation de l'assurance transport des facultes maritimes a l'importation\. CONCLUSION GENERALE Des progres importants ont et6 r6alis6s dans le cadre de 1'execution du Programme d'Appui au Developpement du Secteur Priv6, mais tous les efforts entrepris doivent etre poursuivis\. Le present document a ete 6tabli par l'Administration ivoirienne\. II serait souhaitable qu'un bilan plus complet et plus impartial soit 6tabli par un cabinet prive, qui prendra en compte le point de vue du secteur prive\. 57

REVIEW

P084567

 ICRR 12185 Report Number : ICRR12185 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 09/15/2005 PROJ ID : P077789 Appraisal Actual Project Name : Programmatic Education Project Costs 100 100 Sector Adjustment Credit US$M ) (US$M) Country : Bangladesh Loan/ US$M ) 100 Loan /Credit (US$M) 100 Sector (s): N/A Cofinancing 0 0 US$M ) (US$M) L/C Number : Board Approval 05 FY ) (FY) Partners involved : Closing Date 12/31/2004 12/31/2004 Prepared by : Reviewed by : Group Manager : Group : Howard Nial White Martha Ainsworth Alain A\. Barbu OEDSG 2\. Project Objectives and Components a\. Objectives The objective of the Sector Adjustment Credit was to support the Ministry of Education in undertaking the first phase of a medium-term reform agenda aimed at addressing systemic governance issues in order to raise the quality and cost-effectiveness of service delivery, and improve equity of access in secondary education \. This objective can be broken down into the following four specific objectives \. 1\. Improve governance of the education sector 2\. Increase efficiency (cost-effectiveness) in secondary education 3\. Improve quality of secondary education 4\. Improve equity of access in secondary education b\. Components This was a programmatic loan, so there were no formal components \. However, the areas of policy reform associated with this credit focused on : (i) greater transparency in the use and allocation of resources through devolving and improving the efficiency of the system with greater stakeholder participation; (ii) initiating reforms to help develop a transparent and high quality teacher recruitment system based on agreed criteria and standards; and (iii) enhancing competition in textbook production and publishing with emphasis on the privatization of textbook production\. c\. Comments on Project Cost, Financing and Dates This was a single tranche credit to be disbursed once prior actions are completed \. Loan effectiveness was on 10/07/2004\. This was the first of a series of three single tranche operations, although future operations may be subsumed under the proposed PRSC \. 3\. Achievement of Relevant Objectives: Objective 1: Improve governance of the education sector (Partially achieved ) Reforms have focused on achieving greater transparency in the use and allocation of resources through developing and improving efficiency of the system with greater stakeholder participation : An Administrative Order was issued in 2004 by which non-government schools not meeting performance criteria will stop receiving salary subventions from government (until performance improves)\. 226 schools have had payments suspended\. With respect to monitoring and evaluation: (a) the Bangladesh Bureau of Educational Statistics has been strengthened, though further efforts are needed; (b) evaluations of the female secondary stipend are being undertaken; and (c) expenditure and performance tracking surveys are being conducted \. Criteria have been established for granting recognition of new schools, but the procedure has been subject to political interference\. Hence an Independent Inspection Body is to be created \. The creation of this body has been delayed by resistance from the Board that currently has the responsibility for recognizing schools, but the  idea has now been accepted and is to be implemented \. New guidelines have been issued to limit elite capture /political interference in school committees \. District and upazilla oversight committees have been established to devolve performance monitoring, but are not yet operational as the result of lawsuit \. The Financial Management Unit has been strengthened and a budget monitoring committee established \. All agencies under MoE are following 2003 Public Procurement Regulations\. Reforms have also been initiated to help develop a transparent and high quality teacher recruitment system based on agreed criteria and standards : The Nongovernment Teacher Registration and Certification Authority (NTRCA) was approved by the cabinet and Parliament and is in the process of being set up \. A policy, effective since 2002, is in place to grant pensions to teachers in nongovernment schools and create an incentive system to attract qualified teachers \. Objective 2: Increase efficiency (cost -effectiveness ) in secondary education (Achieved ) The focus has been on enhancing competition in textbook production and publishing with emphasis on the privatization of textbook production \. To this end the following has been achieved : Functional separation of the curriculum and textbook units of the National Curriculum and Textbook Board (NCTB) has been completed\.  In 2004, the Independent Textbook Evaluation Committee established guidelines for evaluation of textbook manuscripts, which are now being followed \. Other achievements listed elsewhere have also contributed toward this objective, notably halting school building in over-served areas\. Objective 3: Improve quality of secondary education This objective was not a major focus of this operation and so is not rated \. However achievements listed elsewhere in support of this objective are : (1) linking salary subvention to school performance; (2) establishment of a new incentive system for teachers (which however dates from 2002); and (3) guidelines for approving manuscripts of textbooks\. Objective 4 Improve equity of access in secondary education (Achieved ) No subventions are to be made to new schools in 'over -served' upazillas, and a program is being implemented to set up secondary schools in the 60 most under-served upazillas\. 4\. Significant Outcomes/Impacts: The context for the program is the overall macroeconomic framework, supported by two Development Support Credits from the Bank\. Macro performance remained good with growth for FY 05 expected to be 5\.3 percent\. There has been progress in important, often difficult, reforms : Pass rates in SSC (grade 10) exams have risen to 50% from 37% a year earlier, and in HSC (grade 12) from 39% to 48% over the same period\. Textbook production has been privatized - 7 secondary level books have been published by private publishers and another 34 are to be published in 2006\. Salary subventions have been linked to performance : subventions have been suspended for 226 schools\. No subventions are being allocated to new schools in over -served areas\. The NTRCA was set up\. Given the plans for M&E under the program, it should be possible to report on a wider range of indicators, but these are not reported in the ICR, possibly reflecting the weakness in implementation of M&E, noted above \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): There have been no significant shortcomings to date, though there have been two sources of slippage \. First, there were delays in implementing the system of independent recognition of nongovernment schools, but these problems have been resolved\. Second, the functioning of Upazilla and District Education Oversight Committees has been held up by a lawsuit, which is expected to be resolved in the coming months \. However, these reforms are the first year of a three -year program\. Success ultimately depends on sustaining and deepening these reforms\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev \.: Substantial Substantial Sustainability : Likely Likely Subject to effect and results of elections in 2006 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: 1\. Government commitment to, and ownership of, a reform program, backed up by broad stakeholder support, can ensure implementation of reforms despite opposition from vested interests \. 2\. Strengthening technical capacity of line ministries is a key step in sectoral reform \. 3\. Sector adjustment credits can focus reforms in a single sector in the context of a broader range of reforms supported by other policy-based lending (both Bank and Fund)\. 8\. Assessment Recommended? Yes No Why? Assessment of sectoral programmatic lending, which is an increasing share of Bank social sector operations\. 9\. Comments on Quality of ICR: The ICR is to be commended for being more comprehensive that many ICRs for programmatic loans, especially that it provides some information on progress since credit effectiveness \. However: (1) Much of the document provides no new information to that contained in the Project Document \. While this context is welcome, there should be a stronger orientation toward providing new information; and (2) Information is missing from the ICR on trends in some key indicators, most notably government spending on secondary education\. The Project Document (Annex A2) contains a long list of monitorable indicators which are not reported in the ICR\. Annex 2 of the ICR also omits mention of a number of activities under Systems Management which are mentioned in the Project Document (Annex A2), e\.g\. better monitoring of exams, and itemized bidding procedures for civil works, although some of the omitted items are discussed in the text \. There is no discussion of the disbursement procedures, although the PAD mentions that there is provision for auditing by the Bank\.

REVIEW

P000364

 Education and vocational training project Report No: ; Type: Report/Evaluation Memorandum ; Country: Cameroon; Region: Africa; Sector: Vocational/Technical Education & Training; Major Sector: Education; Project ID: P000364 Cameroon: Education and Vocational Training Project (Loan 2683-CM) The Cameroon Education and Vocational Training project, supported by Loan 2683-CM for US$30\.1 million, was approved in FY87\. The Loan was closed on June 30, 1995; the balance of US$21\.3 million was canceled\. The Implementation Completion Report (ICR) prepared by the Africa Regional Office, provides a clear and comprehensive account of the implementation of the project\. The Borrower's full report on the implementation and achievements of the project is included in Appendix B\. The project's original objectives were to: (a) improve the quality of primary, secondary, and technical education; (b) strengthen sector management; and (c) adapt the vocational training system to the needs of the labor market\. To help fulfill its objectives, the project provided support for hardware (civil works, vehicles, and equipment for technical colleges and secondary schools), software (technical assistance and training), and operating expenses\. Due to a large local cost component, the Government was to finance 51 percent of total project costs\. Shortly after the project became effective, the country's economic situation deteriorated, and the Government was unable to pay arrears on other Bank loans and to mobilize counterpart funds\. Implementation was halted\. Subsequently, the project was restructured\. The construction component was eliminated in order to focus the project more closely on improving the quality of primary and secondary technical schools and to modify the vocational training system to meet the changing needs of the market\. However, inefficient management in conjunction with lack of counterpart funds severely hindered implementation\. Most of the project activities were never initiated, with the exception of training abroad for Ministry of Education staff and technical assistance to develop a national policy statement for the education and training sector\. As a result, 71 percent of the loan was canceled\. The Operations Evaluation Department (OED) and the ICR rate the outcome of the project as unsatisfactory and sustainability as unlikely\. The ICR rates institutional development as modest, but OED rates it as negligible, since relatively little was accomplished\. OED agrees with the ICR and rates Bank performance as unsatisfactory because the appraisal mission did not take the risks and likely labor market consequences of an economic downturn into account and supervision missions did not adequately deal with the implementation problems that arose as a result of economic difficulties\. The project illustrates the importance of accurately assessing benefits and risks during appraisal\. It also shows the value of financing part of local costs rather than seeking a high level of counterpart funds from borrowers who face financial difficulties\. Finally, projects that span several subsectors and government departments risk creating complexities that overwhelm the borrower's implementation capacity\. The ICR is satisfactory\. No audit is planned\.

REVIEW

P074015

Document of The World Bank Report No\.: 82528 PROJECT PERFORMANCE ASSESSMENT REPORT ETHIOPIA PROTECTION OF BASIC SERVICES PROJECT (IDA H2240-ET, IDA H3470-ET) December 30, 2013 IEG Public Sector Evaluation Independent Evaluation Group ÿþii Currency Equivalents (annual averages) Currency Unit = Ethiopian Birr 2004 US$1\.00 $8\.64 2005 US$1\.00 $8\.67 2006 US$1\.00 $8\.70 2007 US$1\.00 $8\.67 2008 US$1\.00 $9\.60 2009 US$1\.00 $11\.78 2010 US$1\.00 $14\.41 2011 US$1\.00 $16\.90 Abbreviations and Acronyms ADB African Development Bank IDA International Development Association BOFED Bureau of Finance and Economic IGR Institutional Governance Review Development (regional) ISR Implementation Status and Results CSC Community Score Cards Report CSOs Civil Society Organizations JBAR Joint Budget and Aid review CIDA Canadian International Development KfW Kreditanstalt fir Wiederaufbau Agency Bankengruppe COPCU Coordination Program for Channel One LIG Local Investment Grant DFID Department of International MDGs Millenium Development Goals Developments MOH Ministry of Health DHS Demographic and Health Surveys MOFED Ministry of Finance and Economic DPL Development Policy Loans Development DPO Development Policy Operations NGO Non-Government Organization DSA Decentralization Support Activity ODA Official Development Assistance ERSC Economic Rehabilitation Structural PBS Protection of Basic Services Adjustment PEFA Public Expenditure and Financial ESAC Economic Structural Adjustment Credit Accountability FTA Financial Transparency and PID Project Information Document Accountability PREM Poverty Reduction and Economic FTAPS Financial Transparency and Management Accountability Perception Survey PPAR Project Performance Assessment Report GOE Government of Ethiopia PSCAP Public Sector Capacity Building HD Human Development Program IBEX Integrated Budget and Expenditure PRSC Property Reduction Support Credit ICR Implementation Completion and Results USAID U\.S\. Agency for International report Development IEG Independent Evaluation Group WUT Water Users' Committee IEGPS IEG Public Sector Evaluation Fiscal Year Government: 8 July - 7 July 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\. Basil Kavalsky 111 Contents Principal Ratings\. \. \. \. v Key Staff Responsible\.v\. \. v Preface\. vii Summary\.ix 1\. Background and Context\.1 2\. Objectives, Design, and their Relevance \.5 3\. Implementation\.10 4\. Achievement of the Objectives\.13 Objective 1: Protecting Basic Services\.14 Objective 2: Promoting increased financial transparency and accountability \. 23 Instrument 2a: Outcome Indicators\. 26 Instrument 2b: Intermediate Outcome Indicators\.27 5\. Efficiency\. 27 6\. Ratings \. 28 Outcome \.omoting\.increased\.fina\. 28 Risk to Development Outcome \. \. 30 Bank Performance \. 31 Borrower Performance\. \. 33 7\. Monitoring and Evaluation\. \. 34 References\. 37 Annex A\. Basic Data Sheet \. \. 39 Annex B\. Selected health and education outcomes in Ethiopia, derived from the DHS\. 44 Annex C\. Review of the current status of the Social Accountability pilot\. \. 47 Annex D\. List of Persons Met\. 49 Annex E\. Borrower's Comments \. 53 Boxes Box 1\. Economic and Social Progress between 2000 and 2005 \. 1 Box 2\. The Ethiopian Regime and Development Partners: A different philosophy\. 3 Box 3\. The Federal Formula for Regional Allocations\. \. 17 This report was prepared by Basil Kavalsky and Buli Edjeta, who assessed the project in May 2013\. The report was peer reviewed by Alan Harold Gelb and panel reviewed by Robert Mark Lacey\. Viktoriya Yevsyeyeva provided administrative support\. iv Box 4\. Integration of Public Finance work into the PBS framework \. 19 Box 5\. An Impressionistic Ground Level View of Basic Services in Ethiopia\. 23 Box 6\. The Financial Transparency and Accountability Perception Survey (FTAPS) \. 24 Box 7\. A Bank Staff Perspective on the Government's Commitment to Social Accountability\. \. 27 Tables Table 1\. Timeline of Events in Ethiopia and the PBS Program\. 11 Table 2\. Tracking PBS Objectives, Instruments and Components \. \. 14 Table 3\. General Government and Basic Services expenditure growth \. \. 15 Table 4\. Number of Civil Servants (2004/05 2010/11) \. \. 15 Table 5\. Infant (i\.e\. Under-1) and Under-5 Mortality Trends\. 22 Table 6\. PBS Achievements by Objective \. 29 Table 7\. Estimates for Under-5 and Infant (i\.e\. Under-1) Mortality\. \. 44 Table 8\. Births in X years prior to survey\. 44 Table 9\. Mortality Rate: Under-5 mortality (5qO) \. 45 Table 10\. Mortality Rate: Under-5 mortality (IqO) \. \. \. 45 Table 11\. Stunting (height-for-age - 2 SD)\. 45 Table 12\. Vaccination Rates \. 45 Table 13\. School Participation \. 46 Table 14\. School Attainment \. \. 46 Figures Figure 1\. The Woreda Budget Post \. \. \. 25 V Principal Ratings ICR* ICR Review* PPAR Outcome Moderately Satisfactory Unsatisfactory S atc y Satisfactory Risk to Development Significant Significant Significant Outcome Moderately Moderately Bank Performance Satisfactory Unsatcy S atc y Unsatisfactory Satisfactory Borrower Moderately Moderately Performance Unsatisfactory Satisfactory * The Implementation Completion Report (ICR) is a self-evaluation by the responsible Bank department\. The ICR Review is an intermediate IEGWB product that seeks to independently verify the findings of the ICR\. Key Staff Responsible Project Task Manager/Leader Division Chief/ Country Director Sector Director Appraisal Trina S\. Haque Laura Frigenti Ishac Diwan Completion Andrew Sunil Rajkumar Lynne D\. Sherbume-Benz Kenichi Ohashi Vi IEG Mission: Improving World Bank Group development results through excellence in 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://worldbank\.org/ieg)\. 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 objectives\. 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\. vii Preface This is a performance assessment of the Ethiopia Protection of Basic Services project, approved in May 2006\. At the time of Board approval a $215 million IDA grant, leveraged a total of $532 million with the balance coming mainly from DflD (with larger financing than IDA)\. In December 2007, IDA provided a second grant of $215 million under the Additional Financing agreement\. By completion, the program had channeled $1622 million for support for basic services\. The assessment was based on a review of the relevant documents as well as substantial additional information provided by the PBS secretariat, based in Addis Ababa\. A two week mission was undertaken including discussions with the relevant Government agencies, donors and NGOs, as well as the PBS secretariat and the relevant members of the Bank country team\. The mission visited two Regional offices and three woredas (Districts, the third level administrative divisions of Ethiopia)\. Subsequent to the main mission, one of the consultants carried out visits to a further two woredas that had participated in the social accountability pilot program\. This evaluation takes place well after the completion of PBS in 2009 and the preparation of the ICR in 2010\. IEG did not review the ICR until 2013 when the recommendation was made to undertake a PPAR given the importance and interest in the project and the divergence in views between the ICR and the ICR review\. In the interim, a follow up project (PBS2) was undertaken and has now closed, and a further follow up (PBS3) was approved in September 2012\. Although the PPAR is limited to PBS, for learning purposes the evaluation has looked at and discusses the links between the PBS model and the subsequent evolution of the program\. In addition there is an attempt to draw some lessons from the overall experience that can be useful in planning the future course of the program\. However the assessment and ratings of PBS are based on the evaluation of the PBS and do not constitute a judgment on the later phases of the program\. The Government of Ethiopia has reviewed the PPAR and the comments received are included in Annex E\.  ix Summary This PPAR reviews the experience of the Bank in supporting Basic Service Provision in Ethiopia through the Protection of Basic Services (PBS) project, approved in May 2006 and completed in December 2009\. The project objectives were 1) to "protect the delivery of basic services by Sub-national Governments" and 2) "promoting and deepening transparency and accountability in service delivery\." These were to be achieved initially through four instruments : a) providing funding for block grants that transfer resources from the federal government to the regional and district (woreda) governments; b) supporting health service provision through funding the supply of vaccines, treated bed nets, condoms and pharmaceuticals to local medical services; c) promoting the achievement of greater financial transparency and accountability of the federal, regional and district governments through the production of timely budgets that are made publicly available and through increased citizen participation in, and understanding of, the budget process; and d) supporting social accountability directly through engaging civil society organizations to work with citizen groups in monitoring the activities of local government\. When additional financing was approved in December 2007, a fifth instrument, the Local Investment Grant (LIG) was introduced to pilot the provision of grant funding for investment in the sectors supported by PBS to selected woredas, with the delegation of decision-making and project management to the woreda council and government\. In the early 2000s Ethiopia made effective progress towards reducing poverty and achieving the MDGs\. This was supported by substantial donor funding with the centerpiece being a series of World Bank Development Policy Operations, providing large amounts of budget support, associated with a dialogue on key issues of macro- economic management\. In 2005, however, new parliamentary elections showed strong opposition support, and the Government took pre-emptive action which led to demonstrations that were put down with considerable bloodshed, followed by the imprisonment of opposition leaders and members\. In this environment, donors were unwilling to continue budget support programs that provided fungible resources to the Government\. At the same time, there was concern that the basic services programs at the local level, that had shown promise in expanding coverage of basic service delivery, should not be defunded and put at risk\. The PBS was introduced as a mechanism for continuing support for these services\. The PBS was, and remains in some circles, a highly controversial operation\. It was intended as a supplement to the expected resumption of Development Policy Operations, but in fact has evolved as a substitute\. This affected the content of the policy dialogue between the Bank and Ethiopia's other development partners, and the Government\. The dialogue shifted from broader macro-policy, financial sector and private-sector- development related issues, to the decentralization agenda, and issues of basic service provision and management\. While the former set of issues were controversial and the dialogue often difficult, there is a broad consensus on issues relating to decentralization among the Government and donors built around a shared commitment to the decentralization process and basic service provision\. This has left a gap in the dialogue on some of the core issues in the growth agenda and the Government has little incentive x to put these issues back on the table as long as the PBS is providing the same levels of budget support as would have been provided through a continuation of DPLs\. The evaluation rates the relevance of the PBS project objectives as substantial\. PBS was a creative response to a difficult situation\. A continuation of general budget support through macro-policy based operations would not have been supported by donors\. Had the Bank chosen to go it alone, any new operation would have needed to feature significant progress on key policies, which were not likely to have been agreed to by Government\. The argument that the need for resources would eventually have forced the Government back to the table was seen by most interlocutors as highly questionable\. In their view the Government would simply have cut back on its programs in this event\. The theory of change that underlay the approach adopted was extremely plausible\. Decentralization was a vitally important program which affected the life and livelihoods of most of the population\. An operation which enhanced its efficiency and fairness had the potential to make a major contribution\. It allowed the Bank and other donors increased access to and dialogue with regional and local governments\. In addition, it allowed donors to target their support to the poor, since any curtailment of services would have disproportionately impacted the lowest quintiles of the income distribution\. However, the design of the PBS fell short of what was needed for the achievement of the objectives it supported over time\. First, some of the longer-term issues of how to best use the PBS to promote a dialogue on key issues of fiscal management and governance were not thought through\. Second, a more holistic view of the issues relating to decentralized fiscal management in Ethiopia should have been taken and more done to pilot instruments that could promote more efficient and accountable local governments\. Third, the results framework for the program was rather thin and put little emphasis on the quality of or impact of basic service delivery\. The outcomes for the indicators included in the results framework suggest that while on balance there have been significant achievements, some gaps remain\. As far as the individual objectives of PBS are concerned, the evaluation assessed the achievements under the first objective (protecting basic service provision) as high\. Basic service delivery was protected and the Local Investment Grant program, which was introduced midway through the project to provide support for capital investment on a pilot basis, created the potential for improved planning and implementation management at the local level\. The projected indicators for the Health Facility, in terms of increasing access to vaccination, ITNs, contraceptives and other pharmaceuticals and medical equipment, were met\. The evaluation rated the outcomes of the second objective of increasing financial transparency and enhancing social accountability as modest, however, given the lengthy delays that were encountered and some foot-dragging on the part of the Government\. Overall the risks to the development outcome are rated as significant\. The key risk facing the project is that it may prove not to be fiscally sustainable\. There are a range of critical issues such as; the impact of the expansion of administration of services to the kebele (village) level on fiscal sustainability, the implications of increased employment and salary costs for the longer term availability of funds for maintenance and non-salary xi recurrent expenditures, the role of generation of resources at the local level in this area, etc\. These issues could and should have provided the Bank with an important entry point into the dialogue on overall fiscal management, yet this opportunity has not been taken\. The risks associated with institutional sustainability seem more moderate\. There is certainly a long way to go to build institutional capacity, but this is a major feature of Bank and donor programs\. Finally the evaluation noted the significant political risk given the brittle political structures in Ethiopia and the continuing ethnic and regional tensions\. The overall outcome of the project is rated moderately satisfactory reflecting the substantial relevance and efficacy of the program, discussed above\. Bank performance is rated moderately satisfactory\. As far as quality at entry is concerned, the program represented a significant effort by the Bank to put together a coherent and useful operation in a very short time-frame\. The key concern is that the Bank did not do enough to build into the program a comprehensive, well informed and monitored approach to fiscal policy issues at the local level\. The PBS and its sustainability are fundamentally linked to important questions of revenue mobilization and expenditure allocations\. There was thus the potential for focused engagement and well-selected analytic studies\. One other design issue was the decision to include the Health Services component which was a questionable fit with the rest of the operation, focused as it was on services provided by the line ministry rather than building promoting the capacity and accountability of the regional and woreda officials\. As far as the quality of implementation support is concerned, the Bank deserves credit for retro-fitting the LIG to the project design at the stage of additional financing, and for effective monitoring of the additionality and fairness tests\. However, the Bank did not put in the up-front investment needed to get the Social Accountability component off the ground in a timely manner, and was slow in moving to resolve some of the procurement issues which arose under the Health Component\. Finally the Bank ICR lacks the incisiveness needed to contribute effectively to improvements in project implementation for the successor operations and deriving useful broader lessons\. Borrower and implementing agency performance is rated moderately satisfactory\. The Borrower had mixed feelings about the PBS at entry\. Over time however, the instrument has earned the appreciation and support of senior government officials, and the level of commitment, even to the components on Financial Transparency and Social Accountability which initially had been very difficult to accept, has increased\. For much of PBS, implementation quality left a great deal to be desired, but it is apparent that in the course of 2008 the Government got the message and by putting in place more effective management and by, moving with some urgency on health procurement, was able to meet some of the key objectives of the program\. The evaluation draws a number of lessons from the PBS experience: * There is no good way to end budget support in problematic contexts\. The cessation of budget support creates problems for the sustainability of social programs and the likelihood is that the axe will fall disproportionately on the poor Xii and vulnerable who have limited voice and influence\. This creates enormous pressure on the donor community to sustain support\. * This makes it all the more important to think through and discuss the endgame at the outset of budget support, and maintain a strong dialogue with government on economic management\. In this case the question of where are we headed with this program was one that should have figured strongly from the outset, including on measures to keep the policy dialogue robust and central\. The continuation of the PBS needs to be associated with a long-term program of enhanced capacity building and management of decentralization, local government empowerment and citizen participation\. It also needs to be built on a strong policy dialogue with both central and local governments\. * Decentralization is a complex inter-action of programs and processes and successful approaches need to take a holistic view that clearly defines the objectives in terms of the accountabilities of the decentralized units and builds their capacity to meet those accountabilities\. While it is not necessary for a single operation to encompass all aspects of decentralization it is important that the Bank's analytic work underpins a holistic view of the process and that the Bank identifies gaps and supports programs to address them\. * The decision to embed a health component channeled through the line ministry, within a program of support for enhancing the management and accountability of local governments is questionable\. It succeeded in supplying inputs but did not provide the follow up to ensure that those inputs were effectively used\. And it diverted some of the focus that might otherwise have been put on how well the decentralized service provision was functioning\. * Where a project involves key issues of fiscal management at various levels of government there needs to be a steady long-term involvement in the project of a Public Sector Management specialist from the Bank's PREM network in addition to sector specialists (in this case from the Human Development network)\. Consideration ought to be given to having joint management by Poverty Reduction and Economic Management and Human Development, with PREM leadership of the fiscal dialogue\. The fiscal policy issues seem to have been consistently under-represented in the program and this may well reflect the limited involvement of PREM alongside the limited appetite of the Government for dialogue\. * The PBS presents an unusual case in which the Bank provides large scale financial support for expanded service delivery executed by subnational governments\. Unlike budget support through a conventional Development Policy Operation, this support is multi-year, does not rely on annual programs built around 'prior actions' and 'triggers', and is in keeping with Paris Declaration principles placing program ownership firmly in the hands of Government\. This could be an effective and efficient alternative or supplement to DPOs provided there is strong government ownership in principle and practice, adequate attention xiii to building subnational capacity where needed, and a strong M&E system to monitor development results\. Such a program effectively takes on key features of the Bank's new Program for Results that links disbursements to defined results\. Caroline Heider Director-General Evaluation  1 1\. Background and Context 1\.1 In May 2005, the Meles Government in Ethiopia held elections that received mixed reviews for fairness from international observers\.1 The early results indicated substantial support for the opposition, but the Government in a pre-emptive move announced before counting had ended, that it had won the election\. This led to demonstrations that were put down by the Government with considerable bloodshed\. The full election count was only completed in November when a formal announcement of the results was made giving the Government a majority of seats in parliament\. Large demonstrations were again mounted by the opposition, which turned violent and were met with force by the police, again with demonstrators killed\.2 The Government then detained a large number of opposition leaders and members\.3 1\.2 Until the 2005 elections Ethiopia had seemed to be headed in a positive direction\. (See Box 1 below)\. The Government had shown a genuine commitment to growth, poverty reduction and meeting the MDGs, and corruption had been, by and large, kept at bay\. Box 1\. Economic and Social Progress between 2000 and 2005 The war with Eritrea ended in 2000\. "Since then Ethiopia has undertaken reconstruction, stabilized the economy and restarted structural reforms begun in the 1990s\. Despite a severe drought in 2002/3, economic growth averaged 6 percent per annum from 2000/01 through 2005/06 according to official statistics\. Macroeconomic management has been prudent during most of this period, and pro-poor budget spending rose from 11\.7 percent of GDP in 2001/02 to about 16 percent in 2005/06\. The official poverty headcount estimates also shows a decline from 44\.2 percent in 2000 to 40 percent in 2005\. Social indicators have mostly, but not uniformly, improved\. Access to education expanded dramatically, but at some cost to quality\. Infant mortality declined, but average life expectancy has declined in recent years because of HIV/AIDS\." Source: Report no\. 43336: PPAR on four budget support operations in Ethiopia issued by IEG in April, 2008\. 1\.3 The main institutional driver for improved development management in Ethiopia was a far reaching decentralization program which had been initiated in the early 1990s with a first step of shifting a significant share of financial and human resources to the regional level\.4 In 2001 the Government introduced a second phase of decentralization "designed to 1 On May 19h, 2005 former US President Jimmy Carter, reflecting the views of monitors from the Carter Center, stated that "While there were serious problems in the run-up to the elections, many positive strides were made\. Depending on the transparency and fairness of the tabulation and publication of results, the election could represent a quantum move forward in democratization for Ethiopia\." 2 Estimates vary from 40 to 200 depending on the source\. 3 In the view of one observer "The Government seems to have regarded the election as a general plebiscite on whether it was supported, but not as putting in play competing views on how the community should be developed, and under no circumstances as an occasion for a transfer of power"\. 4 "The first phase of this strategy involved the creation of a federal state structure based on ethnic regional states responsible for a broad range of the country's political, economic and social objectives\. Through the use of formula-driven block transfers and the redeployment of the majority of civil service staff, the Government 2 shift decision-making closer to the people at the 'grass-roots level' and to improve the responsiveness of service delivery\. A series of far-reaching legal, fiscal and administrative measures were rapidly introduced in 2001 \. \. \. to empower the local government sphere - comprising woredas and municipalities - to deliver the bulk of basic services in a responsive manner\. The primary fiscal instrument that regions used to ensure rapid decentralization of delivery responsibilities to woredas was a formula-driven, equity-oriented 'block' grant\. Implemented for the first time in the 2001-2002 fiscal year, this 'unearmarked' transfer was expected to empower local authorities to make critical allocative decisions and in the process, enhance the responsiveness of service delivery as well as downward accountability\."5 1\.4 The donor community responded to these positive economic and social policies and outcomes with a substantial program of development assistance, of which the core was a budget support program, spearheaded by a series of four World Bank policy-based credits\.6 "A number of reform objectives were common to all four operations: public expenditure policy and management; private sector development; and human development through increased pro-poor spending and better service delivery\." The IEG project performance assessment report (PPAR) of these operations found that while there was "progress in improving institutional performance and also in expanding budget support and improving governance for service delivery for human development, outcomes were unsatisfactory for promoting private and financial sector development and there was negligible progress in improving the investment climate\. The series of credits was rated moderately unsatisfactory by IEG, which found that the Bank had moved too quickly into direct budget support and that direct budget support for human development was premature\. It argued that the Bank had relied too heavily on direct budget support, which had led to programs that were "too broad and ill-focused to be effective"\. It noted the positive impact of the complementary PSCAP program on capacity development and pointed out that effectiveness in rural development and education had suffered because of the lack of complementary projects and programs\. 1\.5 With hindsight there is some consensus among those involved at the time that the Bank and donor partners misjudged the openness of the authorities to consider a broad agenda of development reforms\. See Box 2 below\. sought to ensure the viability of regional states\. Notwithstanding the success of regionalization public sector governance within Ethiopia's regions continued to rely on systems that afforded local communities little by way of decision-making accountability\. Enduring challenges of improving frontline service delivery in priority sectors loomed large\." Source: Report no\. 40306: Ethiopia: Issues in State Transformation: Decentralization, Delivery and Democracy\. An Institutional Governance Review (IGR) Concept Note\. World Bank: p\.1\. Ibid: p\. 1\. 6The Economic Rehabilitation Support Credit (ERSC) of $150 million was approved by the Bank's Board on June 5, 2001\. The Economic Structural Adjustment Credit (ESAC) of $120 million was approved on June 18, 2002\. The First Poverty Reduction Support Credit (PRSCI) of $120 million was approved on February 17, 2004 to support the 2003/04 budget\. The Second PRSC of $130 million was approved on November 30, 2004 to support the 2004/05 budget\. Source: Report no\. 43336: PPAR on four budget support operations in Ethiopia issued by IEG in April, 2008\. 3 Box 2\. The Ethiopian Regime and Development Partners: A different philosophy In the view of a political economist who lived through and has studied the recent past in Ethiopia, during the 2003-mid-2005 period, "the DPs [Development Partners] mistakenly thought that the Government was on the same wavelength as them in pursuing a vision which involved a linear progression to Western liberalism\. With hindsight the agreement was semantic rather than philosophical\. It is now clear that the Ethiopian Government has been and is pursuing a vision of political and social development drawn from models such as China\. The Government's vision was one of collective rights rather than individual rights; of grass roots democracy leading to mass mobilization of the people through highly organized structures\." He saw this as accounting for the limited achievements of the earlier Policy-Based Loans which ran into major obstacles on fairly modest steps in the direction of promoting private sector development\. A more cynical view comes from a former Bank manager who felt that the Government feared the development of a powerful private sector and favored those business groups that were aligned with the party, and that invoking ideology was a convenient way to avoid discussion\. In his words: "This was a Government that was willing to sacrifice economic efficiency for political control\." Source: Interviews conducted by the Evaluation team\. 1\.6 The dynamic of the Ethiopia/donor partnership underwent a radical transformation with the post-election violence\. The events surrounding the elections made the continuation of budget support difficult for both the Bank and donor community\. There was strong political concern in most donor countries that general budget support could enable resources to be transferred to military and police activities\. In early 2006, a Bank document described the situation as follows: "Political tensions within the country have become stronger and more open in the months following the May 2005 elections\. Heightened risks on the governance front have become apparent, with concerns that the political tensions have the potential to adversely impact economic governance and the larger development agenda\. Ethiopia's development partners have suspended direct budget support which had been providing significant levels of support for increasing pro-poor spending at local levels, and also served as a platform for broad-reaching dialogue around the key issues of growth, governance, vulnerability, service delivery, and the macroeconomic picture\. Partners based this decision on their perception of increased risks relating to governance, particularly the risk that unconstrained budget support could be vulnerable to political capture or diversion from the core priority of basic service delivery\." 1\.7 However, there was also concern on the part of the donor community, that the progress that had been made towards poverty reduction in general and achievement of the MDGs in particular, should not be reversed as a consequence of reduced donor budget support\.9 As discussed above, the core of Ethiopia's support for basic services was the provision of block grants to Ethiopia's regions and (at that time) 700 districts (woredas) with authority over allocation in principle transferred to these levels (i\.e\. federal to region and then region to woredas)\. Prior to the election, the Bank had already provided substantial support for capacity building at the regional and local levels as well as providing resources to the line 8 See Report no\. 36212: Project Information Document (PID) Appraisal Stage: page 1\. 9Ibid: "Given the extent to which Government expenditures are devoted to pro-poor sectors, and in view of the financing pressures the likely adverse consequences for the poor of Ethiopia if Government expenditures are cut below budgeted levels are clear\." 4 ministries in Addis Ababa for their use in the regions\. While it had also funded capital investment at the local level, this funding was simply the regional or local component of the national investment program and was neither additional nor subject to decision-making at the local level\. The Bank had not provided direct support for recurrent expenditure at the local level\. There had been discussion among donors of the possibility of doing this through supporting the block grant system\. With the new post-election situation and the unlikelihood that the suspended PRSC series could be resuscitated in the near term, the idea was revived\. While the Government initially insisted that the regular budget support operations should be resumed, it was willing to accept support for block grants as a temporary expedient\. 1\.8 From the Bank and donor perspective, the idea of direct funding of Regions and woredas had a great deal to recommend it\. It was a natural fit with much of what the Bank was already doing\. The Public Sector Capacity-building Program (PSCAP) provided strong support for capacity building at the sub-national level, and a parallel program had addressed the capacity needs of municipalities\. The Bank was also exploring the potential of investment grants at the local level\. Many donors already had functioning programs in individual regions, but had run into the problem that, in order to maintain inter-regional balance, the Government was offsetting aid to a particular region with budget reductions\. 1\.9 There were however two major concerns with supporting block grants to regional budgets\. First, there was a need to demonstrate that the resources provided were genuinely additional to the Government's own funding of block grants, and did not simply release funds for the Government to use to exercise control over the population\. Second, there was concern that the Government might use the regional allocation process to steer funding towards 'loyal' regions and districts, and away from opposition strongholds\. The Bank needed therefore to build into the operation tests of additionality, and transparent and fair allocation\. In addition there was a strong sentiment based on the findings of a high-level Bank missionlo that all Bank operations should move the good governance agenda forward by putting in place enhanced transparency and social accountability mechanisms at the local level through partnerships with Civil Society Organizations (CSOs)\. There was resistance from the Government to this and it was only when the Africa Region Vice President came to Addis Ababa and made it quite clear that, without this, the operation would not go forward, that the Government finally acquiesced\. With the basic design in place, there was substantial donor co-financing forthcoming for the Bank operation\. 1\.10 The decision to proceed with the PBS was extremely controversial within the Bank\. Many Country Team members were horrified and disillusioned by the Government's actions and some shared the initial reaction of the then President of the Bank, that no further support should be provided to Ethiopia\. The argument won the day that the Bank could not simply turn its back on the second largest, and one of the poorest, countries in Africa\. This position was also consistent with the Bank's lending objectives and fitted well with the prevailing international context for Official Development Assistance (ODA)\. In the context of the Gleneagles Agreement and Paris Declarations of 2005 to, inter alia, increase aid to Africa, 10 The mission was led by Sanjay Pradhan, then Director of Public Sector Management in PREM, and Mark Baird who had just completed an assignment as Country Director for Indonesia in the immediate post-Suharto phase\. 5 cutting a large aid program in the region became more difficult politically\." Once the decision was taken to remain engaged, the question became how to do so\. There were arguments for the continuation of the series of policy-based loans with stiffened macro- conditionality and stronger emphasis on governance\. The donor community made it very clear however, that fungible budget support at the federal level was not on the table\. Expanded sector budget financing was considered, but still raised some issues of fungibility, would have been more difficult to administer and, given the sectoral focus, did not provide an entry point into systemic issues of basic service provision at the local level\. A program of traditional investment projects was a realistic option but it risked sacrificing the momentum which had been achieved in poverty reduction and promoting the achievement of the MDGs\.12 This is the context in which the PBS was launched\. 2\. Objectives, Design, and their Relevance 2\.1 The issue of the counter-factual is a particularly interesting and important one for the Ethiopia PBS\. For most Bank operations the counter-factual is simply a trade-off between one activity or another within a given strategy\. Some would argue, however, that the PBS represented a strategic shift - a deliberate choice by the Bank and Development Partners (DPs) to move away from the macro-dialogue (at least temporarily) and focus its attention on a set of issues that was less controversial and less central to growth over the medium to long term\. The argument has also been made that the pressure on resources would have led to more tractability on the part of the Government on some of the issues relating to private sector and financial reforms where the donor community had not achieved much progress in the PRSC dialogue\. 2\.2 The theory of change that underlay the approach adopted was very plausible\. Decentralization was a vitally important program which affected the life and livelihoods of most of the population and an operation which enhanced its efficiency and fairness had the potential to make a major contribution\. The PBS approach accepted the Government's word that it wanted to move away from an extremely centralized governance structure and allow increasing autonomy to regional and district governments in allocating resources and implementing programs\.13 It was designed to use and strengthen the government's own systems for management of the decentralization process and not substitute an alternative DP- designed approach\. It also created the potential for the DPs to reduce fragmentation and move away from providing all their support in the social sectors, agriculture, water and rural 1 The international atmosphere in which debate over aid to Ethiopia took place favored expanding aid to Africa: in July 2005, the G8 summit at Gleneagles had called for cancellation of debt for 18 African countries including Ethiopia, and a doubling of new aid to Africa, making cuts to a large program more politically difficult\. The 2005 Paris Declaration further set out commitments to greater developing country ownership of aid programs and for aligning ODA with their country systems\. Several donor partner informants indicated these were significant factors driving the agreement to support the PBS approach in 2006\. 12 Another possible option was direct donor support to specific regions\. The Government policy however, did not allow any additionality of such resources and donor funding of a region was offset by an identical reduction in budgetary transfers\. 13 "Ethiopia is so top down\. The Federal Government micro-manages everything\. The PBS has helped to foster a more collaborative dialogue between the Federal Government and the Regions\." (A Bank staff member) 6 roads, through the central line ministries\.14 It allowed the Bank and other donors increased access to and dialogue with regional and local governments\. Another substantial benefit was that a curtailment of basic services would likely have had a disproportionate impact on the lower quintiles of the income distribution\. While there were obviously other approaches that might have yielded similar benefits, from a political economy standpoint no other approach had the same level of feasibility and prospect for generating positive outcomes\. 2\.3 While the Bank and the donors saw the PBS as a viable instrument for supporting basic service delivery at least through the period of the Millenium Development Goals (MDGs), they viewed it as a temporary vehicle for supporting a continuing policy dialogue with the authorities\. Both the Bank and DflD, the two key actors, saw this as preparing the ground for a resumption of Development Policy lending in Ethiopia\. In practice the country strategies of the Bank and the DPs have not evolved in this way\. The PBS has become the main mechanism for delivering large scale donor budget support to Ethiopia and conducting the policy dialogue\. The Bank and the donor community have painted themselves into a corner where a cessation of this support is likely to put the achievement of the MDGs at serious risk\. The Government has been able to in effect select from the policy dialogue those elements which it is most comfortable with and keep out those which run counter to its ideology or what it perceives as its political interests\. 15 2\.4 The Financing Agreement states the objectives of the Project as 1) "to protect the delivery of basic services by Sub-national Governments" and 2)"promoting and deepening transparency and accountability in service delivery\." The program as designed had four instruments for achieving these objectives, organized under four components\. The first, and by far the most important instrument (supported by a component accounting for $190 million out of the original IDA grant of $215 million)16, was to protect the provision of basic services\. For this purpose funding was provided through the block grants\. Although set up as a Sector Investment Loan no-one was under any illusion that the first component was anything other than simply an alternative mechanism for continuing to derive the perceived benefits of budget support\. The key here was therefore as indicated above, to ensure a) additionality and b) fairness in allocation of the funds, and c) the fiduciary requirement that funds were indeed being used for the purposes for which they were given\.17 The Bank therefore established 'tests' to measure these\. 14 PBS covered Health, Education, Agriculture, and Water Supply and Sanitation\. Rural roads were added in PBS2\. These are collectively referred to as the 'protected services' under the program\. 15 The PBS was widely perceived in the donor community as a 'back door' way of providing budget support, since the 'front door' of the PRSCs was effectively closed by donor authorities\. In the words of one Bank staff: "As time went on, there was an appreciation of what PBS could do\. There was donor support and unlike abstract policy dialogue, the dialogue on PBS was about practical changes needed\. It was taken seriously by the Government and donors felt that they were getting more traction\. There were no major changes, but given the importance of service delivery, donors felt encouraged\. The discussions had an impact\. So although the origins of the PBS were still questioned, donors increasingly saw it as a very useful instrument, although lacking a macro policy dialogue\. General budget support remained on the table but was no longer seen as a substitute for PBS\." 16 An additional $165 million was provided for this under the Additional Financing in December 2007\. 17 In the words of one DP, these tests were needed to enable them to 'follow the money\.' 7 * As far as additionality is concerned, "the purpose of PBS financing is to support increases in basic services which would be financed via sustained increases in the Federal block grant\. The additionality principle further implies that the Federal Government will maintain the trend growth rate of 10% a year in its own-revenue share of the Federal block grants as a minimum starting from the base year\. While the Federal Government does not have the mandate to allocate budgets at the sub- national level, sub-national budgets for basic services will nonetheless be monitored to confirm whether increases in the block grant transfers are leading to correspondingly greater spending on basic services\."18 * The fairness test required that "i) Budget allocations (including supplementary allocations) of block grants from the Federal government to the regions and from the regional governments to woredas should be based on transparent, fair and rules-based formulae\. ii) Actual transfers of these grants are expected to be equal or close to their budget allocation; if there are deviations of actual transfer amounts from budget allocations there should be good reasons for this\. Moreover the review will be utilized to confirm the absence of any systematic deviations related to political or ethnic factors\."19 * The fiduciary test was mainly a matter of putting in place a continuous audit mechanism and strengthening the Office of the Federal Auditor General to carry this out\. In addition it required support for local government financial and accounting systems, linked to the support for Financial Transparency and Accountability (see below)\. 2\.5 Under the Additional Financing provided by IDA at end 2007, an additional $20 million sub-component was added under this objective to support a pilot program for a Local Investment Grant (LIG)\. "The ultimate objective of the Government is to introduce LIG as a national, performance-based capital grant\. This would represent a new component in the existing intergovernmental fiscal system\. The objectives of this new capital grant would be to increase the quantity of capital investment by providing additional money specifically earmarked for capital investment and to improve the quality of that investment by making access to LIG funds conditional on meeting certain performance criteria"\. 2\.6 A second instrument to support the protection of basic services was for the Health MDGs Performance Facility, (supported by a component consisting of a $20 million IDA grant)\.20 This was essentially a health services project which was only related to the other project components in that it also supported basic service provision\. The Facility had its own separate group of co-financiers whose funds were tied specifically to this component\. The health services component was channeled through the line ministry and provided support that had been handled through free-standing health projects in the past\.21 "The component would PAD for PBS, May 2006, p\.43\. 19Ibid p\.44\. 20 A further $29 million was provided under the Additional Financing\. 21 As indicated, while the block grants are referred to as Channel One in Ethiopia and overseen by a separate coordination unit in MOFED, funds channeled through the line ministries are referred to as Channel Two\. The Ministry of Health was the executing agency for Component 2\. 8 support the establishment of a Federal budget line to finance the critical functions of the federal MOH to support basic health services at woreda level\. The budget line would finance high impact health commodities (vaccines and vitamin A, bed-nets, contraceptives) as well as capacity building activities, particularly in the area of procurement and logistics\." The argument for linking this with the PBS was that "the inclusion of a component in this operation offers an opportunity to start transitioning from the fragmented off-budget approach characterizing donor financing for health inputs, toward building inter- governmental systems for the management of these services and bringing these expenditures on-budget over time\. Component 2 will thus be an avenue for promoting donor coordination on the one hand, and for improving public accountability in health service delivery on the other\."22 Perhaps equally important in the views of the staff involved, was the concern of both the Bank and the Government that a free-standing health project would mean additional financial and transaction costs and a preference to avoid having too many different projects in the Bank program\. 2\.7 The second objective of the project was to strengthen Government systems through promoting Financial Transparency and Accountability (FTA)\. This objective was addressed by two instruments\. The first was focused on financial transparency and accountability of the Federal and sub-national governments, supported by component three of the loan, with $5 million of IDA\.23 At the Federal Government level this component was closely related to the fiduciary requirements of the first objective; it provided "urgent strengthening of the Office of the Federal Auditor General, including capacity building and provision of essential hardware and software necessary to conduct continuous audits of activities undertaken under Component 124 , as well as providing equipment and capacity building for MOFED and the Regional BOFEDs\. At the Regional and woreda levels, it required that their budgets, which had hitherto been black boxes, be posted at the regional and district headquarters in a publicly accessible place and that council meetings be held to discuss and approve the budgets\. This required much better information systems and connectivity between various levels of government and capacity building to enhance the understanding of the budget processes and content of both local officials and elected representatives\. 2\.8 The second instrument for promoting Financial Transparency and Accountability, dealt with Social Accountability\. This was supported through the fourth and final component of the loan\. The Bank did not directly fund this activity, under which CSOs were financed through a Multi-Donor Trust Fund administered by the Bank\. The Trust Fund would contract CSOs to work with communities in supporting their capacity to understand, assess and influence the content of local programs\. The PAD contrasts the "downward accountability" of the first instrument under this objective with the focus of this instrument on the "demand side" of governance, i\.e\. citizen and civil society organization-led approaches to increase responsiveness\. Much of the emphasis here was to provide support for Ethiopia's thinly developed civil society organizations which were looked at with suspicion by the Government\. A non-government Management Agency was to be selected for the 22 Ibid p\.44\. 23 A further $1 million was provided under the Additional Financing\. 24 Ibid p\.48\. 9 Trust Fund which would 'work with input and endorsement' from a Steering Committee consisting of three Government, three CSO and three donor representatives\. Since the funding was provided to CSOs through a Trust Fund that was not directly administered by the Government, there was no IDA financing of this component which was initially funded by Department of International Developments (DflD) and Canadian International Development Agency (CIDA) with $6 million\. There was no question however that this was an integral part of the PBS and fully covered by all the reporting and review requirements\. 2\.9 The PBS also put in place a process which the Bank and donor community hoped would allow for a continuation of the dialogue on macro-policy issues\. The mechanism for this was the quarterly Joint Budget and Aid Review (JBAR) covering the macro and fiscal framework, expenditure allocation and aid review\. The Public Expenditure and Financial Accountability (PEFA) studies formed a part of this framework\. 2\.10 As concerns the relevance of the PBS, it was a creative response to a difficult situation\. As far as the counterfactual is concerned, the evidence from interviews with Bank staff, government, donors and from the various project-related documents is clear that the main alternative option of a continuation of general budget support through macro-policy based operations would not have been supported by donors and even if the Bank had chosen to go it alone, any new operation would have needed to feature significant progress on key policies, which would likely not have been agreed to by Government\. The argument that the need for resources would eventually have forced the Government back to the table was seen by most interlocutors as highly questionable and in their view the Government would simply have cut back on its programs in this event, with the cuts falling most heavily on capital expenditures\. In the view of donors rechanneling general budget resources through sector SWAP operations would have raised very difficult fungibility issues and put more influence into the hands of the Federal line ministries\. The alternatives of opting for a project-based program or of opting out altogether would have severely limited the funding of the block grants and would have likely impacted basic service delivery and the achievement of the MDGs\. 2\.11 The PBS should not be seen as just making the best of a bad situation, however\. On the contrary, the PBS positioned the Bank very effectively in supporting one of the most important policy initiatives and programs in Ethiopia - one moreover where the value added of the Bank's contribution was likely to be substantial given the need for improved policies, processes and capacity in this area\. The decentralization also provided the potential for an expanded dialogue on overall fiscal management\. The support for basic service delivery enabled the Bank to increase the overall poverty focus of its lending\. As suggested in paragraph 2\.2, even in the absence of a crisis this was a program that the Bank should have supported\. By and large the PBS design related closely to the objectives defined\. 2\.12 However, there are issues concerning the relevance of program design\. The PBS was intended as a short-term response to a crisis situation and a number of the initial documents and interviews with the participants make it clear that the Bank and DPs saw this initially as a stopgap measure\. As a consequence there was little thought given to the end-game and where this was taking the donor dialogue down the road\. Until recently, the Bank has taken the view that there needs to be an additional budget support track of a macro-policy based 10 operation that allows for a broader dialogue along the lines of the former PRSC\. The Government quite clearly prefers that budget support be channeled through the PBS which allows it to avoid a confrontation on some of the contentious issues where it is unwilling to give ground (such as on the business environment)\. At the same time the donors are locked into a continuation of the PBS because of their concern not to rock the boat on the MDG attainment\. 2\.13 In addition to its longer-term positioning in the Bank strategy context, there is also a question of how to position PBS in the Ethiopian fiscal context, which does not appear to have been thought through\. The block grants essentially support government salaries - about 85 percent of the proceeds go for this purpose, with about 10 percent for non-salary recurrent expenditures and 5 percent for capital expenditures\. It is widely recognized that the latter two categories are seriously under-financed and this was easily validated by the field observations of the evaluation\. It was also apparent at the time PBS was designed\. Over time, donor funding needs to move to the non-salary categories which means that the Government needs to initiate civil service reforms while building up its capacity to cover salaries through its own contribution to block grants\. There is surprisingly little discussion of what this would require and how it should be done in the PBS documentation\. The decision not to proceed with the LIG as part of PBS3 is seen by the evaluation as particularly unfortunate\. 2\.14 Related to this was the apparent failure to think through not just the first steps along the road to transparency and accountability, but where this was taking communities down the road and what had to be put in place in order to do this\. The Bank did not seem to take a holistic view of the local budget process including the generation and retention of own resources at the local level (this is now included in the work program for FY14), the different approaches needed for salary and non-salary budgets, the human resource management issues, etc\. Consideration should have been given to piloting a more comprehensive approach in selected districts\. This would also have allowed for an understanding of some of the issues that emerged over time, such as the limitations of posting budgets in the regional or woreda local government compounds for example\. 2\.15 A further concern with the design relates to the inclusion of the MDG health facility component in the project\. It brought another set of more traditional investment project issues into the project design (e\.g\. pharmaceuticals procurement) and created an awkward dynamic in terms of the relative importance of various categories of local expenditures (i\.e\. why insert a malaria prevention component and leave out other categories - education, agriculture and water supply?)\. More importantly however, it created an ambiguity about the focus of the operation at the impact level on better governance, resource allocation and program implementation of regions and districts within the framework of decentralization\. This may have contributed to the less intensive follow up of the key process issues during the course of program implementation\. 3\. Implementation 3\.1 The PBS project evolved into a major channel for donor funding of Ethiopia's basic service provision\. At the time of Board approval a $215 million IDA grant, leveraged a total 11 of $532 million with the balance of donor support coming mainly from DFID (with larger financing than IDA)\. The contribution from the Government of Ethiopia was envisaged at $2\.03 billion\. At end 2007, IDA provided a second IDA grant of $215 million under the Additional Financing agreement\. By completion the program had channeled $1622 million with $430 million from IDA including the additional financing\. 3\.2 To understand the implementation of PBS, it is useful to examine the timeline covering the period from the elections of May 2005 to the closing of PBS2 in January 2013\. See Table 1 below\. Table 1\. Timeline of Events in Ethiopia and the PBS Program GOE Elections May Protests lead to police shooting of November demonstrators and jailing of opposition 2005 leaders PBS Concept Note December PBS Appraisal February PBS Board Approval May 2006 PBS Effectiveness June PBS Project Launch JRIS July PBS Mid-Term Review May 2007 PBS Additional Financing approved December PBS Original Closing Date June 2008 GOE Comfort letter on CSOs sent February PBS2 Board Approval May 2009 PBS Revised Closing Date June PBS Final Closing Date December PBS ICR June AAA Public Finance Review on August 2010 Decentralization PBS2 Additional Financing approved February 2011 PBS2 Original Closing Date December PBS3 Board Approval September 2012 PBS2 Revised Closing Date January 2013 Source: Compiled by the Evaluation team from various World Bank sources\. 3\.3 Within days of Board approval of PBS a project launch mission was mounted with joint participation by donors (DflD, Canadian CIDA, Irish Aid and the Netherlands at that point)\. The key was to put in place the monitoring systems that would allow the Bank and donors to assess additionality and fairness, and also the institutional structures and processes for the fiduciary requirements of the program and the FTA and Social Accountability 12 25 components\. Some donors (e\.g\. Canada) were only willing to support the Health Facility of Component 2, but over time other donors became convinced that the tests and supporting mechanisms that had been put in place, were sufficiently robust as to effectively rule out possible reputational risks through accusations of providing fungible resources that supported the Government crackdown\. The European Community and Spain joined the Multi-Donor Trust Fund and the African Development Bank, Austria and KFW provided parallel financing\. 3\.4 The executing agency for components 1 and 3 was the Ministry of Finance\. As explained, the block grants and capacity building supported by components 1 and 3, were referred to as 'Channel One' programs, to differentiate them from 'Channel Two' in which funds were provided through the line ministries to local government for specific defined programs\. It took some time for the management structure and capacity for the Channel One programs to get off the ground\. Initially the responsibility was given to the macro department of MOFED\. This did not work because of competing demands on the staff assigned to manage the program - numerous positions, were unfilled and financial reporting procedures were not put in place during the early phase\. At the time of the additional financing, the Bank insisted that a separate structure was required and COPCU (the Channel One Program Coordination Unit) was put in place which has contributed to much more effective implementation\. COPCU has organized a set of working groups which according to subsequent ISRs on the project and follow up projects, has provided effective coordination and reporting of progress on the program\. In addition there is a COPCU office in the Bureau of Finance and Economic Development (BOFED) of each region to manage the Channel One program\. 3\.5 An important element of the program was the use of national systems for most of the activities\. The project was highly appreciated by the Government for the fact that the capacity building which was supported generally went to strengthen the use of national systems in activities such as financial management\. The fact that this was set up by the Bank as an Investment Loan in order to ensure that the funds were not fungible did mean that audit requirements were somewhat tighter than the country's system normally required\. The Bank did however, agree that procurement under component 1 by the Regions and woredas could be handled using Ethiopia's local government procurement procedures and rules\. 26 The approach to component 2 was more complex with mainly Bank procedures being applied, but with some exceptions for local procurement in response to specific requests from the Government\. 3\.6 With the progress of the operation and growing donor support, it was decided to provide additional financing for a second phase of the PBS, rather than financing a new project which would have been more costly and time-consuming\. The Bank decided to support a new instrument, the Local Investment Grant (LIG), which provided funding that 25 In PBS2 this was modified to the 'SAFE' framework: Sustainability in additionality; Accountability including fairness; Fiduciary standards, and Effectiveness\. 26 Obviously building audit capacity in 800 woredas remains a huge challenge\. The Auditor General cites problems such as high turnover, low competence and generally weak quality of audit work despite excellent laws, manuals and growing coverage\. 13 could be used for investments, agreed, prepared and implemented, at the woreda level\. 27 The Board document for the Additional Financing stated that the objective of supporting the LIG was to 'scale up' the impact of the PBS\. This new instrument reflected a sense that by only financing recurrent costs, the project was not providing support for building the planning and implementation management capacity of local governments for the longer-term\. The LIG was initially piloted in 51 woredas with funding of $20 million provided entirely by the Bank\. Under PBS2 this was expanded to 99 woredas with total funding of $87 million\.28 3\.7 In January 2009, the Ethiopian parliament passed the Charities and Societies Proclamation, which was aimed at international CSOs, such as Human Rights Watch, which were seen as having been significant players in bringing some of the Government's actions in 2005 to international attention\. The proclamation prohibited CSOs which received "more than 10% of their funding from foreign sources from engaging in activities in political governance and rights-based advocacy, while allowing their engagement in social and economic development and other charitable purposes"\.29 Given the involvement of CSOs in the Social Accountability pilot there was a great deal of concern on the part of the Bank and donors about the impact of this on the component and as a consequence on the entire PBS operation\. To address this concern, the Government provided a 'comfort letter' to the Bank indicating that it regarded the Trust Fund that had been set up to fund the pilot as being government funding rather than funding from foreign sources\. 4\. Achievement of the Objectives 4\.1 The PBS defined a clear and limited set of objectives relating to protection of basic services and deepening transparency and accountability in service delivery\. In practice however, the project was also intended to support the enhancement of service delivery, promoting expanded access, coverage and quality as well as improved efficiency\. In addition, it is clear that support for an effective decentralized system through strengthening decentralized budget and planning capacity and implementation, and citizen participation in this process, was also a key objective for both the Bank and the DPs\. With hindsight, a formulation that encompassed these broader objectives might have provided the basis for a more effective dialogue on overall public finance and public expenditure management in Ethiopia\. From the perspective of this PPAR, the evaluation is focused on the objectives defined by the project documents\. 4\.2 As indicated above, the two broad objectives of the project were supported by five separate instruments as shown in Table 2 below\. These in turn were organized into four program components\. The Local Investment Grant (LIG) instrument which was introduced as part of the Additional Financing, was included as component lb\. The Results Framework of the project is best examined in terms of the individual instruments\. 27 The LIG was originally conceived as a stand-alone operation, and implementation of a PHRD grant to support its preparation, began in March 2006\. 28 The LIG was discontinued in PBS3 however, for reasons that are discussed in para 4\.12\. 29 Quoted in the ICR: para\. 138 p\. 28\. 14 Table 2\. Tracking PBS Objectives, Instruments and Components Objectives Instruments Components 1\. Protecting basic service a\. Support for block grants 1\. Basic Service Protection provision b\. Local Investment grants c\. Health Facilities support 2\. Health Facilities 2\. Enhancing transparency and a\. Financial Transparency and 3\. FTA accountability Accountability Program b\. Social Accountability 4\. Social Accountability Program Source: The evaluation team\. Objective 1: Protecting Basic Services 4\.3 This objective was supported by three instruments of the project: Support for federal block grants; the Local Investment Grant; and the Health Facility support program\. 4\.4 Instrument la: Support for federal block grants to protect basic services at the sub-national level is concerned, the levels of financial support for the five protected service areas were not only maintained, but have been substantially increased\. The additionality test was fully met during the life of the project and subsequently with increases in the 30 government's own resources going into federal block grants exceeding 10% in each year\. The total federal block grant went from $632 million in 2004/5 to $1,598 million in 2008/9\. Table 3 below shows that the growth in budgets at the regional and woreda levels consistently exceeded the increase in general government expenditures\. It also suggests however that the focus on additionality at the aggregate level of block grants may have been too crude an instrument\. Regional and woreda recurrent expenditures increased at twice the rate of general expenditures\. Most of the block grants finance salary expenditures and the real bottlenecks that have emerged at the local level relate to non-salary recurrent expenditures such as simple maintenance activities, supply of fuel and materials, etc\., as well -31 as capital expenditures on major renovation or new construction\. 30 Note that this is not the same figure as Table 1 which comprises both donor and government funding and is broader than block grants\. The Government argued without success with the donors that their resources for block grants should also be subject to the additionality test\. 31 The additionality test was changed during PBS2 - where there was concern about the fiscal impact of rapidly growing block grants\. The question raised was what was the optimal level of federal-regional transfers? 15 Table 3\. General Government and Basic Services expenditure growth Average annual growth in 2000 Expenditures real prices (05/06-09/10) in % General government 0\.8 General government recurrent 1\.6 Consolidated regional 3\.2 Consolidated regional recurrent 6\.5 General government basic services 1\.7 Consolidated regional basic services 5\.3 Source: World Bank and MOFED data, quoted in the ICR pages 53 and 54\. 4\.5 Additional evidence of the shift in the balance of expenditures from the federal level to the Regions can be drawn from the employment data\. Taking a somewhat longer period, Federal employment increased by 56 percent over 6 years while Regional and woreda civil service employment increased by 122 percent\. (See Table 4 below)\. Table 4\. Number of Civil Servants (2004/05 2010/11) 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Federal Government 46,238 52,833 56,911 57,012 59,281 65,238 72,515 Regional Governments 377,829 437,530 524,918 563,451 724,214 789,078 854,201 Source: Ministry of Civil Service (annual reports), compiled by the PBS Secretariat\. 4\.6 As far as fairness is concerned, there are three broad issues\. First are there some biases built into the design of the formula itself? Box 3 below discusses the formula\. 32 For PBS some donors felt that it gave inadequate resources to lagging regions\. Although the 'emerging' regions get more on a per capita basis than the more developed regions, there are issues of whether the balance is right\.33 Second, there may be issues of the transparency and stability of the formulas\. The evaluation mission found it difficult to obtain the formulas from either the national or regional levels\. While the formula at the Federal level is more stable, in some regions the formulas seem to be changed frequently\. Donors confirmed the difficulty of getting information on the current formula at any given point in time and in one region the evaluation team was informed that the regional formula had changed every year over the last seven years\. It is quite surprising that the dialogue has not encompassed proposals for greater transparency -- for example, that formulas should be included in the budget documents, made public and the regional formulas should be reviewed on a fixed schedule - say, every three years as is the case for the federal formula\.34 Third, there may be 32 Box 3 describes the 2007 formula which was operational during PBS\. The formula was revised in 2012\. " Two Professors from Addis Ababa University are currently working to review the formula at the federal level and make proposals\. 34 A two-day Bank organized workshop in 2013 for federal and regional officials discussed the formulas and the evaluation team was able to obtain powerpoint presentations from this workshop which discuss the formulas\. It 16 an issue of micro-level fairness that is difficult to pick up and document\. Human Rights Watch has raised the issue of the politicization of benefits within woredas\. It argued that there was bias in areas such as teacher hiring for example, and questioned whether families that had supported the opposition were getting equal access to benefits\. Obviously these are very difficult matters to control and the project was unable to put in place mechanisms that might substantiate or disprove these accusations\. is difficult to assess whether the fact that neither of the BOFEDs visited were able to provide the formulas was a matter of chance or reflects a more fundamental issue of lack of transparency\. 17 Box 3\. The Federal Formula for Regional Allocations The Federal Budget Grant Distribution Formula was approved in May 2007 by Ethiopia's House of Federation\. This reflected the work of a Technical Committee over a three year period\. Since the original block grant formula was introduced in 1995, it had been revised four times (1997, 1998, 2000 and 2004)\. Three variables were included in all five versions of the formula: the size of the population; the level of development; and the regional revenue collection\. In addition some of the 1995 and 1998 formulas used the area of the Region as a variable\. The weight given to each variable also shifted between each revision with population moving from a weight of 30 percent in 1995 to 65 percent in 2004\. The 2007 formula started with the assumption of equal per capita transfers, but then analyzed the regional revenue capacity and expenditure needs\. For revenues, the formula looked for example at the expected tax collections given the tax base, as compared to the actual tax collections\. It looked at different per capita expenditure needs through a detailed sector by sector analysis of each of the sectors for which Regional governments were responsible\. The resulting allocation is shown in the table below, excerpted from the document describing the Formula\. (The New Federal Budget Grant Distribution Formula, published by the House of Federation, Addis Ababa, May 2007\.) As is evident the formula is important in raising allocations for the smaller, less developed regions where the expenditure needs variable is particularly powerful, though this is partly offset by their weak revenue raising efforts\. Thus Gambela for example with only 0\.34% of Ethiopia's population gets 0\.92% of the grant allocation\. The largest reallocation is from Oromia with 36\.7% of population and 33\.7% of grants\. TABLE 4\.1; SUNIMARY OF DIFFERENCES IN REVENUE CAPACITY AND EX PENDITURE NEEDS ASSESSMENT Diffarence Difference Average Average per In Per Cap- in Per Sum of (5) muti- Percent- Region Popula- Capita ita Revenue Capita Ex- (2), (3) plied by age R tion Transfer a pendture and (4) (1) Share Capacity Needs -1 2 3 4 5 6 7 Tigray 410 88\.95 -5\.04 10\.25 94\.16 385\.59 6\.38 Afar 1\.33 88\.95 3\.33 21\.95 114\.23 151\.57 2\.51 Amhara 18\.06 88\.95 4\.26 -4\.57 88\.63 1600\.84 26\.49 Oromia 24\.97 88\.95 -3\.92 -3\.44 81\.59 2037\.62 33\.72 Somale 4\.09 88\.95 6\.14 3\.58 98\.67 403\.68 6\.68 B'S Gumuz 0\.59 88-95 -4\.42 60\.54 145\.07 86\.03 1\.42 SNNPR 14\.01 88\.95 3\.06 -2\.67 89\.34 1252\.10 20\.72 Gambela 0\.23 88\.95 -22\.59 172\.80 239\.15 55\.87 0\.92 Hareri 0\.18 88\.95 -56\.91 133\.38 165\.41 30\.40 0\.50 Dire Dawa 0\.37 88\.95 -34\.02 52\.43 107-36 39\.64 0\.66 TotaV Average 67\.94 88\.95 0\.00 0\.00 88\.95 6043\.34 100\.00 Source: Government of Ethiopia\. Federal Budget Grant Distribution Formula\. House of Federation\. 2007\. 18 4\.7 The project development objectives and intermediate outcome indicators included in the Results Framework for the first instrument are thin and probably reflect the limited time available for preparation of PBS and the difficulty of putting in place some of the baseline data and monitoring systems needed to provide more complex objectives\. Thus, for example, there is nothing on the expansion of basic services for the poorest quintiles, which would have been important information to include in the results framework\. The indicators for Objective la, the protection of basic services, are limited to one rather vaguely defined indicator on education, added when the additional financing was approved, and the health indicators discussed under Instrument Ic below\. There is nothing on agriculture and water supply and sanitation despite substantial flows of block grants to these sectors\. Access to water supply in particular would have been an important and useful indicator to add to the list\. On the process side a number of indicators for the second objective are relevant also to the first objective since they cover fiduciary aspects, capacity building and transparency\. Project achievements against the indicators related to Objective la are as follows: Instrument la: Outcome Indicators * Sub-national governments expenditure on basic services is maintained or increased with respect to the previous fiscal year: Target 98% achieved35 Instrument la: Intermediate Outcome Indicators * Aggregate level of block grant transfers to regional governments\. Target 90% achieved\. * Transfers of block grants to local governments made in accordance with intergovernmental fiscal rules\. (i\.e\. formulas): No quantitative indicators but interviews of the evaluation in regions and woredas indicated that the target was achieved\. This would need to be validated however, through field level data collection\. * New teachers recruited in the education system: No quantitative target was provided\. Number ofprimary teachers increased by 62% and number ofsecondary teachers by 22%\. 4\.8 An important benefit of the project was that it put in place management systems such as timely reporting by the woredas on utilization of funds, and a monitoring and evaluation framework\. A key part of the program has been capacity building at the Regional and woreda levels\. Starting in 2005, 800 woreda staff have received training in accounting for example\. The IBEX system is now running in 1700 locations, but there are still gaps\.36 The PBS has provided 3600 computers as well as printers and other equipment\. In addition, In calculating percentage achievements the evaluation uses the difference between the target and the baseline as the denominator\. 36 IBEX is the Integrated Budget and Expenditure management system which is intended to connect Federal, Regional and woreda budgets and expenditures against budgets\. The Government was implementing IBEX prior to the PBS, as part of the pre-existing and ongoing national PFM reform effort\. Support was provided by USAID, Irish Aid, etc\. through the Decentralization Support Activity (DSA) project, managed by Harvard University\. In Benishangul region the evaluation team was told that only 4 woredas out of 21 are currently using IBEX though they are hoping for a substantial increase in the number next year\. 19 41,000 officials have received training against the original target of 17,000\. Even then it must be acknowledged that there are still huge data gaps at the woreda level\. The IBEX does not run everywhere and even where it does it is often difficult to track actual expenditures at the woreda level\. In addition the project put in place a structure for carrying out fiscal analysis on a regular basis to monitor and deepen the Bank and DPs understanding of the fiscal management in Ethiopia (See Box 4 below)\. Box 4\. Integration of Public Finance work into the PBS framework As a complement to the PBS process there was a need for systematic reporting on public finances, inter alia of course to validate whether the tests were being met, but also as an input into the evolution of the structure\. Traditional Bank Public Expenditure Reviews (PERs) which can take 18 months to prepare and often only appear three years after the concept stage, were regarded as unsuitable for this purpose and a decision was made to prepare a much more focused Public Finance Reviews\. Such reviews were prepared for 2008, 2009 and 2010\. The reviews had two components\. The first was a short term analysis focused on the block grant allocations in the broader public expenditure context\. The second was to pick up on longer term issues that could be looked at over time and reported on in the Public Finance Reviews\. These were joint reviews with donor input\. For the 2010 PFR which focused on decentralization, extensive case studies on particular Regions were prepared as background papers\. The concept stage was participatory with the Government and the Regions, and a government counterpart team was set up to work on the data\. The reports were disseminated in Addis Ababa and in the view of the TTL had an impact on the allocation process and formulas\. The documentation formed the basis for one week training programs for each Region\. Source: World Bank Public Financial Reviews for Ethiopia, 2008, 2009 and 2010\. 4\.9 In addition to the above, it is also useful to look at the trends in the overall number of Regions and woredas\. In some African countries increases in the number of local authorities have become a favorite instrument for patronage on the part of governments\. At the same time it creates increasing administrative costs and dilutes the available capacity\. While initially there was a fairly rapid expansion from around 700 in 2005/6 to 788 woredas and towns in 2009/10, since then it has been marginal, growing to only 814 in 2012/13\. It may be that the movement to locate civil servants at the kebele or village level is playing this role in Ethiopia\. It would be useful for the PBS team to monitor these trends and assess whether the expansion to the kebele level is warranted in terms of basic service provision, or whether it is diluting the limited capacity even further\. 4\.10 Instrument 1b: Local Investment Grants: In the course of implementation, it became increasingly clear that building local empowerment meant giving local governments authority over more than salaries and some minimal maintenance expenditures\. As a consequence, with the decision to provide Additional Financing under PBS, the Bank also supported a pilot project for a Local Investment Grant (LIG)\.37 This proved extremely popular with local communities since it gave them additional resources (of the order of $250,000 per woreda, in some instances tripling or quadrupling usual capital expenditures) that could be spent on the investment activity of their choice, whether it was fixing the school 3 Although the LIG was financed under Component 1, its objectives fit more naturally under Component 3 and therefore we have chosen to discuss it here\. 20 roof, or rehabilitating the water supply, or constructing a new clinic\. The decisions were made in a participatory fashion at the local level\. The LIG also appears to have succeeded in leveraging substantial local contributions to project implementation\. The evidence suggests that in the initial phase the LIG satisfactorily met its objectives\. 4\.11 A review of the LIG was carried out from January to April 2010 with field visits to 10 woredas\. The review indicated a significant number of positive achievements: high levels of commitment; staffing in place in all woredas for planning financial management and accounting; high levels of physical implementation; and 84 percent of projects assessed as having satisfactory technical quality\. However, the review noted more than 20 'issues constraining further progress' that needed to be addressed\. Almost without exception these are areas where institutional and human capacity will need to be strengthened if the decentralization is to result in effective planning, budgeting and management at the woreda level\. 4\.12 The evaluation is of the view that it was a mistake that this important program was not included for financing under PBS3\.38 The reason given is that the Government did not feel comfortable with a pilot that provided additional resources to a few districts and was concerned with the appearance of favoring some over others\. For the Bank a particular source of concern was the finding of the review team that "the procedures to comply with the Environmental and Social Management Framework and the Resettlement Policy Framework were not given proper attention by federal, regional and woreda governments since no orientation/training was provided\."39 In addition an EU evaluation team had a lukewarm response to this component which seems to have influenced donor perceptions\. This needs to be set against the fact however, that this is the one instrument that is capable of providing a meaningful basis for strengthening planning, budgeting and management capacity at the woreda level\. That is why it was added to PBS\. If the PBS is to continue over the longer term it should have been supporting an increasing shift from financing recurrent expenditures to funding maintenance and capital investments\. The demise of the LIG may be a severe 40 blow to the longer-term viability of the program\. Instrument lb: Outcome Indicators * Percentage of woredas receiving LIG that adopt and implement new national standards for planning, budgeting, environmental screening and resettlement: 2010 LIG review indicates that all 10 woredas surveyed had adopted standards for planning, budgeting, procurement and financial management, but not for environmental screening and resettlement\. The target was 40%\. Weighting each area equally gives achievement of 167%\. * Percentage of LIG annual allocation spent by woredas: Target 109% achieved\. 3 "The feeling was that the LIG had not had a fair shot\. It needed more time\. It made the budget processes meaningful\. No-one was willing to step up and do the heavy lifting needed to get the LIG extended"\. (a donor) 3 Quoted in ICR: para\. 23, p\. 42 40 After dropping the LIG the Government announced that it was establishing an MDG fund that would fund capital expenditure linked to the achievement of the MDGs at the woreda level, controlled at the regional level\. 21 Instrument lb: Intermediate Outcomes * Number of Pilot LIG woredas which have successfully completed all preparatory activities to improve the quality of capital investment\. This may be interpreted (as in the ICR) as "participation in training conducted by MOFED to reinforce operational methodology and introduce LIG procedures\. On this basis achievement was 95% against an 80% target and the target was therefore 119% achieved\. 4\.13 Instrument ic: The Health Services Facility\. The data suggest that this instrument helped to promote the expansion of coverage of basic health services in order to assist Ethiopia to achieve the MDGs\. However the attribution to the project is doubtful\. Since this was an 'investment program' embedded in a budget support context, it predictably did not meet the schedule of the rest of the project\. The last 9 months of the extension of the project was almost entirely to allow for disbursement of Component 2 that supported this instrument\. Component I had already disbursed fully by that stage\. Procurement issues delayed this component and the imports of equipment and pharmaceuticals it funded were only available towards the end of the project, so that when the project closed it was impossible to attribute impact to these\. In the second PBS however, these goods did contribute to project impact\. 4\.14 The PBS design recognized that higher level impacts from this instrument were unlikely in such a short period even if the procurement had been timely, and the focus for component 2 was therefore not on the higher level impacts such as the MDGs unless, as in the case of malaria, short term impacts could be significant\. The data show high levels of achievement against the targeted outcomes\. The project defines four PDO and four intermediate outcome indicators of relevance to instrument Ic\. While these are more comprehensive than for other instruments they notably do not include any breakdown of achievements by income group\. Instrument 1c: Outcome Indicators * Immunization DPTS/Penta for children under one year: DPTS target 89% achieved; Penta target 131% achieved\.4' * Contraceptive acceptor rate of women in the age group 15-49: Target 97% achieved\. * Malaria case fatality for children under one year of age: Target 108% achieved\. * New malaria cases: Target 148% achieved\. 41 Where quantitative achievements are identified and where their definition is unambiguous, the evaluation has made use of the data provided in the ICR, which draws on the project files and various Government of Ethiopia sources\. Where there is a question of judgment about the use of particular numbers, or where qualitative assessments are implied however, the evaluation has in all cases followed through in order to provide an independent assessment\. 22 Instrument 1 c: Intermediate Outcome Indicators * Distribution of hormonal contraceptives: Target 159% achieved\.42 * Numbers of health extension workers: Target 168% achieved\. * Numbers of Insecticide Treated (Mosquito) Nets (ITNs distributed: Target 113% achieved\. * New pharmaceutical and medical equipment procured\. Target 69% achieved for pharmaceuticals and 98% achieved for medical equipment\. * Contraceptives procured\. Target 1010% achieved\. 4\.15 The broader achievements of basic service provision to the MDGs are however obviously of considerable interest both to the program, and especially to the DPs, and it is unlikely that the program would have been undertaken or evaluated by them as successful except in the context of significant progress towards MDG achievement\. Overall the outcomes over the period as shown in Table 5 below are very positive\. The DHS data show the following trends for under-5 and infant mortality\. Similarly positive results are shown in the annex for the education sector under school enrollment and primary school completion rates\. A view from the evaluation mission visits to regions shows, however, that there is still a long way to go (Box 5)\. Table 5\. Infant (i\.e\. Under-1) and Under-5 Mortality Trends Survey Under-5 Infant 2000 DHS 166 97 2005 DHS 123 77 2011 DHS 88 59 Source: Taken from DHS survey for Ethiopia in years cited\. 42 The ICR did not include information on this as it was not available at the time of publication\. Subsequent GOE publications on health indicate that distribution was equivalent to 12\.18 million couple/years of protection\. This compared with the baseline of 1\.07 million in 2005 and the target of 8\.75 million\. 43 Annex B provides this data broken down by quintile\. 23 Box 5\. An Impressionistic Ground Level View of Basic Services in Ethiopia The evaluation team visited schools, hospitals and clinics in four woredas in three regions\. The impressions gained, while obviously subjective, and based on a limited sample,suggest that there is still a long way to go\. The structures were in place, but in almost all cases in serious need of maintenance, roofs were leaking and windows broken\. Cleanliness in schools, but more seriously in hospitals and clinics, was a major issue\. The schools generally lacked access to water and one textbook is supplied for every two students\. Blackboards were available and in use but there were almost no instructional materials on the bare walls\. The school desks were usually in a terrible state, and in one school visited a classroom had been converted into a graveyard for broken desks - apparently it costs more to repair them than to buy new ones\. There is good news as well\. Teacher absenteeism did not seem to be a problem in the schools visited and in one school teachers were meeting in a well-appointed library to discuss the next year's curriculum\. Teacher/student ratios in most woredas visited of around 40-50 seem reasonable by comparison with some other low income countries\. This is not uniform however\. In one woreda, the ratio went up to 70 pupils\. Hospitals seemed to have the basic equipment and one had a particularly well stocked pharmacy with a wide range of medications obtained through USAID\. Hardly anyone seemed to be at the hospitals or clinics - all had beds but none were in use\. This was particularly striking in the delivery rooms\. The woredas receive budget based on the number of women who may be pregnant in the woreda\. In one woreda visited budget utilization for deliveries was 5 - 10 percent\. The shortfalls are because people are not coming to use the services\. The problem is lack of demand, perhaps related to hidden costs\. Source: The evaluation team\. 4\.16 A concern that has been expressed about the impact of basic service provision in Ethiopia and by extension, the PBS, is that the data seem to show that health outcomes for the bottom two quintiles of the income distribution were stagnant during the 2005-2011 period or improved by substantially less than other quintiles\. This seems particularly the case for under-5 mortality and infant mortality (see Annex B)\. The counter-argument to this is first that the Demographic and Health Survey (DHS) data on which this is based need to be interpreted carefully since they reflect the preceding 10 years and in Ethiopia's case are likely to have been impacted by droughts and civil wars; second that given the pervasiveness of poverty even reaching the second and third quintile means a substantial improvement for the near-poor; and third, the longer term trends suggest that overall Ethiopia is moving, if not to achievement of the MDGs, at least to very substantial gains in most of the key indicators\. In the view of the Ministry of Health (MOH) the benefits of PBS should be visible for the lower quintiles in the next set of DHS data\. Objective 2: Promoting increased financial transparency and accountability 4\.17 The second objective was an increase in financial transparency and accountability at all levels of Government\. This was supported by two instruments\. The first was the Financial Transparency and Accountability (FTA) program itself and the second, the support for Social Accountability implemented through Civil Society Organisations\. 4\.18 Instrument 2a: The FTA program: Given the difficulty of providing an evidence base for outcomes in this area, the project designed a survey instrument the FTAPS (Financial Transparency and Accountability Surveys)\. A baseline survey was undertaken but 24 only completed in December 2008 and reported on in June 2009 by which time PBS was close to completion, giving the appearance that it received attention only when renewal of PBS support was at hand\. The undertaking of the FTAPS was itself one of the development objectives of the program\. The FTAPS findings are discussed in Box 5 below\. Box 6\. The Financial Transparency and Accountability Perception Survey (FTAPS) FTAPS represents a major innovation and contribution of the PBS that offered the potential of assessing progress on the ground in basic service provision, transparency and accountability\. However, it was poorly integrated into the Results Framework of the project\. The end-2008 survey, reported in 2009 (There was a follow-up four years later) provides an important baseline\. The Federal Ministry of Finance deserves a great deal of credit for signing off on a report which states that "The most critical finding \. is how uninformed citizens are with regard to the budget\. \. \. Multiple statements from Focus Groups discussion participants indicate that government does not want the citizens to know about the budget\." 74% of respondents said they knew nothing about the role of the elected city or woreda councils\. Another striking finding was that less than one-third of respondents thought the local administration acted in a fair and honest way when giving out contracts\. In addition to findings on FTA, the Survey also has rich data on public perceptions of the quality of basic service provision\. Source: Financial Transparency and Accountability Perception Survey Report\. 2009\. 4\.19 The key operational programs under the FTA were capacity building and the public posting of budgets at the regional and local level\. There has been a great deal of rhetoric in Bank documents about what a signal achievement the posting of these budgets is\. The evaluation visited three regions and four woredas in different parts of the country\.44 The budget was indeed posted in all of them through a chart with pictures of different activities and the budget figure alongside each activity, but without any comparative data on changes from the previous year or averages for other regions or woredas\.45 The mission did not observe anyone looking at these charts or any pedagogic use being made of them with groups of schoolchildren\. While it is probably worth doing, it only constitutes a very small step along the road to fiscal accountability and participatory review at the local level\. The picture below shows the posted budget in one woreda visited by the evaluation team\. 4 The Regions were Southern Nationalities, Oromia and Benishangul\. 45 "What we observe are baby steps\. This is not participatory budgeting\." (Bank staff)\. 25 Figure 1\. The Woreda Budget Post Source: Evaluation mission photograph\. 4\.20 What was more significant was the requirement that the woreda council review and approve the budget\. Discussions at the local level suggested that this requirement was taken seriously and there was active participation\. The problem with this is that given the large proportion of salaries to total budget the scope for prioritization and re-allocation is extremely limited\. In one case the block transfers were not even sufficient to cover the full salary cost at the woreda level and the balance had to be met from own revenues\. As a consequence resources to spend on maintenance are very limited\. There were serious maintenance issues at every one of the clinics and schools visited by the mission\. \. Although in principle maintenance expenditures are budgeted and managed at the woreda level, the line units at the local level seem to identify more closely with the concerned sector ministry than operating in an integrated fashion at the woreda level\. The line ministries seem to have ceded very little of their control over local expenditures at the sector level\. 4\.21 The results framework for this instrument was clearly very difficult to design\. It appears to place excessive emphasis on the relatively simple indicator of posting of budgets in Regions and woredas\. With hindsight it would have been more useful to emphasize the role of woreda councils in the budget process and to explore to what extent these bodies had met and discussed budgets, and if there had been any changes as a result of these discussions\. Another indicator that is largely missing is that of capacity development\. The provision of 26 training was only used as an indicator for the LIG46 and not for the overall budgeting and planning process\. Instrument 2a: Outcome Indicators * Citizens have improved access to budget information: The baseline was zero and the target was an "increasing number of citizens informed about how to access public budget and expenditure information"\. Of those surveyed for the FTAPS 91% indicated that they did not know how much money their city administration or rural woreda has and how it is spent\. 47 * Sound baseline information made available showing citizens' understanding of and engagement in public budget process: The FTAPS baseline survey was completed but with a delay against the target date which translates into 83% achievement\. Instrument 2a: Intermediate Outcome Indicators * Number of regions and woredas that disclose public budget information: The target was 85% of woredas posting budget information and achievement was 90%\. Target 106% achieved\. * Percent of public service delivery facilities posting in their facility standard service delivery templates with completed information on budgets, resource inputs and service standards\. The target here was 40% but the template was not yet ready by project completion\. Target 0% achieved\. Number of woredas that post "laypersons" budgets (following new templates developed by consultants)\. The target here was 50% but the templates were not ready for use by project completion\. Target 0% achieved\. 4\.22 Instrument 2b: The Social Accountability component funded CSOs to go to local communities and work with them in a particular sector, explaining to the local councils the objectives in the sector and how the expenditures related or did not relate to the achievement of those objectives\. Most of the evidence here comes from the CSOs themselves who are obviously to a large degree, beneficiaries of this component\. In their view the component: a) familiarized Ethiopia with social accountability; b) piloted a practical approach to the topic and c) has motivated the NGO sector to take public positions on these issues\. They concede however, that even now some years down the road, the program remains at a very early stage of implementation\. During the PBS period, t-he steering committee does not seem to have evolved into an effective mechanism for steering the program\. Tools such as citizens' report cards, which were supposed to be used quite widely, have only been implemented in a few 46 Even for the LIG the indicator does not explicitly mention training provided, though the ICR has chosen to interpret it in this way\. See ICR page xi\. 47 The ICR chose to interpret this as being identical to the first intermediate outcome below which was whether this information was posted\. In fact the indicator is about awareness among citizens of the posting\. This was not asked by the FTAPS and therefore has been interpreted as knowledge of budgets, admittedly a more demanding criterion\. 27 instances\. Some of the anecdotes the evaluation heard of experience on the ground were exciting in terms of the potential of this approach\. Box 7\. A Bank Staff Perspective on the Government's Commitment to Social Accountability The election results came as a shock to the Government\. They understood that there was a significant degree of unhappiness out there\. They went to talk to people in the regions and asked them what went wrong\. They saw the good governance package supported by the PBS and PSCAP as a way to address some of these concerns\. In particular they tried to move more responsibility down the system\. There were more woredas, more council members and even an attempt to promote village level structures\. This has created a good environment for the PBS social accountability program\. It is seen as a useful addition\. Source: Interviews conducted by the evaluation team\. 4\.23 The indicators for the Social Accountability pilots are, in essence,/ first, that they are happening and second, that Government is not undercutting them\. Even by these rather modest standards, the outcomes are ambiguous\. The component has been very slow to get off the ground, first because of the uncertainties created by the legislation discussed earlier, and second, in the view of some donors because the Bank was not really as invested in this part of the objective as it was in the other objectives\. The question remains whether these pilots are indeed achieving the objectives of enhanced social accountability\. Instrument 2b: Intermediate Outcome Indicators * Strengthened engagement of CSOs on budget literacy and social accountability: The target here was that at least 6 'large' pilots on social accountability would be finalizing implementation by project completion\. 12 pilots were carried out under PBS\. However it should be noted that these were modest pilots and were short of finalizing implementation by project completion\. In the circumstances, this is rated as not achieved\. * Improved dialogue between GOE and CSOs on social accountability and basic services delivery issues\. This is very difficult to assess\. On the one hand a large number ofpilots were undertaken and there was substantial government support and commitment\.48 On the other hand this came in the context of the severe Government restrictions on CSO activities described above\. In the circumstances, this is rated as not achieved\. 5\. Efficiency 5\.1 Although technically PBS is an investment program, most of the program consists of budget support for block grants\. Since rates of return are not calculated for budget support, the efficiency of the program has not been evaluated\. Although the PAD had an extensive annex which looked at sector-specific rates of return for the four protected basic services, this 48 "The level of Government support for the social accountability pilots and the commitment came as a surprise to us," (a donor) 28 was not followed up\.49 Subsequent to the preparation of the ICR, an economic analysis was carried out for the health component which yielded an estimate of an internal rate of return of roughly 13 percent\. Similarly DfID's economic analysis for the health sector identified an IRR of 23 percent though this also covered the road sector, which was only introduced in PBS2\. These were calculated based on the national average under-5 mortality rates\. Given that the health component only accounted for 11 percent of the total funding of the project, the evaluation is of the view that it is inappropriate to assign a rating for efficiency to the project\. 6\. Ratings Outcome 6\.1 The overall outcome of the PBS is rated moderately satisfactory\. 6\.2 The relevance of the project's objectives was substantial\. The program represented a significant effort by the Bank to put together a coherent and useful operation in a very short time-frame\. The key concern is that the Bank did not do enough to build into the program a comprehensive, well informed and monitored approach to fiscal policy issues at the local level\. The PBS and its sustainability are fundamentally linked to important questions of revenue mobilization and expenditure allocations\. There was thus the potential for focused engagement and well-selected analytic studies\. One other design issue was the decision to include the Health Services component which was a questionable fit with the rest of the operation, focused as it was on services provided by the line ministry rather than building promoting the capacity and accountability of the regional and woreda officials\. 6\.3 With regard to efficacy, basic service provision in Ethiopia is still work in progress\. However, the evaluation recognizes that it is only when measured against a baseline that the efficacy of the program can be evaluated\. The results framework discussed in Section 4 of this report suggests that overall achievements have been substantial\. The evaluation assessed the level of achievements under objective 1 as being high\. Basic service delivery was protected, the LIG made a promising start on promoting improved planning and implementation management at the local level, and the projected outcomes of the MDG facility, in terms of increasing access to vaccination, ITNs, contraceptives and other pharmaceuticals and medical equipment, were met\. The evaluation rated the outcomes of objective 2 however, as modest given the lengthy delays that were encountered and a lack of clear prioritization of these issues by either the Bank or the Government\. 49 The ICR Review argued that efficiency should be regarded as modest since the results were only realized after project completion due to procurement delays and the late delivery of the template for accountability\. This is less a comment on the efficiency of the program however, than the awkward bundling together of budget support and investment loan components in the operation\. 29 Table 6\. PBS Achievements by Objective OBJECTIVE ACHIEVEMENT I (%) OBJECTIVE la: PROTECTING BASIC SERVICES Rating: Substantial 1) Sub-national governments expenditure on basic services is maintained or 98 increased with respect to the previous fiscal year 2) Aggregate level of block grant transfers to regional governments 90 3) Transfers of block grants to local governments made in accordance with 100 intergovernmental fiscal rules\. (i\.e\. formulas) 4) New teachers recruited in the education system: 100 OBJECTIVE 1b: PROMOTING LOCAL PLANNING AND INVESTMENT Rating: Substantial 5) Percentage of woredas receiving LIG that adopt and implement new national 83 standards for planning, budgeting, environmental screening and resettlement 6) Percentage of LIG annual allocation spent by woredas 101 7) Number of Pilot LIG woredas which have successfully completed all 119 preparatory activities to improve the quality of capital investment OBJECTIVE 2: SUPPORTING THE ACHIEVEMENT OF THE HEALTH MDGs Rating: Substantial 8) Immunization DPTS/Penta for children under one year 110 9) Contraceptive acceptor rate of women in the age group 15-49 97 10) Malaria case fatality for children under one year of age 108 11) New malaria cases 142 12) Distribution of hormonal contraceptives 159 13) Numbers of health extension workers 168 14) Numbers of ITNs distributed 113 15) New pharmaceutical and medical equipment procured 83 OBJECTIVE 3a: ENHANCING FINANCIAL TRANSPARENCY AND ACCOUNTABILITY: Rating: Modest 16) Citizens have improved access to budget information 45 17) Sound baseline information made available showing citizens' understanding 83 of and engagement in public budget process 18) Number of regions and woredas that disclose public budget information 106 19) Percent of public service delivery facilities posting in their facility standard service delivery templates with completed information on budgets, resource 0 inputs and service standards 20) Number of woredas that post "laypersons" budgets (following new templates 0 developed by consultants)\. I 30 OBJECTIVE IACHIEVEMENT I (%) OBJECTIVE 3b: PROMOTING SOCIAL ACCOUNTABILITY Rating: Modest 21) Strengthened engagement of CSOs on budget literacy and social 0 accountability 22) Improved dialogue between GOE and CSOs on social accountability and 0 basic services delivery issues Source: Compiled by the Evaluation team\. Risk to Development Outcome 6\.4 Overall the risks to the development outcome are rated as Significant\. Perhaps the key risk for a project of this nature is the fiscal sustainability\. The evaluation found very little analysis of the long term fiscal needs for sustaining basic service provision at the local level, the impact of increasing numbers of the expansion of administration of services to the kebele level on fiscal sustainability, the implications of increased employment and salary costs for the longer term availability of funds for maintenance and non-salary recurrent expenditures, the role of generation of resources at the local level in this area, etc\. This could and should have provided the Bank with an important entry point into the dialogue on overall fiscal management, yet this has not been done\. Sacrificing the high level macro and fiscal policy dialogue that is central to Development Policy Operations is a significant shortcoming of the PBS design\. 6\.5 As far as the institutional sustainability is concerned, it is not realistic for the Bank to work with 800 woredas, but it is realistic to work with 11 provinces\. The PBS did have a substantial capacity building component, but in some areas it appears not to have been well coordinated with the PSCAP program which was building capacity for the decentralized system\. With the ending of PSCAP the Bank needs to move much more forcefully than it has thus far into capacity building at the provincial level with a more holistic approach\. The Bank and the Government seem to be doing an effective job of knowledge sharing across regions and to some extent even across districts\. There are numerous workshops and events for local officials which allow good practices in one part of the country to be shared with others\. In addition, the Ethiopia case is serving as a model for other countries and hopefully at some point there will be feedback from them that can serve to improve the PBS design\. 6\.6 The failure to continue with the implementation of the LIG constitutes a major missed opportunity in terms of sustainability of the project\. It could have provided the basis for a quantum increase in participation and local empowerment\. It also raises some serious questions about the Government's own commitment to the decentralization process\. 6\.7 Overall the donor support for the block grant system is likely to be sustained through 2015 given the concern of the donor community not to do anything that might jeopardize the achievement of the MDGs\. PBS and PBS2 each covered three years, but PBS3 following recommendations of various review and evaluation teams has moved to a five year period 31 which will take the program beyond the MDG cut-off\. Whether there will be continued donor support after that remains to be seen\. 6\.8 The political risks inherent in the Ethiopia situation are high\. Given the diversity of some of the regional populations, the risks of internal conflicts are high and recognized by the Government which sees the decentralization as an important instrument for maintaining support and cohesion of the country\. Obviously the Government's own posture constitutes a program risk\. It is unlikely that the current situation is sustainable as a 'steady state'\. The Government will either need to liberalize and allow public opinion to 'vent' and enable power sharing to a greater degree than at present, or it will be forced to even more restrictive and autocratic steps to retain control\. The latter situation, which given past practice is probably the more likely, is a broad program risk which affects the overall level of donor support and the Bank program in Ethiopia\. Bank Performance 6\.9 Bank performance is rated moderately satisfactory\. As far as quality at entry is concerned, a key issue is whether support through the PBS has crowded out other potential instruments which might have played a more effective role in supporting the policy dialogue on broader macro-economic issues, the financial sector and PSD\. There are two questions here\. First, has the Bank done enough to exploit the potential that the PBS itself offers to engage in a dialogue on broader policy issues? The PBS and its sustainability are fundamentally linked to important questions of revenue mobilization and expenditure allocations\. In the view of the evaluation, there was the potential to go beyond the current levels of engagement on these issues, through focused engagement and well-selected analytic studies\. (The first Bank study on revenue mobilization potentials at the local government level for example, is first included in the work program for FY2014)\. This would not have been easy to do\. The Government view, as indicated to the evaluation, is that other issues should the taken up through other channels\. In their view, the dialogue on PBS relates to how to improve delivery, quality and governance of basic services\.50 This takes us to the second question, whether there are other opportunities for a dialogue on broader development issues? The Bank view has consistently been that there is a need to develop other channels for dialogue and specifically to consider budget support through Development Policy Loans which would allow for a resumption of discussions on some of the issues that cannot be taken up in the PBS context\. The Government has equally consistently rejected this\. 6\.10 Among those the evaluation team met with, -- staff, donors and government -- there were mixed views as to whether the earlier series of policy loans had been effective in moving forward the various agendas on the core economic strategy issues and how serious The Government view is that there are already a multitude of opportunities for a broader dialogue on macro/financial/PSD issues\. They cite the high level forums where the political and private sector agendas are discussed, the specialized joint working groups with donors covering topics such as agriculture, transport, etc\., the EU-African summit meetings, etc\. They also see the six monthly macro-economic updates of the Bank as also providing a useful occasion for discussion\. They take the view that the context for policy dialogue should not be 'conditionality'\. They also expressed some skepticism of the role of Bank analytic work, outside the updates and the 'doing business' reports\. 32 the loss through the cessation of the PRSC series after the crisis, has been\.51 In view of this, the evaluation is of the view that there is little purpose at this point in time in the Bank constantly pushing for a resumption of policy-based lending outside of the PBS\. For practical purposes the PBS is the 'only game in town' and the effort should rather be to leverage it through focusing analytic work on some of the important margins of decentralization\. For example work on revenue potentials in woredas could well contribute to a study on the policy and institutional framework needed to support enterprise development in rural woredas, including the role of the banking system, etc\. This in turn could feed back into the design of future phases of the PBS\. For this to work however, some important nuances need to be introduced into the core objective of the PBS by defining it as support for more, and more effective, basic service provision through enhancing the transparency, efficiency, capacity and accountability of the decentralization process and local government units\. This would not preclude the opportunistic use of other instruments - analytic work, technical assistance, focused operations in areas such as civil service reform, etc\. which could provide entry points into a dialogue on some key areas of macro-policy\. 6\.11 This fruitless pursuit of an alternative instrument to support a macro-policy dialogue, might explain why, in the view of some donors, the Bank under-resourced the PBS\. For much of the time the Task Team Leader was Washington-based, and the Bank did not provide the kind of pro-active leadership and supervision for the FTA and Social Accountability components which might have got them off the ground more quickly\. The Social Accountability component in particular probably needed its own TTL\. 6\.12 Another area of concern about Bank performance relates to the slowness of the Bank in moving to resolve some of the procurement issues which arose under the Health Services Component\. The procurement process under PBS began with the hiring of procurement agents\. This was supposed to be done in 2006 so that a start could be made on procurement\. In practice this seems to have run into obstacles and the Bank had to re-advertise before settling on Crown Agents\. In the view of the MOH this was 'more of a burden than a benefit'\. The existing procurement department was sidelined because the Bank felt that they lacked the capacity\. Crown Agents prepared a procurement package\. The subsequent audits found a number of problems with the implementation of this\. 6\.13 With regard to fiduciary management, the evaluation team consulted with the Bank's Internal Audit department which indicated no major issues of concern\. 6\.14 As far as safeguards are concerned, the PBS was a Category "B" project and OP 4\.01 was triggered by the health component\. In discussions with the MoH, the mission concluded that the guidelines issued, which addressed concerns over medical waste disposal, were in place and being implemented\. Safeguards addressing risks over involuntary settlement and the resettlement policy framework have been raised regarding PBS\. These were discussed in the ICR and have become the subject of an ongoing case with the Inspection Panel\. In light of this, the evaluation team did not feel it was appropriate to cover this topic\. 51 An example: "The confrontational style of dialogue was not working well\. The budget support type instrument was not being effective\. The PBS has gotten us further than the PRSCs were doing" (a donor); 33 6\.15 The Bank's ICR is a thorough review\. It provides a detailed description of what has been achieved\. Unfortunately the tone throughout the main text of the ICR is of special pleading\. Every problem identified is on the verge of solution or else glossed over\. To give a small example - it took the Government two and a half years to complete the step of approving the prototype FTA tools\.52 The ICR describes this as follows: "During the PBS I period, the four core prototype FTA tools were eventually developed, validated, disseminated to regions and posted on the website for customization by the regions and use\." In addition the ICR takes a narrow perspective on the project - a literal assessment of what was achieved and what was not achieved\. The ICR is redeemed however by Annex 11 which is a very insightful 17 page discussion of the PBS relative to other instruments\. This section draws on the 2008 PPAR on the earlier series of policy loans (the ERSC, ESAC, PRSC1 and PRSCII)\. Borrower Performance 6\.16 The Government of Ethiopia's performance is rated moderately satisfactory\. It had mixed feelings about the PBS at entry and the implementing agency\. Over time however, the instrument has earned their appreciation and support and the level of commitment, even to the components on FTA and Social Accountability which initially had been very difficult to accept, has increased substantially\. For much of PBS implementation, quality left something to be desired, with significant delays in decision-making, for example, on the template for budget posting, but it is apparent that in the course of 2008 the Government's commitment increased, and by putting in place COPCU, with effective management and by moving with some urgency on health procurement, the key objectives of the program were eventually met\.53 6\.17 As indicated earlier during the course of implementation of PBS, the Government adopted policies that had a potentially significant impact on the CSO participation in the Social Accountability pilot\. The first requirement was that advocacy CSOs were permitted to receive no more than 10 percent of their funding from abroad\. This was clearly aimed at the international CSOs operating in Ethiopia\. From the point of view of domestic CSOs however, an equally serious provision was the limitation on funding of 'overheads' to 30 percent of the total expenditures of the CSO\. Overheads include for example capacity building for CSO officials\. Given ambiguities in the definition of overheads, this could be administered in an arbitrary fashion and has had a discouraging effect on the CSO community and the development of CSOs in Ethiopia\. In the view of many, this was the intention of these provisions, since advocacy activities would generally be defined as overhead\. Until recently, for example, services provided by CSOs to women who were victims of domestic violence were not regarded as 'engagement in social and economic development' and as a consequence the CSOs which had been engaged in this, stopped 52 The perception of Bank staff is that these delays were not a consequence of deliberate foot-dragging, but reflected a lack of experience and competence\. Either way it would seem to reflect that the timely preparation and approval of the templates was not assigned high priority by the Government\. 53 PPARs generally distinguish performance of implementing agencies from broader Government performance\. In this case however, the evaluation is of the view that the determining factor of implementing agency performance was the Government's own commitment to the program, and therefore no distinction has been made\. 34 providing these services\. While the Government's comfort letter exempted the recipients of funding for the PBS pilot from the foreign funding provision, they still needed to meet the limit on overhead funding\. The response of the Bank and other donors seems to have been based narrowly on possible implications for the project, rather than reflecting concern for the - - 54 longer term development of civil society organizations\. 7\. Monitoring and Evaluation 7\.1 As a consequence of the hasty preparation, the project did not get off the ground with adequate baselines or institutional mechanisms for M & E\. While there was a clear calendar for the JBAR and semi-annual meetings with reporting to DPs, there remained problems of weak baseline data and incomplete indicators (e\.g\. for Water and Sanitation)\. A particularly egregious example is the inclusion of an indicator on hiring of new teachers without a baseline or target\. In particularly the monitoring framework and the indicators should have reflected on the potential trade-offs between number of new teacher hires on the one hand and the quality of new teachers coming into the system\. The focus on the regional level with too little monitoring of the sub-regional transfers undermined monitoring on additionality and, particularly on fairness\. As a consequence the achievements of the PBS on M & E are rated modest\. It was only in PBS2 that, in the view of both the Government and the DPs, the substantial advance in putting in place proper monitoring systems for decentralized budgets and expenditure at all levels of Government took place and is one of the signal achievements 55 of the second phase of the program\. 7\.2 However, even with the improvements in PBS2, the Bank appears to have lacked a clear strategic vision for M & E\. It is surprising for example that there was no attempt to select, say, one of the smaller regions and pilot a more comprehensive approach to M & E, putting in place the required systems and equipment\. This would have allowed testing of the needed training approaches, software, etc\. All the woredas visited by the evaluation had some computers, yet most of the documents relating to basic services were prepared by hand\. The lines of connection for the local administration seemed to be from each department (e\.g\. education and health) to their line ministry in Addis Ababa, rather than across departments coordinated through the Woreda Finance and Economic Development department\. The quality of monitoring and evaluation is rated modest\. 8\. Lessons 8\.1 There is no good way to end budget support in problematic contexts\. There is rightly concern that donor funding should be predictable and sustained over time, but if that is the case then Government programs are based on that assumption\. The cessation of budget support creates problems for the sustainability of those programs and the likelihood is that 54 The Government has since issued other letters of comfort and groups such as Oxfam and Save the Children are able to operate though with a substantial redesign of their delivery model\. " "In negotiating PBS2 we had the feeling we just did not know enough e\.g\. we had little or no information on access to services by income groups" (a donor representative)\. 35 the axe will fall disproportionately on the poor and vulnerable who do have limited voice and influence\. This creates enormous pressure on the donor community to sustain budget support\. 8\.2 This makes it all the more important to think through and discuss the endgame at the outset of budget support\. In this case the question of where are we headed with this program was one that should have figured strongly\. Initially of course it was viewed as a stopgap, but by the time of preparation of PBS2 this should have been the key question\. The continuation of the PBS is of course a feasible option, but it needs to be associated with a long-term program of enhanced capacity building and management of decentralization, local government empowerment and citizen participation\. 8\.3 Decentralization is a complex inter-action of programs and processes and successful approaches need to take a holistic view that clearly defines the objectives in terms of the accountabilities of the decentralized units and builds their capacity to meet those accountabilities\. The PBS was initially narrowly focused on recurrent expenditures for basic service provision and it was only with the inclusion of the LIG that important areas such as planning and implementation management capacity at the local level were addressed\. While it is not necessary for a single operation to encompass all aspects of decentralization it is important that the Bank's analytic work underpins a holistic view of the process and that the Bank identifies gaps and supports programs to address them\. 8\.4 The decision to embed a health component channeled through the line ministry, within a program of support for enhancing the management and accountability of local governments is questionable\. It succeeded in supplying inputs but did not provide the follow up to ensure that those inputs were effectively used\. And it diverted some of the focus that might otherwise have been placed on how well the decentralized service provision was functioning\. 8\.5 Where a project involves key issues of fiscal management at various levels of government there needs to be a steady long-term involvement in the project of a Public Sector Management specialist from the Bank's PREM network in addition to sector specialists (in this case from the Human Development network)\. Consideration ought to be given to having joint management by Poverty Reduction and Economic Management network and Human Development network\. The fiscal policy issues seem to have been consistently under-represented in the program and this may well reflect the limited involvement of PREM\. 8\.6 The PBS presents an unusual case in which the Bank provides large scale financial support for expanded service delivery executed by subnational governments\. Unlike budget support through a DPO, this support is multi-year, does not rely on annual programs built around 'prior actions' and 'triggers', and is in keeping with Paris Declaration principles placing program ownership firmly in the hands of Government\. This could be an effective and efficient alternative or supplement to DPOs provided there is strong government ownership in principle and practice, adequate attention to building subnational capacity where needed, and a strong M&E system to monitor development results\. Such a program 36 effectively takes on key features of the Bank's new Program for Results that links disbursements to defined results\. 37 References Dom, Catherine, Lister, Stephen, and Manos Antoninis\. 2010\. "An Analysis of Decentralization in Ethiopia\." Final Report\. Oxford, UK\. Gebre-Egziabher, and Tassew Woldehanna\. 2013\. Workshop Report on Region-subregion Fiscal Transfer System\. Organized by the House of Federation and the World Bank\. Addis Ababa, Federal Democratic Republic of Ethiopia\. IEG\. 2012\. CASCR Review FY08 - FY12 on the Federal Democratic Republic ofEthiopia\. Washington, DC: World Bank\. \. 2013\. Evaluation of World Bank Group Support to Health Financing in Improving Health Systems Performance FYO3-Fy]2\. Pilot Tested Ghana Country Case Study\. Washington, DC: World Bank\. IFAD\. 2013\. "Progress Report on the Additional Resource Mobilization for IFAD (ARM) Initiative\. "Directive of the Executive Board issued at the Informal Seminar\. Rome, Italy\. Jones, Beverly, Bladon, Rupert, Belei, Teamrat, Diro, Alemayehu, and Mohammed Mussa\. 2008\. "Lessons to be learnt from the Protecting Basic Services Instrument\." Addis Ababa, Federal Democratic Republic of Ethiopia\. Ministry of Finance and Economic Development\. Macro Policy Management\. 2009\. "Financial Transparency and Accountability Perception Survey\." Addis Ababa, Federal Democratic Republic of Ethiopia\. \. 2013\. "Financial Transparency and Accountability Implementation Assessment Report\." Addis Ababa, Federal Democratic Republic of Ethiopia\. Taddessee, Samuel, Swain, Biraj, Afeta, Merga, and Gadissa Bultosa\. 2010\. Evaluation and Design of Social Accountability Component of the Protection ofBasic Services Project, Ethiopia\. Evaluation Report - Final\. India: Infrastructure Professionals Enterprise (P) Ltd\. The Secretariat of House of Federation\. Economic and Social Study Department\. 2007\. "The New Federal Budget Grant Distribution Formula\." Addis Ababa, Federal Democratic Republic of Ethiopia\. World Bank\. 2006a\. "Financing Agreement (Protection of Basic Services Project) between Federal Democratic Republic of Ethiopia and International Development Association\." Report No\. Grant Number H224-ET\. Washington, DC\. \. 2006b\. "Project Appraisal Document on a Proposed Grant in the Amount of SDR 149\.60 Million to the Federal Democratic Republic of Ethiopia for a Protection of Basic Services Project\." Report no\. 35121-ET\. Washington, DC\. \. 2006c\. "Project Information Document on an Ethiopia for a Protection of Basic Services Project\." Report no\. 36212\. Washington, DC\. \. 2006d\. "Project Information Document on an Ethiopia for a Protection of Basic Services Project\." Report no\. AB2107\. Washington, DC\. \. 2007a\. "Project Paper on an Ethiopia for an Additional Financing - Protection of Basic Services\." Washington, DC\. \. 2007b\. "Ethiopia Accelerating Equitable Growth Country Economic Memorandum\. Part I: Overview\." Poverty Reduction and Economic Management Unit, Africa Region\. Report no\. 38662-ET\. Washington, DC\. \. 2008a\. "Ethiopia - Economic Rehabilitation Support Credit; Economic Structural Adjustment Credit; First Poverty Reduction Support Operation; and Second Poverty Reduction Support Operation; Ethiopia - Economic Rehabilitation Support Credit; Economic Structural Adjustment Credit; First Poverty Reduction Support Operation; Second Poverty Reduction Support Operation\." Report no\. 43336\. Washington, DC\. 38 \. 2008b\. "Financing Agreement (Additional Financing for Protection of Basic Services Project) between Federal Democratic Republic of Ethiopia and International Development Association\." Report No\. Grant Number H347-ET\. Washington, DC\. \. 2008c\. "Ethiopia Review of Public Finance\." Poverty Reduction and Economic Management Unit, Africa Region\. Green Cover\. Washington, DC\. \. 2009\. "Ethiopia Public Finance Review\." Poverty Reduction and Economic Management Unit, Africa Region\. Report no\. 50278-ET\. Washington, DC\. \. 2010a\. "Implementation Completion and Results Report on an IDA Grant in the Amount of SDR 149\.6 Million and an Additional IDA Grant in the Amount of SDR 137\.05 Million and on Multi- Donor Trust Funds Grants in the Amount of US$660 Million Equivalent to the Federal Democratic Republic of Ethiopia for a Protection of Basic Services Project\." Report no\. ICR00001569\. Washington, DC\. \. 20 1Ob\. "Draft Ethiopia Public Finance Review 2010\." Poverty Reduction and Economic Management Unit, Africa Region\. Report no\. 54952-ET\. Washington, DC\. \. 201 la\. "Project Paper on an Ethiopia for a Protection of Basic Services Phase II Project\." Report no\. IDA/R2011-0024/1\. Washington, DC\. \. 201 1b\. "Staff Statement to the Board on an Ethiopia for a Protection of Basic Services Phase II Project\." Washington, DC\. \. 2013\. "Implementation Status and Results Report on Ethiopia Protection of Basic Services Program Phase II Project (P103022)\." Report no\. ISR7646\. Washington, DC\. 39 ANNEX A Annex A\. Basic Data Sheet ETHIOPIA PROTECTION OF BASIC SERVICES I LOAN (P074015) Key Project Data (amounts in US$ million) Appraisal Actual or Actual as % of estimate current estimate appraisal estimate Total project costs 2,562\.91 4,860\.87 189\.66 Loan amount 215\.00 443\.81* 206\.42** Cofinancing 317\.16 1,243\.46 389\.26 Cancellation 0\.00 0\.39 0\.00 *It includes the Additional Financing of US$215 million\. **Not included at the appraisal of PBS\. Commitment during the implementation cycle: (i) EC US$196\.04 million; (ii) Spain US$12\.93 million; (iii) ADB US$55 million; (iv) Austria US 1\.45 million; and (v) KfW US$14 million\. Cumulative Estimated and Actual Disbursements FY06 FY07 FY08 FY09 FY10 FY11 Appraisal estimate (US$M) 90\.00 212\.00 215\.00 215\.00 215\.00 215\.00 Actual (US$M) 91\.00 205\.68 393\.37 437\.26 437\.26 445\.13 Actual as % of appraisal 101\.11 97\.01 182\.96 220\.12 203\.37 207\.03 Date of final disbursement: 07/06/2010 Project Dates Original Actual Initiating memorandum 09/10/2002 12/22/2005 Negotiations 04/26/2006 04/27/2006 Board approval 05/22/2003 05/25/2006 Signing 05/29/2006 05/26/2006 Effectiveness 06/02/2006 06/02/2006 Closing date 06/30/2008 12/31/2009 ANNEX A 40 Staff Time and Cost Stage of Project Cycle Staff Time and Cost (Bank Budget Only) US$ Thousands (including Lending travel and consultants costs) FY04 1\.33 741\.94 FY05 31\.54 201,432\.34 FY06 153\.93 845,591\.02 FY07 0\.10 454\.88 Total: 186\.9 1,048,220\.18 * Supervision/ICR FY06 14\.30 46,993\.31 FY07 195\.61 729,996\.30 FY08 146\.16 540,157\.86 FY09 124\.91 437,513\.72 FY10 52\.84 261,118\.14 Total: 533\.82 2,015,779\.33 * These data were obtained from the system\. The total figure for spending on preparation is misleading because most of it in fact went towards preparation for the PRSC III (budget support) operation which was suspended in mid-FYO6\. (PRSC III and PBS I shared the same project code in the system)\. The preparations for PRSC III had been intensive, involving various teams within the Bank and dialogue with various sectors, as well as some analytical work on different issues\. Task Team Members T 1 1Responsibility/ Names Title Unit specilty Specialty Lending Trina S\. Haque Lead Economist AFTH3 Task Team Leader Eleni Albejo Program Assistant AFTH3 Abebaw Alemayehu Senior Operations Officer AFTU1 Fiscal Decentralization Sheetal Asrani Legal Associate LEGOP Legal Aspects Suprotik Basu Public Health Specialist AFTHD MDG/Health Component 2 Marylou R\. Bradley Senior Operations Officer AFTH1 Crosscutting Oper\. Support John Van Dyck Operations Officer AFCET CMU Focal Point Eyerusalem Fasika Research Analyst AFTP2 M&E Reiner Forster Senior Social Development SDV Component 4 Sp\. Getahun Gebru Senior Operations Officer AFTH3 Education Lawrence M\. Hannah Lead Economist INFVP Fiscal Decentralization Muthoni Kaniaru Counsel LEGAF Legal Aspects 41 ANNEX A Responsibility/ Names Title Unit specilty Specialty Southsavy Program Assistant AFTH3 Nakhavanit Rajat Narula Senior Financial Officer LOAG2 Disbursements Gebreselassie Senior Health Specialist AFTH3 MDG/Health Component 2 Okubagzhi Edward Olowo- Lead Financial Manag\. Sp\. AFTFM Financial Management Okere Jemal M\. Omer Senior Country Economist AFTP2 Component 1 / Fiscal Decent\. Jonathan Pavluk Senior Counsel LEGAF Legal Aspects Andrew Sunil Senior Health Economist AFTH3 Economic Analysis Rajkumar Samuel Haile Senior Procurement AFTPC Procurement Selassie Specialist Agnes L\.B\. Soucat Lead Economist AFTHD Component 2, Health William D\. Wiseman Senior Economist AFTH3 Fiscal Decentralization, Economic Analysis Carolyn Winter Senior Social Development AFTS2 Component 3 Sp\. Eshetu Yimer Senior Financial AFTFM Financial Management Management Sp\. Supervision/ICR Trina S\. Haque Lead Economist AFTH3 Task Team Leader Andrew Sunil Senior Health Economist AFTH3 Task Team Leader Rajkumar Eleni Albejo Program Assistant AFTH3 Abebaw Almayehu Senior Operations Officer AFTU1 Component lb Philippe Auffret Senior Social Protection Sp\. Tesfaye Ayele Procurement Specialist Procurement Shimelis W\. Badisso Procurement Specialist Procurement Trichur K\. Lead Financial Financial Management Balakrishnan Management Sp\. Abiy Demissie Belay Financial Management Financial Management Analyst Mesfin Bezawagaw Research Analyst Research Ass't / Comp\. 1 Marylou R\. Bradley Senior Operations Officer AFTH3 Crosscutting Oper\. Support Ian Leslie Campbell Consultant Safeguards Tim Carrington Consultant Mukesh Chawla Sector Manager Component 2 ANNEX A 42 Responsibility/ Names Title Unit specilty Specialty Robert S\. Chase Lead Economist TTL for PBS II Yoseph Abdissa Sr\. Social Protection Consultant Deressa Specialist John Van Dyck Senior Operations Officer AFCET CMU Focal Point Eyerusalem Fasika Research Analyst M&E Lemma Argaw Consultant Public Financial Management Findusse Christopher Gaukler Consultant Research Assistant Lawrence M\. Hannah Lead Economist INFVP Component lb Kevin J\. Kelly Consultant Component 4 / Governance Jeni G\. Klugman Lead Economist Overall Macro Issues Girma Earo Kumbi Consultant Research Assistant Berhanu Legesse Sr\. Public Sector Management Component lb, Cap\. Bldg\. Sp\. Wendmsyamregne Social Protection Specialist M&E Mekasha Fikru Tesfaye Consultant LIG Expert Deepak K\. Mishra Lead Economist Component 1 / Macro Paul Moreno Senior Economist Component 1 / Macro Stefano Ellero Consultant Component 2 Ken Green Consultant Safeguards Donald H\. Mphande Senior Financial Financial Management Management Sp\. Abiy Demissie Belay Financial Management Financial Management Specialist Southsavy V\. Program Assistant Nakhavanit Gebreselassie Environ\.& Social\. AFTH3 Medical waste management Okubagzhi Safeguards Sp\. Richard Olowo Senior Procurement Procurement Specialist Jemal Omer Senior Country Economist AFTP2 Component 1 / Fiscal Decent\. Jonathan Pavluk Senior Counsel Legal Aspects Janelle Plummer Senior Government Component 4 / Governance Bank Specialist Cambodia Office Manuel Salazar Sr\. Social Protection AFTSP Specialist Isabel Mignone-del Operations Officer MDTF Expert Carril 43 ANNEX A Responsibility/ Names Title Unit specilty Specialty Francesco Sarno Consultant Procurement Sybille Schmidt Consultant AFTH3 Research Assistant Luis Schwarz Senior Financial Officer Disbursements Samuel Haile Senior Procurement AFTPC Procurement Selassie Specialist Agnes L\.B\. Soucat Lead Economist AFTHD Component 2 Cassandra de Souza Operations Analyst Component 2 Mulat Tegegn Financial Management Financial Management Consultant Lakech Tsegaye Team Assistant Per Wam Senior Social Scientist Social Accountability William D\. Wiseman Senior Economist AFTH3 Component lb Carolyn Winter Senior Social Development AFTS2 Component 4 Sp\. Senait Kassa Yifru Team Assistant Eshetu Yimer Senior Financial Management Sp\. AFTFM Financial Management Feng Zhao Senior Health Specialist Health MDG Selome Belay Team Assistant Zegeye Josiane Luchmun Program Assistant AFTSP ANNEX B 44 Annex B\. Selected health and education outcomes in Ethiopia, derived from the DHS\. The information and analysis in this annex was compiled at the request of the evaluation team, by the Human Development Sector Department of the Africa Region (World Bank)\. Selected health and education outcomes in Ethiopia, derived from the DHS\. The Demographic and Health Surveys (DHS) provide data at selected points of time covering the preceding ten years\. The DHS data therefore needs care in interpretation\. Overall the data suggests that Ethiopia is making consistent and strong progress in reducing both infant and under-5 mortality\. The data that is disaggregated by income quintile over a ten year period suggests considerable variations across the income distribution with huge improvements in the middle and fourth quintiles, but with stagnant trends in the lowest quintile and smaller improvements in the second\. There are a number of possible explanations for this\. Many of the poorest are located in some of the less stable regions or remote rural areas, or undertake shifting cultivation and move locations regularly\. The gradual expansion of the health and education systems takes longer to reach these (although the education figures suggest impressive achievements even for the poorest groups\.) In addition the out of pocket expenses for the poor in travelling to a health center, as well as the costs in foregone income of doing so need to be taken into account\. Mortality Aggregate mortality estimates Based on the 5-year period prior to the survey, DHS reports the following estimates for Under-5 and Infant (i\.e\. Under-1) mortality: Table 7\. Estimates for Under-5 and Infant (i\.e\. Under-1) Mortality Survey Under-5 Infant 2000 DHS 166 97 2005 DHS 123 77 2011 DHS 88 59 Source: DHS data\. Note that DHS also reports these 5-year periods, for a number of additional prior years-- which gives a sense of past trends\. Based on the latest data, ie\. the 2011 data, these are: Table 8\. Births in X years prior to survey Oto4 5to9 10to 14 15to 19 20to29 Under-5 88 133 165 212 218 Infant 59 88 101 115 121 Source: DHS data\. 45 ANNEX B Wealth disaggregated mortality estimates The DHS website doesn't report the wealth quintile specific estimates for the 5-year period estimates\. They do, however, for the 10-year estimates (i\.e\. mortality for births in the 10 years prior to the survey)\. These are reported as follows using a 10 year retrospective of births from survey date\. Table 9\. Mortality Rate: Under-5 mortality (5q0) Survey Lowest Second Middle Fourth Highest Overall 2000 DHS 159 195 227 206 147 188 2005 DHS 130 144 144 139 92 132 2011 DHS 137 121 96 100 86 110 Source: DHS data\. Table 10\. Mortality Rate: Under-5 mortality (iqO) Survey Lowest Second Middle Fourth Highest Overall 2000 DHS 93 115 141 118 95 113 2005 DHS 80 86 86 84 60 80 2011 DHS 91 84 60 66 60 74 Source: DHS data\. Note that the estimates for 2011 are based on the mortality of births in the 10 years prior to 2011 - i\.e\. in the period 2001-2011\. Finer disaggregations would require doing primary analysis of the micro-data\. Additional outcomes are available from the DHS website\. Table 11\. Stunting (height-for-age - 2 SD) Survey Poorest quintile Second Middle Fourth Richest quintile Overall 2000 60\.6 59\.9 60\.4 56\.7 48\.5 57\.7 2005 52\.3 55\.3 52\.3 51\.4 39\.6 50\.8 2011 49\.2 47\.7 45\.6 45 29\.7 44\.4 Source: DHS data\. Table 12\. Vaccination Rates Survey Poorest quintile Second Middle Fourth Richest quintile Average 2000 7 8\.8 9\.1 17\.1 33\.5 14\.3 2005 14\.1 16\.7 21\.8 17\.9 35\.6 20\.4 2011 16\.8 18\.2 18\.2 24\.9 50\.5 24\.3 Source: DHS data\. ANNEX B 46 Table 13\. School Participation Proportion of 6 to 11 year olds who report being enrolled in school POOREST SECOND THIRD FOURTH RICHEST OVERALL QUINTILE QUINTILE Ethiopia 2000 0\.12 0\.14 0\.17 0\.24 0\.57 0\.23 Ethiopia 2005 0\.21 0\.27 0\.31 0\.35 0\.57 0\.33 Ethiopia 2011 0\.41 0\.45 0\.48 0\.56 0\.74 0\.52 Source: DHS data\. Table 14\. School Attainment Proportion of 15-19 year olds who have completed grade 6 POOREST SECOND THIRD FOURTH RICHEST OVERALL QUINTILE QUINTILE Ethiopia 2000 0\.03 0\.04 0\.05 0\.08 0\.49 0\.17 Ethiopia 2005 0\.08 0\.12 0\.15 0\.22 0\.57 0\.26 Ethiopia 2011 0\.18 0\.25 0\.35 0\.48 0\.72 0\.42 Source: DHS data\. 47 ANNEX C Annex C\. Review of the current status of the Social Accountability pilot\. This report is the result of fieldwork in two woredas (Bahr Dar of Amhara Region, Dugda Dawa and Wolmera Worda of Oromia Region, interview in Addis Ababa and Document Review\. The implementing CSOs-6 employed social accountability tools such as Community Score Cards (CSC)\. Project relevance; according to the findings of this report, the ESAP I in particular is highly relevant to the needs and context of Ethiopia\. First, it was relevant to change the lack of voices from the demand side\. Ethiopian political culture has been dominated from above while the lower structure of society has been stripped of voices, and empowering the powerless through introducing and strengthening social accountability was monumental to bring about better service delivery\. Second, the programs of the government of Ethiopia since 1991 primarily focus on building capacity from the supply side\. Introducing social accountability would, however, contribute to the building of capacity from the demand side\. The general objective of the Enhanced Social Accountability Program (ESAP) of the PBS was to strengthening the use of social accountability approaches by citizen and civil society organizations as a means to make basic service delivery more effective, efficient, responsive and accountable-7\. According to the findings of this brief overview, the project has made progress to achieve this objective, even if the sustainability issue remains a challenge\. At the outcome level the project has produced encouraging results\. First, citizens' awareness of their rights, responsibilities and entitlements to get better quality services has increased\. This is evidenced by the cases we collected during the fieldwork\. People began to be aware of their rights and access to basic services in education, water and sanitation, and agricultural extension\. Yet, the breadth of the awareness raising is limited to those community members and individuals who got the chance to get involved in the project awareness raising and, sensitization workshops, and social accountability tools exercise\. Given the pilot nature of the project (technical, time and resource shortages), the project could hardly make appropriate dissemination of results to reach the broader community\. Second, the engagement between citizens to participating in, negotiate with and hold the service providers accountable has shown improvement as the result of the project\. Community members, through their representatives have started to participate in influencing the service providers to allocate funds for school facilities and water points, and, at the same time, mobilizing community members to pay their share through community participation\. The social accountability tools that survey the quality and access of services and the resultant interface meeting where both citizens and service providers and policy makers enter into face to face discussion to negotiate and agree in setting standards and then prepare a Joint 56 The CSOs that were responsible to implement the project were Jerusalem Children and Community Development Organization and Rift Valley Women and Children Development\. 5 World Bank, PAD, 2006, p\. 50\. ANNEX C 48 Strategic Plan for improving and attaining a specified goal by also allocating roles to each party is a novel achievement brought in by the project\. Third, social accountability tools such as Participatory Budgeting and Expenditure Tracking and Budget Transparency has given a new tool for community engagement in planning, budget and implementations\. The tool demystified the highly technical and bureaucratic budget process\. Citizens, who got training and participated on workshops, have now begun to deconstruct the way budgets are generated, allocated, implemented and, audited\. However involvement in budget planning is challenged by contextual factors that are outside the reach of the project: budget allocation in Ethiopia generally is top-down, and, the amount of resources (like capital budget) that reaches the grass roots are so scarce that it is prioritized at the woreda level, leaving no option for the community to make choices\. Fourth, capacity of public basic service providers improved to respond to community and citizens' needs and preferences and be accountable\. Our assessment shows that the frontline service providers at the woreda, schools, water distribution centers (WUC/Water Board began to understand the rights of citizens to get quality services, and began to respond to this\. In all these service centers, citizens report that the service providers are giving swift responses to the demands of the service users\. The Water Users' Committee/Water Boards are now beginning to handle their income and expenditures by introducing accountability procedures and the amount that each of the Water Users Committee/Water Board saves in the bank has dramatically improved\. The WUC/Boards that have gotten involved in the project have much better financial capacity, have managed to maintain the water pumps, have more reserves of spare parts, extended water points for more users58 and have ensured continuity in providing services to the water users\. Thus, as the result of the ESAP, the capacity of the service providers and their responsiveness to the demands of the citizens has shown improvement\. Some of the works undertaken to make the project sustainable like the creation of community-based organizations59 show promise, but making any of them into a self-sustained and institutionalized entity is far from complete\. The impact of the project is also limited to a few individuals and institutions that are directly involved, while the vast majority remains unaffected\. The social accountability pilot now needs to be scaled up to reach the vast majority of the demand side\. The pilot project only covered a very small proportion of the total need\. Second, sustainability of any forthcoming project must be given due consideration, especially, in institutionalizing the approach\. Currently the government of Ethiopia seems to be more receptive to the social accountability programs than was the case when these programs were first introduced in 2006\. This opportunity should be fully utilized\. 58 The Areta Water Board for example managed to extend water for 300 households at individual level on top of those who use the communal water points\. This increased the accessibility of the services and improved the quality of services\. 5 The community based social accountability groups that were created at the woreda level have been given different names in different woredas and different CSO operational areas\. 49 ANNEX D Annex D\. List of Persons Met World Bank Ato Brehanu Legesse Ayane, Senior Public Sector Management Specialist, World Bank, Ethiopia Ato Wendmsyamregne Mekasha, Sr\. Social Protection Specialist, Ethiopia Mr\. Guang Zhe Chen, Country Director for Ethiopia Mr\. Ishac Diwan, former Country Director for Ethiopia Mr\. Kenichi Ohashi, former Country Director for Ethiopia Mr\. Qaiser Khan, Lead Economist, AFTHD Mr\. Rupert Blandon, Sr\. Public Sector Specialist, World Bank Ethiopia Mr\. Xavier Furtado, Coordinator, AFTSE Ms\. Camilla Holmemo, Senior Economist, AFTSE Ms\. Elsa Arraya, Sr\. Public Sector Management Specialist, Ethiopia Government of Ethiopia Ato Adamu Ayana, State Minister and former PSCAP head, Ministry of civil service &Good Governance Ato Degu, Ministry of Finance Ato Fantahun, Consultant, Macro-economic Department Head, Ministry of Finance and Development Ato Gemachu Dubbiso , Auditor General, Ethiopia Ato Getachew Negara, MoFED, Treasury Directorate Director Ato Medkim Enkosa, Ethiopia Federal Government Ministry of Health (MoH) Ato Melaku Kifle, MoFED, Channel One Coordinator Ato Mezgebu Amaha, Micro Economic Directorate Director, MoFED Ato Mezgebu, Ministry of Finance and Development Ato Rahel Yirgache Darge, Planning and Resouurce Mobilization Ato Solomon Chiferaw, Director, EMIS, Planning and Resource Mobilization Directorate Ato\. Abraham Tekeste, State Minister, Minister of Finance and Development Mr\. Rahel, Ministry of Economy Mr\. Tewodros Adhanon Ghebreyesus, Minister of Foreign Affairs (former Minister of Health) Other Government Officials Note: The mission met with numerous officials in Oromia Region, Southern Nations, Nationalities, and People's Region (SNNPR), and Benishangul Region at the regional and woreda levels, but a full list is not available\. Ato Berhanu Geleto, General Manager, Rift Valley Childe and Women Development Organization (RCWDO) Ato Abeeta Lida, Shebedino Health Officer, Shebbadino Kebele Ato Adane Utaha, Shebadino Health Center Head Ato Adenie, former State Minister, PSCAP Counterpart Ato Admasu Yimer, Public Finance Management Core Process, SNNPR, BoFed ANNEX D 50 Ato Awoke Ayisheshum, Planning Deputy Head &Acting Burea Head, Benishngul-Gumuz Regional State BOFED Ato Berihum Ijigu, Benishngul-Gumuz Regional State BOFED Finance Sector Burea Head Ato Eduma Suyena, Public Finance Manager, SNNPR, Bureau of Finance and Economic Development (BoFed) Ato Ferenj Shegiro, Benishngul-Gumuz Regional State BOFED, PBSI Focal Persons Ato Getachew Disasa, Benishngul-Gumuz Regional State BOFED, Channel One Coordinator Ato Jafar Mekeni Kelifa, Benishngul-Gumuz Region, Bambasi Woreda Health Office Head Ato Merara Tibebu, Debirlabanos Woreda Council Speaker Ato Neway, PMO Ato Rekalau, Head of Planning and Budget, PBS Ato Sagai Alemu, Sr\. Accountant, PBS Ato Shebedino W\., Head of the Financial Department, PBS Ato Tareqegni Nuramo, Channel One Program Coordinator, SNNPR, BoFED Ato Teka Gamta, Benishngul-Gumuz Region, Bambasi Woreda, Health Center Head Ato Tsegahe Alemu, PBS Senior Accountant, SNNPR BoFED Ato\. Bekele Yenuquena, Planning and Budget Head of WOFED, Shebbadino, Ato\. Zewudu Kebede, WOFED head, Shebadino, SNNPR Donor Partners, Civil Society Organizations Ato Admit Zerihun, Sr\. Macroeconomist African Development Bank Ato Ahmed Mohammed, DFID, Governance Sector Ato Fisseha Alazar, Former Irish Aid Staff and currently a private consultant Mr\. Christopher Berry, Senior Education Adviser, DFID Mr\. Dennis Weller, USAID Head Mr\. Gebrekidan Mesfin, WHO Mr\. Meshesha Shwarega, Managing Director, Christian Relief and Development Association (CRDA) Mr\. Mulutega Gebru, Executive Director, Jerusalem Children and Community Development Organization (JeCCDO) Mr\. Paul Walters, Deputy Head, DflD Mr\. Peter Hawkins, Head of Human Development Team, Ethiopia Mr\. Tesafayu Yihuna, Jerusalem Children and Community Development Organization (JeCCDO) Mrs\. Benedetta Musillo, Economic Attach6, Economic and Social Development, Trade and Regional Integration, European Union Ms\. Betafel Kefedu, Jerusalem Children and Community Development Organization (JeCCDO) Ms\. Betalihem Befekadu, Jerusalem Children and Community Development Organization (JeCCDO) 51 ANNEX D Key Informant Interviews or Participants in Focus Group Discussions on Social Accountability No Name Woreda Position 1 Ato Yeshiwas Solomon Bahir Dar Town SAC chairman 2 W/r Manalebign Mulatu Bahir Dar Town SAC Member 3 Ato Solomon Nigatu Bahir Dar Town Teacher, SAC member 4 Zelaem Mihirate Bahir Dar Town Teacher, SAC Members 5 Ato Managegnew Wole Bahir Dar Town Pensioned, SAC members 6 Ato Wondu Zegayye Bhiar Dar Head of Master, SAC Member 7 Ato Mulualem Abe Bahir Dar Education Office Curriculum Development Head 8 Ato Idagilign Fanta Bahir Dar Office Head, Jerusalem Children & Community Dev't Organization, Bahir Dar 9 W/r Innat Belay Bahir Dar Service User, at Schools 10 Paulos Mekonnes Bahir Dar School Master, Sertse Dengel School 11 Ato Alleneh Birhanu Bahir Dar School Master, Yeiwket Fana School 12 Ato Yabibal Addis Bahir Dar Amhara Regional State Deputy Bureau Head 13 Ato Solomon Kassa Bahir Dar ARSFEDB60, Planning Process owner 14 Ato Yeqoyye Worqineh Bhair DaR ARSFEDB, Procurement, Finance and Property Management Process Owner 15 Obbo Mekonnen Teferaa Ziway Dudgda Z Dugda Woreda Water Desk/Office Woreda 16 Obbo Jamal Badhaso Ziway Dudgda Z Dugda Woreda Water Desk/Office Woreda 17 Obbo Muhammed Obsa Ziway Dudgda Z\.Dugda Woreda Council Office Woreda 18 Obbo Muhammed Saddao Ziway Dudgda Water Bard, member Woreda 19 Obbo Baricha Haji Ziway Dudgda Water Bard, member Muhmmed Woreda 20 Obbo Sammu Ragasa Ziway Dudgda Water Bard, chairman Woreda 21 Obbo Hassen Godana Ziway Dudgda Water Board, member Woreda 22 Obbo Dhabsu Sima Ziway Dudgda Water Board, Member Woreda 23 A/e Gennet Ashenafi Ziway Dugda Ziway Dugda, Council deputy speaker 60 Amhara Regional State, Finance and Economic Development ANNEX D 52 No Name Woreda Position 24 Obbo Abu Baker Chiro Ziway Dugda WUC, head 25 Ato Wondimeneh Mekesha Addis Ababa World Bank, Country Office, Ethiopia 26 Ato Mesfin Temesgen Addis Ababa World Bank, Country Office, Ethiopia 27 Ato Tesfaye A Addis Ababa JeCCDO 28 Obbo Birhanu Gelato Addis Ababa RWCDA 29 Obbo Amintu Ziway Dugda RWCDA Office 30 Tesfaye Zeleke Wolmera Participants of PBET 53 ANNEX E Annex E\. Borrower's Comments Comments on "Project Performance Assessment Report" Ethiopia Protections of Basic Services Project (IDA H2240-ET, IDA H3470-ET) document General Comments: 1\. This assessment is supposed to be for PBS I and as such since PBS I is completed in 2009, the assessment cannot be used as a learning for the next design\. The report also tries to talk about periods extending up to 2012/13\. PBS II is completed and PBS III has passed its design stage and is on the stage of implementation\. What is the value added of this assessment? Performance assessment should be conducted in time so that the next design should benefit from the assessment\. 2\. PBS was new aid modality when it was introduced and the first design and implementation may face design and implementation problems\. You improve through learning and this has also been proved while designing and implementing PBSII and PBSIII\. The document should mention this fact since some of the under-implementations are the result of this situation\. 3\. It is not appropriate to put sweeping statements under the pretext of 'one observer' as is stated under footnote 3 of paragraph 1\.1 (page 1)\. An independent evaluation report such as this one will lack credibility if it bases it findings and recommendations on observer accounts especially on issues of political sensitivity since people are naturally inclined to have differing political opinions\. The report writers should also know that depending who is being questioned as "the view of one observer" extremely contrasting views could have been obtained as response for similar questions\. 4\. Box 2: It is better to remove Box 2 (page 3) completely\. The statements by the stated 'political economist' and 'Bank manager' are so biased against the government of Ethiopia, that they could not be considered as representatives of opinions and views of people situated in similar positions at the time\. 5\. The content of paragraph 3\.7 (page 13) is completely incorrect\. It is very unprofessional of the report writers to include a sentence in the report which says " \.the Ethiopian parliament passed the Charities and Societies Proclamation, which is aimed at international CSOs, such as the Human Rights Watch\."\. The purpose of having the proclamation could have been cited from the preamble of the proclamation itself instead of trying to draw inferences from parties which have to fabricate motivations regarding what they think is the rational for having the proclamation in the first place\. The preamble of the proclamation states that "\.it is found essential to promulgate a law to aid and facilitate the role of Charities and Societies in the overall development of Ethiopian peoples\."\. ANNEX E 54 Specific Comments 1\. Page ix summary, 2nd paragraph, line 7 "Considerable bloodshed\."\. This phrase is very strong\. 2\. Page x, summary, 4th paragraph, last sentence "\.foot-dragging on the part of the government" Is the delay because of foot-dragging? There was absence of clarity regarding what social accountability means on both government and donors' side and this has taken time\. 3\. Page xi, summary, on top of the page last sentences Which reads "Finally the evaluation\.continuing ethnic and regional tensions'\. Was there an ethnic and Regional tension during 2006 and 2007? 4\. Page 1, Background & context, 1st paragraph The paragraph as a whole seems very biased\. For instance when it starts it says \.the Meles Government\." instead of saying the Ethiopian Government\. 5\. Page 4, 2nd paragraph, line 11 "There was resistance from the Gov't to this\." Is there any proof that substantiates this statement? For instance, a written letter from the government which states that they are not accepting social accountability\. 6\. Page 8, 2nd paragraph, line 10 " \.were looked at with suspicion by the Government" This also needs a sort of proof to put in a document\. 7\. Page 7, 1st paragraph, line 11 "The decision not to proceed \.is seen by evaluation as particularly unfortunate"\. The decision is made by an agreement made between donors and Government since there is an MDG fund to cover capital expenditure\. The government has started to invest a lot of money in capital expenditure for the last 2-3 years\. It was thought that it is not necessary to invest in parallel\. 8\. Page 11, Table 1 55 ANNEX E The table should only put the timeline of events for PBS program\. The 1s and 2nd row are not necessary\. 9\. Page 27, Box 7 It is not fair to put a bank staff (an individual) perspective in this document\. 10\. Page 30\. Risk to development outcome, paragraph 6\.4 The paragraph stated that the risk to the development outcome is rated as significant and the reason is fiscal sustainability\. PBS donor financing is 30-35% of basic services (education, Health, water, agriculture and rural roads) for salary\. The other is covered by the government\. The government is also preparing annually macro- economic & fiscal framework which shows revenue & expenditure forecast for the coming years\. Therefore, it is very difficult to rate it as significant from the above situation\. 11\. Page 30, Paragraph 6\.6\. First of all, the presence of LIG does not ensure the sustainability of the project or the program i\.e\. PBS\. The last sentence which questions the government commitment to decentralization is totally wrong\. This is confirmed in the Constitution\. 12\. Page 31, paragraph 6\.8 The political risk in Ethiopia is not high as claimed by the report\. The paragraph seems to be one sided and biased\. What are the indicators to put a country as politically risky? 13\. Annex D, List of People Met I would suggest that the names of people met be written according to their portfolio and also with their exact position and title including full name for some\.

REVIEW

P083932

 Document of The World Bank Report No: ICR2304 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-40140 IDA-44280 TF-56348) ON A CREDIT IN THE AMOUNT OF SDR 51\.1 MILLION (US$75\.0 MILLION EQUIVALENT) TO THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA FOR A NORTH EAST HOUSING RECONSTRUCTION PROGRAM June 11, 2012 Sustainable Development Department Urban, Water, and Sanitation Sector South Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective December 2011) Currency Unit = Sri Lankan Rupee 1\.55 US$= SDR1 132\.5 Rupees (Rs\.) = US$ 1 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank NEPC North East Provincial Council AF Additional Financing NGO Non Governmental Organization BRC Beneficiary Rehabilitation Committee PAD Project Appraisal Document CAS Country Assistance Strategy PDO Program Development Objective CBO Community Based Organizations PPF Project Preparation Facility CEIA Continuous Environmental Impact Assessment PO Partner Organization CSIA Continuous Social Impact Assessment QAG Quality Assurance Group EC European Commission QALP Quality Assessment of Lending Portfolio EIA Environmental Impact Assessment RAP Resettlement Action Plan EIQ Environmental Impact Questionnaire SDO Social Development Officer EMF Environmental Management Framework SIA Social Impact Assessment FMR Financial Management Report SIL Specific Investment Loan GOSL Government of Sri Lanka TA Technical Assistance IDA International Development Association TOR Terms Of Reference IDP Internally Displaced Person UN United Nations IEC Information, Education, and Communication VRC Village Rehabilitation Committee ISR Implementation Status Report LTTE Liberation Tigers of Tamil Eelam MoNB Ministry of Nation Building MIS Management Information System ii MTR Midterm Review NEERP North East Emergency Reconstruction Project NEHRP North East Housing Reconstruction Program NEHRU North East Housing Reconstruction Unit Vice President: Isabelle M\. Guerrero Country Director: Diarietou Gaye Sector Manager: Ming Zhang Project Team Leader: Shideh Hadian ICR Team Leader: Shideh Hadian iii  SRI LANKA Sri Lanka: North East Housing Reconstruction Program Contents A\. Basic Information\. v B\. Key Dates \. v C\. Ratings Summary\. v D\. Sector and Theme Codes \. vi E\. Bank Staff \. vi F\. Results Framework Analysis \. vii G\. Ratings of Project Performance in ISRs \. viii H\. Restructuring (if any) \. ix I\. Disbursement Profile\. ix 1\. Project Context, Development Objectives and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes \. 6 3\. Assessment of Outcomes\. 13 4\. Assessment of Risk to Development Outcome\. 20 5\. Assessment of Bank and Borrower Performance \. 21 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\. 31 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 36 Annex 5\. Beneficiary Survey Results \. 38 Annex 6\. Stakeholder Workshop Report and Results \. 38 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 39 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders \. 51 Annex 9\. List of Supporting Documents \. 52 Map iv  DATA SHEET A\. Basic Information Sri Lanka: North East Housing Country: Sri Lanka Project Name: Reconstruction Program IDA-40140, IDA- Project ID: P083932 L/C/TF Number(s): 44280,TF56348 ICR Date: 06/11/2012 ICR Type: Core ICR GOVERNMENT OF SRI Lending Instrument: SIL Borrower: LANKA XDR 51\.10M for Original Total Parent Project Total Disbursed XDR 77\.30M Commitment: XDR 26\.2M for Amount: Additional Financing Revised Amount: XDR 77\.30M Environmental Category: B Implementing Agencies: Ministry of Economic Development Cofinanciers and Other External Partners: European Commission B\. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 02/26/2004 Effectiveness: 03/15/2005 03/15/2005 Appraisal: 10/04/2004 Restructuring(s): Approval: 12/14/2004 Mid-term Review: 04/23/2007 Closing: 06/30/2009 12/31/2011 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: 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 Satisfactory Implementing Satisfactory Quality of Supervision: Agency/Agencies: Overall Bank Satisfactory Overall Borrower Satisfactory Performance: Performance: v C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry Highly Satisfactory No 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) Housing construction 97 97 Sub-national government administration 3 3 Theme Code (as % of total Bank financing) Conflict prevention and post-conflict reconstruction 29 29 Land administration and management 14 14 Personal and property rights 14 14 Social safety nets 14 14 Urban services and housing for the poor 29 29 E\. Bank Staff Positions At ICR At Approval Vice President: Isabelle Guerrero Praful C\. Pate Country Director: Diarietou Gaye Peter C\. Harrold Sector Manager: Ming Zhang Sonia Hammam Naresha Duraiswamy and Christoph Pusch Project Team Leader: Shideh Hadian This is correct\. In the PAD, both names are given\. ICR Team Leader: Shideh Hadian ICR Primary Author: Sati Achath vi F\. Results Framework Analysis Project Development Objectives The main objective of the project was to facilitate the reconstruction of 46,000 houses in the North East over a four-year period through the provision of housing support cash grants\. Revised Project Development Objectives (as approved by original approving authority) The objective was not revised\. However, the initial target of 46,000 houses by International Development Association (IDA) was reduced to 27932 houses, due to budget shortfall resulting from: (a) the Government‟s decision to increase the cash grant from Rs\.250,000 to Rs\.325,000 in May 2007, at the time of mid-term review of the project (allocation of Rs\.100,000 for partly damaged houses remained unchanged); and (b) a change in the ratio of fully damaged to partly damaged houses from initial estimate of 80:20 to 95:5 which was actually observed on the ground and resulted in increase in the number of houses requiring Rs 325,000\. Further, under the Additional Financing (AF), which was approved in November 2008, additional 13615 houses were planned to be rebuilt across eight districts in the North and East\. Thus the revised target for the IDA part became 41,547\. The target of 8514 houses for European Commission (EC) remained the same\. The revised total for both the IDA and EC became 50061 (41547+8514)\. At the time of EC grant closing on June 30, 2009, 8532 houses were constructed (18 houses over and above the initial target), due to savings from favorable exchange rate fluctuation\. (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 Number of housing units constructed within specified time and allocated budget Indicator 1 : (Parent Project and Additional Financing) Value quantitative or 46,000 50,079 49,507 Qualitative) Date achieved 30 June, 2008 Dec-31-2011 Dec-31-2011 Comments This is inclusive of 8,532 EC funded houses completed on June 30, 2009\. (incl\. % achievement) Percentage of cash grants disbursed within the allocated four year Indicator 2 : construction period vii  This indicator was Value not monitored for quantitative or Qualitative) the reason mentioned below\. Date achieved NEHRP was a large scale housing project, and more than 95% of the fund Comments was allocated to the housing\. This indicator could not be followed for (incl\. % each and every house\. But collectively, the quarterly disbursement was achievement) pretty much the indicator for disbursement on housing cash grant\. (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 : Number of homeowners with regularized land titles as part of NEHRP\. Value (quantitative N/A 50,091 50,079 49,507 or Qualitative) Date achieved March 1, 2005 Dec-31-2011 Dec-31-2011 Comments Land title is the main eligibility criteria for housing grant\. Therefore, all (incl\. % beneficiaries who have completed their houses and the ones under construction achievement) should have a legal land title\. G\. Ratings of Project Performance in ISRs Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 06/13/2005 Satisfactory Satisfactory 3\.68 2 01/24/2006 Satisfactory Satisfactory 16\.59 3 08/09/2006 Satisfactory Satisfactory 21\.51 4 01/23/2007 Satisfactory Satisfactory 34\.54 5 06/29/2007 Satisfactory Satisfactory 36\.11 6 12/26/2007 Satisfactory Satisfactory 48\.67 7 06/29/2008 Satisfactory Satisfactory 62\.45 8 12/31/2008 Satisfactory Satisfactory 70\.54 9 05/29/2009 Satisfactory Satisfactory 72\.72 10 11/29/2009 Satisfactory Satisfactory 75\.77 11 05/26/2010 Satisfactory Satisfactory 81\.66 12 12/11/2010 Satisfactory Satisfactory 95\.97 13 06/27/2011 Satisfactory Satisfactory 113\.29 14 01/01/2012 Satisfactory Moderately Satisfactory 118\.65 viii H\. Restructuring (if any) Not Applicable I\. Disbursement Profile ix 1\. Project Context, Development Objectives and Design 1\.1\. Context at Appraisal Country and Sector Background: More than 20 years of civil conflict in Sri Lanka had led to loss of life, displacement of persons belonging to all ethnic groups, and the destruction of infrastructure, housing, health centers, and schools\. At the time of appraisal, approximately 2\.5 million persons lived in areas of direct military activity\. Of these, up to 700,000 had left the country while about 615,000 individuals remained internally displaced as of June 2002\. About 172,000 of the internally displaced persons (IDPs) lived in refugee camps\. The Government of Sri Lanka (GoSL) and the Liberation Tigers of Tamil Eelam (LTTE) agreed to a permanent cease-fire on February 23, 2002, which led to 34 months of cessation of hostilities\. The cease-fire led to the lifting of the economic embargo on LTTE controlled areas, the re-opening of road and certain rail links to the North East, the resumption of economic activity in the region, and the return of 369,000 IDPs to their original homes\. However, the situation remained volatile, as the LTTE suspended its participation in the peace talks in April 2003, and in October 2003 it submitted its proposals for an Interim Self-Governing Authority in the North East\. A center-left coalition was voted into power in April 2004\. Although the new administration pledged to continue the peace process, there was considerable lack of trust between the Government and the LTTE\. Sector issues\. The restoration of damaged houses was a key component to help establish normalcy for the conflict-affected population\. The war had led to the destruction or damage of 58% of the total housing stock in the North East i\.e\. 326,000 units\. The Jaffna district alone accounted for 45% of these damaged units\. The Government policy was to provide Rs\. 150,000 to families below the poverty threshold (defined as a family income of less than Rs\. 2,500/US$25 per month) to help repair their damaged housing\. The funds required to assist the reconstruction of total housing needs was about US$485 million\. Rationale for Bank assistance: The North East Housing Reconstruction Program (NEHRP) was in line with the Government's development strategy to rehabilitate the conflict-affected areas and encourage the return of IDPs\. The Bank‟s Country Assistance Strategy (CAS) emphasized peace as a precondition for sustained economic growth in Sri Lanka and added that without peace, there was no prospect for development\. The CAS explicitly provided for financing the repair of infrastructure\. The Bank subsequently decided to focus on the housing sector, given the scale of financing needs and the relative absence of donor involvement therein\. NEHRP complemented other Bank programs in the North East including for restoring livelihoods, health, education, roads, irrigation, and water\. 1 1\.2\. Original Project Development Objectives (PDO) and Key Indicators The main objective of the project was to facilitate the reconstruction of 46,000 houses in the North East over a four-year period through the provision of housing support cash grants\. Key performance indicators: ï‚ Number of housing units reconstructed within a specified time and allocated budget ï‚ Percentage of cash grants disbursed within the allocated four year construction period ï‚ Number of homeowners with regularized land titles as part of NEHRP 1\.3\. Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The objective was not revised1\. However, the target of the number of houses was revised due to factors mentioned in the Foot Note 1 given below\. 1\.4\. Main Beneficiaries, The expected beneficiaries of the project included: ï‚ Displaced populations in the North East who would be provided with houses and would benefit in terms of the regularization of their land titles\. ï‚ Construction workers who would receive training in carpentry and masonry, which would consequently allow the resumption of economic activity in the war devastated region through increased construction activity\. 1 NEHRP was funded by the Parent Project ($75\.0 million); Additional Financing ($43\.0 million); and EC co-financing ($21\.7 million)\. The initial target of 46,000 houses by the IDA was reduced to 27932 houses, due to budget shortfall resulting from: (a) the Government‟s decision to increase the cash grant from Rs\.250,000 to Rs\.325,000 in May 2007, at the time of mid-term review of the project (allocation of Rs\.100,000 for partly damaged houses remained unchanged); and (b) a change in the ratio of fully damaged to partly damaged houses from initial estimate of 80:20 to 95:5 which was actually observed on the ground and resulted in increase in the number of houses requiring Rs 325,000\. Further, under the Additional Financing (AF), which was approved in November 2008, additional 13615 houses were planned to be rebuilt across eight districts in the North and East\. Thus the revised target became 41,547\. The target of 8514 houses for European Commission (EC) remained the same\. The revised total for both the IDA and EC became 50061 (41547+8514)\. At the time of EC grant closing on June 30, 2009, 8532 houses were constructed (18 houses over and above the initial target), due to savings from favorable exchange rate fluctuation\. 2 1\.5\. Original Components The project consisted of three components as follows: Component A: Housing Assistance (US$68\.8 million)\. NEHRP would finance housing reconstruction through the transfer of a housing cash grant of either Rs325,000 for a fully damaged house or Rs100,000 for a partly damaged house to eligible beneficiaries\. It would transfer the housing cash grant to the joint bank accounts of selected households in four tranches for the fully damaged housing cash grant category and two tranches in the case of a partly damaged house\. The pace of installments would be performance-based and the beneficiary would be allowed a period of four months to complete construction\. NEHRP would select divisions and villages for participation based on a ranking system2, taking into account: (i) case load of damaged housing stock; (ii) case load of returnees; (iii) ethnic sensitivity while cognizant that certain villages suffered disproportionate damage; (iv) extent of mine clearance; and (v) where available North East Provincial Council (NEPC) vulnerability and poverty maps\. It would determine the number of grants per village based on: (i) caseload of returnees; and (ii) damaged housing stock\. Subsequent to the selection of villages and the apportioning of grants, the North East Housing Reconstruction Unit (NEHRU) would undertake a Housing Damage Assessment and Social Verification Survey in the selected villages to determine eligible beneficiaries and prioritize them\. A potential beneficiary must meet four eligibility criteria ( main beneficiary permanently settled in village, regularized land title, income of less than Rs\. 2,500 and a conflict damaged house to be considered for the housing assistance)\. Component B: Capacity Building and Monitoring (US$2\.72 million)\. NEHRP would include a comprehensive technical assistance program to ensure smooth implementation\. To this end, the Bank would support the following sub-components: ï‚ Land Dispute Resolution\. The program would support the establishment of multi- disciplinary mobile Land Task Forces (LTFs) in each district for nine months on a contractual basis and the related operating expenditures\. ï‚ Skills Training for Construction Labor\. NEHRP would support the training of 1,200 masons and carpenters to bridge the acute shortage of skilled construction labor in the North East\. The training courses would run for four months in each training site, and would consist of classroom training and supervised on-the-job training\. 2The 3-step selection process consisted of: (1) initial allocation of houses across districts based on housing damage assessment; (2) village selection within each district bases on ranking according to mainly quantifiable established criteria; (3) beneficiary ranking within each selected village, based on established largely quantifiable criteria\. All were entered into the database and subjected to review by CSIA 3  ï‚ Support for Partner Organizations3 would ensure that the partner organizations were made cognizant of their roles and responsibilities in carrying out their construction function through three-day workshops to be held in each district\. ï‚ Study for Housing Finance would finance a study examining the feasibility of a new housing finance mechanisms in the North East\. ï‚ Technical Assistance for Program Implementation would provide studies and consultancies to support program implementation\. It included: (a) Communication Campaign to ensure transparency; (b) Continuous Social Impact Assessment (CSIA) which would facilitate the articulation of community perceptions, undertake third party monitoring of village and beneficiary selection, review grievances resolution process, document wider social impact through and provide feedback on the mobilization of resources; (c) Follow-up Environmental Impact Assessment (EIA) would ensure proper management of the environmental dimensions of the program; (d) Technical Audit of Civil Works which would ensure that construction complied with developed technical standards; (e) Technical Assistance (TA) to NEHRU for the set up and operations of a Management Information System (MIS)\. Component C: Program Management (US$4\.7 million)\. This component included program management and implementation support for NEHRP\. ï‚ Program Management and Supervision at the Provincial Level and by District and Divisional Secretaries which would cover staff costs, incremental operating costs and goods\. ï‚ Program Implementation by the Partner Organizations\. It was expected that 20% of the fully damaged houses would be contracted to the Partner Organizations (POs) by the beneficiaries\. 1\.6\. Revised Components The components were not revised\. 1\.7\. Other significant changes (i) Additional Financing\. The Bank approved US$43 million in AF which became effective on November 10, 2008\. The AF was required because there were no available funds under the parent project to meet the requested caseload\. The AF credit aimed at reconstructing 13,615 more houses in the North and East using the same criteria as the NEHRP parent project\. The houses to be reconstructed were distributed across the eight districts in proportion to the incidence of conflict-damages\. The AF supported the following activities under the three components of the parent project: 3 Expected partners at preparation was EC, UNDP, and KfW\. However, during implementation, only EC was the Bank partner for this project\. 4 ï‚ Housing Assistance (IDA: US$ 40\.2 million): Activities included rebuilding 13,615 houses\. ï‚ Housing Technical Support and Monitoring (IDA: US$ 2\.1 million)\. Activities consisted of the training of construction workers, a communications campaign, a CSIA, Environment Assessment, Technical Audit and Beneficiary Eligibility Audit\. ï‚ Program Management (IDA: 0\.7 million and Government: US$ 0\.7 million): This component supported project administration\. It would finance the operational expenditure of NEHRU, the NEHRU District Program Units and NEHRU staff at the divisional level\. (ii) Changes in grant amount and ratio of fully damaged to partly damaged houses\. As mentioned in footnote 1, the Government increased the cash grant from Rs\.250,000 to Rs\.325,000 in May 2007, at the time of mid-term review of the project, and changed the ratio of fully damaged to partly damaged houses from initial estimate of 80:20 to 95:5 which was actually observed on the ground and resulted in increase in the number of houses requiring Rs 325,000\. \. (iii) Project Schedule\. The closing date of the project was extended once for a period of two and a half years from June 30, 2009 to December 31, 2011 to accommodate the activities under the AF\. (iv) Funding allocations\. During implementation there were two reallocations, one in April 2010 and the other in November 2010\. ï‚ First reallocation: The 'Unallocated Category‟ amount of US$733,800 was reallocated in order to: (a) expand skills training program in the Northern Districts; (b) expand environmental mitigation programs (tree planting in the constructed houses); and (iii) build more housing units in the Northern Districts\. ï‚ Second reallocation: The undisbursed funds under the Unallocated Category were reallocated for: (a) housing constructions in the newly resettled areas in the Northern Province; (b) scaling up skills training in the hard-hit districts during the war; and (iii) protecting the environment by planting trees in the areas where trees were cut for the use of timber in housing construction\. (v) Changes in implementation arrangements\. Based on the Supreme Court‟s ruling in October 2006 to de-link the North and the East, the two provinces were administered separately since then\. The Government then designated the Ministry of Nation Building (MoNB) to oversee NEHRP and requested the Bank to amend the Development Credit Agreement and cancel the Project Agreement\. The impact of this de-merger on day to day implementation and management was minimal, given the nature of activities, fund flow and implementation structures of NEHRP\. 5 2\. Key Factors Affecting Implementation and Outcomes 2\.1\. Project Preparation, Design and Quality at Entry Project Background\. The Government's Assessment of Needs in the Conflict Affected Areas prepared with the support of the Asian Development Bank (ADB), the Bank and the United Nations (UN) in May, 2003; and the document „Preparing for Transition in Sri Lanka: the Contribution of the Multilateral Group of June, 2004‟ had highlighted support for humanitarian relief, human development, economic infrastructure and capacity building\. The ADB focused on the rehabilitation of economic infrastructure - i\.e\. power, highways, ports and large reservoirs\. The UN agencies focused on humanitarian relief, human development - i\.e\. education and health - and capacity building\. There was no large scale housing program in the North East despite the need\. The Government requested the Bank‟s financial support, given its ability to support reconstruction, and target vulnerable people in remote villages in the North East as demonstrated in other Bank-financed projects\. The EC had initially made arrangements to co-finance NEHRP with additional funding of US$ 21\.7 million equivalent\. The EC committed €6\.0 million (US$7\.5 million equivalent) up front for the reconstruction of 3,514 houses\. In December 2007 the EC committed another €10 million (US$14\.2 equivalent) for the reconstruction of additional 5,000 houses in the North and East\. Selection of villages and beneficiaries within each village were need-based, using objective and quantifiable criteria, which were essentially without any special consideration for ethinc background and which were agreed between the Bank and the Government, as outlined both in the Project Appraisal Document and Operational Manual\. These criteria fully supported the poverty elements of the project\. The criteria enabled a ranking both of villages and of individual households according to housing damage, displacement and poverty need\. Selections were done in a transparent manner which involved the communities, the Village Rehabilitation Committee (VRC) members and a Community Based Organization (CBO) representative supported by the village headman/woman called Grama Niladari\. Assessment of quality at entry: The ICR team has rated the quality at entry to be Satisfactory\. for the following reasons: ï‚ The North East Provincial Council used a US$ 1\.5 million Project Preparation Facility (PPF) to finance: (i) a pilot housing damage assessment and social verification survey and EIA in 29 villages; (ii) a pilot housing initiative; and (iii) pilot training of skilled construction workers\. The housing pilot initiated in July 2004 entailed the reconstruction of 860 houses in the eight districts of the North East\. 6  ï‚ To identify the social impacts, a Social Impact Assessment (SIA) was undertaken in the course of the pilot\. Several of the recommendations of this SIA were incorporated into program design\. A continuous process of social impact analysis were scheduled to be commissioned for the duration of the program to ensure that social issues were promptly and adequately addressed\. ï‚ Two land surveys were commissioned during the course of preparation to determine the nature and scale of land related issues that would likely to be encountered as part of the program\. ï‚ A Social Safeguards Framework was prepared and cleared with the Bank\. This included guidelines to prepare a Resettlement Action Plan (RAP), if needed at a future date\. ï‚ The key environmental issue identified with regard to the program was possible unsustainable harvesting of natural resources as construction material, particularly timber, sand and clay\. ï‚ Proper mechanisms were incorporated into program design to ensure that unsustainable resource extraction practices were not permitted\. ï‚ A number of alternatives were considered in arriving at the chosen design\. Other highlights of the project design included: ï‚ The “Home-Owner-Drivenâ€? concept of the housing component proved to be extremely successful and “Best Practiceâ€? in housing construction in the country\. Beneficiaries‟ direct involvement in planning, decision making, and hands-on implementation of the project significantly enhanced “ownershipâ€?\. This aspect of the project design was aimed at improving effectiveness and efficiency of the implementation\. ï‚ The inclusion of Dedicated Technical Officers and Engineers at the District level provided ongoing assistance to the beneficiaries with the technical requirements of the housing construction and ensure more hands-on supervision and quality control\. ï‚ The project design focused on improving transparency of information gathering, public awareness and clarity and quantification of eligibility criteria, which lent credibility to the process\. The pilot provided the initial framework for that process ï‚ The Continuous Social Impact Assessment was an excellent Third Party Monitoring tool that served multiple purposes, generating data on a full range of appropriate issues and indicators, the results of which were used in many ways, from understanding field conditions to reviewing selection procedures and thereby withstanding political pressure\. ï‚ Environmental aspects were well integrated into the design at the project and sub- 7  project level\. An EIA was undertaken during the course of the pilot based on which an Environmental Management Framework (EMF) was prepared during project preparation\. The process of undertaking site specific environmental assessment, the use of a questionnaire, monitoring arrangements were well described in the PAD\. ï‚ The project design clearly spelled out the criteria to be used for the selection of villages and specific families to benefit under the Reconstruction Program\. It also included an elaborate grievance redress arrangement, with suitable representation of community members, to resolve complaints relating to determination of land ownership or the selection of beneficiaries\. ï‚ In addition to the external audit by the Auditor General, a strengthened internal auditing function in the implementing agency was included to carry out quarterly audits of the Program\. These arrangements provided reasonable safeguards to prevent fraud and corruption in the Project\. ï‚ The FM arrangements for the Project were based on the government‟s Financial Regulations\. Moreover, the staff of NEHRU, the project‟s implementing agency had prior experience with World Bank projects\. The project design included suitable additions to the accounting staff of NEHRU and the strengthening of the Internal Audit Department of North East Provincial Council which was in charge of doing quarterly internal audit of the Project\. These arrangements in the Project Design were adequate to provide sound financial management of the project\. Soundness of sector analysis\. As part of project preparation, the sector background was studied, main sector issues were analyzed in depth, and government strategies to deal with these issues were also considered\. Lessons from the pilot taken into account\. The following lessons learned from the pilot were incorporated into the design of NEHRP: ï‚ Program Area Selection: In the absence of a village profile, the district administration used its discretion in village selection\. Under NEHRP, village selection was based on quantifiable criteria on extent of damage, caseload of returnees, ethnic sensitivity and vulnerability, in addition to some non- quantifiable criteria\. ï‚ Beneficiary Selection: Beneficiaries were eligible for selection based on extent of housing damage, income, and land ownership as determined through a survey\. They were prioritized through a quantifiable vulnerability weighting system\. The pilot showed that income reporting was insufficiently selective, vulnerability criteria required increased stringency and that reported data necessitated cross- checking to ensure an honest reflection of household status\. As a result of this, NEHRP‟s beneficiary selection process was modified and adopted to local requirements\. During implementation, the scope for exercising discretion in selection was further reduced to make the selection process even more robust\. 8  ï‚ Construction Approach: The pilot tested both homeowner-driven and donor- driven construction approaches\. Beneficiaries largely preferred the former, except for the most vulnerable who lacked the means\. Program design focused on a homeowner approach, but allowed beneficiaries to opt into the partner approach\. ï‚ Land Ownership: The pilot recognized that many beneficiaries were excluded from participation owing to inadequate land title documentation\. A sub- component on land-related dispute resolution was designed to address land issues as they related to the program\. ï‚ Grievance Redressal: The pilot grievance redressal system lacked transparency, and ended at the divisional level\. Beneficiaries subsequently had little right of appeal\. Taking this experience into account, the system designed for NEHRP included divisional, district, and provincial grievance redress procedures\. It was followed by a substantive communication campaign which ensured broad awareness of and easy access to the system\. ï‚ Resource Requirement Plan: The pilot demonstrated that the purchase of goods and services was a challenge, and that individual procurement of construction materials sometimes had negative environmental effects\. The pilot also had positive cost and environmental results when beneficiaries resorted to bulk procurement through co-operative societies, VRCs, and Divisional Secretaries\. NEHRP would facilitate optional bulk procurement for beneficiaries\. ï‚ Quality Control and Reporting: There was an absence of well-defined technical audit guidelines, and technical officers were not always competent\. NEHRP allowed for the design of technical audit guidelines, a third party technical audit of construction, and the hiring of consultants for technical support should government staff not be able to perform that function\. Risk Assessment\. The Project Appraisal Document (PAD) had identified several potential risks and mitigation measures, as deemed appropriate at that time, which were included in the project design\. Adequacy of participatory processes\. Stakeholder consultation was undertaken at every stage of planning and assessing environmental safeguards\. While the EMF had included consultations with district officials, NGOs and other donor funded projects operating in the North and East, the pilot EIA and the village-specific Environmental Impact Questionnaire (EIQs) had extensive consultations at the village level\. The Information, Education, and Communication (IEC) strategy followed a very effective and interactive community consultation campaign to ensure that it was a two-way approach, involved a continuous process, and targeted to the entire community\. The activities included awareness programs; exposure visits; cultural events; school competition; providing detailed pamphlets on all aspects of the project in three languages, and TV and Radio advertisements\. 9 Adequacy of government commitment\. At the time of project preparation, the government demonstrated a high level of commitment to the objectives of the project\. The high level of borrower involvement, ownership and commitment was demonstrated through the substantial participation of the three tier administration and of the population in target communities\. 2\.2\. Implementation The project implementation was carried out at a time when the conflict was at its peak in the North-East\. Even in the face of safety and security challenges, the government, NEHRU, and the Bank‟s task team operated efficiently and tried their best to find feasible solutions to overcome the challenges resulting from the long standing conflict\. The project was not restructured and no changes were made to the design\. The Bank conducted a Mid Term Review (MTR) in April 2007\. The MTR introduced some changes to the housing program due to inflation, which increased the cost of construction material and labor\. The original NEHRP Core House, defined as a 500 square feet, two locked rooms, a kitchen, a toilet and plastered internal and external walls, appeared to require a higher investment than the grant of Rs 250,000 initially approved\. However, the price of construction materials varied widely across districts\. The NEHRP Core House was redefined to consist of just one locked room, a kitchen, and internal plastering\. It was also proposed by the Bank-EC team that the cash grant for a fully destroyed house to be raised from Rs 250,000 to Rs 325,000\. This was subsequently approved by the GOSL\. The following factors affected project implementation: (i) Land Issues\. About 1100 families were excluded at the final selection process because of their inability to provide sufficient documents to prove land ownership\. The grievance redress mechanism maintained by the NEHRU also indicated that the main reason for rejection of a large number of poor families from housing cash grant was the lack of documentation of ownership of the land on which the house would be built\. (ii) Unavailability of material and shortage of labor slowed down progress of housing construction in the North, especially in Jaffna district\. Further, on December 26, 2004 Sri Lanka was hit by the tsunami and the reconstruction process that followed significantly increased the demand for raw materials in the country\. In addition, the recurrent conflict and associated mobility constraints had reduced labor availability\. Many masons had moved elsewhere leaving the North East with fewer construction workers\. (iii) High case load for Technical Officers led to insufficient time for quality supervision\. Further, technical officers did not always have adequate knowledge of construction practice while the training of masons and carpenters was not sufficient to meet the need for skilled labor\. The fluid security situation contributed to reduce the mobility of technical officers and delayed report submission\. 10 (iv) Shifting construction activities to safer areas\. The Government had to scale back NEHRP to safer areas as an interim measure due to renewed hostilities, material shortages and the inability to supervise construction on the ground\. This led to deferred implementation in Kilinochchi and Mullaitivu districts and certain divisions in Mannar and Vavuniya\. (v) Multiple displacements of families\. Many families who lived in Kilinoichchi and Mullaithivu districts were subject to forceful evacuation or had to flee from their homes several times in order to escape from the cross fires between the LTTE and Sri Lankan military\. Some of them attempted to build houses despite the war conditions but more often they had to leave from their homes and therefore they were never able to complete their houses or get the full benefit of the housing cash grant\. Under the last phase of the housing cash grant, many of these multiple displaced families could not get assistance due to their inability to prove the land ownership because they ran away, leaving all the deeds and other important documents\. It is worth mentioning that in spite of the above challenges, the project succeeded in achieving its objective because of the commitment and dedication on the part of the Bank as well as the Government\. 2\.3\. Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E design\. Indicators were developed to monitor the progress of the project\. NEHRU was assigned responsibility for monitoring outcomes, impacts, outputs, and finances\. The output monitoring covered both the number of houses constructed and the stages of construction\. The latter was crucial for the phased disbursement of the housing cash grant\. The M&E system was designed so that NEHRP would have several mechanisms to monitor progress, including: (i) a Continuous Social Impact Assessment (CSIA) to monitor social impact, review beneficiary selection process, outcomes and outputs of the program using quantitative and qualitative methodologies; (ii) Village level Environmental Impact Questionnaire (EIQ) survey to identify and monitor environmental impacts from resource extraction\. Results would be used to design mitigation measures; (iii) district and divisional secretaries would submit technical reports on program outputs; (iv) a third party technical audit of construction would be carried out by independent experts to monitor engineering standards; and (v) monitoring arrangements included plans for intensive supervision by the Bank\. M&E implementation\. NEHRU collected data on a regular basis according to the indicators developed during project preparation\. The MIS included financial, physical, and operational data with detailed information on each NEHRP beneficiary i\.e\. name, location, socio-economic profile, family details, housing data, land ownership etc\. The user-friendly MIS was operational in all eight districts\. It included modules on village selection, beneficiary selection, grievance redressal, construction progress and financial 11 management\. Information from three independent sources i\.e\. (i) CSIA; (ii) Independent Technical Audit; and (iii) EIA was incorporated\. Field staff collected data using standardized forms, and the District Program Units processed the data and submitted it to NEHRU each week\. These data were closely monitored and the actual figures were compared with the target values\. M&E utilization\. Appropriate data collected by NEHRU was evaluated and used for decision-making on certain activities\. For example: (i) beneficiaries were paid installments after verification of physical progress made on their house construction; (ii) problem areas such as lack of materials, for construction were identified and appropriate decisions were made to resolve them\. For instance, when there was shortage of tiles in Jaffna, asbestos roofing was allowed to be used as an exception in order to complete the houses; and (iii) because of moving conflicts and wars, construction was shifted to those areas which were safe and had no conflicts\. 2\.4\. Safeguard and Fiduciary Compliance Safeguard issues\. The project dealt with reconstructing houses that had been damaged and destroyed as a result of the war\. As such, it was not causing any land use changes in the region that would have serious consequences on the environment\. The key safeguard concern under NEHRP was the off-site adverse environmental impacts related to unsustainable exploitation of construction material such as sand, clay, rocks, coral and timber\. The project contributed to the increased demand of these materials in the region and as a consequence increased mining and extraction in numerous sites throughout the region as well as in the rest of the country\. The on-site environmental impacts of housing re-construction, as implemented under the project, were not considered a serious threat\. During the pilot project, a detailed EIA was carried out and based on its findings an EIQ was designed for the project\. During implementation, every village selected for funding under the project was subjected to a rapid environmental assessment (using the EIQ) based on which a village specific environmental management plan was prepared\. This assessment was undertaken at the start of each implementation phase by the technical staff of the relevant divisional secretariats and local authorities\. The completed EIQs were then reviewed by the project environmental officers and cleared\. It was only upon environmental clearance that social mobilization and housing construction activities in the villages commenced\. Fiduciary issues\. The project complied with fiduciary covenants during implementation\. Internal control arrangements were in place, and adequate financial management system and records were maintained\. 2\.5\. Post-completion Operation/Next Phase (a) Transition arrangements\. The houses constructed under the project have been transferred to beneficiaries, and hence have become private assets\. Individual house owners are responsible for the maintenance of their houses\. 12 (b) Follow-on project\. No follow-on project is currently scheduled\. However, the Bank is working with the Ministry of Economic Development, and participating in donor meetings to keep track of the developments such as the Indian Housing Project which is currently under implementation\. (c) Future Impact Evaluation\. It will be important to conduct an impact evaluation after three years of project closing in order to assess the sustainability of the project‟s achievements as well as the socio economic impact emanating from this project\. 3\. Assessment of Outcomes 3\.1\. Relevance of Objectives, Design and Implementation The objective of the project remains relevant to the country‟s social and economic development\. It is also timely and appropriate to the present needs of Sri Lanka, and is consistent with the Bank's current CAS for Sri Lanka\. The CAS highlights the need to invest in development where the Bank is better positioned to address the causes and consequences of Sri Lanka‟s conflict\. The Bank would use the economic instruments at its disposal to enable an end to the economic causes caused by the conflict to the extent that it can\. It is doing so with an emphasis on reconciliation and development in the conflict-affected areas\. Further, under the Bank‟s Country Partnership Strategy 4(CPS) for the period FY 2013- 2016, the World Bank Group will continue to support improvements in living standards and social inclusion in order to ensure the benefits of rapid growth and higher quality services are broadly shared\. Activities in this area already include three ongoing livelihood projects in the conflict-affected North and East regions of the country which include restoration of basic infrastructures, housing construction, and cash for work as well as support for starting new businesses\. 3\.2\. Achievement of Project Development Objectives Satisfactory\. The project was successful in achieving its objective\. The following achievements demonstrate the direct correlation between the project‟s outputs and their resulting outcomes\. (i) Number of housing units constructed within specified time and allocated budget (Parent Project and Additional Financing)\. At the time of project closing, out of 50061 target number of houses under the project, a total of 49,507 houses (99%) had been completed in eight districts (five in the Northern 4 Report No\. 66286-LK, dated April 17, 2012 13 Province and three in the Eastern Province)\. A total of 572 houses were not completed for various reasons on the part of beneficiaries such as: not being resettled; displaced to India; land sold with partially constructed houses; internally displaced; unresolved land problems and disputes; and death\. It is estimated that these completed houses would be covering about 13% of total need for housing in the North and East\. Table 1: Physical progress in the overall Housing Program as of December 31, 2011 Houses Number Of Houses Donor planned Construction Construction Percent Cancelled (Number) commenced Completed Completed International Development 41,547 41,547 40975 98\.90 572 Association– IDA Initial and additional funding European Commission (1and 8,532 8,532 8,532 100\.00 2 Tranches) Total 50,079 50079 49507 572 Table 2: Houses completed and houses dropped as of December 31, 2011 Installments Refunded of December 31, 2011 and Construction Did Houses Completed as Dropped for Various Houses Started but adjustments, as of Allocation after October 2010 % of Houses Completed not Start Reasons Districts Jaffna 13,342 13,269 73 8 99\.5% Killinochchi 5,502 5,335 167 4 97\.1% Mullaithivu 2,920 2,920 100\.0% Vavuniya 2,143 2,142 1 99\.9% Mannar 3,473 3,431 42 98\.8% Total North 27,392 27,097 282 12 90\.0% Trincomalee 6,513 6,394 119 98\.1% Batticaloa 11,593 11,441 170 98\.5% Ampara 4,575 4,575 100\.0% Total East 22,699 22,410 289 98\.7% TOTAL 50,061 49,507 572 12 99\.0% 14 (ii) Number of homeowners with regularized land titles as part of NEHRP\. An uncontested land title was a precondition for qualifying as beneficiary for a housing grant\. By the end of the project, 45,000 new title deeds were issued under NEHRP\. (iii) Percentage of cash grants disbursed within the allocated four year construction period\. NEHRP was a large scale housing project, and more than 95% of the fund was allocated to the housing\. This indicator could not be followed for each and every house\. But collectively, the quarterly disbursement was pretty much the indicator for disbursement on housing cash grant\. 3\.3\. Efficiency The benefits from the NEHRP include both direct and indirect benefits: Direct benefits: The direct benefits included: a\. Incremental value of the housing stocks itself from the reconstruction of 49,507 houses with direct housing assistance to the IDP families\. b\. Increased wage income of trained construction workers as a result of their improved skills Indirect benefits: The indirect benefits from the project included: c\. Multiplier impacts of wage income of construction workers generated from the housing reconstruction program d\. Benefits from additional economic activities, through multiplier effect, resulting from linked businesses including suppliers of construction goods and services , other operating inputs and employment opportunities created in the services sector including transportation and sales e\. Benefits from resolution of land disputes and rehabilitation and settlement of internally displaced families/persons due to the conflict f\. With a permanent house, beneficiaries reported that they could easier go and search for employment since their possession were secured in a locked house as opposed to a temporary shelter g\. Psychological and social value of having a decent home This analysis accounted for the benefits listed under (a), (b), (c), (d) and (e)\. However, the ICR team has not attempted economic valuation of the /quantification of the psychological and social value of having a decent home, which is high in Sri Lanka\. Economic efficiency and sensitivity analysis The analysis relates the project costs (Annex-3-Table 1) to the benefits from the economic value stream of benefits due to the project\. The benefits stream included the incremental value of the reconstructed houses under the project, economy-wide multiplier impacts of wage incomes of construction expenditures, increase in wage incomes as a 15 result of improved skills of workers trained as part of the project and benefits from resolution of land disputes and rehabilitation and settlement of internally displaced families/persons due to the conflict\. The values of houses were found to appreciate over the years in the project area\. Based on discussions with the project staff, the rate of appreciation is expected at an annual rate of 9 percent for the next 15 years\. In addition, it is assumed that the trained construction workers will earn additional wage incomes for the next 15 years of their productive life\. The net present value and the Benefit: Cost ratios based on the cost stream and the estimated benefit stream from the whole project are presented in Table 4\. The actual costs and the itemized benefit streams from the project are presented in Annex 3\. Table 3: Net present value and benefit: cost rations Annex 3-Table 4: Net present value and benefit: cost ratios 8% discount rate 10 % discount rate 12 % discount rate Net Present value (Million 23,000 22,420 19,103 Rs) Benefit: Cost ratio 2\.14 2\.05 1\.91 The above table shows that the project yielded modest returns measured in terms of Benefit: Cost ratio and Net Present Value of cost and benefit streams\. At 8% rate of interest the Benefit: Cost ratio was 2\.14, which implies that a dollar invested in the project yielded $2\.1 as returns\. At a higher discount rate of 12 percent, the project returned a Benefit: Cost ratio of 1\.91\. The ICR team could not identify significant risks to affect the project outcomes and the benefits from the project\. Hence, only a sensitivity analysis of the results to different discount rates has been conducted\. The analysis showed that even at a discount rate of 12 percent, the project yielded a Benefit:Cost ratio of 1\.91\. The PAD did provide an economic analysis for the whole project\. The Net Present Value and Benefit: Cost ratios presented in the PAD cover only the benefits from income generation activities undertaken by the beneficiaries and the benefits from training construction workers\. According to the estimates presented in the PAD the expected benefits from income generating activities supported by the project will have a Net Present Value ranging from $2100 to $3600 per worker over a period of 15 years at 8 percent discount rate\. Similarly, the PAD estimated NPV of the additional income from training of construction workers at $4470 per worker over the 15 year period (8 % discount rate)\. Since these estimates relate only to the above two components our results could not be compared with the results in the PAD and hence a comparison is not attempted\. 16 3\.4\. Justification of Overall Outcome Rating Rating: Satisfactory\. As explained in Section 3\.2, 3\.3, and 3\.5, the project has many satisfactory achievements: ï‚ Out of 50,061 target number of houses under the project, a total of 49,507 houses (99%) were completed in eight districts\. ï‚ 45,000 new title deeds were issued\. ï‚ With a permanent house, it has become easier for beneficiaries to search for employment because their possessions can be secured in a locked house as opposed to a temporary shelter\. ï‚ Reconstruction of a permanent house enabled families to marry of their daughters more easily, because daughters are supposed to get a house as dowry The project contributed to boosting the sense of pride and self-esteem of beneficiaries because of their having own house, and as a reflection of this new sense, they are participating in social events and community based organizations in villages\. Thus, based on the many achievements of the project, the overall outcome is rated as Satisfactory\. 3\.5\. Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development Poverty Impacts\. ï‚ Anecdotal evidence shows that, because of the skills development program, skilled and semi-skilled workers at village levels are working as masons and carpenters and their earning capacity has increased\. ï‚ There was an increase in household income from home gardening and cultivating fruits and vegetables, as many households have started these activities after reconstruction of their houses under the project\. ï‚ Because the beneficiaries own their houses, they are in a better position to apply for bank loans to start businesses and thereby increase their income potential\. Gender Aspects\. NEHRP empowered women as demonstrated by the following examples: ï‚ The role of women in household decision-making has increased\. This may have been facilitated by the joint bank accounts under NEHRP\. Further, the Land Task Force ensured that land title was issued in the name of both husband and wife where ever possible\. 17  ï‚ Women also participated in the VRCs\. Women headed 51 out of the 495 VRCs in Phase 3 villages\. This represented a doubling from Phase 1\. Further, some VRCs had a 30% female membership\. ï‚ Special attention was given to women during selection of skill programs in masonry and carpentry\. Special training was given to women, especially in Mulaitivu district\. They were also given tools pack for doing work\. Because of these acquired skills their income levels have gone up and it has also boosted their confidence to pursue their profession\. Social Development\. ï‚ Reconstruction of a permanent house has enabled families to marry of their daughters more easily as daughters are supposed to get a house as dowry at the time of marriage\. ï‚ Project contributed to boosting the sense of pride and self-esteem of beneficiaries because of their having own house, and as a reflection of this new sense, they are participating in social events and community based organizations in villages\. ï‚ The project facilitated widow remarriage and re-entry into social life otherwise impossible for dispossessed single women\. ï‚ Because children are now having better ambience and facility to study at home, they are performing better at school\. In addition, the number of children attending schools has increased\. ï‚ Other social benefits include investment in home gardening, livestock, poultry, home-based retail or tailoring and increased physical security in contrast to a thatched hut\. (b) Institutional Change/Strengthening The project resulted in a substantial institutional development impact as demonstrated by the following: Skill Training Program\. Skill training was very successful in helping the beneficiaries find labor during housing construction period; minimizing the construction time; and maintaining the standard and quality of the NEHRP housing reconstruction\. The program has also helped create skilled and semi-skilled labor at the village level amongst the beneficiaries to help their neighbors and more vulnerable families (including widows, elderly, and handicapped)\. For example, NEHRP trained over 1284 masons and 617 carpenters across project areas and provided short term training on NEHRP housing requirements to over 1,000 traditional construction workers\. With this approach, the impact on the youth and unemployed villagers has been highly positive, and there will also be a long term impact on the northern and eastern parts of Sri Lanka\. Land Task Force: The Land Task Force was established in March 2005 to review and resolve disputed land ownership and unclear title\. This has been an important activity, as proof of land ownership was a precondition for being eligible for housing grant\. The 18 resolution of land disputes provided security of tenure and 45,000 new title deeds were issued under NEHRP\. Third Party Technical Audit: NEHRP provided funding to support an independent and continuous 3rd party audit of the quality of civil work construction\. A consulting firm was contracted to carry out the audit of civil works on a sample basis\. This audit included monitoring of technical engineering standards, and number of houses constructed in a phased manner\. NEHRU benefited from this audit to improve on the construction quality over the phases of the project\. CSIA: The CSIA was an independent 3rd party monitoring of the village and beneficiary selection process, which also provided important information on broader social issues, reviewed the grievance redressal, land disputes, and gender issues through periodic reports\. This was a very important exercise, as it gave opportunity to the task team and NEHRU to provide timely support and take remedial measures to mitigate risks\. Grievance Redressal Institutions: To ensure transparency and fairness of the process, NEHRP supported the Government to establish a Divisional Grievance Redressal Committee to hear complaints regarding the selection process\. A District Grievance Redressal Committee heard grievances from individuals dissatisfied at the ruling of the Divisional Grievance Committee\. In case the individual concerned was still dissatisfied with his/her exclusion (based on the decision of the District Committee) he/she had the option to submit a grievance to NEHRU for consideration of the Chief Secretary of the NEPC\. The ruling of the Chief Secretary was final\. The Grievance Redress mechanism was supported by an awareness campaign, and was overall functioning well\. \. VRCs and Beneficiary Rehabilitation Committees (BRCs)\. VRCs contributed to the beneficiary selection process, acted as local representative at divisional level monitoring committees, and functioned as a platform to voice community feedback at the village level\. VRCs and BRCs have introduced microfinance system for the members for utilizing the amounts for livelihood activities and start their own businesses and create employment opportunities\. (c) Other Unintended Outcomes and Impacts (positive or negative) Positive ï‚ Overwhelming response from donors, including NGOs, as grants for housing construction was unexpected at project preparation\. Due to the positive experience with NEHRP, donors like EC and India decided to contribute for housing construction in the conflict-affected areas\. 19  ï‚ The success of NEHRP led to replication of home-owner driven strategy to other Bank-financed projects in Sri Lanka i\.e\. the Tsunami Emergency Recovery Credit (TERC) and the Puttalam Housing Project\. ï‚ Because of the project, the Government initiated several programs to improve infrastructural facilities in terms of building roads and electricity connections to those villages where houses were constructed\. ï‚ The Government has started applying NEHRP standards as the national standards for the post-housing reconstruction in the North after 2009\. Negative ï‚ Beneficiaries were often unable to complete construction of their houses within the allocated housing grant envelope\. They frequently utilized their savings and incurred debts\. This was exacerbated when many of them built houses bigger than the standard NEHRP specification of 500 sq\. ft for a house\. ï‚ Half way through the implementation, house construction had to be suspended at Killinoichi, Mulaitivu, and Jaffna because of the escalation of war in those areas\. Construction started in the newly resettled areas in the North only after the conflict was over and cleaning up of land mines in those places\. Consequently, many houses remained incomplete at the time of project closing\. 3\.6\. Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A 4\. Assessment of Risk to Development Outcome Rating: Moderate As the houses constructed under the project have been transferred to beneficiaries, and hence have become private assets, individual house owners are responsible for the maintenance of their houses\. Further, the Bank is also working with the Ministry of Economic Development, and participating in donor meetings to keep track of the developments such as the Indian Housing Project and NGO housing projects which are currently under implementation\. On the other hand, as mentioned in the Borrower‟s Evaluation Report, the following risks could affect the sustainability of the achievements of the project: (i) Excessive borrowings beyond the capacity to repay (ii) Lack of essential social and economic infrastructures 20 (iii) Capacity building and training of skilled staff (iv)\. Environmental concerns of sustainability For details, see Annex 7 - Borrower‟s Evaluation Report 5\. Assessment of Bank and Borrower Performance 5\.1\. Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory QAG‟s QALP-I panel had rated the quality of design and focus on development effectiveness as Highly Satisfactory; According to the ICR team has rated the Bank's performance in the identification, preparation, and appraisal of the project was Satisfactory\. 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\. A number of alternatives were considered for the project design\. In addition, major risk factors and lessons learned from other earlier projects in the social sector were considered and incorporated into the project design\. Project preparation was carried out with an adequate number of specialists who provided the technical skill mix necessary to address sector concerns and a good project design\. The Bank provided adequate resources in terms of staff weeks and dollar amount to ensure quality preparation and appraisal work\. The project was consistent with the CAS and government priorities in the sector at the time\. The Bank had a consistently good working relationship with the Borrower during preparation and appraisal\. (b) Quality of Supervision Rating: Satisfactory QAG‟s QALP-I panel had rated the quality of Bank supervision, supervision inputs and processes, and candor and realism of ISRs, and quality of implementation as Satisfactory, and the likelihood of achieving DOs as Highly Satisfactory/Likely\. According to the ICR team, the Bank's performance during the implementation of the project was satisfactory\. Sufficient budget and staff resources were allocated, and the project was adequately and intensively supervised, and closely monitored\. The task team‟s reporting on supervision was satisfactory\. The team prepared Aide-Memoires regularly and alerted the Government and NEHRU to problems with project execution and facilitated remedies in a timely manner, in conformity with Bank procedures\. Further, 21 the Implementation Status Reports (ISRs) realistically rated the performance of the project both in terms of achievement of development objectives and project implementation\. The task team also monitored safeguard and fiduciary compliances\. Bank‟s procurement and financial management staff worked with the NEHRU staff to explain the rules and procedures to be applied during project implementation, based on the Loan and Project Agreement\. The task team also carried out MTR in April 2007\. As QAG panel had observed, various levels of management performed well while providing cross-checks and complementary expertise; there was continued rapid response to implementation issues; project implementation was suspended in those districts where appropriate conditions were not met; and implementation schedule was adhered to by the task team\. Further, continued Social Impact Monitoring was used to feed back information for implementation improvement as well as to ensure transparency, and perception of transparency to the beneficiary selection process\. Strict attention to impartiality resulted in a significant positive impact on gender relations because of the dual ownership requirement and promotion of women‟s participation\. It is worth pointing out that the task team carried out supervision missions regularly at a time when the conflict was at its peak\. Even in the face of safety and security challenges, the team operated efficiently and conducted ongoing risk mitigation measures to ensure that the project was implemented smoothly\. (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: Satisfactory As mentioned in Section 2\.1, the government showed its commitment to the objective of the project at the time of project preparation, and maintained this commitment throughout implementation\. The government officials worked closely with the Bank's project team on a continual basis, and cooperated fully with the task team\. Appropriate levels of review and approval were usually in place; financial accountability and follow-up was observed, and expenditures were duly authorized before they were incurred; and documentation was maintained properly for periodic review\. The project did not suffer from any counterpart funding problems, as the GOSL took timely corrective measures and made appropriate budget provisions\. However, towards the end of the project, there were frequent changes of project directors and other senior staff of NEHRU, which adversely affected implementation 22 (b) Implementing Agency or Agencies Performance Rating: Satisfactory NEHRU was very effective in carrying out all aspects of project management, such as financial management, procurement arrangements, reporting activities, and disbursements: Financial Management Review\. An Internal Audit Unit was established in the Project Unit which closely monitored and controlled the implementation progress on continuous basis\. Annual Project Audits were carried out, and was up-to-date with satisfactory result\. Financial control of NEHRP was further strengthened by independent Fixed Asset Verification of equipments and vehicles\. NEHRU adopted accounting policies laid out in the Financial and Administrative Regulations of the GoSL and project-specific procedures laid out in the Project‟s Financial Management Procedures Manual\. NEHRU followed the Central Government‟s Financial Regulations (FRs)\. Administration procedures for following the Government FRs and detailed project Financial Management arrangements were specified in the NEHRP Financial Management Manual\. The Auditor General of Sri Lanka carried out the audit of NEHRP annually\. Overall, Financial Management performance of NEHRP was satisfactory throughout the project\. Procurement for NEHRP was carried out in accordance with the „Guidelines: Procurement Under IBRD Loans and IDA Credits‟; „Guidelines: Selection and Employment of Consultants by World Bank Borrowers‟, and the provisions stipulated in the Development Credit Agreement Signed between GOSL and the Bank\. For each contract to be financed under the NEHRP, the Government and IDA agreed upon the procurement method, the consultant selection method, the need for prequalification, estimated cost, the requirements for prior review and the time frame\. This was described in the Procurement Plan prepared at the initial stage of the project and periodically reviewed and updated annually or as required by NEHRU and the Bank Procurement Specialists to reflect the actual implementation needs and improvements in institutional capacity\. Procurement of resources (construction material and labor) was done directly by the beneficiaries for their housing construction, without any middle men\. Environmental and Social Safeguards\. Environmental issues of NEHRP were monitored by NEHRU and the Bank team during project preparation and implementation\. NEHRU established an Environmental Unit staffed with district level Environmental Officers\. Environmental issues of NEHRP were assessed through an EIQ for each selected village and designed based on the findings of a full scale EIA carried out in the pilot phase in 2004\. The release of funds for construction in a given village took place after the EIQ was completed and cleared\. Each completed EIQ was evaluated by the Environmental Unit at NEHRU and rated for its quality based on accuracy, relevance and presentation of 23 data/information\. There was no case of land acquisition, and due diligence was applied in terms of the CSIA, selection process, social inclusion and gender issues\. Reporting Arrangements\. NEHRU submitted all required quarterly and annual reports in a timely manner\. These reports were informative, and provided valuable feedback on how the project was progressing covering all project activities\. The status of performance indicators were incorporated in all progress reports and served as valuable input to Bank supervision mission reports\. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory In light of the Government and NEHRU performance as discussed above, the overall performance of the Borrower was satisfactory\. 6\. Lessons Learned ï‚ An „owner driven‟ housing reconstruction program is the most preferred strategic option, even in war damaged and displaced societies, if adequate institutional and financial supports are made available\. As the house owners themselves will be staying in the houses after reconstruction, they will be more interested and committed to ensure that a high quality is maintained in construction\. ï‚ For a large scale housing program to be successful, important factors to be considered are: (i) a simple project design; (ii) appropriate administrative arrangements, at the village, division, district and province; (iii) appropriate coordination among these stakeholders; and (iv) a decentralized supervision of the project by technical officers and other sectoral staff at the village/division level\. In addition, the arrangement to pay the housing cash grant money directly to beneficiaries, giving them responsibility, linking physical progress with financial payments, and avoiding middle men are also critical factors for the success of a project\. ï‚ Third party technical audits at the household level will help in improving construction activities and quality\. For this project, the use of CSIA was very useful as a third party monitoring, due to the fact that the project comprised private goods where a transparent beneficiary selection process was essential, especially in a politically highly sensitive context\. ï‚ Capacity building should be given greater importance, especially in backward areas such as NEHRP project area\. Not only should the capacity of the project office be built but also of partner agencies who are mandated to enforce regulations and/or monitor activities\. 24  ï‚ As a policy the NEHRP had promoted tiles as the roofing material but most of the beneficiaries could afford only a roof with asbestos sheets with the given housing cash grant (as the cost involved is about 40% less on the roof)\. With the escalation of costs, of both materials and labor, beneficiaries had found it increasingly difficult to complete the core house within the given budget\. As a result, the NEHRU as well as the Bank had to agree to the use of asbestos sheets in order to facilitate project implementation and also to ensure beneficiaries won‟t be pushed into obtaining loans to build the roof\. ï‚ It is very likely that for a project like NEHRP with a duration of about four years, there will be price escalations and the consequent cost over runs\. In order to cope with these increases, there should be adequate flexibility to adjust the housing cash grant amount\. ï‚ Close monitoring and supervision by technical officers and engineers contributed to the high quality and completion of houses within the time frame\. They went out of their way to help beneficiaries to resolve shortage of construction materials, and even worked beyond their working hours\. ï‚ Frequent changes in the project team, especially the project director should be avoided to ensure continuity in implementation\. The ad hoc turnover and deployment of key staff would result in a lack of continuity and loss of institutional memory in the project team, leading to the top and senior management not being adequately familiar with the project\. To avoid such situations, the government will need to take special care to see that, as far as possible, the project staff is retained during the project period\. In particular, PMU staff should not be moved out for political reasons\. In case any staff resigns or retires from service, the government should try its best to fill up the vacant position without much delay\. ï‚ As QAG had observed, the project was successful because it was beneficiary-led, used local capacity, and generated private goods of immediate benefit to the beneficiaries, who were then able to leverage the equity for further social and economic benefits\. ï‚ The pilot grievance redress system lacked transparency, and ended at the divisional level\. Beneficiaries subsequently had little right of appeal\. Taking this experience into account, the system designed for NEHRP included divisional, district, and provincial grievance redress procedures\. It was followed by a substantive communication campaign, which ensured broad awareness of and easy access to the system\. It is a good feature that the project learned from a pilot component and accordingly made adjustments\. For additional lessons, see Annex 7 - Borrower‟s Evaluation Report 25 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies N/A (b) Cofinanciers An audit was carried out by the EC and shared with the Bank\. No major issues were identified and project implementation was considered satisfactory\. The Bank prepared a „Specific Completion Report‟ for the EC funded component and shared with the co- financier\. The report was found to be of good quality and endorsed by the EC\. (c) Other partners and stakeholders N/A 26  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) Housing 108\.99 110\.45 Capacity Building 4\.82 6\.35 Project Management 5\.37 3\.90 Total Baseline Cost 119\.20 120\.66 Physical Contingencies 0\.00 0\.00 0\.00 Price Contingencies 0\.00 0\.00 0\.00 Total Project Costs 119\.20 120\.66 Project Preparation Fund 0\.00 0\.00 \.00 Front-end fee IBRD 0\.00 0\.00 \.00 Total Financing Required 119\.20 120\.66 (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower 2\.70 2\.70 \.00 International Development 75\.00 75\.00 \.00 Association (IDA) 43\.00 IDA- Additional Financing 27  Annex 2\. Outputs by Component Component A: Housing Assistance: The project supported the return of displaced population in the North and East, and regularize land title problems and enabled them to resume economic activity through construction\. The physical progress achieved is shown in Table 2 and housing allocation is given in Table 3 Table 1: Physical progress in the overall Housing Program as of December 31, 2011 Houses Number Of Houses Donor planned Construction Construction Percent Cancelled (Number) commenced Completed Completed International Development 41,547 41,547 40975 98\.90 572 Association– IDA Initial and additional funding European Commission (1 , 2 8,532 8,532 8,532 100\.00 Tranche) – EC Total 50,061 50079 49507 572 Table 2: Housing Allocation as of December 31, 2011 Installments Refunded of December 31, 2011 and Construction Did Houses Completed as Dropped for Various Houses Started but adjustments, as of Allocation after October 2010 % of Houses Completed not Start Reasons Districts Jaffna 13,342 13,269 73 8 99\.5% Killinochchi 5,502 5,335 167 4 97\.1% Mullaithivu 2,920 2,920 100\.0% Vavuniya 2,143 2,142 1 99\.9% Mannar 3,473 3,431 42 98\.8% Total North 27,392 27,097 282 12 90\.0% Trincomalee 6,513 6,394 119 98\.1% Batticaloa 11,593 11,441 170 98\.5% Ampara 4,575 4,575 100\.0% Total East 22,699 22,410 289 98\.7% TOTAL 50,061 49,507 572 12 99\.0% 28 Component B: Capacity Building and Monitoring Skill Training Program was conducted in all eight districts\. Table 3 provides details of different training courses undertaken TABLE 3: Summary of training courses completed under Skill Training program Training Course Target Achievement (Persons) (Persons) Masonry Training 1550 1284 Carpentry Training 752 617 Aluminum Fabrication, house wiring & plumbing Training * 100 100 * Conducted only in Jaffna Land Task Force - The Land Task Force was established in March 2005 to review and resolve disputed land ownership and unclear title\. This was an important activity, as proof of land ownership was one of the criteria for eligibility for housing grant\. The resolution of land disputes provided security of tenure and enabled many to participate in NEHRP\. Third Party Technical Audit - NEHRP provided funding to support an independent and continuous 3rd party audit of the quality of civil work construction\. A consulting firm was contracted to carry out the audit of civil works on sample basis\. This audit included monitoring of technical engineering standards, and number of houses constructed in a phased manner\. The NEHRU benefited from this audit to improve on the construction quality over the phases of the project\. Continuous Social Impact Assessment (CSIA) - The CSIA was a an independent 3rd party verification of the housing program which provided important information on the social issues, selection process, grievance redressal, land disputes, and gender issues through periodic reports\. A consulting firm was contracted to conduct the independent CSIA (on sample basis) under NEHRP and special reports on request\. This had been very important exercise, as it identified issues under the project; and had given opportunity to the team and NEHRU to provide timely support and take remedial measures to mitigate risk\. Grievance Redressal Institutions - NEHRP provided housing support cash grants to the poorest and most vulnerable and only 14% of the conflict-affected population in the North and East\. Therefore, a set of selection criteria had to be in place and agreed with the Government\. To ensure transparency and fairness of the process, the NEHRP supported the Government to establish a Divisional Grievance Redressal Committee to hear complaints regarding the selection process\. 29 The Information, Education, and Communication (IEC) - www\.nehrp\.com – The NEHRP also supported a wide scale and effective campaign which was intended to educate beneficiaries to: (i) understand NEHRP and its selection process; (ii) know the procedure in case of grievances; and (iii) obtain technical guidance\. The IEC was a successful exercise to make the IDPs (beneficiaries and non-beneficiaries) fully aware of the project objectives and selection criteria\. Strong and pro-active communication campaign was instrumental in the project success\. A Website was developed by NEHRU to further disseminate information and to enhance transparency\. Component C: Program Management The GOSL established NEHRU with the staff at provincial, district, and divisional levels to carry out the day to day implementation of this large scale housing program\. NEHRU set up its head office in Trincomalee District and a satellite office in Batticaoloa to be close to the project areas\. NEHRU was staffed with Engineers, a large number of Technical Officers at divisional level, Social Development Specialists, Environmental Specialists, Information-Education Communication Specialists, Management Information System Experts, and other required staff to effectively implement this large scale housing program\. There was a set of agreed criteria for village and beneficiary selection\. The NEHRU scored and ranked each village and the beneficiaries (within selected village) according to these criteria\. Management Information System (MIS) – To ensure that NEHRP operations and financing were properly collected, recorded and shared with the stakeholders, NEHRU developed a comprehensive MIS with the help of its in-house IT Specialists and trained District Project Unit (DPU) staff on the use of this database\. The information system included a comprehensive database on financial, physical and operational activities at the village, divisional and district level with detailed information for each beneficiary (name, location, socio-economic profile, family context, housing condition, land ownership)\. The field staff collected the relevant data using standardized forms\. The data collected was in turn submitted to the DPUs\. The DPUs processed this and submitted the information to NEHRU each week\. The identification of villages and beneficiaries was based on this data\. The database also included information on the phases of construction and payment of installments\. The MIS was used to generate reports for the MoNB and IDA\. Data was also collected for other activities i\.e\. skills training, IEC activity, land task force and project management\. 30  Annex 3\. Economic and Financial Analysis 1\. Introduction NEHRP facilitated reconstruction 46,000houses in the North East over a four-year period through the provision of housing support cash grants\. The housing reconstruction facilitated return of displaced populations in the northeast ad regularization of land title to targeted beneficiaries\. The project also contributed to training of skilled construction workers, consequently allowing the resumption of economic activity in the war devastated region through increased construction activity\. The project had three main components which generated economic benefits: Housing assistance for reconstruction of 46,000 houses and training of skilled workers; capacity building and monitoring; and program management\. 2\. Project costs and outputs The actual project costs over the eight year period from 2004 through 2011 are presented in Table 1\. The total project costs was US $148 million of which IDA contributed US $120\.9 million, EU contributed US $ 21 million and the rest $6\.4 million by the GOSL\. Table 1: NEHRP-Project costs by years Table 1: NEHRP-Project costs by years Million US $ IDA EU GOSL Total 2004 1\.15 - - 1\.15 2005 13\.02 - 0\.62 13\.64 2006 17\.87 1\.37 0\.75 19\.99 2007 18\.46 3\.08 0\.94 22\.48 2008 18\.46 4\.39 0\.91 23\.76 2009 6\.66 12\.16 2\.22 21\.03 2010 21\.73 - 0\.45 22\.17 2011 23\.59 - 0\.51 24\.09 Total 120\.93 21\.00 6\.39 148\.31 The project envisaged reconstruction of houses and training workers in construction, settlement of land disputes in addition to implementation support\. The project outputs were the reconstructed houses, training offered to the skilled workers and the improved skills of construction workers in addition to some capacity building through implementation support\. The numbers of houses constructed, by year, in the different districts are presented in Table 2 below\. 31 Table 2: Number of houses reconstructed in different districts District Allocation 2004 2005 2006 2007 2008 2009 2010 2011 Total 1 Jaffna 13,342 125 1,088 630 1,333 2,045 2,142 962 4,944 13,269 2 Kilinochchi 5,502 100 501 3 7 93 4,631 5,335 3 Mullaitivu 2,920 100 513 123 2184 2,920 4 Vavuniya 2,143 120 295 907 22 301 495 2 2,142 5 Mannar 3,473 100 66 727 782 246 466 1\.044 3,431 Northern 27,380 545 2,463 2,267 1,362 3,128 2,883 1,644 12,805 27,097 Province 6 Trincomalee 6,513 115 666 1,697 1,324 892 1,050 28 622 6,394 7 Batticaloa 11,611 100 471 660 1,390 4,476 3,439 750 155 11,221 8 Ampara 4,575 100 309 786 164 2,354 862 4,575 Eastern 22,699 315 1,446 3,143 2,878 7,722 5,351 778 777 22,410 province Total 50,079 860 3,909 5,410 4,240 10,850 8,234 2,422 13,582 49\.507 In addition to the construction works the project also facilitated training to laborers in masonry and construction works\. The numbers of workers trained in the different districts as part of the project are presented in Table 3\. Table 3: Number of workers trained in masonry and carpentry Masonry Carpentry Total 1 Jaffna 151 144 295 2 Kilinochchi 94 32 126 3 Mullaitivu 325 52 377 4 Vavuniya 76 25 101 5 Mannar 156 156 6 Trincomalee 115 115 230 7 Batticaloa 297 199 496 8 Amparai 70 50 120 Total 1,284 617 1,901 In addition the training in masonry and carpentry about 346 workers were also trained in concrete block casting\. The workers who were trained participated in the reconstruction programs\. Thus the training programs while reducing the costs of reconstruction also improved their skills and experience and thus increased their current and potential future wage earnings\. 3\. Project benefits The benefits from the NEHRP include both direct and indirect benefits: Direct benefits: The direct benefits include ï‚ Incremental value of the housing stocks itself from the reconstruction of 49,507 houses with direct housing assistance to the IDP and non-IDP families; ï‚ Increased wage income of trained construction workers as a result of their improved skills 32 Indirect benefits: The indirect benefits from the project included ï‚ Multiplier impacts of wage income of construction workers generated from the housing reconstruction program; ï‚ Benefits from additional economic activities, through multiplier effect, resulting from linked businesses including suppliers of construction goods and services , other operating inputs and employment opportunities created in the services sector including transportation and sales; h\. Benefits from resolution of land disputes and rehabilitation and settlement of internally displaced families/persons due to the conflict\. i\. Psychological and social value of having a decent home This analysis accounted for the benefits listed under (a), (b), (c), (d) and (e)\. However, we have not attempted economic valuation of the /quantification of the psychological and social value of having a decent home, which is high in Sri Lanka\. Methodology and assumptions: The ICR team has made the following assumptions for valuation of the economic benefits from the project: Value of reconstructed houses: As the houses are reconstructed the value of the houses increase\. The value added of the reconstructed houses is one of the major direct benefits of the project\. The value added is estimated by average of value of the house before the project to the value after the project\. Based on discussions with the project engineers and the rural households the values before and after reconstruction are estimated at Rs\. 325 and Rs\. 700 thousand respectively\. These values are used to estimate the aggregate value of houses reconstructed under the project\. In addition, the values of the houses reconstructed also appreciate over time in the project area at an annual rate of 9 percent\. Increased wage income of trained construction workers as a result of their improved skills: The skills training improved the skills of construction workers and as a result increased their wage earnings by average of $ 400 per annum\. The workers trained as part of the project was assumed to earn the higher wages over a productive life of 15 years\. Multiplier impacts of wage income of construction workers and the additional economic activities as a result of the housing reconstruction program: In order to compute the multiplier impacts of wage income and construction expenditures a multiplier of 1\.4 was used in this analysis5\. 5 The multiplier was arrived at as 1/(1-x*y*z) where x is the percentage of new income the consumer and business will spend; y is the percentage of consumer expenditures made in the state/region; and z is the percentage of business expenditure made in the state/region\. We have assumed that the values of x, y and z to be 0\.8, 0\.9 and 0\.4 respectively (Income multipliers in Economic Impact Analysis, Guide Z-108, New Mexico State University\. www\.aces\.nmsu\.ed ) 33 Benefits from resolution of land disputes and rehabilitation and settlement of internally displaced families/persons due to the conflict: The analysis assumes that the beneficiaries with land and housing ownership will have better livelihood and can generate higher income by investing in income generation activities\. Based on data collected from the project area, the estimated increase in income from investment in income generating activities is Rs\. 24,000 per year\. 4\. Economic efficiency and sensitivity analysis The analysis relates the project costs (Annex-3-Table 1) to the benefits from the economic value stream of benefits due to the project\. The benefits stream included the incremental value of the reconstructed houses with the project, economy-wide multiplier impacts of wage incomes of construction expenditures, increase in wage incomes as a result of improved skills of trained workers trained as part of the project and benefits from resolution of land disputes and rehabilitation and settlement of internally displaced families/persons due to the conflict\. The values of the houses were found to appreciate in values over the years in the project area\. Based on discussions with the project staff, we have assumed the rate of appreciation at an annual rate of 9 percent for the next 15 years\. In addition to the appreciation in value of the houses, as discussed above as a result of the training imparted, the construction workers will earn increased wage incomes from their improved skills\. It is assumed that these trained workers will earn additional wage incomes for the next 15 years of their productive life\. The net present value and the Benefit: Cost ratios based on the cost stream and the estimated benefit stream from the whole project are presented in Table 4\. Table 4: Net present value and benefit: Cost ratios 8% discount rate 10 % discount rate 12 % discount rate Net Present value (Million 23,000 22,420 19,103 Rs) Benefit: Cost ratio 2\.14 2\.05 1\.91 The above table shows that the project yielded modest returns measured in terms of Benefit: Cost ratio and Net Present Value of cost and benefit streams\. At 8% rate of interest the Benefit: Cost ratio was 2\.14, which implies that a dollar invested in the project yielded $2\.1 as returns\. At a higher discount rate of 12 percent the project returned a Benefit: Cost ratio of 1\.91\. The ICR team could not identify significant risks to affect the project outcomes and the benefits from the project\. Hence, only a sensitivity analysis of the results to different discount rates has been conducted\. The analysis showed that even at a discount rate of 12 percent, the project yielded a Benefit:Cost ratio of 1\.91\. 5\. Conclusions 34 It may be noted that the analysis did not include the psychological and social value of owning a decent home\. Such social values could be high in a country like Srilanka that has long been affected by internal conflict and populations have been internally displaced for long periods of time\. The main project benefit was creation of private assets in the form of reconstructed houses whose values appreciate over time\. The possible risks include resumption of conflict and the loss of values, the chances of which is which are very negligible/Since this project envisages construction of private assets in the form of houses and settlement of property disputes, there are no maintenance or recurring expenses for the government after the project was closed\. The PAD did provide an economic analysis for the whole project\. The Net Present Value and Benefit: Cost ratios presented in the PAD cover only the benefits from income generation activities undertaken by the beneficiaries and the benefits from training construction workers\. According to the estimates presented in the PAD the expected benefits from income generating activities supported by the project will have a Net Present Value ranging from $2100 to $3600 per worker over a period of 15 years at 8 percent discount rate\. Similarly, the PAD estimated NPV of the additional income from training of construction workers at $4470 per worker over the 15 year period (8 % discount rate)\. Since these estimates relate only to the above two components our results could not be compared with the results in the PAD and hence a comparison is not attempted\. 35  Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Supervision/ICR Representative/Country Manager, EACSB Naresh Duraiswamy Former TTL Task management GFDRR Task management/ Raja Rehan Arshad Lead Disaster Management Disaster Specialist, former TTL Management Farahnaz Azoor Program Assistant SASDO Program Assistance Deepal Fernando Senior Procurement Specialist ECSO2 Procurement Senior Urban Development Soraya Goga MNSUR Urban Development Specialist Pushya Mitra Gunawardhana Consultant SARFM Consultant Task management/ Shideh Hadian Senior Infrastructure Economist SASDU Infrastructure Economics Nina Pauliina Kataja Consultant SACSL Consultant Disaster Risk Management Disaster Risk Haris Khan SASDU Specialist Management Lilian MacArthur Program Assistant SASDO Program Assistance Senior Social Development Social Asta Olesen SASDS Specialist Development Sumbo Adeyemo Program Assistant SASDO Program Assistance Nadeera Rajapakse Consultant SASDI Environment Eashwary Ramachandran Operations Analyst SASDI Operations Sunethra Chandrika Procurement Specialist SARPS Procurement Samarakoon Financial Jiwanka B\. Wickramasinghe Sr Financial Management Specialist SARFM Management Financial Supul Chamikara Wijesinghe Financial Management Specialist SARFM Management Samantha Prasada Water & Sanitation Specialist SASDU Water & Sanitation Wijesundera (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) USD Thousands Stage of Project Cycle No\. of staff weeks (including travel and consultant costs) Lending FY04 115\.04 FY05 176\.66 36  FY06 0\.00 FY07 0\.00 FY08 0\.00 Total: 291\.70 Supervision/ICR FY04 0\.00 FY05 58\.59 FY06 188\.61 FY07 101\.39 FY08 115\.47 FY09 112\.85 FY10 93\.17 FY11 97\.67 FY12 78\.70 Total: 846\.45 37 Annex 5\. Beneficiary Survey Results N/A Annex 6\. Stakeholder Workshop Report and Results N/A 38  Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR 1\. INTRODUCTION The main objective of the North East Housing Reconstruction Project (NEHRP) was to provide improved and affordable housing units to the poorest conflict-affected families in this region who meet the accepted vulnerability criteria\. In this respect, to assist them to revive their living conditions, NEHRP has supported for there construction of 40,307 fully damaged houses and repair of 9,200 partly damaged houses, over a seven year period commencing from the last quarter of 2004\. North East Housing Reconstruction Programme (NEHRP) was set up with the assistance of World Bank, and Sri Lankan Government to assist the vulnerable war affected families in the North and East Provinces\. Eligible families were selected from all the Eight Districts in North and East Provinces using a stringent and transparent NEHRP criteria\. Financial grants were made for the reconstruction of houses at the rate of Rs: 250,000 for fully damage houses and Rs: 100,000 for partly damage houses under Phase I & II in 2005 and 2006\. This grant was increased to Rs: 325,000 for fully damage houses under phase III, IV & V due to claims made by the beneficiaries\. By adopting “Home Owner Driven Conceptâ€?, 49,507 houses have been successfully completed as at 31\.12\.2011\. A Pilot housing Project was carried out covering 860 Houses in all eight Districts in North and East Provinces in 2004 The entire project involved U\.S$ 146\.91 of which 81% funded by the International Development Association (IDA) and 14% by the European Commission (EC), while the balance 5% was funded by the Government of Sri Lanka (GOSL)\. Commencing from the Pilot Project of 2004/05, a total of 4,370 villages in the North and East have been covered, out of a planned total of 5,874\. Mode of assistance was to entail a cash grant paid in five installments under the “Owner Drivenâ€? concept\. The project has been terminated in December, 2011 as planned, and this report is being presented as the “Borrower Evaluation Reportâ€? for the NEHRP Project\. As requested by, Anna Wellenstein, Acting Country Director Sri Lanka and Maldives and Shideh Hadian Task Team Leader, NEHRP, aspects concerned with the Outcome/Achievements; Outputs/Deliverables; Factors affecting implementation; Transition Arrangements for sustenance; Risks associated with sustainability; Bank Performance; Borrower‟s Performance as well as Lessons learnt from the Project, are being briefly discussed in this report\. Detailed field survey is needed for such comprehensive, but realistic assessments\. However, due to lack of time, only four villages were visited, two in Jaffna district and two in Kilinochchi, in a three days program and altogether, 37 randomly selected beneficiaries were interviewed\. Further, consultations with the Addl\. District secretary, 39 Divisional Secretaries of these two districts and the Project staff also were very valuable\. Inspections tour in Mullaitivu district without meeting beneficiaries was also done\. All project documents and records needed were studied and other interrelated documents were also obtained on line\. Data collected through all these means is presented in this report, together with our observations\. (Refer annexed photographs I - V) It is highly recommended to carry out a comprehensive survey about 12- 14 months after project closure, in order to have a clear understanding of its strengths and weakness, and appropriate corrective measures taken in order to sustain the benefits the project has bestowed\. 2\. PROJECT OUTCOME/ACHIEVEMENTS\. Information gathered on the outcome of this project by all these procedures is being presented in log frame format given in Table 1 and needs no further elucidation\. TABLE 1: PROJECT OUTCOME/ACHIEVEMENTS (Presented in the Log Frame Format) Component 1 Intervention logic: 50,079 targeted beneficiaries build houses in the allotted amount of time, and to technical standards specified by the program\. Objectively verifiable Means of Assumptions results indicators verification 19,623 housing units NEHRP Final Inadequate beneficiary capacity mainly reconstructed within 6 month Progress report as contributed to low level of success (39\.2%), and within allocated budget at 31\.12\.2011 though other factors such as difficulties in obtaining materials and errors in beneficiary selection, also would have been partly responsible Objectively verifiable Means of Assumptions results indicators verification Percentage of grants NEHRP Financial Material purchase – 3 weeks – 97% The disbursed within 6 months records program was over- and within each Foundation – 6 weeks – 76% ambitious disbursement phase and could Super structure – 9 weeks – 43% have been planned for a Completion – 6 weeks – 37% longer period\. Grievances redressed NEHRP records No significant delay and 80% settled\. The completed within 15 day procedure adopted for grievance redressed is acceptable Targeted beneficiaries (%) NEHRP records Percentage of most vulnerable among the targeted including women headed beneficiaries is over 90% and included woman &disabled) headed and Disabled\. A very satisfactory status Beneficiaries who had their NEHRP records About 70% of those who appealed had their Land claim normalized (%) claims normalized, indicating special harmony between work schedules of LTFs 40  And program interventions\. Component 2 Intervention logic: Adequate capacity available to support housing reconstruction process ,901 trained skilled NEHRP Approximately 26 skilled construction workers per house\. construction workers record Though appears adequate, timely availability of such workers assisting in NEHRP has been a constraint for such large scale constructions Hence, construction more training of skilled workers will be beneficial Resolved land disputes NEHRP The total of 1,712 land dispute cases received of which 811 through mobile land task record were resolved (47% success), denoting constraints in the force at the district level System that require further investigation\. Completion of study for NEHRP Government use the information to design next steps in proposed North East financial Housing policy framework\. housing finance institution record Component 3 Intervention logic: All actors (NEHRU, district program units, divisional officers) aware of roles and Responsibilities and comply accordingly\. Incidents of Programming- 1,327 cases of bottlenecks were reported of which 746 were bottlenecks Management Solved (56% success)\. Further improved needed\. Implementation (%) system Timeliness of Project record Satisfactory reporting Homeowner Project record Out of the 49,507 beneficiaries, 100% of them complied with the compliance Technical standards\. With tech\. standards (%) 3\. PROJECT OUTPUTS/DELIVERABLES 3\.1\. Physical and financial progress in house construction The core concept of this Housing program was that, reconstruction will support the return of displaced population in the North and East, regularize land title problems and enable them to resume economic activity through construction\. The physical progress achieved is shown in Table 2 and the financial progress is in Table 3\. TABLE 2: Physical progress in the overall Housing Program (Refer annexed IV & V) Houses Number Of Houses Donor planned Construction Construction Percent Cancelled (Number) commenced Completed Completed International Development 41,547 41,547 40975 98\.90 572 Association– IDA Initial and additional funding European Commiss,(1 , 2 8,532 8,532 8,532 100\.00 Tranch) – EC Total 50,079 50079 49507 572 41 Vulnerability has been the criteria for selection of villages and beneficiaries and the targeted 50,079 Houses (Table 2) were expected to cover 13\.5% of total need for housing in the North and East\. The Different funding sources are in Table 3 and a total of US$146 million was made available\. TABLE 3: Financial progress in the overall Housing Program Funding source Original Present Disbursement approved value amount (31\.12\.2011 Total Percent of (US$ in Mn) ) (US$ in the Present (US$ in Mn Mn) Value International Development Association – IDA 118\.00 118\.65 118\.65 100\.00 Initial and additional funding European Commission (1 & 2 Tranch) – EC 22\.05 21\.74 20\.55 94\.50 Government of Sri Lanka GOSL including EC com 6\.52 6\.52 5\.97 90\.65 Total 146\.57 146\.91 145\.17 The overall financial performance indicates disbursements between 90% to 100%\.for different funding sources, a remarkable achievement with cancellations of only 572 houses (1\.1%) for various reasons\. Non completion of houses attributed to several factors, including not being resettled, displaced to India, land sold with partially constructed houses, internally displaced, unresolved land problems and disputes and death of beneficiary and is justifiable\. The overall achievement of villages undertaken for house construction (Table 4) was 26% with the lowest of 6\.3% in Mullaitivu, probably due to the effect of intense conflict situation and displacement on a massive scale\. Reconstruction in some villages was undertaken for more than one phase\. TABLE 4: Details of villages undertaken for construction Parameter District Jaffna Kilinochchi Mullai Vavuni Mannar Trinc Batic Ampar Total No\. of villages 1,440 370 625 505 587 645 857 876 in districts Villages total No 385 141 39 121 121 161 192 296 169 undertaken Achievement (%) 27\.3 38\.1 6\.3 24\.0 24\.0 27\.4 29\.8 34\.5 19\.3 Total No of villages: 5874 Total No of villages undertaken: 1,504 Mean achievement %: 25\.8 42 3\.2\. Progress in Skill Training Skill Training Programme was conducted in all Districts and the total allocation made available was Rs\.30\.90 million of which only Rs\.1\.893 million remained unspent\. Details of this component are in Table 5\. TABLE 5: Details of Skill Training carried out under NEHRP District Parameter Jaffna Kilinochchi Mullai Mannar NEHRU Trinc Batic Ampar Allocation Mn (SLR) 28\.000 2\.900 30\.900 Expenditure Mn (SLR) 5\.027 1\.239 10\.408 2\.366 8\.716 0\.042 1\.290 29\.007 Balance unspent Mn 0\.244 1\.649 1\.893 (SLR) Table 6 provides information on different courses undertaken\. The total number trained for each course may not be sufficient to meet the demand and there is a need not only to repeat these courses through TABLE 6: Summary of training courses completed under Skill Training program Training Course Target No Achievement Masonry Training 1550 1284 Carpentry Training 752 617 Aluminum Fabrication, house wiring & plumbing Training * 100 100 * Conducted only in Jaffna Alternate donor funding, but also for further additions such as in basic computer skills and information technology essential for children who have completed O/L and A/L studies, but without opportunities to enter universities for higher education\. Most beneficiaries interviewed, indicated that they were not aware of these training programs\. 3\.3 Environmental safeguards framework The integrated Environmental Safeguards Framework executed by NEHRP included processing of an Impact Assessment questionnaire, a tree planting program involving distribution of 151,641 seedlings, Environmental Awareness Program for 933 persons including beneficiaries, VRC as well as school students and a training for the staff of Divisional Secretariats involving 19 members from all 8 districts\. Fund allocation was Rs\.12\.65 million but only 85,538 were issued in all the districts at a total cost of Rs\.9\.071 million\. It is recommended that this program also continued through alternate donor funding Under the program to mitigate harmful conditions to environment, the formation of village level Environmental Protection groups and building their capacity, monitoring of environmental conditions as well as monitoring/maintenance of seedlings planted has been carried out\. It is important to continue such awareness programs, uninterrupted, but 43 tree planting campaigns should be restricted to the optimum planting period for each crop in order to reduce their mortality rate\. It is appreciable that the project has also encouraged beneficiaries to plant four types of seedlings in their home gardens\. 3\.4\. Grievances received Altogether, 6,891 grievances were received (only for phase V) of which only 1,075 (16%) were accepted and the balance 84% were rejected\. 3\.5\. Condition of most vulnerable beneficiaries The most vulnerable beneficiaries who include 1,405 widows, 304 separatists, 25 orphans and 169 Disabled persons have been identified and further assistance to this group of 1,903 recommended\. 3\.6\. Unresolved land disputes and problems It is commendable that as many land dispute problems as possible have been resolved through LTF\. 4\. FACTORS AFFECTING IMPLEMENTATION It should be noted that almost every activity carried out under the project will have an effect on it, Though those mentioned below will have far reaching consequences and are very briefly discussed: 4\.1\. Insufficient grant A sum of 325,000/= was insufficient of grant to complete the construction of 500 square feet houses\. Due to this, few houses in some Districts (about 10%) were partially completed according to NEHRP criteria (Core house system)\. 4\.2\. Beneficiary selection The selection of villages and beneficiaries, strictly based on the selection criteria is very important and should be carried out without any bias\. Besides, though confined to the vulnerable group, those Selected should have adequate capacity and motivation to complete the task\. Proper beneficiary selection is the corner stone of success and should be completed as early as possible, preferably using even additional inputs, but correctly, and any delays or errors will not only slow down the entire project, but also bring in further difficulties and complications which may not be correctable subsequently\. Perusal of project records of NEHRP and the field survey denote that though the scoring System is desirable, a few problems and wrong selections have occurred which should be avoided in future\. 4\.3\. Coordination among stakeholders Proper coordination among District/Divisional staff, project staff, beneficiaries and other stake holders will have deeper implications on the achievement of objectives, but there appears to be no serious problem in coordination of activities among the various stake holders\. 44 4\.4\. Easy availability of building materials and skilled labor Greater requirements of building material for projects of this nature may result in procurement / Transport delays and requires special attention\. Our investigation indicated that availability and Restrictions in transport of sand has delayed the construction process to some extent and it is the same with availability of skilled labor\. 4\.5\. Technical supervision Project records show inadequacy of Technical Officers (TO) to supervise the construction program and has resulted in not only delays but also poor quality of construction in some cases that were rectified subsequently\. Responsibility for each TO should be reduced not to exceed 130 houses for monitoring and supervision\. 4\.6\. Problems associated with land ownership Several problems in Land ownership were brought to light, but settled by the Land Task Force\. 4\.7\. Fund disbursement delays Records indicate that fund disbursement has not seriously affected activities and caused delays\. 4\.8 Government regulatory mechanisms and favorability of conditions No serious delays or other ill effects have been caused by government regulations and unfavorable Ground situations in the North and East, especially after end of the conflict in 2009\. 4\.9\. Other factors The core concept of this project was not only to complete the physical structures of houses, but also to support the return of those displaced, and also to assist them to resume their economic activities\. Hence, all factors affecting their livelihood and project sustainability will also affect its implementation 5\. TRANSITION ARRANGEMENTS FOR SUSTAINING PROJECT ACHIEVEMENTS The ultimate goal in any project is to ensure that its achievements are sustained after the closure of the project itself, though it is regretful that much importance is not given to it in many cases\. The three phases of relief – recovery – stability have to be viewed independently and in this respect, the transition from relief to recovery is a very critical period that would decide on the fate of the project itself\. Based on the lines of United Nations Sri Lanka Post Tsunami Recovery and Reconstruction Working Draft for December 2004 – December 2006 (UNTS), which outlines UNs response to assist the Government of Sri Lanka to meet their priorities, the four under-mentioned strategic areas have been identified\. 1\. Getting people back into their homes - Transitional and permanent structures 45 2\. Getting people back to work - Livelihoods, economic recovery and small infrastructure, Fisheries, agriculture and environment\. 3\. Provide education, health and - Food security and nutrition, water and protection to all Sanitation sanitation, health and Education 4\. Upgrade national Infrastructure - Capacity Development\. These four components in respect of the NEHRP project, has been adequately discussed in this report and there is no need for repeating them\. In general, the transition from relief to recovery is a very critical, but a sensitive phase and adequate measures taken either directly by the bank or in combination with other multilateral donors to work in partnership with GoSL to ensure smooth transition from relief to recovery\. 6\. RISKS FOR SUSTAINABILITY The principal intention of the GoSL and World Bank, in funding this project was to help launch a housing program that would continue in ensuing years with alternate sources of finance\. The bank has indicated several other measures also in the project program, to ensure sustainability, consequently allowing resumption of economic activity in this war devastated region\. Due to the war, damages occurred to the houses reconstructed by the North East Housing Reconstruction Programme (NEHRP) had fully demolished (debris) in some Division in Mannar, Kilinochchi and Mullaitivu Districts in 2008 & 2009 and it was pointed out by Government Agents to look into these cases for selection of beneficiaries under Phase V\. But World Bank stated that their Grant could be given only once\. Hence, sustainability of activities after closure of the project is a very important aspect and all possible measures taken to ensure it\. Major risks associated with sustainability of this project are as follows: 6\.1\. Betterment of livelihood, income generation and employment opportunities The employment and occupational status of the investigated four villages are presented in Table 7\. Manthirimalai, remote interior farming village in Jaffna with about 70% beneficiaries at present involved in small scale farming on leased lands and/or small enterprises\. Others are mainly employed as farm labor\. Table 8 indicate that present monthly income for about 40% of them is between Rs\.5,000/- 10,000/- while for the balance 60%, is between Rs\.10,000 – 15,000/\. Pulopallai, also is a remote, but coastal village in Kilinochchi district indicating similar trend with about 50% in farming at present and balance involved in small enterprises and skilled labor\. The monthly income of about 70% of them at present is less than Rs\. 10,000/- (Table 8)\. 46 TABLE 7: Employment status of sampled beneficiaries Occupation Number of beneficiaries in each category Village Factor Farmer Fishing Samall Skilled Unskille Total enterprise d labor Manthirimalai Prior to intervention 6 0 1 0 3 10 At present 5 0 2 0 3 10 Pulopallai Prior to intervention 2 2 2 2 0 8 At present 5 0 1 2 0 8 Navatkuli Prior to intervention 0 6 3 1 0 10 At present 3 2 4 1 0 10 Ananthapuram Prior to intervention 0 0 5 3 1 9 Kilinochchi At present 0 0 4 4 1 9 Navatkuili is also a remote coastal village in Jaffna equally poor as the other two\. Prior to the conflict situation, lagoon fishing has been the main occupation, but now due to total loss of boats and fishing gear and a desperate need for survival, some have taken to farming rather than fishing though the coastal saline lands are not suitable for any crop other than rice, while a few continue with their small enterprises and skilled labor such as carpenters and masons\. TABLE 8: Income status of sampled beneficiaries Mean Number of beneficiaries in each category income (Rs/month) Village Factor Less Rs\. Rs Rs Morethan Total than 5000- 10,000- 15,000- Rs 20,000 Rs 10,000 15,000 20,000 5,000 Manthirimalai Prior to 0 1 9 0 0 10 intervention At present 0 4 6 0 0 10 Pulopallai Prior to 3 1 2 0 2 8 intervention At present 2 5 0 0 1 8 Navatkuli Prior to 0 7 3 0 0 10 intervention At present 0 5 5 0 0 10 Ananthapuram Prior to 2 2 5 0 0 9 Kilinochchi intervention At present 1 1 1 5 1 9 Ananthapuram village located in the outskirts of Kilinochchi town, in sharp contrast, indicated an Different trend\. All beneficiaries from this village were in Vavuniya welfare camps, just about 12 – 14 months back with all their property destroyed, but now show signs of remarkable recovery with over 65% of them involved in more income generating 47 small enterprises and skilled labor than farming or fishing\. Also 67% of them reported income levels of over Rs\.15,000/-per month (Table8)\. 6\.2\. Excessive borrowings beyond the capacity to repay The loan situation is shown in Table 9\. Borrowing for productive purposes is beneficial and encourages livelihood development, but for other purposes may result in harmful effects TABLE 9: Outstanding loan of beneficiaries Criteria Villages Pulo Pallai Navatkuli Kilinochchi Avarangal South Ananthapuram Less than Rs\.100,000/- 4 Rs\.100,0000/ -400,000/- 6 5 7 5 More than Rs\.400,000/- 2 0 3 0 Total 10 8 10 9 As indicated in table 9, all sampled beneficiaries have outstanding loans without any saving at all\. The pattern of outstanding loan amongst the villages also show a similar trend as the case of employment and income, with only at Ananthapuram, 40% having less than Rs\.100,000/-\. Most of the loans in other villages were in the Rs\.100,000/- to 400,000/- range, but at Manthirimalai and Navatkuli, 20% and 30% of beneficiaries respectively have loans exceeding Rs\.400,000/-\. The “Seetuâ€? system of saving participated by most of them appears to be the only consolation, which may help to settle loans in some way\. These loans have been obtained exclusively for the house construction and necessitated due to the larger houses (more than 500 – 550 sq\.ft) they have commenced\. Hence, here is a need to strictly limit the floor area in future\. In a broader sense, those in villages close to cities have better opportunities for employment and lively hood enhancement than those in remote areas\. Kilinochchi town at present is a fast developing city with better opportunities than in remote villages and it is in this sense that those at Ananthapuram have profited from small enterprises and skilled labor than farming or fishing\. The same trend could be safely extrapolated for the entire project area\. This aspect has to be taken into consideration in future planning and that remote villages require more inputs, monitoring and additional help for their survival and development\. 6\.3\. Lack of essential social and economic infrastructures There are several social organizations at the village level, including Rural Development Societies, Women‟s Cooperatives, Fisheries Cooperatives, Mother Care etc in these areas but the interaction of beneficiaries was very poor\. Most beneficiaries have neither interest nor adequate knowledge of the activities of these organizations and just consider them as organs for lending money for their immediate needs\. Even “shramadanaâ€? activities are very low and hence, essential that they are made to understand the benefits of proper 48 interaction with such social organizations\. Banks and other economic infrastructure are also quite essential for their livelihood activities and needs closer examination\. Sustainability of activities initiated by the project will certainly depend on the support provided by such social and economic infrastructure\. 6\.4\. Capacity building and training of skilled staff This has already been discussed under section 3\.2 & 3\.3\. The direct and indirect activities connected with resettlement of over 50,000 families could involve probably twice the number of beneficiary households, thereby necessitating adequate training for all categories of skilled staff at periodic intervals\. This aspect also will affect sustainability and requires due consideration\. 6\.5\. Environmental concerns of sustainability Degradation of environment in several ways, as it is extensively happening at present, is also a matter of grave concern and risk for sustainability, which requires continuous management in a proper manner\. As stated in section 3\.3, the importance of tree planting campaign is stressed and it should be carried out on an annual basis\. Home gardening and social forestry should be seriously considered for future\. 6\.6\. Follow up action To follow up the activities indicated above, it would be essential for GoSL and the Provincial Councils of North and East to take appropriate action directly as well as through other national/multinational funding programs\. 7\. BANK PERFORMANCE Role of the World Bank in this project are as follows: 1\. Supervision and monitoring of Project activities Periodic visits and advice to the North East Provincial Council and the various stakeholders about the project progress and performance, has been regularly done through the Aide Memories of the visit of Implementation Support Mission\. 2\. Procurement purchase As per the Bank‟s guidelines, it is responsibility of the bank to review and approve procurements of Goods and services\. The bank has carried out this responsibility very efficiently\. 3\. Review of project activities It is also the responsibility of World Bank to review project activities and progress at times and approve project outcomes of technical assistance as well as the investment component\. This also has been carried out very efficiently\. 8\. BORROWER’S PERFORMANCE Finance management was at a very satisfactory level from the commencement of Project and this is indicated in the Aide Memories dated 24th May & 3rd June of 2011\. I 49 wish to point out that the ultimate target of this project is achieved with lowest project management cost of 3\.42% of the total cost of the project\. Technical supervision was successfully carried out through the Internal Technical Team assigned specially to rectify the identified defects in construction\. Skill Instructors and Trainees were also assigned this responsibility\. Proper training was provided to BRC to identify defects and to take prompt action\. Disbursement of funds – The total funds releases for this project up to 31st December, 2011 was Rs\.16,097 million (US$145\.17 million), which amounted to 99\.9% of the total allocation\. There were no delays in the disbursement of trenches\. Material purchase – Up to 2009, due to restrictions in transport of building materials, procurement of building materials and their distribution was with the assistance of BRC\. As a result of normalization of civil administration, from 2010 onwards, procurements were made directly by the beneficiaries the selves\. Conclusion – Out of the 50,079 houses planned, 49,507 (99%) had been completed with the efficient coordination of all stake holders, including the district administration and Beneficiaries Rehabilitation Committee\. 9\. LESSONS LEARNED The strengths and weakness of the project are important lessons useful for future\. 9\.1 Strengths 1\. Over 50,000 families in the North and East have their own dwelling places, providing the much needed confidence, recognition as well as social stigma associated with it\. 2\. The great success of the “owner drivenâ€? concept as a strategic option\. 9\.2\. Weaknesses 1\. The political risk due to war and unstable condition in North & East is low but the social risk of exclusion of these families from society has to be carefully avoided\. 2\. Integration of these families into the society is not satisfactory and that unless supporting social organizations are activated and put into action, their livelihood activities may suffer\. 3\. Shortcomings in the selection process of villages and beneficiaries should be avoided\. The selection process should include the Grama Niladharis in a responsible manner and should also involve community validation of selection\. 4\. Enhanced coordination between the various stake holders is very critical for the success and continuity of the project\. The decentralized implementation setup should entail a great deal of coordination between NEHRP, District and divisional administration as well as other multilateral institutions\. 5\. Increased capacity to efficiently supervise construction of such large number 50  of housing units would have been more desirable\. 6\. The Government of Sri Lanka is responsible for the coordination of the project with ongoing and future development programs in the North and East\. Through such means, comprehensive monitoring of beneficiary status and provision of further support for their livelihood would be possible\. 7\. Floor area in future programs to vulnerable families should be strictly limited not to exceed 550 sq\.feet\. 8\. Villages in remote places require more assistance and support than those close to cities\. 9\. The North and East of Sri Lanka has tremendous agricultural/fisheries potential and sustainability of achievements bestowed by the project will ultimately depend on exploitation of this vast potential\. Future support projects should take this into consideration\. Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders N/A 51  Annex 9\. List of Supporting Documents ï‚ Project Implementation Plan ï‚ Project Appraisal Document for Democratic Socialist Republic of Sri Lanka: North East Housing Reconstruction Program dated November 9, 2004 (Report No: 30436-LK) ï‚ Aide Memoires, Back-to-Office Reports, and Implementation Status Reports\. ï‚ Project Progress Reports\. ï‚ Borrower's Evaluation Report dated February 2012 *including electronic files 52  IBRD 33485 80°E 81°E I N DIA SRI LANKA 10°N 10°N SELECTED CITIES AND TOWNS PROVINCE CAPITALS it r a Point Pedro NATIONAL CAPITAL St RIVERS k Jaffna MAIN ROADS Pal Delft Elephant Pass RAILROADS Island PROVINCE BOUNDARIES Palk Bay Killinochchi INTERNATIONAL BOUNDARIES Iranamadu Tank Mullaittivu Ferr y Ad Talaimannar Manakulam am 's B ridge 9°N Mannar Island Mannar NORTHERN Pulmoddai Aruvi A Vavuniya ru SRI LANKA Trincomalee Gulf of Karaitivu NORTH CENTRAL Island Rambewa Mutur Mannar Anuradhapura Yan Oya Galkulama Kalpitiya Ka Kaud la Oya ulla Oya Bay of Bengal Puttalan Habarane 8°N 8°N NORTH Madura Oya WESTERN Maho Oya Batticaloa uru ed Kattankudi Mahaweli Ganga D EASTERN Chilaw Madura Oya Kurunegala Reservoir Kalmunai CENTRAL ha O y a Ma Ampara Negombo Kandy Gal Oya y Kegalla Victoria Falls Reservoir U VA Pidurutalagala Senanayake WESTERN (2,524 m) Samudra g Badulla 7°N Kelan Gan 7°N COLOMBO Sri Jayewardenepura Kotte Pottuvil Monaragala Moratuwa Ratnapura lu Wellawaya Ka Kirin SABARAGAMUWA in d Kalutara i Oya Kumana ya Laccadive Wala Kataragama l aw INDIAN e eG Sea an OCEAN g g a SOUTHERN Hambantota Galle 6°N Tangalla 0 20 40 60 Kilometers 6°N Matara This map was produced by the Map Design Unit of The World Bank\. The boundaries, colors, denominations and any other information Dondra Head shown on this map do not imply, on the part of The World Bank 0 10 20 30 40 Miles Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries\. 80°E 81°E 82°E SEPTEMBER 2004

REVIEW

P116951

 ICRR 14226 Report Number : ICRR14226 IEG ICR Review Independent Evaluation Group 1\. Project Data : Date Posted : 04/03/2014 Country : Bosnia and Herzegovina Is this Review for a Programmatic Series? Yes No How many operations were planned for the 3 series? How many were approved? 1 Series ID : S116951 First Project ID : P116951 Appraisal Actual Project Name : Public Expenditure US$M ): Project Costs (US$M): 96 96 Crisis Development Policy Loan L/C Number : Loan/ Loan US$M): /Credit (US$M ): 96 96 Sector Board : Economic Policy US$M): Cofinancing (US$M ): 0 0 Cofinanciers : Board Approval Date : 04/08/2010 Closing Date : 12/31/2010 12/31/2010 Sector (s): Other social services (50%); General public administration sector (50%) Theme (s): Debt management and fiscal sustainability (34% - P); Social safety nets (33% - S); Public expenditure; financial management and procurement (33%) Evaluator : Panel Reviewer : ICR Review Group : Coordinator : Brian Ames Fareed M\. A\. Hassan Lourdes N\. Pagaran IEGPS2 2\. Project Objectives and Components: a\. Objectives: The Project Development Objectives (PDOs) of the Public Expenditure Development Policy (PEDP) Loan/Credit series for Bosnia and Herzegovina (BiH) are: (1) to increase social assistance to the poor, while reducing the fiscal deficit and creating fiscal space for poverty -reducing growth; (2) to improve the structure and efficiency of public expenditures; and (3) to reduce social contribution rates and pressures on private sector wages from faster wage growth in the public sector, thereby enhancing private sector competitiveness (Program Document, page 1)\. As the Financing Agreement did not specify the operation ’s PDOs, the ICR and ICR Review were done on the basis of the PDOs specified in the Program Document \. Moreover, even though the Development Policy Loan /Credit (DPL) series was not completed, both the ICR and ICR Review assessed the achievement of objectives for the overall series \. 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 PEDP consists of three pillars \. Pillar I \. Reform of Social and Unemployment Benefits : The reforms focused on improving the targeting and means testing of social programs by shifting away from a “rights-basedâ€? to a “targetedâ€? social safety net system, as well as on achieving more effective and efficient administration of social benefits \. Pillar II \. Reform of Public Sector Pay and Wage Bill Management : The reforms aim to lower the burden of  the budget on the economy by lowering public sector wage expenditures to a level closer in line with the European Union average (as a percent of GDP)\. The reforms were also aimed at creating a more transparent and internally equitable performance -based public sector pay system \. : The reforms Pillar III \. Social Contribution and Indirect Tax Measures in Support of Competitiveness aimed at lowering the tax wedge and thereby improving competitiveness and promoting formal employment \. The indirect tax measures pursued under the reform were meant to have a lower direct tax burden on firms while, at the same time, raising additional revenue for the budget \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The PEDP-1 was the first of what was to be a programmatic series of three Development Policy Loans/Credits (DPL) and was financed by an IDA credit of US$ 66 million and an IBRD loan of US$30 million\. It was appraised on November 16, 2009; approved by the Bank Board on April 8, 2010; became effective on October 1, 2010; and was closed on December 31, 2010\. The first DPL was disbursed as a single tranche upon effectiveness while the latter two operations were subsequently canceled and the series closed\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: The PDOs of the PEDP are fully relevant to the country ’s circumstances and priorities and aligned with the Bank ’ s Country Partnership Strategy (CPS) at closing\. The DPL was prepared in response to the BiH government ’s request to the Bank to help mitigate the impact of the effects of the spillover of the global economic crisis into the domestic economy, with the PDOs aimed to address the key drivers of the resulting fiscal unsustainability while promoting competitiveness\. Moreover, the DPL supported the CPS 2008-11 goals of (1) reducing the burden of Government on the economy and strengthening fiscal coordination; and (2) improving the targeting of social benefits\. Specifically, the DPL focus on reform of social benefits and the public sector wage bill supports the objectives of Pillar 1 of the Country Partnership Strategy “Improving the environment for private sector led growth and convergence to Europe \.â€? The DPL’s seven specific objectives (i\.e\., shift from a rights-based to a needs-based system, improved benefits incidence, more efficient and effective social administration, lower wage bill, increased transparency, improved social contribution fairness, and a fairer health financing system ) are all directly relevant to the fundamental challenge facing the country, namely achieving an equitable and sustainab le social benefits system while maintaining competitiveness and macroeconomic stability \. The relevance of objectives rating is High \. b\. Relevance of Design: The design of PEDP is consistent with its PDOs \. The DPL’s three pillars are aligned with the three PDOs and seven specific objectives \. The operation's results framework included a clear statement of objectives, the prior actions were fully consistent with the achievement of these objectives, and the causal chain between funds and outcomes was clear and convincing \. The disbursement of the single-tranche DPL-1 was triggered by the approval of the key laws and regulations that laid the foundation for the reform effort \. Subsequent disbursements under DPL-2 and DPL-3 were to be triggered by the satisfactory implementation of the new framework as measured by a set of 15 relevant performance indicators \. The design was therefore highly relevant to the country's immediate priorities and needs as it was aimed at taking advantage of a limited window of opportunity for reform\. Moreover, the choice of lending instrument (i\.e\., DPL) was appropriate and front-loading through a single-tranche appeared to be appropriate given the ongoing financial crisis \. However, both the PAD and the ICR could have discussed the pros and cons of a single -tranche operation, especially given the risks involved, and any exogenous factors and unintended (positive and negative) results relevant to project design \. The relevance of design is rated Substantial \. 4\. Achievement of Objectives (Efficacy): This DPL program series was a high risk /high return operation designed to provide quick -disbursing financial support to the pro-reform government in the face of the global financial crisis, while addressing critical fiscal sustainability and fairness issues regarding social protection system reform \. DPL-1 was disbursed on the basis of the government’s enactment of key legislation regarding targeting, means testing, and benefits auditing as “prior actionsâ€?\. With the subsequent change in parliamentary majority, challenges by the constitutional court, and policy reversals in the face of push back by beneficiaries, there was no mandate or political will to continue to implement the DPL series\. Hence, following the initial disbursement of funds, there was backtracking on the reforms supported by DPL1 and little or no progress on reforms supported by DPL 2 and DPL3\. The latter two operations were cancelled in October 2012\. The ICR and this ICR Review assess the achievement of the objectives in relation to the three PDOs for the entire program and the seven specific objectives presented in the PAD (pg\. vii and pgs\. 45-51) The PEDP included three PDOs and seven specific objectives \. PDO 1: Increase Social Assistance to the Poor while Reducing the Fiscal Deficit and Creating Fiscal Space PDO1 for Poverty -Reducing Spending Unfortunately, there was no data available to measure the percent of transfers that reach the bottom quintile (PDO Indicator 1) or the reduction in poverty headcount (PDO Indicator 2), although the ICR suggests that anecdotal evidence shows some improvements across both fronts \. The fiscal savings that were expected to arise from the elimination of benefits to demobilized soldiers (PDO Indicator 3) and the introduction of means testing for medal holder benefits (PDO Indicator 4) were partially achieved, while those related to means testing for disabled war veterans (PDO Indicator 5), civilian benefits (PDO Indicator 6), the conduct of audits (PDO Indicator 7), and the elimination of double dipping of social benefits (PDO Indicator 8) were not achieved as the new Government did not implement the supporting regulations and legal changes and the Constitutional Court ruled against means testing of medal holders \. Hence, although there was progress with regard to this overarching objective at the start of the DPL series, it soon dissipated with the change in parliamentary majority and the eventual cancellation of the remaining operations \. Efficacy in achieving PDO1 is rated Negligible\. Specific Objective 1:Targeting and means testing The reform-oriented government enacted key legislation regarding targeting and means testing as prior actions for PEDP-1\. However, the new government did not subsequently introduce the implementing regulations and other legal measures related to this legislation and the constitutional court ruled against means testing of medal holders\. As a result, the targets for the indicators regarding the elimination of benefits to demobilized soldiers in the Federation of Bosnia and Herzegovina (FBH) (PDO Indicator 3) and the introduction of an income test for medal holders benefits in FBH (PDO Indicator 4) were only partially achieved and those for the introduction of means testing for disabled war veterans (PDO Indicator 5) and the introduction of means testing for civilian benefits to disabled (PDO Indicator 6) were not achieved\. Efficacy in achieving the first specific objective is rated Negligible \. Specific Objective 2: Benefits administration As in the case of Specific Objective 1, this objective was not achieved due to the policy reversals, lack of implementation, and unfavorable court rulings \. As a result, the targets regarding an income test for medal holders benefits in FBH (PDO Indicator 4), means testing for disabled war veterans (PDO Indicator 5), and means testing for civilian benefits to disabled war veterans (PDO Indicator 6) were not met\. Moreover, as noted above, it is not possible to assess what percentage of transfers reached the bottom quintile (PDO Indicator 1) nor a reduction in poverty headcount (PDO Indicator 2) due to the lack of data availability \. Efficacy in achieving the second specific objective is rated Negligible \. Specific Objective 3: Social contribution base harmonization Performance regarding this objective was mixed \. Eligibility audits (PDO Indicator 7) were conducted on about one-half of the civilian and military disability beneficiaries and marginal fiscal savings arose from the removal of disqualified beneficiaries\. However, the remaining audits have yet to be completed and there are pending legal challenges by the disqualified beneficiaries against the removal of their benefits \. Moreover, the elimination of double dipping of social benefits (PDO Indicator 8) was not achieved, as the necessary legal changes to prevent such double dipping were never implemented \. Efficacy in achieving the third specific objectives is rated Modest\.  PDO 2: Improve the structure and efficiency of public expenditure PDO2 This objective was to have been the focus of measures to be pursued under DPL 2 and DPL3\. However, as these measures were not implemented by the new Government, the targets for reducing the public sector wage bill as a percent of GDP (Indicator 9), lowering the variance between the BiH and EU wage bill to GDP ratio (Indicator 10), and reducing allowances as a share of the payroll (Indicator 11) were not achieved\. Efficacy in achieving PDO2 is rated Negligible\. Specific Objective 4: Wage bill management This objective was not achieved as the public sector wage bill as a percent of GDP (Indicator 9) remained constant and the variance between the BiH and EU wage bill as a percent of GDP (Indicator 10) actually increased rather than decreased between 2008 and 2011\. Efficacy in achieving the fourth specific objective is rated Negligible \. Specific Objective 5: Pay structure, consistency and competitiveness This objective was partially achieved \. While allowances (Indicator 11) were absorbed into the base pay in the Republika Srpska (RS), they continued to be maintained in FBH\. Pay scales in FBH remained compressed, however, with decompression ratios between the salary of an entry level and top civil servant being 1\.9 according to the ICR\. Distortions continue to exist between low level civil servants in FBH relative to private sector equivalents\. Moreover, the harmonization of variation in pay across cantons remains problematic, particularly for the more prosperous and less prosperous cantons \. Efficacy in achieving the fifth specific objective is rated Negligible \. PDO 3: Reduce social contribution rates and pressure on private sector wages, thereby enhancing PDO3 competitiveness There was no progress regarding reducing the health contribution rate in the FBH, which was to be supported by DPL2 and DPL3, or the introduction of the VAT on luxury goods and further harmonization with that of the EU, which was to be supported by DPL 3\. These measures were not considered by the new government due to a change in priorities and commitments\. Efficacy in achieving PDO3 is rated Negligible\. Specific Objective 6: Health insurance contributions The target for reduction in health contribution rate (Indicator 12) was not achieved because the associated measures under DPL2 and DPL 3 were not implemented\. Efficacy in achieving the sixth specific objective is rated Negligible \. Specific Objective 7: Indirect tax harmonization There was good progress regarding making the health financing system fairer, although this progress cannot be attributed to the DPL series since the supporting measures that were envisaged under DPL 2 and DPL3 were not implemented\. The targets regarding the harmonization of the VAT, excise, and customs duty regimes with those of the EU and Africa region (Indicator 13) and fully harmonizing the BiH customs tariff with that of the EU (Indicator 15) were largely achieved\. Although the excise tax on tobacco was gradually increased since 2009, no other increases in excises have been introduced and, hence, the target of increasing excise taxes in line with those in the region (Indicator 14) was only partially achieved\. Efficacy in achieving the seventh specific objective is rated Negligible \. 5\. Efficiency (not applicable to DPLs): 6\. Outcome:  The DPL series’ development outcome rating is “unsatisfactoryâ€? as the policy reversals of the new government and the constitutional court challenges regarding changes in the social safety net system prevented the key measures, targets, and objectives from being achieved \. This rating takes into account the “substantialâ€? relevance of the program’s objectives and design and the negligible achievement of operation ’s three PDOs and seven specific objectives \. It is important to note, however, that the operation did contribute to macroeconomic stability as the country was facing severe balance of payments and fiscal constraints in the face of the global crisis\. The combined financial support of the World Bank, the IMF, and the EU allowed the country to finance its balance of payment and fiscal deficits while rebuilding reserves \. Since the cancellation of the operation, the IMF and the EU have continued to provide financial supports, while the Bank has focused on continuing its policy dialogue and providing non-lending technical assistance on structural reforms \. a\. Outcome Rating : Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating: The Bank team and management considered the DPL series as “high risk/high rewardâ€? from the outset\. On the one hand, the economic crisis presented an opportunity for the reform -oriented government to weaken the opposition of influential interest groups and address the two key internal drivers for its fiscal crisis —namely, non-contributory cash transfers and the public sector wage bill \. On the other hand, there were critical risks to government’s ability to achieve the intended development outcomes, including a pending parliamentary election, powerful opposition to reform by the beneficiaries affected by the reform, polarization and tensions between the two political entities (FBH and RS), the complex governance structure of the Federation vis -à-vis the cantons, and concerns over transparency and accountability \. The Bank team therefore integrated risk mitigating measures into the operation\. For example, since government ownership of the reform effort and support from the public would be crucial for program implementation, the Bank took mitigating actions through intense policy dialogue and the inclusion of all key stakeholders in the development and discussion of the policy matrix \. A comprehensive communications strategy was also developed as a mitigating measure to help reform proponents deliver their message effectively, both within the political leadership and to the public \. However, commitment to reform dwindled with the change in the parliamentary majority following the October 2010 election\. Hence, although the global crisis provided a window of opportunity for reform, the identified risks materialized and brought about the demise of the reform program \. a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: a\. Quality at entry: The quality at entry of the PEDP was moderately unsatisfactory \. The ICR provides a frank assessment of Bank performance in ensuring quality at entry \. The Bank’s response to the government ’s request for budget support was timely, the DPL had the right objectives of reducing the fiscal deficit and improving the efficiency of social transfers, the DPL was the appropriate instrument, and the Bank team and management understood that this was a “high risk/high returnâ€? venture, had considered alternatives, and took an informed decision\. It is also notable that the Bank understood that successful reform implementation required an effective communication strategy and went to great lengths to generate public support for program implementation by engaging all stakeholders \. The Bank’s main shortcoming was its choice of a series of DPLs spanning three years in the lead up to the elections \. It gambled that the current government would remain in power and did not have any contingencies for dealing with a “change in the parliamentary majority â€? scenario\. This raises the question that, despite the extensive Bank analytical work that underpinned this operation, a better socio-political analysis of the obstacles to reform could have usefully been used at both the design and entry stage of the operation \. Under the circumstances and as noted in the ICR, a less ambitious and more focused reform agenda in the context of stand -alone one-year DPLs would have been more appropriate and would have likely had a greater chance of success \. at -Entry Rating : Quality -at- Moderately Unsatisfactory b\. Quality of supervision:  The quality of supervision was moderately unsatisfactory \. The Bank undertook extensive program monitoring, policy dialogue, information campaign, and non -lending technical assistance during the period between the effectiveness of DPL 1 in October 2010 and the cancellation of the two remaining DPLs in October 2012\. However, as underscored in the ICR, it is apparent that the Bank did not fully appreciate the socio-political dynamics facing the pro -reform government nor foresaw the constitutional challenges against means testing\. These forces ultimately undermined the achievement of the operation ’s objectives\. Quality of Supervision Rating : Moderately Unsatisfactory Overall Bank Performance Rating : Moderately Unsatisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: There was strong government support for the proposed reform and DPL operation at the time of effectiveness\. However, this support waned following the October 2010 elections in the face of opposition by veterans groups and constitutional challenges against the means testing \. Ultimately, the authorities reversed several reform measures (i\.e\., means testing for veteran’s benefits) and failed to implement others\. The ICR acknowledges the challenges facing the two entities because of the constitutional set -up, but believes that there should have been more concerted efforts to build consensus for reform both between and within \. Government Performance Rating : Unsatisfactory b\. Implementing Agency Performance: N/A Implementing Agency Performance Rating : Not Applicable Overall Borrower Performance Rating : Unsatisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: As noted in the PAD, the BiH Ministry of Finance was responsible for overall program monitoring and evaluation of the operation\. The Bank was to monitor actions and review progress in implementation on the basis of the agreed policy matrix\. Although there was a detailed Results Framework covering the three operations, there was very little discussion in the PAD and ICR regarding the modalities and timetable for joint monitoring of the operation\. Presumably, the monitoring was to take place in the context of the ongoing policy dialogue that was underpinning the preparation of the second DPL \. b\. M&E Implementation: Neither the Implementation Status and Results (ISR) Report nor the ICR provide an assessment of M&E implementation\. The basing of the co-task team leader in the Bank's BiH office inevitably greatly facilitated the monitoring of DPL-1\. There is no information, however, to suggest that M&E data were collected \. But, as noted above, monitoring of the operation was presumably taking place during the preparation missions \. c\. M&E Utilization:  Both the PAD and the ICR indicated that the monitoring of program implementation of the first DPL was to feed into and influence the discussions regarding the second and third DPLs \. In principle, therefore, the lessons and experience gained from the first operation were to be utilized in preparing the other two operations \. As the reform effort was cut short and the subsequent operations were cancelled, there is no basis to assess the utilization of M&E\. M&E Quality Rating : Modest 11\. Other Issues a\. Safeguards: As indicated in the PAD (but not discussed in the ICR), the actions in the DPL series are not likely to have significant effects on the environment, on forests, and natural resources, as the program ’s measures are primarily geared towards supporting the Government ’s reforms in fiscal management, social protection and public employment\. However, there might be indirect positive impacts on the environment due to reforms in social protection and poverty alleviation, including the mitigation of unsustainable use of natural resources such as cutting firewood, illegal logging, poaching, over fishing or over grazing, and other activities that are a source of income for the poor\. The operation therefore did not trigger any of the Bank ’s environmental or social safeguard policies\. b\. Fiduciary Compliance: As noted in the PAD (but not discussed in the ICR), fiduciary arrangements are in line with Bank policies \.The 2007 Fiduciary Update on PFM found that the automated treasury system has improved control and overall cash management across the State and Entities \. The Update concludes that the fiduciary risks associated with the PFM system in Bosnia and Herzegovina are moderate and that ample safeguards exist in the Central Bank (as confirmed by the IMF safeguards assessment ) to record and track foreign currency funds received under the Bank’s DPL program\. c\. Unintended Impacts (positive or negative): The PAD and the ICR did not mention any unintended impacts nor do there appear to be any unintended impacts, positive or negative \. d\. Other: 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Risk to Development Significant Significant Outcome : Bank Performance : Moderately Moderately Unsatisfactory Unsatisfactory Borrower Performance : 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: There are three main lessons to be gleaned from the implementation of the first programmatic DPL : 1\. DPL operations need to take into account political -economic considerations facing a member government, particularly during periods of crisis \. Political economic analysis is critical to the design and implementation of politically sensitive and /or contentious reforms\. The Bank drew upon extensive analytical work and consultations with key stakeholders affected by the reform, yet seems to have not fully understood the influence and impact of key beneficiary groups and the constitutional questions involving the move to a means-based social protection system \. The Bank should redouble its efforts to ensure that a comprehensive socio-political analysis is conducted at both the design stage and during implementation \. 2\. The design of a DPL operation during a period of crisis needs to find the right balance between addressing an immediate financing need and the desire to make progress on critical reforms \. The global financial crisis spilled over into the BiH economy, contributing to large fiscal and balance of payments deficits and the urgent need for exceptional financing \. Although the operation was successful in supporting the immediate macroeconomic stability objective, it failed to go beyond the initial measures that served as prior actions for the first DPL, resulting in the cancelation of the two remaining DPLs \. Despite the fact that the Bank assessed alternatives and decided to pursue a three -year DPL series, a one-off operation would likely have been more appropriate and provided greater flexibility to deal with the changing circumstances \. 3\. Sequencing of reforms can lead to better outcomes \. Given the multiple interests and stakes involved in reform, it is important to assess carefully the best path forward and sequence measures in order to have the highest chance for success \. There were two key interest groups regarding the PEDP —the general public who was concerned about excessive spending on the wage bill and abuse of social program benefits and the war veterans and their families who were the direct beneficiaries of these social programs \. As indicated in the ICR, the PEDP may have had a better chance of success therefore if the reforms had been sequenced to address first the public wage bill and eligibility audits issues (which had broad-based public support) , rather than starting with the politically contentious issue of targeting war veteran benefits (which had a powerful and vocal constituency)\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR was very frank and candid in its assessment \. It appropriately identified and underscored the shortcomings in the design of this “high risk/high returnâ€? DPL series and the need for more substantial socio-political analysis in order to assess and address the main obstacles for reform and to design and sequence implementation accordingly \. The ICR could have usefully included a discussion of key issues, such as safeguards, fiduciary compliance, and unintended impacts, as well as a more comprehensive discussion and assessment of the M&E framework\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P035608

Document of The World Bank Report No: 26930-NE IMPLEMENTATION COMPLETION REPORT (PPFI-Q0220 IDA-30260) ON A CREDIT IN THE AMOUNT OF SDR 20\.3 MILLION TO THE REPUBLIC OF NIGER FOR THE TRANSPORT INFRASTRUCTURE REHABILITATION PROJECT February 3, 2004 Transport Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective August 25, 2003) Currency Unit = FCFA 1 FCFA = US$ 0\.001657 US$ 1 = FCFA 603 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AFD = Agence Française de Développement (French Overseas Development Agency) BEEEI = Bureau d'Evaluation Environnementale et des Etudes d'Impact (Bureau for Environmental Impact Studies) BNC = Bureau National de Coordination (National Bureau for Coordination) CAFER = Caisse Autonome de Financement de l'Entretien Routier (Road Maintenance Fund) CNUT = Conseil Nigérien des Utilisateurs de Transport (Shippers' Council) CNEDD = Conseil National de l'Environnement pour un Développement Durable (National Council of Environment for a Sustainable Development) DMTP = Direction du Materiel des Travaux Publics (Public Works Equipment Department) DTP = Direction des Travaux Publics (Department of Public Works) DTT = Direction de Transports Terrestres (Directorate of Land Transport) IRI = International Road Roughness Index OCBN = Organisation Commune Benin-Niger (Joint Organization Benin-Niger) PIP = Public Investment Program PRIT = Project de Réhabilitation des Infrastructures de Transport (Transport Infrastructure Rehabilitation Project) PRIU = Projet de Réhabilitation des Infrastructures Urbaines (Urban Infrastructure Rehabilitation Project) RED = Roads Economic Decision Model SME = Small and Medium Enterprises SNTN = Société Nationale des Transports Nigériens (National Road Transport Company) SNTV = Société Nigérienne de Transport Voyageurs (Association of Passenger Tranport of Niger) VOC = Vehicle Operating Cost Vice President: Callisto E\. Madavo Country Director (Acting) Diarietou Gaye Sector Manager Sanjivi Rajasingham Task Team Leader/Task Manager: Andreas Schliessler  REPUBLIC OF NIGER TRANSPORT INFRASTRUCTURE REHABILITATION 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 11 7\. Bank and Borrower Performance 12 8\. Lessons Learned 13 9\. Partner Comments 14 10\. Additional Information 14 Annex 1\. Key Performance Indicators/Log Frame Matrix 15 Annex 2\. Project Costs and Financing 19 Annex 3\. Economic Costs and Benefits 21 Annex 4\. Bank Inputs 28 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 30 Annex 6\. Ratings of Bank and Borrower Performance 31 Annex 7\. List of Supporting Documents 32  Project ID: P035608 Project Name: NE TRANSP\. INFRA\. REHAB Team Leader: Andreas Schliessler TL Unit: AFTTR ICR Type: Core ICR Report Date: February 5, 2004 1\. Project Data Name: NE TRANSP\. INFRA\. REHAB L/C/TF Number: PPFI-Q0220; IDA-30260 Country/Department: NIGER Region: Africa Regional Office Sector/subsector: Roads and highways (99%); Central government administration (1%) Theme: Rural services and infrastructure (P); Other urban development (P) KEY DATES Original Revised/Actual PCD: 09/21/1994 Effective: 05/07/1998 05/12/1998 Appraisal: 06/26/1997 MTR: 11/08/2000 08/01/2001 Approval: 12/18/1997 Closing: 01/31/2003 05/30/2003 Borrower/Implementing Agency: Government of Niger/Ministry of Equipment and Infrastructure Other Partners: STAFF Current At Appraisal Vice President: Callisto E\. Madavo Jean-Louis Sarbib Country Director: Darietou Gaye (Acting) Theodore Ahlers Sector Manager: C\. Sanjivi Rajasingham Maryvonnne Plessis-Fraissard Team Leader at ICR: Andreas Schliessler Jean-Noël Guillossou ICR Primary Author: Robert Fishbein 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: U Sustainability: UN Institutional Development Impact: SU Bank Performance: S Borrower Performance: U QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: Yes The project has not been subject to QAG reviews at any time\.  3\. Assessment of Development Objective and Design, and of Quality at Entry 3\.1 Original Objective: The development objectives stated in the Project Appraisal Document were to improve the condition of the road network and the efficiency of road maintenance execution\. These objectives were straightforward and responded directly to needs, both at the time of the original project design in late 1994, and even much more so at appraisal in 1997\. The long delay between identification and appraisal was caused by a military coup during the preparation process\. This caused a withdrawal of most donors from Niger, including the Bank\. Following the Presidential election in July 1996 and legislative elections in November 1996, project preparation re-started\. Since donor support for heavier periodic maintenance activities had been largely withdrawn following the military takeover, and the road network was deteriorating\. This was made worse by insufficient local funding of routine road maintenance\. Hence, project design responded to the Government's request for assistance in rehabilitating priority sections of the road network and re-establishing a credible program of road maintenance, including the maintenance funding aspect, which would also facilitate the return of additional donor resources\. 3\.2 Revised Objective: The development objectives were not formally revised during the project period\. However, two years into execution, the PSR statement of development objectives was expanded in order to broaden the focus of the project\. The following goals were stated: (i) to stabilize and improve the condition of the priority network, reducing the long-run economic costs for road maintenance and rehabilitation in order to attain sectoral financial sustainability; (ii) to restructure and strengthen institutional capacity, financial viability and operational efficiency of the agencies of the sector; (iii) to encourage private sector involvement in investment and management of the sector; and (iv) to reduce transport cost for the poor\. This expansion of goals and objectives reflected the fact that the project components as presented in the SAR addressed, in reality, a much broader range of issues than the rather limited original project development objectives which were stated in the SAR\. The revised objectives were nevertheless relevant, given the Government's desire to lay the groundwork for a more coherent transport sector strategy beyond road network management and maintenance\. 3\.3 Original Components: The project included six components: (a) Earth Roads: Regravelling of 1,060 km of unpaved main roads\. (b) Rural Roads: Definition of a strategy for rural roads, including the pilot execution of 150 km of rural roads\. (c) Road Maintenance Administration and Management: Support to the implementation of the Government's stated reform program, including (i) divestiture of public works equipment rental activities; (ii) Road Laboratory restructuring; (iii) Public Works Department restructuring; (iv) Road maintenance programming procedures; (v) Monitoring and contracting out road maintenance; (vi) Training; (vii) computerized system and procedures for management of the Road Maintenance Fund; (viii) creation of the Road Maintenance Fund; (ix) definition of a Road Maintenance Strategy; and (x) Training in environmental management\. (d) Road Transport: Support to a series of studies and actions including (i) technical advisory services to implement a road safety plan; (ii) improvement of technical control of vehicles; (iii) revision of regulatory framework for protection of road assets, including axle load limitation; (iv) study of poverty-transport linkages; (v) creation of a National Observatory for Transport; (vi) feasibility study for a inland container terminal; (vii) definition of a training strategy for the transport sector; (viii) development of an investment plan for river ports; and (ix) computerization of vehicle registrations\. - 2 -  (e) Environment: In addition to the road-specific environmental activities above, the project included (i) support to the National Council of Environment for Sustainable Development (CNEDD) under the Prime Minister's Office and the Department of Environment in the Ministry of Hydraulics and Environment; (ii) preparation of legal documents to implement the 1997 law institutionalizing environmental assessments; and (iii) equipment\. (f) Project Management: (i) Financial audits of the Credit and Special Accounts; (ii) Equipment; and (iii) incremental operating costs for the National Bureau of Coordination (BNC), including contractual staff\. 3\.4 Revised Components: The project retained the original six components throughout the credit period\. However, in June 2000, a portion of credit proceeds (SDR 3\.0 million equivalent) were reallocated to support the Government's retrenchment program for the Department of Public Works (DTP) and the Public Works Equipment Pool Directorate (DMTP)\. Funds were reallocated from the Category 1, Civil Works, to a new Category titled "Severance Payments\." Although the project design had earlier assumed that the National Budget would finance the severance portion of the restructuring plan, the SAR noted already that the lack of Government funds for this purpose was a "serious risk\." This was born out by events, especially following another coup d'état in April 1999\. Although political stability was restored and donor assistance resumed in November 1999, public finances had deteriorated dramatically\. Since a cornerstone of the plan to strengthen road maintenance under the Credit was the disengagement of the state, direct support was justified, in view of the urgent need to proceed with this particular reform\. 3\.5 Quality at Entry: Quality at entry is considered satisfactory, although marginally so\. The project was clearly linked to the third core area of IDA assistance in the CAS of November 1997: "Promotion of open economic policies and regional linkages\." It was consistent with the Bank's effort to foster a favorable business climate through support of state divestiture\. By improving basic access in the country, it would also facilitate other direct programs for poverty reduction\. Safeguard polices were adequately addressed in the SAR\. Although the project was based on the Government's letter of sector policy, the SAR recognized that, since none of the reforms envisaged in the letter were yet in place, there was a major risk that consistent Government support for fundamental reforms would not materialize\. Also, it was considered that there was a risk that counterpart funds, particularly to support the retrenchment program, would not be available\. As noted above, both risks later turned into a reality\. However, given that the Government officials in charge at the time of project preparation were fully supportive of the reforms and thought it possible to finance the retrenchment program from local budget resources, it was deemed reasonable for the preparation team to recommend accepting this risk, so as to stay engaged and lend support to the reform process, with a full understanding that the risks be reassessed later during the project\. The project design team, in their effort to be very thorough, included such a large number of actions and activities that the project design can be judged as somewhat overloaded and not selective enough\. It involved numerous (over 40) studies covering a wide range of subjects, particularly in the area of Road Transport Policy\. A part of the studies resulted in successful reforms and follow-on activities\. For some other studies carried out, there was insufficient funding (by Government and/or donors) and insufficient human capacity to implement the recommendations made\. In addition, the Road Transport Component, in spite of being very useful and successful, diverted a lot of attention without contributing to the originally-stated development objective\. During project preparation, the preparation team grafted itself to the ongoing preparation of the Urban Infrastructure Project (PRIU) and the National Bureau for Coordination (BNC), attached to the Ministry of - 3 -  Planning and eventually to the Prime Minister's Office\. It was decided that the PRIT was to be implemented together with the PRIU, under the leadership on the Government side of a single National Coordinator\. Overall, the BNC operated efficiently\. However, it turned out that the technical monitoring and overall management of both projects were an exceptionally challenging task\. In retrospect, it was not realistic to assume that one single coordinator at the BNC could effectively coordinate and monitor the panoply of studies and activities in the transport project, in addition to the numerous activities of the urban project\. This problem was only addressed after the mid-term review, when three technical specialists were hired for the BNC to support the coordinator\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective: The project's outcome/achievement of objective is rated unsatisfactory, although only marginally so given the project's numerous positive achievements\. The fundamental reason for this rating is that the overall condition of Niger's road network is deteriorating today rather than improving, and that a reversal of this situation is presently not in sight\. It is a case where, although the project can be said to have achieved almost all of its output objectives, the expected outcomes of improved road network condition and improved efficiency of road maintenance execution (the core objectives) have not been realized in a sustainable way\. It can be said, however, that this outcome is primarily a result of the overall declining situation of Niger's public finances, and not the result of a "bad" project\. The general problem is that as a result of a serious decline of fiscal revenue over the past 15 years, Niger cannot afford any more to keep up its entire road network of some 9,700 km plus 5,000 km of rural roads, which was built at a time when both domestic and donor resources were much more abundant than today\. In terms of physical improvement works on the road network, the project actually exceeded original output objectives\. As a temporary outcome, the level of service on some 1,400 km of unpaved roads was improved very significantly, compared to an original target of only 1,060 km\. This included emergency works to save portions of the network and expand coverage by reducing service standards, following extremely heavy rains in 1998\. Regarding the improvement of road maintenance execution, the project was instrumental in introducing fundamental structural reforms which did indeed put in place the essential legal and organizational framework needed to achieve more efficient road maintenance\. These accomplishments include: l The restructuring of the Public Works Directorate from a massive force account organization to a much smaller and professionalized organization\. This included the retrenchment of some 1\.200 staff of the Ministry of Equipment (bringing about much-needed fiscal relief for the Government), and the creation of a dedicated Road Maintenance Directorate\. l The successful move from road maintenance by force account to contracting out those activities to private firms\. This has led to the creation and use of at least eight local private contractors for road maintenance works who absorbed many of the retrenched workers of the former government force account brigades, plus several local consulting firms active in the design and supervision of road works\. l The privatization of the Government's plant and equipment pool, by transforming it into a privately-owned equipment rental firm\. l The transformation of the Government's public works laboratory into a commercial enterprise\. l The establishment by law of the Road Maintenance Fund, based on a modern legislation following the concept of a second-generation road maintenance fund\. Each of these reforms involved difficult and commendable strides for the Government\. Although some of - 4 -  the resulting new institutions are still in their formative stages (e\.g\. the privatized equipment rental firm), the overall success of the project in moving forward these reforms cannot be denied\. Why is it then that the desired outcome of the project was not achieved? The answer is: the non-application of some aspects of the Road Maintenance Fund Law by the Government (Ministry of Finance), which resulted in insufficient funding for road maintenance\. This aspect was outside the control of the implementing agency (Ministry of Equipment and Infrastructure) and is discussed in detail in section 5\.2 of this ICR\. The project developed an innovative rural roads strategy and applied this strategy through several pilot projects\. As explained in section 4\.2 below, implementation delays for the pilot projects did however not allow for the practical testing of the basic underlying concepts of the new rural roads strategy\. The success or not of the strategy can only be judged some two years after the completion of the pilot projects, which will be in 2005\. The validation of the strategy and its formal adoption by the Government was thus not achieved\. Regarding the expanded set of actions and objectives mentioned earlier, the project was successful in assisting the Directorate of Land Transport to put in place several basic services and address some fundamental sector issues related to safety, quality and affordability\. For example, the computerization of vehicle registration and driver licensing has been fully completed for Niamey and is underway for decentralized locations outside Niamey at the time of ICR preparation\. Most essential elements of the Road Safety Action Plan financed under the project have been implemented\. The numerous other studies financed under the project have led to various positive structural reforms and outcomes\. The most notable are the successful full privatization of the National Transport Company (long-distance passenger transport by bus); the establishment of the Transport Observatory, which provides transport and trade statistics; and the liberalization of inter-city passenger and freight services, which have resulted in an average 7 percent reduction in passenger fares and 15 percent reduction in freight rates\. 4\.2 Outputs by components: Earth Roads: This component is rated very satisfactory\. It achieved an acceptable level of service on 1,435 km of gravel roads, compared to the original target of only 1,060 km\. This expansion was achieved by reducing the original specifications, which involved full regravelling (implemented on the first phase of 545 km) to a "spot improvement," approach (implemented on some 890 km in the second phase, twice the originally planned amount)\. This decision demonstrates the flexible approach of the project team\. It was taken following the exceptionally heavy rains of July/August 1998, when it was perceived that traffic on a major portion of the earth road network was in danger of complete disruption\. A study was commissioned to formulate a program of spot improvements on 1,800 km\. The study recommended a priority program in four tranches, two of which were financed by PRIT\. An added advantage of the revised approach was that it provided an opportunity to build local capacity in road engineering and maintenance works, since it involved smaller, more dispersed works which would not be attractive to international firms\. Minor reductions in the final output of several contracts in Phase 2 were necessary, so as to stay within the funds available in the Civil Works category (reduced due to the reallocation of the credit to support the retrenchment program and the fall in the value of the US dollar)\. The overall savings in the regravelling component also enabled the project to assist in additional emergency works following the 1999 rains and to bridge the gap in funding for maintenance during the transition from force account to contracting\. This made it possible to finance the rehabilitation of an important bridge on National Road (RN) 6, mechanized routine maintenance on 696 km, and eight spot improvement contracts on the paved network\. Rural Roads: The rating for this component is unsatisfactory\. While an innovative rural roads strategy was indeed developed, and most of the planned pilot projects were actually implemented, the main goal of validating and formally adopting a strategy for rural road development could not be achieved before the - 5 -  closing date\. This is because the new strategy was supposed to be tried out through several pilot projects carried out under the project, the results of which were to be evaluated before the strategy could be formally adopted by the Government\. However, the pilot projects were much delayed and barely completed at the project closing date, and some were even cancelled\. It was impossible to draw any conclusions as to the results of the approach followed under those pilot projects (community-based maintenance)\. In addition, the pilot roads were at the end all improved to the same high standard, thus not providing a basis for comparison of the various improvement standards proposed in the draft strategy\. On one of the five pilot roads, the project completed only 11 of the 17 km, causing consternation among the population\. In areas where the roads were completed, there is satisfaction among the population; however, the management and finance of maintenance is only now being addressed, and it is not clear the extent to which the approach can be replicated, given the high per km cost of the initial investments\. The pilot projects were recently completed and do not yet allow drawing conclusions needed to validate a rural roads strategy\. Most of the problems in this component were caused by a change of the Director of Rural Roads mid-way through the project, with the new Director not fully applying the principles of the draft rural roads strategy developed under his predecessor\. Road Maintenance Administration and Management: The output rating for this component is satisfactory, although marginally so, not withstanding continued problems of resource mobilization for road maintenance\. There is no doubt that the project did basically everything it set out to do under this component, and that it was instrumental in bringing about major very positive developments and capacity-building for implementing road maintenance operations\. The Government achieved (as outputs) important structural reforms, notably: (i) the full reorganization of the Public Works General Directorate, including the creation of a fully functional Road Maintenance Directorate, the establishment of a road condition database, and better capacity for planning, programming and budgeting of investments and maintenance; (ii) the elaboration of a road network maintenance strategy; (iii) the complete conversion of road maintenance activities from force account to private contractors; (iv) the transformation of the public works laboratory to a commercially-managed enterprise; (v) the privatization of the Government's Plant Pool and its transformation into an equipment rental company; (vi) the establishment by law of the Road Maintenance Fund (CAFER); and (vii) the elaboration of a Road Sector Strategy (which is however only now being finalized, 4 months after the closing date)\. However, the benefits of these reforms (outcome) could not fully materialize, due to resource constraints which are explained in section 5\.2\. Road Transport: The output of this component is rated satisfactory\. Numerous studies were completed and several key structural reforms were promoted, which are yielding improvements in transport service quality and cost\. Tangible accomplishments in structural reform include: l Restructuring of the National Transport Company (SNTN) and the elimination of its previous monopoly on interurban and urban transport\. This, combined with project-supported efforts to circumvent the "tour de role" system for interurban transport (where consumers previously had no choice between operators), has resulted in the introduction of two additional companies providing modern, reliable bus services at competitive rates; l Restructuring of the National Union of Transport Users (CNUT)\. Although texts elaborated through the project are not yet adopted, studies have led to the liberalization of maritime transport (elimination of the 40/40/20 maritime cargo sharing rules) and to the abandonment of the "tour de role" system for most commercial road transport; l Establishment of the National Observatory for Transport, within CNUT, which provides regular transport and trade statistics; l Elimination of the quota system for petrol transport, which overnight reduced by 35 percent the - 6 -  transport cost for petrol and introduced competitive higher-quality service; and l Co-financing with AFD of a study for the concessioning of the Niger-Benin rail service (OCBN)\. PRIT financed the costs for the first phase of the study (which is still underway), while AFD is financing the second and third phases\. Other accomplishments of this component include: (i) elaboration of a Road Safety Action Plan and implementation of initial actions, such as a data base on road accidents and several road safety campaigns; (ii) implementation of an information, education and communication program to reduce the risk of HIV/AIDS along transport corridors and among transport workers; (iii) feasibility studies and preparation of bidding documents for the creation of a "dry port" for Niamey; (iv) studies on transport and poverty, and transport and gender, which have contributed to the elaboration of the PRSP (Poverty Reduction Strategy Paper) and the draft rural roads strategy; (v) studies and elaboration of legal texts to reform the transport services sector; and (vi) feasibility studies and bidding documentation to develop small boat landings along the Niger River\. The criticism which can be made is that some of the studies carried out under the component were too wide ranging and ambitious, so that their results could not always be followed up through concrete action, due to lack of financial and human resources\. Also, a part of the planned training activities had to be cancelled in order to stay within the project funding envelope\. Environment: This component is rated very satisfactory\. The National Council of Environment for Sustainable Development (CNEDD), as well as the Bureau for Environmental Impact Studies (BEEEI), were created through this project\. A total of 200 people have received training in environmental management and assessment procedures, including four staff members who underwent "training of trainers" courses in Canada\. The General Directorate of Public Works has established an environmental unit, which has overseen the completion and implementation of environmental management plans for the PRIT road projects\. Mitigation measures are regularly incorporated into the contract documents\. A major mitigation plan was developed and implemented for the development of social infrastructure (school rooms and solar-powered water supply) in Tegueye (Tera-Yatakala Road) during Phase 1\. Project Management: The rating for this component is satisfactory\. As noted earlier, the initial design assumed that one coordinator at the BNC could effectively coordinate two complex and high-risk projects\. Under these conditions, the National Coordinator did as good a job as can be expected in keeping both projects moving, but was unable to establish an ongoing monitoring and evaluation system, such that indicators on sector performance in the Credit Agreement were not systematically followed up during the first half of the project\. This situation was remedied at the mid-term review, with the appointment of full time technical specialists as sub-coordinators for PRIT and PRIU, and measures to establish a system for monitoring performance indicators\. The BNC provided regular reports as required by the Credit Agreement, and a formal review of procurement procedures by the Bank in March 2003 showed that Bank procedures have been followed adequately\. 4\.3 Net Present Value/Economic rate of return: During appraisal, the economic evaluation of the project was limited to the physical investments in road works, and the same approach is used under the ICR\. A comparison was made between the rates of return for investments (IRR) projected at appraisal, with the actual rates of return based on known investment costs and traffic figures at the end of the project\. The results are presented in Annex 3\. The investments financed under the project were for periodic maintenance / rehabilitation of existing earth roads\. The economic evaluation normally covers both the initial investment for periodic maintenance / rehabilitation, plus the annual routine maintenance during the evaluation period\. In this context, the life cycle of the - 7 -  investment made in periodic maintenance / rehabilitation is defined as the time until the next periodic maintenance or rehabilitation is due, and for the roads in question, the assumption is that periodic maintenance needs to be done every five years\. Thus, the time period to assess the economic rate of return for the investments made in this project is five years\. The ICR mission showed however that on the six roads analyzed, little or no routine maintenance was actually carried out since the rehabilitation works, and the annual routine maintenance costs were therefore zero\. Calculations of net present value (NPV) and rate of return (IRR) were based on actual costs (contract values for works and supervision) and actual traffic data based on traffic counts for the five year period\. Because of limitations in traffic data provided by the Ministry of Public Works Road data base, this was done for four of the six Phase I roads and two of the thirteen Phase II roads, using the Roads Economic Decision Model (RED) developed by the World Bank\. In all of the six cases, the roads were in extremely poor condition and almost impassable for part of the year before the investment\. For this reason, the investment had the effect of releasing a vital constraint, leading to a relatively large increase in traffic immediately following the works, especially on those roads carrying international traffic (particularly Tera-Yatakala and Tikim-Adaré which are respectively on the Burkina Faso and Nigerian borders)\. It is expected however, that this traffic will level off beyond the initial period of analysis\. Investment costs per kilometer ranged from US$ 5,085 to US$ 19,436, with an average of US$ 14,900 on Phase I roads and US$ 6,900 on Phase II roads which used the "spot improvement" approach\. The analysis showed that all the roads had positive NPVs at a 12% discount rate, with the rates of return ranging from 45 % to 119 %\. The sensitivity and switching point analysis shows that NPV would be positive even if one assumes a 25 % lower traffic level, and that traffic levels would have to be from 50 % to 80 % lower to arrive at a zero NPV\. The economic analysis shows that, within the five year periodic maintenance life cycle, periodic maintenance investments on the earth roads had high rates of return, largely because initial conditions were extremely bad\. However, it is clear that rates of return would be even higher if routine maintenance would have been carried out\. 4\.4 Financial rate of return: N/A 4\.5 Institutional development impact: The project's institutional development impact was high\. It was instrumental in fundamentally changing the way in which road maintenance activities are carried out in Niger (from force account to contracting) and setting up an operational system for road maintenance planning and implementation\. In the face of the Government's serious financial constraints, the project facilitated the Government's implementation of socially painful reforms by providing the necessary resources to implement the retrenchment of 1\.200 workers for the Public Works Directorate and the privatization of the plant and equipment pool\. It also facilitated the restructuring of the Public Works Laboratory to commercial operations, an important element in the transition away from force account works\. The establishment of the Road Maintenance Fund was a major accomplishment, given past policies, and although it was not fully implemented as originally envisioned, its mere existence now provides a focal point for seriously addressing the road maintenance issue and a foundation for future improvements and a policy dialogue with the Bank and other donors\. The combination of the institutional reforms brought about by the project, with Phase 2 of the Earth Roads component and two years of Road Maintenance Fund operations, led to the creation of a hitherto non-existent local contracting and consulting industry in the road sector, which found work and gained experience through the numerous small contracts for road maintenance and rehabilitation\. In respect of road transport, the project helped the Directorate of Land Transport (DTT) begin to address some of the root problems of the sector, which was grossly inefficient and a heavy burden on the economy\. The elimination of interurban and urban transport monopolies and transport quota systems and the - 8 -  introduction of consumer choice led to almost immediate improvements in service competitiveness, quality and price\. The project established a minimum capability for vehicle registrations, licensing and road safety campaigns, although a number of the planned activities remain unfunded\. Regarding environmental management, the project made major inroads in main streaming environmental assessment and management, by establishing functioning agencies and training a broad range of stakeholders\. The above very significant institutional gains are however tempered by important risks of sustainability\. The new institutional setup for road management and maintenance is very young and, without regular road maintenance financing, risks floundering in the future (see section 6)\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of government or implementing agency: The extraordinarily heavy rains of 1998 wrought unforeseen damage on the already deteriorating road network\. This came at a time when the Government, supported by the project, was in a period of transition from force account to contracted works but had not yet put in place the Road Maintenance Fund\. In order to save the road network from widespread traffic interruptions, the project downgraded its technical approach on the regravelling component so as to provide at least minimal maintenance funding on the paved network and wider coverage on unpaved network in 1999-2000\. A second major factor was the second coup d'etat in 1999 and the general economic decline of the country in the following period\. GNP grew at 3\.9%, 2\.4%, and 10\.4% respectively in 1996, 1997 and 1998\. Yet following the exceptionally encouraging agricultural year in 1998, the economy slipped into a tailspin in 1999 and 2000, with GNP growth at -1\.2% and -1\.4%\. Under these conditions, the Government was in an even poorer position than initially anticipated to cover the social costs of the retrenchment program and in meeting counterpart funding obligations\. The project responded to this need, but at the price of reducing the amount of funds available for civil works\. A major factor with negative impacts on the outcome of the project was the breakdown in consensus among the donors on the basic policy and approach to assuring sustainable road maintenance financing, which in essence led to the fact that (i) road maintenance funding continues to be insufficient, and (ii) the sustainability of many of the project's achievements, and Niger's road network as a whole, is seriously threatened\. At project inception and until 2001, there was a general agreement among the Bank, the EU and the IMF that the road user fee applied to the price of fuel were to be directly deposited in the Road Maintenance Fund\. This principle is indeed retained in the Road Maintenance Fund Law which was adopted by Parliament in 1999\. However, the Ministry of Finance revisited the application of this law and found support with the IMF and the EU, whose newly appointed representatives departed from the views shared by their predecessors\. In 2003, the Minister of Finance clearly indicated that, because of the deteriorating fiscal situation, he would not accept direct collection of revenues by the Road Maintenance Fund (CAFER)\. This was later backed by a position paper from the EU (see Annex 7, Supporting Documents)\. At that time the project was about to close, and it was too late for the Bank's team to take any measures\. It can be added here that the Bank's Task Manager made numerous attempts to reconsolidate a common donor position between 2001 until the end of the project\. However, diverging views between the transport sector staff and the country operations staff prevented a successful outcome\. 5\.2 Factors generally subject to government control: After the Road Maintenance Fund Law was passed by Parliament in November 1999, it took the - 9 -  Government more than 18 months to actually implement the RMF (CAFER) as a staffed and functioning institution\. The Government then continued to delay the implementation of one particular aspect of the law, namely the direct collection mechanism of fuel levies by the CAFER\. As mentioned in section 5\.1 above, this was explained by "temporary liquidity problems"\. The Government did include in the annual budgets reasonable amounts for road maintenance, but disbursed much less than budgeted\. In 2001, of the amounts programmed for road maintenance, only 35% was actually paid by the Treasury to the Road Maintenance Fund\. This was supplemented by 44% direct aid from AFD, still leaving a gap of 21%\. In 2002, the Treasury deposited some 54% of the user fees collected, and retained the funds which had been provided by AFD specifically for road maintenance\. By July 2003, only some 22% of the programmed funds for 2003 have been deposited into the Road Maintenance Fund by the Treasury\. Under these conditions, the Road Maintenance Directorate is unable to effectively plan and implement a coherent annual road maintenance program\. The predictable result is the gradual deterioration of Niger's road network\. This vicious cycle of poor funding and asset deterioration is precisely the problem which the project sought to solve\. The erratic nature of maintenance funding has also created a chain reaction of adverse affects on other sector actors, including the nascent local construction firms and supervision consultants, as well as their use of laboratory and equipment rental services for road maintenance contracts\. The collapsing consensus between donors during the project encouraged the Government to not fully implement the Road Maintenance Fund legislation adopted by parliament\. Although the Project Management Unit (BNC) had been put under the control of the Prime Minister's office, precisely to ensure full support for the reform measures outlined in the Government's Letter of Development Policy, this was insufficient to induce the Ministry of Finance to implement the "direct collection mechanism" for the Road Maintenance Fund\. Ultimately, it is this shortcoming that undermined the achievement of the overall project development objective and leads to the "unsatisfactory" rating of project outcome\. The Government had serious difficulties mobilizing counterpart funds in 1998 and part of 1999, which led to delays in execution of Phase 1 of Earth Roads\. However, this problem was solved through a flexible approach, by allowing the Government to credit the taxable portion of the works contracts as its contribution\. The turnover of Government personnel had a particularly negative influence on the implementation of the Rural Roads Component, when a new Director essentially rejected the agreed approach to test various technical options, thus rendering the pilot projects of limited use for validating the strategy\. 5\.3 Factors generally subject to implementing agency control: Despite the fact that the BNC was understaffed for covering two projects in the beginning, it did a good job setting up basic management and monitoring systems in conformity with Bank requirements\. Once additional dedicated staff were provided after the mid-term review, oversight of the transport project improved measurably\. Having said that, the BNC shares responsibility for not establishing a system of regular monitoring of project outcome indicators during the first half of the project\. Because of its attachment to the Prime Minister's office, the BNC and the Management Committee was, in theory, well-placed to ensure that the Road Maintenance Fund was set up in conformity with the original Letter of Development Policy and implemented in conformity with its establishing articles\. However, it was not able to play this role as envisioned, as evidenced by the eventual reversal of the original approach\. 5\.4 Costs and financing: Information on project costs and financing is included in the Annexes\. - 10 -  6\. Sustainability 6\.1 Rationale for sustainability rating: The project's sustainability rating is unlikely, because of the poor prospects for achieving sustainable and reliable road maintenance financing in the foreseeable future\. A field visit in June 2003 of a sample of Phase 1 PRIT roads revealed that these roads are beginning to deteriorate due to a lack of adequate routine maintenance over the last two years\. From an institutional point of view, the PRIT has created a road maintenance, management and financing organization under the Road Maintenance Directorate and the Road Maintenance Fund, as well as the emerging private sector capacity in construction and engineering\. However, this capacity is bound to be under-utilized because of: the lack of a reliable and adequate financing system, as noted above\. Clearly, the vicious cycle of poor maintenance funding and asset deterioration is continuing apace\. The temporary solution proposed by the EU is to condition its budgetary support and funding for major rehabilitation on the Treasury's deposits of the full programmed amounts to the Road Maintenance Fund\. This "forced approach" may have some success during the years in which it is actually applied\. However, given the inevitable cross-pressures and priorities faced by public finance, this has the potential to provoke repeated crisis situations with the donor, while holding hostage important periodic maintenance work on the network, thus engendering further asset deterioration and higher maintenance costs\. 6\.2 Transition arrangement to regular operations: The PRIT has laid the foundation for the development of a new "public works economy," within which a set of public and private actors adequately play, and are held accountable for, their respective roles (finance/oversight; planning/management/supervision; and execution) in road network management and maintenance and in road transport\. However, these institutions depend on a steady source of financing, both from local and donor sources\. The new CAS does not include lending for a follow-on transport project, in light of constraints on future IDA lending, and because of priority given to other sectors\. Although the European Union and AFD remain actively engaged in Niger's transport sector, it is however unclear if they will be able to provide adequate policy support\. 7\. Bank and Borrower Performance Bank 7\.1 Lending: Bank lending performance was satisfactory, although marginally so\. Project identification was responsive to Government priorities at the time\. Bank personnel worked closely with the borrower in all aspects of preparation, including identifying key sector reforms to be pursued during the project and formulating a detailed implementation plan\. The Staff Appraisal Report correctly identified the risks associated with reform and counterpart funding\. However, in its effort to be responsive and very thorough, the preparation team included a relatively large number of individual and wide-ranging activities (mostly studies) into some project components\. Although basically all of those studies were carried out, it was probably too optimistic to assume that the Government would be able to absorb the results of some of those studies and translate their recommendations into concrete actions and implementation measures\. The declining fiscal situation and limited donor support during the life of the project made it impossible to finance certain planned investments for which studies were carried out\. 7\.2 Supervision: Bank supervision was satisfactory during most of the project period, with the exception of the year before the mid-term review\. Given the identified risks, early Bank supervision missions carefully monitored the counterpart funding situation and proactively sought to solve key problems, particularly easing the transition to contractor-based road maintenance\. From 2000 onwards, when the Road Maintenance Fund - 11 -  should have been fully functional, PSRs and mission Aide Memoires highlighted the Government's delays in implementing some aspects of the Road Maintenance Fund law\. However, the PSRs contain no information on performance indicators until 2000, and until then supervision missions did not work with the Coordination Office to set up an adequate monitoring and evaluation system, which was only addressed following the mid-term review\. During a certain period before the mid-term review, implementation progress and relations between Bank staff and the Government reached a low point, due principally to: (i) long delays by Bank staff in responding to requests for non-objections which led to important implementation delays; and (ii) a tendency by Bank staff to deal directly with General Directorate of Public Works on important matters, without informing the Project Coordination Office or the Project Steering Committee\. This led to a written complaint by the Prime Minister to the Bank\. These supervision problems were corrected at the mid-term review (change of Task Manager), and since then, project activities progressed very well and relations between project staff at the Bank and the Government markedly improved, as demonstrated by another letter to the Bank by the Prime Minister\. 7\.3 Overall Bank performance: Overall, Bank performance is considered satisfactory, although marginally so\. The main weaknesses were a somewhat "overloaded" project design and inadequate attention to performance indicators in the first half of project execution\. Poor client relations resulted from communication problems, but these were resolved during the second half of the project and almost all project activities were successfully concluded\. Borrower 7\.4 Preparation: Government preparation performance was satisfactory\. The BNC, Directorate of Public Works and Directorate of Land Transport were all integrally involved in the preparation and negotiations\. A letter of sector policy was prepared, which addressed key sector issues and the Government met effectiveness conditions five months following the signing of the DCA\. 7\.5 Government implementation performance: Overall implementation performance by the Government is judged satisfactory\. The Government was able to implement adequately (i) several important reforms related to road maintenance institutions and practices and road transport services, and (ii) physical road rehabilitation works\. However, these accomplishments are diminished by Government's failure to implement the financing arrangements of the Road Maintenance Fund, in conformity with its original articles, and the Government's outright rejection of these principles towards the end of the project in early 2003\. 7\.6 Implementing Agency: Implementation performance of the BNC is satisfactory\. Although the coordination office was understaffed until just before the mid-term review, it nevertheless managed to achieve an acceptable performance in financial management and reporting\. Additional staff hired after the mid-term review has helped to improve the BNC's capacity considerably\. A shortcoming has been the failure to establish a complete and effective monitoring and evaluation system of sector performance, based on indicators agreed during the negotiations\. 7\.7 Overall Borrower performance: Overall borrower performance is, on balance, considered unsatisfactory\. Although the Borrower should be given credit for general project implementation and for making major strides in changing the basic institutional landscape for road and road transport sector management, the lack of following up on an important political commitment and implementing certain aspects of the existing legislation, both concerning road maintenance financing, made it impossible to attain the main development objective of the project and assure sustainability of Niger's road network, which is among the country's largest assets\. - 12 -  8\. Lessons Learned The first lesson is that if a policy change by law is required as a condition of project effectiveness, the laws which are decided under those conditions are not necessarily implemented\. The second lesson is that even if a firm and sincere political commitment by the Government exists at the time of appraisal, a change of key politicians (ministers) in the Government, and a deterioration of the macroeconomic situation may result in a non-adherence to earlier commitments\. In the same line of thought, one could say that when fundamental sector reform is at play, one should resist the temptation to address too many other issues at the same time\. Since the Government's project staff seems to have been extremely busy with the plethora of studies (not only in Transport, but also in Urban development during the first half), it was not always able to devote adequate attention and resources to quality control and the absorption of recommendations made in the studies by the agencies concerned\. Also, the Government's project staff did not have sufficient political weight to ensure the practical implementation of the most fundamental and difficult reform of all: putting in place a reliable system for road maintenance financing\. This in spite of the fact that the legal basis for the reform was there (Road Maintenance Fund Law)\. This experience also suggests that it is not realistic to expect that such a new concept can be adequately established with only minimal technical assistance (such as elaboration of the texts and operations manual) and be fully functional within the span of a single investment project\. Rather, a continued and intense program of technical assistance would have been needed to "iron out" the inevitable problems that arise during the formative stages of such reforms\. Unfortunately, the CAS does not allow for that continuity\. Finally, even if a consensus between various donors and the Government exists concerning a planned policy change, this consensus may subsequently fall apart if the policy stance of the donors concerned evolves; the latter being triggered often by staff rotation\. This problem has been observed in several recent cases in Africa and elsewhere, and has been particularly pointed out in the Niger case\. Governments can easily exploit differences of opinion between donors, and are sometime caught in conflicting demands by different donors\. 9\. Partner Comments (a) Borrower/implementing agency: The implementing agency and members of the PRIT Steering Committee feel that the project was a success in initiating and achieving several politically difficult reforms, which the Government could simply not have accomplished alone and without this project\. There is however, a general agreement that the still unresolved issue of direct collection of user fees by the Road Maintenance Fund is at the crux of realizing the full benefit of the otherwise successful reform of road maintenance\. Particular compliments were paid by the Government to the Bank's Task Manager during the second half of the project\. (b) Cofinanciers: AFD is cofinancing the study for concession of the Niger-Benin rail services\. It expresses satisfaction with progress for this study, albeit with previous delays\. AFD is also providing direct financial assistance to the Road Maintenance Fund and will continue to take an active interest in its management\. AFD expressed its support in principle for the Second Generation Road Maintenance Fund\. It is however not willing at this time to make its support contingent to the full implementation of the Road Maintenance Fund Law\. (c) Other partners (NGOs/private sector): Discussions with the private sector (SMEs and consultants) revealed that this group of economic actors - 13 -  actually and literally owes its existence to the PRIT, and that a number of initial problems associated with qualifications and contract management by the Public Works General Directorate are being ironed out\. The Government has prepared its own Implementaiton Completion Report, which is included in Annex 7\. 10\. Additional Information N/A - 14 -  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate Percentage of roads and quality mark > 12 at Data collection underway\. Paved: (T>250 veh/day) 46% end or 2001\. Earth: (T>50 veh/day) 28% Rural: (T>25 veh/day) 37% Index of VOC in 2001 (100 in 1997) Data collection underway\. Not available Paved: 99; Earth 89; Rural: 94 Creation of public works equipment rental Completed\. Restructured to semi-private company; company with private operators registered 9/2002\. Execution ratio of road maintenance program Ongoing\. 2001: 74% above 80% 2002: 45% Discounted value at 12% of benefits for civil 100% works included in project >0 Output Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate Creation of Road Maintenance Fund Completed Created 11/99; operational 8/2001 Restructuring of DTP Completed\. Restructured and convered to DGTP 2/1999; retrenchment plan completed 5/2000\. Restructuring of the Road Laboratory Completed\. Restructured to semi-private company; registered 9/2003\. State disengagement of road maintenance Completed in all areas of the country\. Completed in all areas of the country, as of execution, except in unsafe areas\. 5/2000\. 1End of project Additional Project and Sector Indicators Agreed at Negotiations: Indicator Target Actual/Latest Estimate Value/Date Road Maintenance: Average overrun on cost of road maintenance contracts N/A No overruns in 2001 and 2002 (CAFER) Average delays in contract execution (CAFER) N/A No delays in 2001 and 2002 Average time of payment of the contractors (CAFER) N/A 7 to 15 days in 2001; 30 to 45 days in 2002 Ratio of national enterprises contracted out (CAFER) N/A 100% in 2001; 64% in 2002 (international contract for urban roads) Kilometers of roads actually regravelled compared to 1,060 km 545 full regravelling estimation 890 spot improvement Paved network spot improvements Works cost compared to estimation at appraisal $ 20\.891 million Road Transport: Evolution of vehicles' age and condition See table Axle loads of trucks Two axle load control stations functional on Benin-Niger corridor\. One station under construction on Niamey-Dosso Road and two stations on Niamey ­Burina Faso planned (EU financing)\. No other stations are functional\. Project Management: Average time between launching of bids and bid opening N/A 8 weeks (engineering studies & works) Average time between bid opening and awards N/A 13 weeks Average time between award and signing N/A 6 weeks Ratio of actual disbursements versus disbursements at N/A appraisal Capacity Building: Ratio of local and regional consulting firms registered N/A on short lists and awarded contracts Number of people trained N/A - 15 -  Sector Indicators 1997 1998 1999 2000 2001 2002 Road Maintenance CAFER Amount of road maintenance budget (billion FCFA) 5\.7 5\.85 Resources allocated to the road maintenance (billion FCFA) 3\.10 3\.66 3\.57 4\.22 4\.72 3\.60 Amount spent on road maintenance (milliards FCFA) 3\.10 3\.66 2\.90 0\.04 1\.68 2\.89 Resources allocated to the road sector in the PIP 1/ 20\.8 12\.6 7\.0 Execution ratios for the budget and PIP Evolution of traffic on the roads maintained by the project Amount and number of road maintenance contracts (billiards 145 63 FCFA) awarded with national budget financing $ 4,2 m\. $ 2,6 m\. Percentage of budget allocated to contracts 100% 96% Arrears on contracts financed by the Road Fund (billion FCFA) 0,462 0,313 Transport Evolution of road transport tariffs See table Restructuring of SNTN completed Road tolls in service between Cotonou et Parakou Two stations Function al OCBN's monopoly abolished Concessi on study in progress Statistics on international transport See Table 1/Strategie BCEOM (12/02), p\. 49 Evolution des tarifs de transports - Voyageurs (FCFA) Axes/ Transporteurs SNTV EHGM RTV Transporteurs ind\. Moyenne 1997- 1997- 1997-2000 2001-2002 2000 2001-2002 2000 2001-2002 1997-2000 2001-2002 1997-2000 2001-2002 % change Niamey-Arlit (1120 km) 21850 18575 16100 17000 16100 16100 18975 16944 -11% Niamey-Zinder (891 km) 14850 12625 11200 11900 10400 11000 12625 11681 -7% Niamey-Ouaga (514 km) 11500 11500 7600 8100 9550 9800 3% Moyenne 16067 14233 13650 14450 11367 11733 13717 12808 -7% Source: SNTV, EHGM, RTM Evolution des tarifs de transports - Marchandises (FCFA) Axes/Produits Riz Farine Sucre Friperies Prod\. Chimiques Moyenne 1997- 1997- % 1997-2000 2001-2002 2000 2001-2002 2000 2001-2002 1997-2000 2001-2002 1997-2000 2001-2002 1997-2000 2001-2002 change Togolais 36281 32000 36331 32000 36373 32000 34917 32000 67954 55000 42371 36600 -14% Ghaneen 32992 29000 33079 29000 33164 29000 30578 29000 56631 65000 37289 36200 -3% Beninois 29000 29000 29000 29000 29000 Moyenne 34637 30000 34705 30000 34769 30000 32748 30000 62293 60000 39830 33933 -15% Sources: L'Observatoire National - Revue des Statistiques 1997-2000; Revue Economique 2000-2001 - 16 -  IMPORTATIONS Importations de produits par tonne par corridor - Benin 1997 1998 1999 2000 2001 2002 % Change Cereales 46666 45000 30000 33334 40651 53715 15% Produits alimentaires 38333 50000 45000 3334 19379 24039 -37% Textiles 21667 25834 31667 31667 24920 28549 32% Materiaux de construction 11667 10000 8334 28334 16510 22706 95% Hydrocarbures 23334 23334 40000 58333 35390 34013 46% Produits chimiques 23334 21667 28333 21667 16728 2006 -91% Autres produits 23334 33334 30000 20000 22369 27084 16% Total 188335 209169 213334 196669 175947 192112 2% Importations de produits par tonne par corridor - Togo 1997 1998 1999 2000 2001 2002 % Change Cereales 40000 74000 34000 28000 38649 36361 -9% Produits alimentaires 36000 46000 10000 10000 12918 18376 -49% Textiles 15000 22500 10000 10000 4832 12407 -17% Materiaux de construction 14000 54000 72000 60000 73656 73120 422% Hydrocarbures 42000 72000 88000 76000 58556 69263 65% Produits chimiques 6000 14000 4000 14000 16996 18365 206% Autres produits 14000 10000 50000 22000 40857 23478 68% Total 167000 292500 268000 220000 246464 251370 51% Importations de produits par tonne par corridor - Ghana 1997 1998 1999 2000 2001 2002 % Change Cereales 8334 35417 41667 33334 107431 181330 2076% Produits alimentaires 16667 200000 70833 100000 103959 107132 543% Textiles 0 0 0 0 422 1007 Materiaux de construction 0 2084 8334 8334 7747 11850 Hydrocarbures 0 0 0 0 35390 34013 Produits chimiques 12500 12500 6250 12500 4723 6280 -50% Autres produits 0 4167 8334 8334 4451 6111 Total 37501 254168 135418 162502 264123 347723 827% Importations de produits par tonne - tous corridors 1997 1998 1999 2000 2001 2002 % Change Cereales 95000 154417 105667 94668 186731 271406 186% Produits alimentaires 91000 296000 125833 113334 136256 149547 64% Textiles 36667 48334 41667 41667 30174 41963 14% Materiaux de construction 25667 66084 88668 96668 97913 107676 320% Hydrocarbures 65334 95334 128000 134333 129336 137289 110% Produits chimiques 41834 48167 38583 48167 38447 26651 -36% Autres produits 37334 47501 88334 50334 67677 56673 52% Total 392836 755837 616752 579171 686534 791205 101% EXPORTATIONS Exportations par tonne - tous corridors 1997 1998 1999 2000 2001 2002 % Change Oignons 36191 49748 29289 91631 81385 125% Niebe 2791 5503 7460 28543 8532 206% Arachide 889 1340 299 1260 144 -84% Uranate 5518 2153 2960 4721 -14% Autres produits vegataux 5339 2059 5057 8848 Total 50728 60803 45065 130282 0 94782 87% Animaux (tetes) 477389 809963 869284 82% Animaux (tetes): % change 1999-2002 - 17 -  Parc Automobile selon les categories et l'age (Niamey, 2002) Voitures Tracteur Particulier Camionne s Remorque Age/Categories Moto es ttes Camions routiers s Autocars Totaux 0-6 981 968 429 43 7 8 35 2471 6-11 455 1522 498 50 59 2 42 2628 11-16 440 7660 1047 163 253 47 661 10271 16-21 797 13748 1208 285 410 299 1157 17904 21-26 743 10159 1453 609 617 615 911 15107 26 a plus 92 2654 796 406 398 727 195 5268 Totaux 3508 36711 5431 1556 1744 1698 3001 53649 Source: DTTMF Evolution des tarifs de transports - Voyageurs (FCFA) Axes/Transporteurs SNTV EHGM RTV Transporteurs ind\. Moyenne 2001- 1997- 1997- 1997- 2001- 1997-2000 2001-2002 1997-2000 2002 2000 2001-2002 2000 2001-2002 2000 2002 %change Niamey-Arlit (1120 km) 21850 18575 16100 17000 16100 16100 18975 16944 -11% Niamey-Zinder (891 km) 14850 12625 11200 11900 10400 11000 12625 11681 -7% Niamey-Ouaga (514 km) 11500 11500 7600 8100 9550 9800 3% Moyenne 16067 14233 13650 14450 11367 11733 13717 12808 -7% Source: SNTV, EHGM, RTM Evolution des tarifs de transports - Marchandises (FCFA) Axes/Produits Riz Farine Sucre Friperies Produits Chimiques Moyenne 2001- 1997- 1997- 1997- 2001- 1997- % 1997-2000 2001-2002 1997-2000 2002 2000 2001-2002 2000 2001-2002 2000 2002 2000 2001-2002 change Togolais 36281 32000 36331 32000 36373 32000 34917 32000 67954 55000 42371 36600 -14% Ghaneen 32992 29000 33079 29000 33164 29000 30578 29000 56631 65000 37289 36200 -3% Beninois 29000 29000 29000 29000 29000 Moyenne 34637 30000 34705 30000 34769 30000 32748 30000 62293 60000 39830 33933 -15% Sources: L'Observatoire National - Revue des Statistiques 1997-2000; Revue Economique 2000-2001 - 18 -  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 Earth Road Regravelling 20\.89 19\.47 93 Improvement of Road Administration & Management 2\.81 0\.79 28 Rural Roads 5\.61 4\.07 73 Land Transport Department 0\.67 0\.85 127 Environment 0\.25 0\.25 100 Project Management 0\.27 0\.07 26 Railway Concessioning 0\.00 3\.59 Total Baseline Cost 30\.50 29\.09 Total Project Costs 30\.50 29\.09 Total Financing Required 30\.50 29\.09 Totals may not add up due to rounding\. 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 24\.70 0\.00 0\.00 0\.00 24\.70 (22\.20) (0\.00) (0\.00) (0\.00) (22\.20) 2\. Goods 0\.35 0\.25 0\.20 0\.00 0\.80 (0\.35) (0\.25) (0\.20) (0\.00) (0\.80) 3\. Services 0\.00 0\.00 4\.30 0\.00 4\.30 Technical Assistance (0\.00) (0\.00) (4\.30) (0\.00) (4\.30) 4\. Training and Seminars 5\. Operating Costs 0\.00 0\.00 0\.10 0\.00 0\.10 (0\.00) (0\.00) (0\.10) (0\.00) (0\.10) 6\. PPF Refinancing 0\.00 0\.00 0\.60 0\.00 0\.60 (0\.00) (0\.00) (0\.60) (0\.00) (0\.60) 7\. Severance Payments 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) Total 25\.05 0\.25 5\.20 0\.00 30\.50 (22\.55) (0\.25) (5\.20) (0\.00) (28\.00) - 19 -  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\.12 10\.98 0\.00 0\.00 20\.10 (7\.58) (8\.96) (0\.00) (0\.00) (16\.54) 2\. Goods 0\.59 0\.00 0\.08 0\.00 0\.67 (0\.59) (0\.00) (0\.08) (0\.00) (0\.67) 3\. Services 0\.00 0\.00 5\.90 0\.00 5\.90 Technical Assistance (0\.00) (0\.00) (5\.90) (0\.00) (5\.90) 4\. Training and Seminars 5\. Operating Costs 0\.00 0\.00 0\.38 0\.00 0\.38 (0\.00) (0\.00) (0\.36) (0\.00) (0\.36) 6\. PPF Refinancing 0\.00 0\.00 0\.40 0\.00 0\.40 (0\.00) (0\.00) (0\.40) (0\.00) (0\.40) 7\. Severance Payments 0\.00 0\.00 3\.05 0\.00 3\.05 (0\.00) (0\.00) (3\.05) (0\.00) (3\.05) Total 9\.71 10\.98 9\.81 0\.00 30\.50 (8\.17) (8\.96) (9\.79) (0\.00) (26\.92) Figures in total may not add up due to rounding\. 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\. Earth Road Regravelling 18\.90 1\.99 17\.70 1\.79 93\.7 89\.9 Improvement of Road 2\.79 0\.00 0\.77 0\.02 27\.6 0\.0 Administration & Management Rural Roads 5\.14 0\.48 3\.72 0\.35 72\.4 72\.9 Land Transport 0\.66 0\.01 0\.84 0\.01 127\.3 100\.0 Department Environment 0\.25 0\.00 0\.25 0\.00 100\.0 0\.0 Project Management 0\.26 0\.01 0\.05 0\.00 19\.2 0\.0 Railway Concessioning 0\.00 0\.00 3\.59 0\.00 0\.0 0\.0 - 20 -  Annex 3\. Economic Costs and Benefits During appraisal, the economic evaluation of the project was limited to the physical investments in road works, and the same approach is used under the ICR\. A comparison was made between the rates of return for investments (ERR) projected at appraisal, with the actual rates of return based on known investment costs and traffic figures at the end of the project\. The results are presented further below\. The investments financed under the project were for periodic maintenance / rehabilitation of existing earth roads\. The economic evaluation normally covers both the initial investment for periodic maintenance / rehabilitation, plus the annual routine maintenance during the evaluation period\. In this context, the life cycle of the investment made in periodic maintenance / rehabilitation is defined as the time until the next periodic maintenance or rehabilitation is due, and for the roads in question, the assumption is that periodic maintenance needs to be done every five years\. Thus, the time period to assess the economic rate of return for the investments made in this project is five years\. The ICR mission showed however that on the 6 roads analyzed, little or no routine maintenance was actually carried out since the rehabilitation works, and the annual routine maintenance costs were therefore zero\. Calculations of net present value (NPV) and economic rate of return (ERR) were based on actual costs (contract values for works and supervision) and actual traffic data based on traffic counts for the five year period\. The ex-post evaluation of economic benefits of the Earth Roads component was carried out using the Roads Economic Decision Model (RED) developed by the World Bank\. The RED model is designed for low-volume roads such as the project roads in Niger\. It is able to compensate for the scarcity of reliable data, normally needed for a full-fledged economic evaluation using the HDM model\. Given data on the road conditions, vehicle fleet characteristics, travel speeds and vehicle operating costs, the RED model computes a series of roughness versus vehicle operating cost (VOC) relationships by interpolating polynomial functions of the above characteristics\. These functions allow the estimation of VOC and roughness in the "before project" situation, by entering the known average speed of vehicles on these roads\. For the "with project" situation, the road and traffic characteristics were taken from information provided by the Ministry of Public Works Road data base\. However, the information provided for some of the project roads seemed unrealistic, and it was decided to analyze only those roads for which reliable data is available\. These were only for four of the six Phase 1 roads and two of the thirteen roads included in Phase 2\. The economic analysis was thus carried out for the following roads: Phase Road Length (km) Phase 1 Kadata-Kornaka 60 Tera-Yatakala 116 Teberam-Badaguichiri 150 Tikim-Adaré 78 Phase 2 Keita-RN25pk22 54 Tchadoua-Mayahi 53 Total 511 In all of the 6 cases, the roads were in extremely poor condition and almost impassable for part of the year before the investment\. For this reason, the investment had the effect of releasing a vital constraint, leading to a relatively large increase in traffic immediately following the works, especially on those roads carrying international traffic (particularly Tera-Yatakala and Tikim-Adaré which are respectively on the Burkina - 21 -  Faso and Nigerian borders)\. It is expected however, that this traffic will level off beyond the initial period of analysis\. Investment costs per kilometer ranged from US$ 5,085 to US$ 19,436, with an average of US$ 14,900 on Phase I roads and US$ 6,900 on Phase II roads which used the "spot improvement" approach\. The analysis showed that all the roads had positive NPVs at a 12% discount rate, with the rates of return ranging from 45 % to 119 %\. The sensitivity analyses shows that NPV would be positive even if one assumes a 25 % lower traffic level, and that traffic levels would have to be from 50 % to 80 % lower to arrive at a zero NPV\. The economic analysis shows that, within the five year periodic maintenance life cycle, periodic maintenance investments on the earth roads had relatively high rates of return, largely because initial conditions were extremely bad\. However, even though road conditions are today still much better than before the investment, they are steadily declining due to lack of routine maintenance\. It is clear that rates of return would be even higher if routine maintenance would have been carried out\. Main Assumptions General: The basic approach taken in this analysis is that investments made on existing earth roads essentially involve periodic maintenance, and that the economic evaluation is therefore assessing the maintenance strategy on these roads\. In this context, the life cycle of the investment is defined as the time until the next periodic maintenance after the investment\. For the roads in question, the assumption is that periodic maintenance would occur every five years\. Based on this, the time period to assess the real economic return for investments made is assumed to be five years\. Traffic estimates: Traffic counts have been carried out by the Ministry of Public Works on a sporadic basis since 1985, from which annual daily traffic levels were derived\. For the six roads, all built in 1999 (Phase 1) and 2000 (Phase 2), traffic data was available for either 1997, 1998 or 1999, and 2002\. This provided a means to estimate the level of traffic before and after the works\. For most of these roads, the investment released a vital constraint, leading to a relatively large increase in traffic immediately following the investment, especially on those roads carrying international traffic (particularly Tera-Yatakala and Tikim-Adaré which are respectively on the Burkina Faso and Nigerian borders)\. It is expected however, that this traffic will level off beyond the initial period of analysis\. The table below summarizes the reported and estimated daily traffic levels\. Annual Average Daily Traffic (vehicles/day) Road Before: End of Period: 1997/1998/1999 2003 Phase 1 Kadata-Kornaka 74 199 Tera-Yatakala 49 303 Teberam-Badaguichiri 110 152 Tikim-Adaré 39 276 Phase 2 Keita-RN25pk22 98 312 Tchadoua-Mayahi 51 106 - 22 -  Cost Estimates: The investment costs used in the analysis were based on the actual costs of rehabilitation, including design and supervision, but excluding taxes\. There was little or no annual routine maintenance on the six roads analyzed, and the annual routine maintenance costs are therefore estimated to be zero\. Road Roughness Based on the initial road conditions, it was estimated that the international road index for road roughness (IRI) was, on the average, 15 before the works\. After the works, the IRI was estimated to be 5 for Phase 1 roads (full rehabilitation) and 7 for Phase 2 roads (less complete rehabilitation and spot improvements\. Results User impact (VOC and Time savings): Attachment 1 summarizes the results of the analysis of benefits, quantified in terms of savings in vehicle operating costs (VOC) and time for two roads ­ one from Phase 1 (Kadata-Kornaka road) and one from Phase 2 (Tchadoua-Mayahi road), which are typical of the results for all the roads in each phase\. The weighted average road user savings (VOC + time) for all vehicle types was 37% on the Phase 1 road and 31% on the Phase 2 road\. For Phase 1 roads, VOC were reduced by 40% and time was reduced by 25%, while VOC and time savings on the Phase 2 road were reduced by 34% and 25% respectively\. Project Investment Costs The actual project cost includes the cost of design, supervision and construction\. This is shown in the table below\. Average cost per km were about 50% less for Phase 2 roads, which used the spot improvement method\. Road Length Investment Investment (km) Cost (US$) Cost/km (US$) Phase 1 Kadata-Kornaka 60 764,407 12,740 Tera-Yatakala 116 2,254,549 19,436 Teberam-Badaguichiri 150 2,033,173 13,554 Tikim-Adaré 78 993,729 12,740 Phase 2 Keita-RN25pk22 54 466,745 8,612 Tchadoua-Mayahi 53 271,555 5,085 All roads 511 6,784,158 13,276 Net Present Value (NPV) and Internal Rate of Return (IRR): The net present value and internal rates of return were calculated for both traffic scenarios\. Financial benefits and costs were converted to economic values using a conversion factor of 85%\. The IRRs are rather high, ranging from 45% to 119%, with the net present value ranging from US$ 482,000 to US$ 2,4 million\. - 23 -  Road NPV at 12% (US$ IRR M) Phase 1 Kadata-Kornaka 1\.109 70% Tera-Yatakala 1\.966 45% Teberam-Badaguichiri 2\.400 66% Tikim-Adaré 1\.057 47% Phase 2 Keita-RN25pk22 1\.558 119% Tchadoua-Mayahi 0\.482 83% Sensitivity analysis: Although the analysis was carried out using actual cost and traffic data, a sensitivity analysis was carried out, to test the impact of possible variations in actual traffic\. This analysis, summarized in the table below, shows that even if observed traffic levels were 25% less, NPVs are still positive at 12% discount rate\. An assessment of the switching values reveals that observed traffic levels would have to be from 50 to 80 percent lower to reach an NPV of zero\. Details are provided in Attachments 2 and 3\. Base Normal Traffic -25% Road NPV at 12% (US$ M) ERR Phase 1 Kadata-Kornaka 1\.509 51% Tera-Yatakala 2\.862 31% Teberam-Badaguichiri 4\.417 31% Tikim-Adaré 1\.532 33% Phase 2 Keita-RN25pk22 2\.518 107% Tchadoua-Mayahi 0\.806 71% Conclusion The economic analysis shows that, within the five year life cycle for periodic maintenance / rehabilitation on earth roads, investments for such periodic maintenance under the project had relatively high rates of return, largely because initial conditions were extremely bad\. However, even though road conditions are still much better than before the investment, they are today steadily declining due to lack of routine maintenance, which means that the sustainability of the investments is at best uncertain\. - 24 -  Attachment 1: Estimated Economic Savings Resulting from Road Improvement: 1-Kadata-Kornaka road (Phase 1): Economic FinancialUnitTripCosts($/veh-trip)(1999dollars) R\.U\.C\. Savings WithoutProject WithProject Variation (%) VOC Time Total VOC Time Total VOC Time Total VOC Time Total Car -45% 12\.99 4\.31 17\.3 6\.28 3\.21 9\.49 -6\.71 -1\.1 -7\.81 -52% -25% -45% Lightbus -35% 20\.27 8\.34 28\.61 12\.77 5\.8 18\.57 -7\.5 -2\.54 -10\.04 -37% -30% -35% Light -39% 26\.6 0 26\.6 16\.22 0 16\.22 -10\.38 0 -10\.38 -39% 0% -39% truck Medium -43% 40\.11 0 40\.11 22\.72 0 22\.72 -17\.39 0 -17\.39 -43% 0% -43% truck Heavy -34% 35\.63 0 35\.63 23\.37 0 23\.37 -12\.26 0 -12\.26 -34% 0% -34% truck 2-Tchadoua-Mayahi road (Phase 2): Economic FinancialUnitTripCosts($/veh-trip)(1999dollars) R\.U\.C\. Savings WithoutProject WithProject Variation (%) VOC Time Total VOC Time Total VOC Time Total VOC Time Total Car -39% 11\.56 3\.84 15\.4 6\.44 2\.95 9\.38 -5\.12 -0\.89 -6\.02 -44% -23% -39% Lightbus -31% 18\.04 7\.42 25\.46 12\.14 5\.38 17\.52 -5\.89 -2\.05 -7\.94 -33% -28% -31% Light -32% 23\.68 0 23\.68 16\.08 0 16\.08 -7\.6 0 -7\.6 -32% 0% -32% truck Medium -36% 35\.7 0 35\.7 22\.84 0 22\.84 -12\.86 0 -12\.86 -36% 0% -36% truck Heavy -28% 31\.72 0 31\.72 22\.77 0 22\.77 -8\.95 0 -8\.95 -28% 0% -28% truck - 25 -  Attachment 2: Sensitivity Analysis and Switching values: Multi- Net IRR Equivalent IRR Multi- Net IRR Equivalent IRR plier Present (%) Annual Net(%) plier Present (%) Annual Net (%) Factor Value Benefits Factor Value Benefits (US$M) ($/km) (US$M) ($/km) BaseCase: 1-Kadata-Kornaka 1\.109 70% 4576 44% 1\.109 70% 4576 44% 2-Tera-Yatakala 1\.966 45% 4198 34% 1\.966 45% 4198 34% 3-Tebaram-Badaguichiri 2\.4 66% 3964 39% 2\.4 66% 3964 39% 4-Tikim-Adaré 1\.057 47% 3355 37% 1\.057 47% 3355 37% 5-Keita-RN25pk22 1\.558 119% 7118 67% 1\.558 119% 7118 67% 6-Tchadoua-Mayahi 0\.482 83% 2237 48% 0\.482 83% 2237 48% SensitivityCases: 1-Kadata-Kornaka BaseNormalTraffic 0\.75 0\.708 51% 2921 35% 1\.25 1\.509 87% 6231 51% NormalTrafficGrowthRate 0\.75 0\.87 61% 3593 39% 1\.25 1\.382 79% 5706 49% 2-Tera-Yatakala BaseNormalTraffic 0\.75 1\.07 31% 2285 25% 1\.25 2\.862 57% 6111 41% NormalTrafficGrowthRate 0\.75 1\.035 32% 2210 25% 1\.25 3\.197 59% 6826 43% 3-Tebaram-Badaguichiri BaseNormalTraffic 0\.75 1\.968 31% 2074 22% 1\.25 4417 48% 4653 29% NormalTrafficGrowthRate 0\.75 2\.038 33% 2147 22% 1\.25 4681 47% 4931 30% 4-Tikim-Adaré BaseNormalTraffic 0\.75 0\.581 33% 1846 28% 1\.25 1532 60% 4864 45% NormalTrafficGrowthRate 0\.75 0\.412 29% 1309 24% 1\.25 2121 68% 6734 53% 5-Keita-RN25pk22 BaseNormalTraffic 0\.75 1\.069 91% 4886 55% 1\.25 2\.046 146% 9351 76% NormalTrafficGrowthRate 0\.75 1\.168 103% 5339 58% 1\.25 2\.058 137% 9403 77% 6-Tchadoua-Mayahi BaseNormalTraffic 0\.75 0\.304 60% 1410 38% 1\.25 0\.806 123% 3741 63% NormalTrafficGrowthRate 0\.75 0\.403 75% 1868 44% 1\.25 0\.57 92% 2645 53% - 26 -  Attachment 3: Switching values: Base Case Case that Yields Net Present Value = 0 Value Value Factor Change 1-Kadata-Kornaka Base Normal Traffic (veh/day) 74 23 0\.31 -69% Normal Traffic Growth Rate % 5\.30% -3\.90% -0\.73 -172\.5 2-Tera-Yatakala Base Normal Traffic (veh/day) 49 22 0\.45 -54\.90% Normal Traffic Growth Rate % 10\.10% 3\.50% 0\.34 -65\.60% 3-Tebaram-Badaguichiri Base Normal Traffic (veh/day) 110 39 0\.36 -64\.20% Normal Traffic Growth Rate % 1\.70% -9\.20% -5\.36 -636\.50% 4-Tikim-Adaré Base Normal Traffic (veh/day) 39 17 0\.44 -55\.60% Normal Traffic Growth Rate % 10\.80% 5% 0\.46 -54\.20% 5-Keita-RN25pk22 Base Normal Traffic (veh/day) 98 20 0\.2 -79\.70% Normal Traffic Growth Rate % 6\.30% -6\.40% -1\.01 -201\.40% 6-Tchadoua-Mayahi Base Normal Traffic (veh/day) 51 17 0\.32 -67\.60% Normal Traffic Growth Rate % 3\.90% -4\.80% -1\.23 -222\.70% - 27 -  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 10/1996, 5 TEAM LEADER/TRANSPORT 12/1996, ECONOMIST (1); TRANSPORT ECONOMIST (1); HIGHWAY ENGINEER (1); ENVIRONMENAL SPECIALIST (1); RESEARCH ASSISTANT (1) Appraisal/Negotiation 04/1997 5 TEAM LEADER/ TRANSPORT ECONOMIST (1); TRANSPORT ECONOMIST (1); HIGHWAY ENGINEER (1); ENVIRONMENAL SPECIALIST (1); RESEARCH ASSISTANT (1) 11/1997 4 TEAM LEADER/ TRANSPORT ECONOMIST (1); LEGAL SPECIALIST (1); DISBURSEMENT SPECIALIT (1); PROGRAM ASSISTANT (1) Supervision 02/18/1998 3 SNR\. TRANS\. S S ECONOMIST (1); ROAD ENGINEER (1); FINANCIAL ANALYST (1) 07/07/1998 2 SNR\. TRANS\. ECONOMIST S S (1); ROAD ENGINEER (1) 04/07/1999 5 TRANSPORT ECONOMIST (1); S U ECONOMIST (1); SPECIALIST OF ENVIRONM (1); RURAL ROAD SPECIALIST (1); FINANCIAL ANALYST (1) 06/18/1999 4 SENIOR ECONOMIST (1); S U OPERATION OFFICER (1); ECONOMIST (1); RURAL SPECIALIST (1) 03/10/2000 6 OPERATION OFFICER (1); S S ECONOMIST (1); FINANCIAL ANALYST (1); SOCIAL DEVEVELOPMENT SPEC\. (1); INFORMATION SPECIALIST - 28 -  (1); STAFF ASSISTANT (1) 05/19/2000 4 TASK TEAM LEADER (1); S S TEAM MEMBER (1); URBAN TRANSP\.SPECIAL\. (1); HIGHWAYS ENGINEER (1) 08/21/2000 3 OPERATIONAL OFFICER (1); S U RURAL SPECIALIST (1); RURAL TRANS\. SPECIALIS (1) 06/18/2001 8 TASK TEAM LEADER (1); S S STAFF ASSISTANT (2) SR\. HIGHWAY ENGINEER (1); SR\. TRANSPORT SPECIALIST (1); SENIOR TRANSPORT ECONOMIST (1); HIGHWAY ENGINEER (1); SENIOR OPERATIONS OFFICER (1) 12/07/2001 6 TASK TEAM LEADER (1); STAFF ASSISTANT (2); HIGHWAY ENGINEER (1); PROCUREMENT SPECIALIST (1); FINANCE SPECIALIST (1) 03/03/2002 2 RURAL TRANSPORT S S SPECIALIST (1); OPERATIONAL OFFICER (1) 07/16/2002 2 HIGHWAY ENGINEER (1); S S STAFF ASSISTANT (1) 02/28/2003 7 TASK TEAM LEADER (1); S S STAFF ASSISTANT (2); HIGHWAY ENGINEER (1); ENGINEER/INTERN (1); PROCUREMENT SPECIALIST (1); FINANCE SPECIALIST (1) ICR 06/13/2003 1 ECONOMIST (1) S U (b) Staff: Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks US$ ('000) Identification/Preparation 49\.4 177\.6 Appraisal/Negotiation 9\.5 42\.0 Supervision 185\.9 478\.0 ICR 5 30\.0 Total 249\.8 727\.6 - 29 -  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 - 30 -  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 Ratings are explained and commented in the ICR text\. - 31 -  Annex 7\. List of Supporting Documents This Annex presents two supporting documents: A: Note prepared in March 2003 by European Union (EU) office in Niamey on the Niger Road Maintenance Fund B: Borrower's contribution to ICR (Original text as received by Government, without modifications) ---------------------------------------------- - 32 -  Annex 7 - A: European Union (EU) Note on Niger Road Maintenance Fund Note sur l'entretien routier au Niger Mars 2003 4 Principaux éléments entravent aujourd'hui encore le bon fonctionnement de la CAFER : 1) une très grande instabilité dans ses ressources : plus de 95% sont constituées de la dotation de l'Etat (qui a toujours été versée à moins de 55% de la dotation initiale) et des recettes des péages (taux de réalisation encore plus faible)\. - En ce qui concerne les ressources budgétaires, la CAFER appuyée par la Banque Mondiale préconise le remplacement de la taxe sur les produits pétroliers par une redevance d'usage routier sur les produits pétroliers qui permettrait l'affectation directe des fonds collectés sur un compte de la CAFER, sans passer par le Trésor\. La Délégation de la Commission européenne n'approuve pas cette méthode, principalement parce qu'elle déroge au principe d'unité de caisse qui dans un pays comme le Niger reste primordial\. En effet, la situation de trésorerie et la faiblesse des recettes budgétaires sont telles qu'il n'est pas raisonnable d'exiger du gouvernement le blocage d'une partie de ses ressources sans option de reprise en cas de problèmes macroéconomiques ou de survenue d'événements exogènes pouvant déstabiliser les équilibres\. - Pour ce qui est des ressources de péage, la CAFER semble vouloir dénoncer la convention avec la CCAAIN et faire un vrai appel d'offres au secteur privé\. La « faisabilité politique » de la chose n'est pas garantie\. Si aucune action n'est possible dans ce sens, il faudrait envisager d'activer le dispositif dont il a été question au moment de la mise en place de la CAFER, à savoir : (i) le rapprochement mensuel des données du concessionnaires à ceux de la banque de données routières, (ii) un système de contrôles inopinés au niveau des péages, (iii) un audit technique et financier de la gestion des postes de péage\. 2) L'instabilité de ses ressources rend la CAFER non-autonome et très vulnérable au « chantage politique » : pour bénéficier d'une partie de sa dotation budgétaire, la CAFER est obligée de se plier à des injonctions et à remplir des missions qui ne sont pas les siennes (ex : dépenses non prévues dans le programme, ou celles qui sont tout sauf de l'entretien)\. 3) L'hégémonie de la DGTP sur la CAFER : elle fait la programmation, lance les marchés, engage les montants et gère les marchés, sans réelle communication avec la CAFER\. Cette déconnexion amène à engager des ressources qui n'existent pas toujours, avec pour conséquence entre autres l'accumulation des arriérés de paiement (et donc une perte de confiance des PME) et le report sur l'exercice prochain du gap de financement constaté sur l'année en cours\. 4) Les textes régissant la CAFER présentent certaines lacunes et imprécisions, notamment en ce qui concerne le rôle des différentes tutelles, la nature des travaux à réaliser, la part à affecter à la voirie urbaine, les frais de fonctionnement de la CAFER, la rémunération de la DGTP\. La Banque Mondiale propose l'amendement de ces textes législatifs, pour tenter d'améliorer le - 33 -  fonctionnement de la CAFER\. Les options de la DCE sur l'entretien routier Les interventions de la DCE sur le secteur routier sont très importantes : 35\.000\.000 environ ont été mis sur le 8ème FED et 84\.000\.000 sur le 9ème où le transport est un secteur prioritaire\. Ces chiffres concernent les interventions sur programme indicatif national\. Des financement existent également sur programme indicatif régional\. Les actions de réhabilitation et d'entretien périodique financés au Niger par l'UE visent à mettre un frein à l'évolution accélérée des dégradations du réseau routier\. Pour ce faire, la Délégation doit également s'assurer (1) que le gouvernement s'acquitte de ses engagements budgétaires en matière d'entretien courant, (2) que ces allocations augmentent dans le temps\. La DCE agit alors à travers : - l'appui budgétaire Sur un programme en cours d'appui au budget de l'Etat de 20\.000\.000 en 2 tranches, la mise à disposition de la CAFER de sa dotation budgétaire 2002 a été mise comme une conditionnalité au versement de la 2nde tranche\. Sur un programme triennal d'appui au budget de l'Etat de 90\.000\.000 en préparation, la Commission se propose d'inclure 2 indicateurs finances publiques relatifs à l'entretien routier : le montant de la dotation budgétaire et la part réelle des fonds transférés\. La libération d'un certain montant de l'appui budgétaire serait assujetti à la réalisation de ces indicateurs\. - le programme transport Le programme transport 9ème FED de 84\.000\.000 est en cours de préparation et commencera probablement en 2004\. Il consistera essentiellement en la réhabilitation de routes primaires classées prioritaires par l'UEMOA, en un appui au programme d'entretien périodique dans le cadre de la stratégie d'entretien réalisée en 2002, et en la construction de pistes rurales dans les zones minières ou à potentiel minier\. Des indicateurs et mesures seront certainement identifiés notamment relatifs à la CAFER, et mis en conditionnalités dans le programme, sous une forme et à des nivaux qui restent à déterminer\. Le but étant la consolidation des résultats de la reforme de l'entretien routier notamment en matière de régularisation et d'augmentation des ressources de la CAFER, de renforcement du Conseil des Routes, d'une gestion technique et administrative autonome, d'une définition dans les normes d'un programme annuel pour l'entretien courant et périodique, d'un suivi régulier de l'état du réseau\. La DCE préconise également : - la mobilisation d'une portion des ressources PPTE, après l'atteinte du point d'achèvement en 2004, pour accroître les fonds réservés à l'entretien routier et financer la stratégie du sous-secteur routier actuellement en définition par les autorités nationales\. L'entretien routier s'inscrit parfaitement dans la stratégie de lutte contre la pauvreté dans ses différents aspects : - 34 -  (1) accès aux services de base : 70% des routes en terre sont actuellement dans un état mauvais ou très mauvais\. Leur entretien permettrait d'améliorer la mobilité des populations pauvres : accès aux centres de santé, aux écoles, aux autres centres sociaux\. (2) recherche de croissance soutenue / développement des secteurs productifs : création d'emploi et de revenu dans le secteur du BTP et des activités connexes, réduction des coûts de transport\. Les fonds disponibles au titre de l'initiative PPTE, qui seront de l'ordre de 40 milliards FCFA par an après l'atteinte du point d'achèvement, ne pourront pas être absorbés par les secteurs aujourd'hui ciblés, à savoir la santé et éducation\. A ce niveau, une position commune et une action concertée des principaux bailleurs (IBW-FR-UE) est nécessaire pour amener le gouvernement à consacrer une partie des ressources PPTE à ce but, en plus de la dotation actuelle\. - 35 -  Annex 7 - B Borrower's Contribution to ICR REPUBLIQUE DU NIGER CABINET DU PREMIER MINISTRE BUREAU NATIONAL DE COORDINATION PROJET DE REHABILITATION DES INFRASTRUCTURES DE TRANSPORT Crédit 3026-NIR RAPPORT D'ACHEVEMENT DE L'EMPRUNTEUR Juillet 2003 PRIT :Crédit 3026 NIR - 36 -  RAPPORT D'ACHEVEMENT DE L'EMPRUNTEUR SOMMAIRE 1 bilan général \. 3 2 objectifs et composantes du projet\. 3 2\.1 le contexte initial \. 3 2\.2 les objectifs \. 3 2\.3 les composantes \. 3 3 déroulement et évènements majeurs \. 4 3\.1 la mise en vigueur \. 4 3\.2 la revue à mi-parcours \. 4 3\.3 le report de la date d'achèvement du projet \. 4 3\.4 l'exécution financière du crédit \. 4 4 exécution des composantes \. 5 4\.1 les travaux d'entretien routier\. 5 4\.1\.1 la première phase des travaux \. 5 4\.1\.2 la deuxième phase des travaux \. 5 4\.1\.3 les travaux d'urgence\. 5 4\.2 le projet pilote de contruction des routes rurales\. 5 4\.3 les réformes institutionnelles\.5 4\.3\.1 la gestion de l'entretien routier\. 5 4\.3\.1\.1 la mise en place du Caisse Autonome pour le Financement de l'Entretien Routier 5 4\.3\.1\.2 la restructuration de la Direction des Travaux Publics \. 5 4\.3\.1\.3 la privatisation de la Direction du Matériel des Travaux Publics\. 5 4\.3\.1\.4 la restructuration du Laboratoire Nationanal des Travaux Publics \. 6 4\.3\.2 le transport routier\. 6 4\.3\.2\.1 la restructuration du Conseil Nigérien des Utilisateurs deTransports Publics 6 4\.3\.2\.2 la restructuration de la Société Nationale des Transports Nigériens \. 6 4\.3\.2\.3 la restructuration de l'OCBN\. 6 4\.3\.2 4 la réforme du cadre institutionnel\. 7 4\.3\.2\.5 le tour de rôle\. 7 4\.3\.2\.6 la sécurité routière\. 7 4\.3\.2\.7 la convention Sida-Transport\. 7 4\.3\.2\.8 les appuis institutionnels\. 7 4\.4 l'Environnement\. 7 4\.5 la gestion du projet par le Gouvernement\. 7 4\.5\.1 le Bureau National de Coordination\. 7 4\.5\.2 l'exécution du projet\. 8 4\.5\.3 les indicateurs de performance\. 8 5 la gestion du projet par l'ida\. 8 5\.1 le suivi par les chargés de projet\. 8 5\.2 les non objections\. 8 5\.3 les décaissements directs\. 8 5\.4 le compte spécial\. 8 6 Recommandations\. 9 6\.1 les travaux routiers\. 9 6\.2 le projet pilote routes rurales\. 9 6\.3 le transport routier\. 9 6\.4 les indicateurs de performance\. 9 6\.5 le compte spécial\. 9 6\.6 le programme sectoriel des transports\. 10 - 37 -  - 38 -  1 Biian général Le Projet de Réhabilitation des Infrastructures de Transports (PRIT), financé par le crédit N° 3026 de l'IDA, a été conçu en 1997 comme un ensemble cohérent de réformes institutionnelles, de remise à niveau d'une partie du réseau routier non revêtu et la mise en place d'une nouvelle stratégie de construction des routes rurales avec la participation des populations bénéficiaires dans le but de préparer un projet sectoriel des transports\. 1437km de routes ont été entretenues pour une prévision totale de 1060km, et des travaux d'urgence ont été exécutés relatifs à des opérations d'entretien courant et à la reprise du pont situé au PK 27 sur la route Niamey-Torodi\. La plupart des réformes institutionnelles ont été mises en place\. La stratégie de construction des routes rurales n'a pas pu être mise en place, mais la participation des populations a été effective\. 2 objectifs et composantes du projet 2\.1 le contexte initial Le Niger est un pays enclavé dont l'économie subit des coûts de transport élevés\. Ses infrastructures routières étaient mal entretenues par manque de moyens suffisants\. Les travaux d'entretien étaient effectués par la régie administrative dont l'efficacité n'était pas satisfaisante malgré l'intervention d'un premier projet sectoriel (PST Cr 1706-NIR) clos le 30 juin 1993\. Aussi, le rapport d'achèvement du PST 1 (PCR, Report N° 13773 du 9 décembre 1994) a recommandé l'établissement d'une politique d'entretien routier basée sur des critères économiques, de même que le rapport d'achèvement du Projet de Routes Rurales (Cr 886-NIR , clos le 30 juin 1987, Rapport N° 7739 du 28 avril 1989) a de son côté mis l'accent sur la nécessité de résoudre le problème de l'insuffisance des ressources pour l'entretien des routes rurales\. Il fallait donc stabiliser le financement de l'entretien routier auparavant pris en charge par le budget de l'Etat et soumis de ce fait au déséquilibre chronique des finances publiques\. C'est dans ce contexte que le PRIT a été préparé et mis en vigueur le 12 mai 1998\. 2\.2 les objectifs Les objectifs globaux du Projet de Réhabilitation des Infrastructures de Transport étaient d'améliorer l'état du réseau routier, d'augmenter l'efficacité de l'exécution de l'entretien routier et de baisser les coûts de transport\. Les moyens pour atteindre ces objectifs sont développés au niveau des composantes du projet\. 2\.3 les composantes Le projet comporte six composantes : Routes en terre : Consiste à recharger 1060 km de routes en terre, en tenant compte des plans de limitation des impacts environnementaux ; Routes rurales : Consiste à construire, dans le cadre d'un projet pilote, 150 km de routes rurales avec la participation des populations dans le but de tester la pérennisation de l'entretien ultérieur de ces infrastructures ; Gestion et administration de l'entretien routier : Consiste à mettre en oeuvre des réformes institutionnelles dans le but de privatiser l'exécution de l'entretien routier et d'en assurer son efficacité ; Transport routier : Consiste à libéraliser le secteur, à apporter un appui pour la préparation d'un plan d'actions dans le domaine de la sécurité routière et pour le renforcement des capacités ; Environnement : consiste à apporter un appui institutionnel à l'Administration de l'Environnement et à limiter les effets négatifs sur l'environnement dans le cadre des réhabilitations et construction de routes; Gestion du projet : consiste à gérer le projet conformément aux indicateurs de performance correspondants ( délais de règlement, de passations de marchés ) et à commettre des audits - 39 -  3 le déroulement chronologique et les évènements majeurs 3\.1 la mise en vigueur L'accord de crédit correspondant ( 3026-NIR ) pour un montant de 20 300 000 DTS) a été signé le 8 janvier 1998 et son entrée en vigueur est intervenue le 12 mai 1998\. 3\.2 la revue à mi-parcours La revue à mi-parcours du projet a eu lieu du 5 au 14 juin 2001\. Après avoir constaté que le projet a couvert un champ d'action très large, il a été recentré principalement sur les travaux\. Les réflexions ont porté aussi sur la préparation d'un projet sectoriel des transports\. 3\.3 Le report de la date d'achèvement Les difficultés rencontrées dans l'exécution de la dernière tranche des travaux routiers a conduit à proroger la date de clôture du projet\. Un délai de quatre mois a été accordé, reportant ainsi la date d'achèvement du 31 janvier 2003 au 30 mai 2003\. 3\.4 L'exécution financière du crédit Deux réallocation de fonds ont jalonné l'exécution du crédit\. La première a été effectuée pour financer les plans sociaux de la Direction du Matériel de Travaux Publics et de la Direction des travaux Publics en ponctionnant sur la catégorie Travaux\. La deuxième a été faite lors de la première mission de supervision après la revue à mi-parcours pour tenir compte de l'orientation donnée au projet\. CATEGORIES ALLOCATION INITIALE 1ère REALLOCATION 2ème REALLOCATION Montant répartition Montant en DTS en DTSrépartitionMontant en DTSrépartition 1\.TRAVAUX 14 500 000 71,4 12 190 00060,012 760 00062,8 2\. FOURNITURES 650 000 3,2 650 0003,2400 0002,0 3\. SERVICES CONSULTANTS 2 700 000 13,3 2 700 00013,33 820 00018,8 4\. FORMATION ET SEMINAIRE 440 000 2,2 440 0002,2470 0002,3 5\.CHARGE DE FONCTIONNE- 70 000 0,3 70 000 MENT ADDITIONNELLES 0,3 240 000 1,2 6\.REMBOURSEMENTDE 440 000 2,2 440 000 l'AVANCE POUR LA PREPA- 2,2 RATION DU PROJET 300 000 1,5 7\.NON AFFECTE 1 500 000 7,4 1 500 000 8\.PLAN SOCIAL - 2 310 0007,4 11,40 2 310 000- 11,4 GRAND TOTAL 20 300 000 100 20 300 00010020 300 000100 - 40 -  L'exécution financière du projet a nécessité aussi la révision du mode de participation de l'Etat aux financements de la composante des travaux\. La répartition initiale était de 10% pour le Gouvernement et 90% pour l'IDA par rapport au montant toutes taxes comprises des travaux\. L'Etat ne pouvant contribuer cash pour 10% et les travaux risquant ainsi de connaître des retards, l'IDA et le Gouvernement ont convenu d'exonérer les marchés correspondants et de comptabiliser les taxes (TVA et enregistrement) comme sa participation\. 4 l'exécution des composantes 4\.1 les travaux routiers 4\.1\.1 la première phase des travaux Elle a concerné 545 km de routes en terre qui ont été entièrement rechargées\. Un groupement d'entreprises nigériennes a pu figurer parmi les entreprises adjudicatrices qui étaient donc principalement étrangères\. D'autres entreprises nigériennes ont bénéficié comme sous traitantes de l'exécution de certains lots\. L'exécution des travaux de la première tranche s'est faite sans dépassement de délai\. 4\.1\.2 la deuxième phase des travaux Elle a été basée sur la réhabilitation et le traitement de points critiques\. Certaines sections ont été entièrement rechargées\. Elle a été scindée en deux tranches, pour tenir compte de la capacité des entreprises nationales\. La première a porté sur un linéaire de 454 km et la deuxième sur 438 km\. L'exécution de la première tranche s'est faite avec des dépassements de délais importants à cause du retard mis dans l'approbation des avenants\. L'exécution de la deuxième tranche a connu plus de problèmes à cause du manque de matériel de travaux publics et trois des sept marchés de travaux ont dû être résiliés\. Des travaux confortatifs ont pu être effectués sur les tronçons concernés pour en améliorer la praticabilité\. 4\.1\.3 Travaux d'urgence En dehors de ces deux phases de travaux, le projet a financé les travaux d'urgence qu'ont nécessité les dégâts causés par la forte pluviométrie de la saison 2000\. Ils ont consisté en des travaux mécanisés et travaux de point temps bitume et de protection des ouvrages, ainsi que la reprise du pont du PK27 sur la route Niamey-Torodi\. 4\.2 Le projet pilote de construction de routes rurales Sur 150 km prévus 117 km ont été réalisés\. Les populations ont effectivement participé à toutes les phases, de l'identification à la construction \. Elles ont réalisé leur part ayant consisté en des travaux de débroussaillage et de plantation d'arbres\. Les travaux à l'entreprise ont été achevés à l'exception du tronçon Filingué-Chical pour lequel 11 km ont pu être réalisés sur les 17 km\. Pour la phase entretien, les populations ont prévu des dispositions pour pouvoir l'assurer dans des conditions satisfaisantes\. Du fait du retard enregistré dans la conduite du Projet Pilote, le suivi-évaluation par un consultant indépendant, qui aurait permis de dégager une stratégie, n'a pas pu avoir lieu\. L'IDA a estimé qu'il n'était objectivement pas possible de tirer des conclusions dans les délais du PRIT\. 4\.3 Les réformes institutionnelles 4\.3\.1 La gestion et l'administration de l'entretien routier Les réformes du secteur routier ont comme axe principal la privatisation de l'exécution de l'entretien routier et l'amélioration de son exécution\. - 41 -  4\.3\.1\.1 la restructuration de la Direction des Travaux Publics (DTP) Auparavant la Direction des Travaux Publics remplissait 3 fonctions incompatibles : elle concevait, exécutait et contrôlait les travaux d'entretien routier si bien que l'efficacité et l'économie n'étaient pas garanties dans une situation de crise financière aiguë\. Il fallait donc supprimer les brigades d'entretien routier (licenciement du personnel correspondant) et confier les travaux aux entreprises\. Il fallait aussi confier la surveillance de ces travaux aux bureaux de contrôle afin que l'administration des travaux publics se concentre à sa fonction de gestion et de programmation\. Cependant, à cause du caractère spécifique de l'entretien courant, l'Administration des Travaux Publics en assure toujours le contrôle et la surveillance des travaux\. Cette réforme a été conduite et achevée en 2000\. 4\.3\.1\.2 la privatisation de la Direction du Matériel des Travaux Publics (DMTP) La restructuration de la DTP a mis fin à la régie\. En conséquence, l'Etat devait se désengager de la location de matériel de travaux publics\. L'opération s'est déroulée en 3 phases : le licenciement du personnel qui a nécessité l'établissement d'un plan social, le parcage du matériel et la transformation de la DMTP en Société de Location de Matériel de Travaux Publics (SLMTP), et enfin la privatisation de la SLMTP\. Le processus a pris beaucoup de retard\. Il n'a été dénoué que le 31 décembre 2002 avec la remise officielle de la SLMTP au repreneur stratégique\. 4\.3\.1\.3 la restructuration de la Direction du Laboratoire National des Travaux Publics et du Bâtiment (DLNT/B) Cette réforme a aussi pris beaucoup de retard\. Elle est nécessaire afin de donner au LNTP/B les moyens d'offrir un service de qualité à ses clients\. Elle a été conduite à terme avec la création de la SEM Laboratoire national des Travaux Publics, l'acquisition d'un matériel technique plus performant, la mise en place d'un système de gestion informatisé et la réhabilitation des locaux\. Les membres du Conseil d'Administration ont été nommés et un compte bancaire a été ouvert conformément à l'autonomie de gestion\. Au stade actuel, le Laboratoire s'acquitte convenablement des prestations demandées par ses clients, et est en mesure de les améliorer avec le nouveau matériel acquis\. 4\.3\.1\.4 la création de la Caisse Autonome pour le Financement de l'Entretien Routier (CAFER) Elle est venue couronner les réformes institutionnelles dans le secteur de l'entretien routier\. Pour que cette réforme ait un sens, il a fallu d'abord supprimer la régie et confier, les travaux d'entretien aux entreprises auxquelles il faut garantir les règlements dans des délais acceptables\. Elle a nécessité beaucoup de sacrifices (licenciement de plus de 2000 agents de la DTP et de la DMTP) qui ont été consentis malgré tout\. C'est ainsi que la CAFER a pu être créée en 1999 et installée effectivement en février 2001 avec le lancement des premiers appels d'offres\. Malgré la suppression de la régie, l'autonomie de la CAFER n'est pas effective\. Les recettes continuent de transiter par le circuit du Trésor National\. Ainsi, pour l'exercice 2002, seul un montant correspondant à 50% du budget a été versé par le Ministère des Finances dont plus de 34% allouée à la voirie urbaine\. 4\.3\.2 le transport routier Les réformes institutionnelles du secteur des transports routiers ont concerné surtout la suppression des mono-poles et la révision du cadre institutionnel, avec comme conséquence la restructuration des entreprises concernées\. 4\.3\.2\.1 la restructuration du Conseil Nigérien des Utilisateurs de Transport (CNUT) Dans le cadre de la restructuration du CNUT, la clé de répartition des cargaisons selon la règle des 40/40/20 a été abandonnée\. Les chargeurs ont obtenu ainsi la liberté de choisir leur transporteur maritime\. L'Observatoire - 42 -  National des Transports a été créé et logé au sein du CNUT, afin d'aider à maîtriser les statistiques et les coûts de transport\. Le CNUT intervient aussi dans la facilitation de l'acheminement des marchandises nigériennes\. Une représentation majoritaire des privés en son sein lui permettrait de disposer de moyens pour accomplir cette tâche et même de permettre la diversification de ses activités\. Dans cette optique la révision des statuts du CNUT a été décidée\. 4\.3\.2\.2 la restructuration de la Société Nationale des Transports Nigériens (SNTN) La restructuration de la Société Nationale des Transports Nigériens a résulté de la suppression de son monopole sur le frêt minier et le transport des hydrocarbures, dans le but de réduire les coûts de transports de ces produits stratégiques\. Il fallait alors recentrer ses activités sur le transport marchandises et la séparer des activités de transport voyageurs jugées moins rentables\. La Société Nigérienne de Transport Voyageurs (SNTV) et la Société de Transport Urbain de Niamey (SOTRUNI) ont été ainsi créées et sont devenues opérationnelles\. Cette restructuration a été jugée insuffisante par le Conseil d'Administration qui a décidé de la privatiser\. La loi inscrivant la SNTN sur la liste des sociétés à privatiser a été votée par l'Assemblée Nationale\. 4\.3\.2\.3 la restructuration de l'OCBN La restructuration de l'OCBN constitue l'une des principales réformes dans le domaine des activités de transport, tout en étant aussi la plus complexe de par son caractère bi-étatique\. Malgré ces contraintes, cette restructuration est à présent à un stade irréversible\. Elle a été acceptée par tous les partenaires (Etats et Syndicats) Elle a été précédée par l'élaboration et l'application d'un plan de rigueur pour assainir la gestion de l'entreprise\. Le processus de cette restructuration, qui consiste en la mise en concession de l'OCBN, vient d'être lancé et arrivera à terme dans un délai de 18 mois\. La mise en concession de l'OCBN devrait avoir un impact positif sur les coûts et les délais de transport à destination du Niger, tout en soulageant les finances publiques des 2 Etats\. 4\.3\.2\.4 la réforme du cadre institutionnel Une étude sur le cadre institutionnel a conduit à la proposition d'un projet de loi pour sa réforme\. Le nouveau cadre permettra une exploitation plus efficace des différents modes de transport et d`aplanir la discordance ou le vide juridique des textes actuels\. 4\.3\.2\.5 le tour de rôle Si les résultats sont plutôt encourageants dans le transport voyageurs, ils sont plus mitigés pour le transport de marchandises\. Même si le tour de rôle demeure le système en cours dans les gares, des autorisations peuvent être délivrées à tout opérateur privé pour faire des services réguliers de transport voyageurs à partir des ses propres installations\. Certes le transport intérieur de marchandises n'est plus soumis au tour de rôle, mais les pesanteurs persistent au niveau du transport international\. Ainsi, l'OCBN a tenté de libéraliser l'affrètement des camions à Parakou mais n'a pas pu faire aboutir cette mesure\. La situation est toujours le statu quo sur les autres corridors desservant le Niger\. - 43 -  4\.3\.2\.6 la sécurité routière Un plan d'actions pour la sécurité routière a été élaboré et a connu un début d'application avec l'installation de la base des données sur les accidents\. Ce plan d'actions pourrait être efficacement utiliser pour une amélioration effective de la sécurité routière au Niger\. 4\.3\.2\.7 la convention Sida-Transport Un programme d'intervention dans le cadre de la prévention du VHI Sida a été exécuté\. Non prévu au départ, ce programme a été introduit à la revue à mi-parcours pour tenir compte que les activités du secteur des transports contribuent à la propagation du Sida\. L'intervention du projet a concerné notamment l'aménagement de kiosques pour la sensibilisation dans les autogares de 5 localités ainsi que la formation de leurs gestionnaires et de leurs animateurs\. Des manifestations ont été aussi organisées\. Ce programme a été très important, parce que servant de trait d'union avec le MAP (Multi-country Aids Program) dans le secteur des transports\. 4\.3\.2\.8 les appuis institutionnels Ils ont concerné notamment l'informatisation des documents de transports dans le cadre de la maîtrise du parc, la formation des opérateurs du secteur et des agents de l'Administration\. 4\.4 l'environnement Le but de cette composante est de vulgariser la prise en compte des impacts environnementaux dans les travaux routiers\. Plusieurs sessions de formation et campagnes de sensibilisations ont été organisées\. Des moyens matériels ont été mis à la disposition des structures en charge de cette composante\. Une division environnementale a été créée au sein de la Direction Générale des Travaux Publics\. La prise en compte des mesures de mitigation (limitation des impacts environnementaux négatifs) est devenue effective dans les travaux routiers\. 4\.5 la gestion du projet par le Gouvernement 4\.5\.1 la Coordination du projet Le Bureau National de Coordination a été créé en 1992\. La coordination de la préparation du PRIT ainsi que celle son exécution ont été assurées par le Comité de Pilotage qui regroupe les représentants de toutes les agences d'exécution\. Le projet a d'abord été placé sous la tutelle du Ministère du Plan avant d'être rattachée au Cabinet du Premier Ministre\. Cette dernière tutelle a été pour beaucoup dans l'aboutissement de certaines réformes\. 4\.5\.2 l'exécution du Projet Les actions ont été mises en oeuvre par les agences d'exécution, depuis la procédure de passation de marché jusqu'à la réception des biens ou services\. Les capacités de l'Administration sont ainsi directement mises à contribution à toutes les étapes de la mise en oeuvre\. Elles ont été renforcées par des actions de formation, qui dans le domaine routier, n'a pas pu s'étendre aux opérateurs privés afin qu'ils améliorent leurs prestations\. Il faut noter que des retards, parfois importants, dans la mise en oeuvre des actions, la passation des marchés ou les circuits de mise en règlement des prestations, ont été enregistrés à cause de la lenteur administrative ou la méconnaissance des procédures de l'IDA\. 4\.5\.3 les indicateurs de performance Quoique tardivement, leur gestion a été informatisée et pourra être capitalisée aux fins d'utilisation dans d'autres projets\. Tous les indicateurs de performance ont été pris en compte dans ce système et de nouveaux indicateurs ont été aussi introduits dans cette optique\. Seuls les indicateurs relatifs aux réformes institutionnelles ont été - 44 -  régulièrement suivis tout au long du projet\. Le retard pris dans la mise en place du système informatisé pour le calcul des indicateurs est la raison pour laquelle le suivi n'a pas été global\. Leur connaissance aurait poussé à améliorer par exemple les performances en matière de passation de marché\. 5 la gestion du projet par l'IDA 5\.1 le suivi par les chargés de projet Le projet a connu 3 chargés de projets\. C'est dire la fréquence des changements et leurs incidences sur le cours du projet\. La stabilité observée après la revue à mi-parcours a eu un impact très positif associé au fait que le chargé de projet a beaucoup oeuvré pour son achèvement dans de bonnes conditions\. 5\.2 Les avis de non-objection Jusqu'à la revue à mi-parcours, le projet a beaucoup souffert de la lenteur avec laquelle les avis de non-objection sont donnés\. La situation s'est nettement améliorée après le changement du chargé de projet, ce qui a permis de combler le retard enregistré sur la période précédente\. 5\.3 les décaissements directs Les délais pour les décaissements directs atteignent un mois, voire même plus à l'approche de la date initiale de clôture du Crédit\. Ces délais, ajoutés à celui de la mise dans le circuit de règlement, conduisent à dépasser les délais contractuels des marchés soumis aux procédures de la Banque\. Les différents échanges avec l'IDA ont permis de les comprimer\. 5\.4 le compte spécial Le niveau du compte spécial a été revu à la hausse au cours du projet conformément à l'Accord de Crédit\. Compte tenu des retards enregistrés dans les travaux et de leur exécution simultanée, le niveau du compte spécial n'était plus adéquat\. La bonne collaboration avec le Service Décaissement suivi de l'appui du Chargé de projet a permis de résoudre ce problème en acceptant de baisser le seuil des paiements directs au cas par cas\. La prolongation du Crédit a permis de renflouer le compte spécial\. 6 les recommandations 6\.1 les travaux routiers La substitution en cours de projet de l'entretien courant au profit de l'entretien périodique (sous la dénomination réhabilitation et traitement de points critiques) a fortement ralenti le déroulement des actions, et réduit la qualité des travaux par rapport à l'indicateur de performance correspondant\. A l'avenir, il serait souhaitable d'exécuter les travaux d'entretien courant sur les fonds de la CAFER, et d'orienter les fonds extérieurs vers l'entretien périodique\. Pour leur exécution, la formation de tous les acteurs du secteur est nécessaire afin d'améliorer l'efficacité du système\. 6\.2 Le Projet Pilote Routes Rurales A la clôture du PRIT, la stratégie de construction de routes rurales en cours d'essai n'a pas été validée\. Cette validation est pourtant nécessaire\. Les projets à venir devraient prendre en compte la phase de validation de la stratégie, tout en consolidant l'expérience acquise dans le domaine de la participation des populations\. Un minimum de linéaire de routes rurales devrait être prévu à cet effet\. 6\.3 Le transport routier Beaucoup d'études ont été menées dans le secteur du transport routier\. Il faut donc les exploiter dans les - 45 -  projets ultérieurs\. Il en est ainsi de l'étude sur le port sec (pour l'amélioration de la chaîne logistique), de l'étude sur le financement des véhicules de transport ( pour le renouvellement du parc qui est indispensable ), de l'étude transport et pauvreté (dans le cadre de l'éradication de la pauvreté)\. Par ailleurs, pour lutter contre le développement de l'informel, il est nécessaire d'accorder une grande importance à la formation de tous les opérateurs du secteur\. Une étude a été menée à cet effet dans le cadre du PRIT\. Un effort particulier doit aussi être fait pour amener les opérateurs à abandonner le tour de rôle, garantie indispensable à donner pour pouvoir renouveler le parc dont la vétusté a une incidence négative sur les coûts et les délais de transport\. 6\.4 les indicateurs de performance La gestion de tous les indicateurs de performance devrait se faire tout au long des projets à venir afin qu'ils puis-effectivement servir d'informations alimentant leur tableau de bord\. Dans le cas d'un changement de nature des actions à mener (comme le changement des rechargements en travaux d'entretien courant), il est nécessaire d'en tenir compte au niveau des indicateurs de performance pour ne pas pénaliser le projet lors de son évaluation\. 6\.5 La gestion financière Il est recommandé que le niveau du compte spécial soit adapté à l'ampleur des travaux dans l'exécution des projets ultérieurs Les délais des décaissements directs, qui ont été en moyenne d'un mois au niveau du Service Décaissement, doivent être améliorés afin de respecter les délais de règlement maximums des marchés de la Banque\. Des efforts doivent être aussi faits du côté de l'Administration dans le cadre de l'atteinte de cet objectif\. 6\.6 Le Programme Sectoriel des Transports Les actions menées dans le cadre du Projet de Réhabilitation des Infrastructures de Transport doivent être poursuivies et consolidées à travers l'élaboration et la mise en oeuvre d'un Programme Sectoriel des Transports\. Le processus a déjà été engagé avec l'étude sur la stratégie nationale des transports qui est en cours, et doit être conduit jusqu'à la mise en place du programme\. - 46 -  - 47 -

REVIEW

P071291

 ICRR 14060 Report Number : ICRR14060 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 04/24/2013 Country : Nepal Project ID : P071291 Appraisal Actual Project Name : Financial Sector US$M ): Project Costs (US$M): 30\.1 21\.58 Technical Assistance Project L/C Number : C3727 Loan/ US$M): Loan /Credit (US$M): 16\.0 9\.52 Sector Board : Cofinancing (US$M): US$M ): 14\.1 12\.06 Cofinanciers : Board Approval Date : 12/19/2002 Closing Date : 06/30/2007 12/31/2011 Sector (s): Banking (98%); Vocational training (1%); Media (1%) Theme (s): State-owned enterprise restructuring and privatization (29% - P); Regulation and competition policy (29% - P); International financial standards and systems (28% - P); Corporate governance (14% - S) Prepared by : Reviewed by : ICR Review Group : Coordinator : Robert Keyfitz Rene I\. Vandendries Ismail Arslan IEGPS2 2\. Project Objectives and Components: a\. Objectives: The Financial Sector Technical Assistance Project (FSTAP) was envisaged as the first stage of a programmatic Financial Sector Reform Program (FSRP) with as overarching objective, "to support the renewed efforts of His Majesty's Government of Nepal (HMGN) to improve the sector in order to bring macroeconomic stability and promote private-sector led economic growth\." (PAD, p\. 2) Specific objectives of the FSTAP as stated in the PAD are, "(a) helping to restructure and re -engineer the Central Bank (Nepal Rastra Bank-NRB), so that it can effectively perform its key central banking functions; (b) commencing commercial banking reform in the two large ailing commercial banks that dominate the sector (Rastriya Banijya Bank (RBB) and Nepal Bank Limited (NBL)) -- by introducing stronger bank management that protects the financial integrity of the two banks and would take on a conservator role to prepare the banks for the next steps of restructuring; and (c) supporting a better environment for financial sector reform in areas such as enhanced credit information, better financial news reporting, and better training for staff in financial institutions \.â€? (PAD, p\. 2) The wording in the Development Credit Agreement is materially the same : The objectives of the Project are to assist the Borrower in : (i) restructuring and re-engineering the Nepal Rastra Bank for it to effectively perform key central banking functions; (ii) implementing reforms in the commercial banking sector that will focus initially on restructuring Rastriya Banijya Bank and Nepal Bank Limited; and (iii) improving the environment for financial sector reforms in areas such as credit information and financial news reporting through specialized training and capacity building \.â€? (DCA, p\. 19) In April 2011, a Level 1 restructuring amended the objectives in the Development Credit Agreement :  “The objectives of the Project are to assist the Borrower in : (i) developing capacity of Nepal Rastra Bank to effectively perform key central banking functions; (ii) implementing restructuring program of Rastriya Banijya Bank and carrying out diagnostic reviews of Nepal Bank Limited, to prepare these state -owned commercial banks for the next steps of restructuring; (iii) creating an enabling environment for financial sector development, specifically in the area of credit information Bureau, secure transaction registry and financial news reporting \." While the PAD version is somewhat more detailed and descriptive, for the sake of consistency between the original and amended objectives, the DCA versions will be used in this review \. In broad terms, the April 2011 restructuring, (i) downplayed and lowered expectations about the extent of central bank restructuring; (ii) limited the preparation for final resolution of the two restructured commercial banks to only one of them, Nepal Bank Limited; and (iii) detailed more explicitly the improvements in the financial sector enabling environment\. The changes were relatively minor and, moreover, were introduced only 8 months before the project closed\. Very little if any money was disbursed under the restructured objectives \. Therefore, the project will be evaluated in relation to the original objectives, only \. 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: 04/01/2011 c\. Components: The FSTAP comprised three components \. The versions given here are from the original project \.: (i) Restructuring and re-engineering the Nepal Rastra Bank for it to effectively perform key central banking functions: The FSTAP’s first component targeted a range of problem areas in the central bank \. Specific actions included: (i) Providing legal support for implementing the new NRB Act (2002) to increase the central bank's autonomy and independence; and finalizing and implementing a new Banking and Financial Institutions Act (BFIA) and other legal reforms; (ii) Developing a Human Resources ( HR) strategy to right-size staff and implement a voluntary retirement scheme (VRS), decompress the salary structure to improve incentives for performance, and computerize HR functions; (iii) Strengthening supervisory and regulatory capacity through recruitment of experienced bank supervisors and inspectors, implementation of a strategic plan for financial sector surveillance and upgrading of computer systems; and (iv) Providing other support, including building capacity in the research department and computerizing the library, strengthening accounting and auditing capabilities, supporting internal audit functions, and providing training for professional development \. (ii) Implementing reforms in the commercial banking sector that will focus initially on restructuring Rastriya Banijya Bank and Nepal Bank Limited : This component called for replacing the management of RBB and NBL with new teams to take complete control over day -to-day operations, stabilize operational and financial positions, strengthen accounting departments and develop human resource programs, with the eventual aim of privatizing or liquidating them\. The new management teams, to be hired for periods of three years, comprised eight professional staff, including a CEO, and heads of credit, loan recoveries, accounting, internal audit, IT, treasury and personnel\. (iii) Improving the environment for financial sector reforms in areas such as credit information and financial news reporting through specialized training and capacity building : To increase the financial sector ’s effectiveness, this component aimed to build capacity at the Bankers Training Center (BTC), strengthen the credit information bureau, and improve the competence of local journalists to cover financial sector issues \. The component also aimed to strengthen program management capacity in the Coordination Support Team (CST), the FSTAP implementation unit established at the central bank \. In four successive restructurings, various activities were added and deleted from the project \.components\. The most significant of these, in June 2008, concerned transferring the final resolution of RBB and NBL from the FSRP which was to be closed early \. However, this was dropped from the FSTAP in April 2011\. The April 2011 restructuring added one new activity, conducting a fast track diagnostic assessment of NBL to help determine the next restructuring steps for the bank \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: IDA's $16 million was cofinanced with a US$10 million grant from DFID and US$4\.1 million commitment from the government\. After the Bank downgraded its assessment to Moderately Unsatisfactory in July 2010, DFID decided to withdraw and closed its grant in March 2011 after spending $8\.35 of its $10 million commitment\. By the time the project finally closed in December 2011, total disbursement was $9\.52 million from IDA, $8\.35 million from DFID, and $3\.71 from the Government\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: The CAS at closing (2003) retained the financial sector as a priority sector for the Bank's engagement, with the FSRP as the primary vehicle (CAS Annexes B9, B10)\. Over the CAS period, 2004-06, an allocation of $145 million to financial sector reform was anticipated, 23% of base case lending (Annex B3)\. No new CAS has been prepared since 2003, hence this reference was quite out of date by the time the project closed \. Subsequently, the Bank has prepared regular Interim Strategy Notes \. The latest one, dated August 4, 2011 covered FY12-FY13 and would have been in force when the project closed \. It continued the Bank’s engagement in the financial sector, though with a focus on microfinance and program delivery mainly through IFC \. Although the Government showed great interest in the project at first, its priorities changed and the political situation deteriorated after the initial closing date of 6/30/2007\. By the time it eventually closed in December 2011, the project's ambitions had been downsized to reflect what was achievable with regard to strengthening the central bank and improving efficiency and effectiveness of the banking sector \. The ICR argued that as the Government's priorities progressively deviated from the project's original intent, it should have been fundamentally restructured or closed earlier \. While the picture is mixed, given the overall relevance of modernizing Nepal's financial sector and the importance of a resolution of the RBB and NBL, the relevance of both the original and restructured objectives is rated as substantial \. b\. Relevance of Design: The FSTAP was based on extensive diagnostic work which provided a detailed analysis of the financial sector's problems\. The central bank was ineffective in overseeing the financial sector, especially commercial banking, because of a lack of independence and autonomy, and weak supervisory and regulatory capacity \. In the commercial banking sector, full or majority government ownership of the two leading banks had resulted in inadequate capitalization, weak loan portfolios, poor financial accounting practices, and massive accumulated losses\. More generally, the financial sector suffered from poor training, a lack of credit information, and low levels of financial literacy and sophistication in the general public which impeded wider demand for financial services\. Such problems are by no means unfamiliar and the FSTAP's detailed proposals conformed to best practice approaches in dealing with them\. A recently passed Central Bank Act, prepared in conjunction with the FSTAP, increased the NRB’s independence and a new legal framework for the commercial banking sector was imminent\. Capacity constraints at the NRB would be addressed through a combination of outside hiring and better HR management\. In the commercial banking sector, the most obvious solution was to put new management in place at the RBB and NBL, with a clear mandate to reform the banks' operations and clean up their balance sheets\. Finally, a relatively small component of the project to strengthen training, improve credit information, and train journalists addressed the market's inefficiency and poor integration into the economy \. Nevertheless, the design was overambitious and bundled together a large number of loosely related elements -- reforming the financial sector's legal and institutional framework, computerizing and building capacity throughout the central bank's operations and, last but by no means least, resolving the problems of two insolvent commercial banks which represented a massive fiscal liability for the government \. In fact, the fiscal risk was the  rationale for the entire project\. But, completing the task was separated out and left for the FSRP, while the FSTAP incorporated numerous other unrelated needs of Nepal's financial sector \. A more streamlined project with a narrower focus might well have moved faster toward a resolution of the RBB and NBL while the Government's commitment remained strong \. Instead, momentum was lost before the task was completed, putting at risk the project's central objectives \. A second design flaw was reliance on the central bank's procurement which was known to be weak and which was subsequently responsible for derailing the project as critical procurement ground to a halt \. A design which was (i) narrower and more focused, and (ii) relied less on Government procurement, might well have contributed to a better outcome \. Curiously, the PAD was well aware of these risks and anticipated some of the problems which subsequently arose \. Results framework: The results framework leaves much to be desired \. It is confusing and difficult to follow \. There are numerous inconsistencies between the indicators listed in the text of the PAD (Section A\.2, pp\. 2-3) and the "Project Design Summary" table in Annex 1 (pp\. 23-25)\. The Annex table (p\. 25) includes the FSTAP’s budget allocations as performance indicators which is odd and probably an error, although that is not clear from the presentation\. The PAD distinguishes Sectoral Indicators, Outcome /Impact Indicators, and Output Indicators, with no explanation of this unusual taxonomy \. In fact, there is only one Sectoral Indicator, stated as : Comprehensive financial sector reform that eliminates the need for additional (real or contingent) budgetary support for the financial system – once the banks have been restructured and privatized or liquidated \. Notably, though,budgetary transfers are only peripherally mentioned in the PAD, and privatization and liquidation of the RBB and NBL were not envisaged within the FSTAP ’s time frame, so this indicator could not possibly have been achieved by closing \. Other indicators in the results framework are qualitative and imprecise, resembling objectives more than indicators\. E\.g\. from the PAD, p\. 3: An increase in the range and sophistication of financial instruments and services available at competitive prices\. A more prudently operated financial sector with better trained staff, a better informed general public and an enhanced system of credit information \. Creating a leaner, more efficient, and professional Central Bank No metrics or baseline data are given for any of the indicators and the ICR makes relatively little use of them in describing the project's achievements \. Relevance of design is rates as modest \. 4\. Achievement of Objectives (Efficacy): The FSTAP got off to a good start, with strong Government support and credible progress toward its objectives \. Disbursements through the first few years were below expectations, but mainly due to savings in restructuring RBB and NBL (Component 2) and underspending on the training (Component 1)\. Apart from these, procurement and disbursement were largely on track (ICR, p\. 11)\. The first restructuring in June 2007 extended the closing date by a year at the Government ’s request to maintain continuity in restructuring the NBL (ICR, p\. 8)\. Nevertheless, after 2007 the project stalled due to a combination of unforeseeable events, political developments and a weakening of the Government's commitment \. By the time the project finally closed, its early achievements had eroded significantly \. Results under each of the objectives are outlined below : (i) Restructuring and re-engineering the Nepal Rastra Bank for it to effectively perform key central banking functions: The new NRB Act was prepared and passed in conjunction with FSTAP's preparation and appraisal, hence had largely been achieved at effectiveness \. However the remainder of the legislative reform agenda, namely revision of the Banking and Financial Institutions Act (BFIA) is still pending\. Moreover, capacity constraints prevented the NRB from capitalizing on its newfound independence and autonomy to carry out its mandate\. A halt in procurement delayed computerization and hiring of additional bank supervisors and inspectors and as a result the NRB's supervision capacity has not been strengthened \. Meanwhile, lengthy delays persist in the publication of NRB, RBB and NBL annual reports because of slow progress on computerization and continued reliance on manual accounting procedures \. NRB reports are still not compliant with International Accounting Standards (IAS)\. Progress on HR reform has been limited \. An HR expert was hired  and prepared new policies and manuals, but rather than hiring another expert to oversee implementation the NRB decided to utilize in-house expertise, and the pace of reform ground to a halt \. Efficacy rating for the first objective is modest \. (ii) Iimplementing reforms in the commercial banking sector that will focus initially on restructuring Rastriya Banijya Bank and Nepal Bank Limited : The FSTAP's original objectives of restructuring the NBL and RBB and preparing them for privatization or liquidation were substantially achieved by the project's original closing date \. Under the new management teams, NPLs at the two banks were brought down from around 60% to 5\.3% and 10\.9%, more than 80% of the deposit bases were computerized, and staff levels were more than halved largely due to the FSRP-funded VRS\. Due to the success which had been achieved, the FSTAP's first restructuring added final resolution of NBL and RBB through either sale or closure to the second component \. However, this was not achieved as the government subsequently backed away from this resolution \. A Bank Restructuring and Sales Advisor was to have been hired at NRB for the purpose using project funds, but this also was not done as the government had not decided on the disposition of its shares in the two banks \. NBL also decided against recruiting a new CEO using project funds \. Due to procurement delays, the fast track diagnostic of NBL (added in the April, 2011 restructuring) was not completed\. Meanwhile, reluctance to move ahead toward an ultimate resolution has allowed some of the project's achievements (notably in the HR area) to begin unravelling, while others are at risk\. Efficacy rating for the second objective is modest \. (iii) Improving the environment for financial sector reforms in areas such as credit information and financial news reporting through specialized training and capacity building : objectives under this component were partially achieved\. The Credit Information Bureau was reconstituting as a private Credit Information Center Ltd \. (CICL) and its performance substantially improved \. The Secured Transaction Registry (STR) was established, though is not yet fully operational\. The project enhanced the capacity Of the Debt Recovery Tribunal (DRT) and the Banker's Training Center\. Finally, international training was organized for 44 financial journalists\. Efficacy rating for the third objective is substantial \. 5\. Efficiency: The ICR was unable to calculate an accurate measure of overall efficiency or an Economic Rate of Return for the entire project, in part because some of the ultimate results have yet to be realized, especially the resolution of NBL and RBB\. Nevertheless, it is clear that very significant savings were achieved \. The two restructured banks, RBB and NBL, have generated US$ 400 million in operating profits since 2003 whereas before that they were losing US$ 80 million annually\. The difference between these is over US$ 1 billion\. Total expenditures for both projects were approximately US$ 78 million\. Thus, while the net worth of the two banks remains negative the deficit has declined substantially reducing the eventual fiscal cost of re -capitalizing the banks\. Rating for 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- 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 objectives of modernizing the central bank and restructuring two large, failing, commercial banks were substantially relevant to reforming Nepal's financial sector \. However, despite building on extensive diagnostic work the design was only modestly relevant – overly ambitious, poorly focused, and with a confusing results framework\. The project was restructured four times as it went progressively off track, including a six year  extension of the closing date, which did little to streamline the design \. Despite initial success in restructuring the two commercial banks, ultimately the project ’s achievements were modest and remain significantly at risk \. Considering these factors, the project is rated as Moderately Unsatisfactory \. a\. Outcome Rating : Moderately Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating: Despite a significant improvement in the performance of NBL and RBB, both banks still have a negative net worth and remain fragile and there is a significant risk they will revert to their previous management practices without a change in ownership\. A rapid increase in staff costs is indicative, following a costly and protracted VRS that was partially funded under the FSRP \. The ICR did not consider risks to the other two components, since the project's achievements there were so limited \. a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: a\. Quality at entry: During preparation, the bank paid considerable attention to the scope of the project as well as to the Government's implementation capacity and commitment to reform, but then disregarded the obvious implications of its analysis\. The second component focusing on restructuring of the RBB and NBL was specified narrowly and explicitly, and largely achieved its objectives although, as noted above, failed to complete the job\. The first component dealing with restructuring of the central bank ran into more difficulties \. The project comprised a wide range of loosely connected tasks, touching on almost every aspect of the NRB ’ s operation, from the legal framework, to HR management, supervisory capacity, training, research, and IT \. A narrower focus and less emphasis on fundamentally reengineering the central bank, and less reliance on the Government’s procurement capacity might have led to greater success \. at -Entry Rating : Quality -at- Moderately Unsatisfactory b\. Quality of supervision: The Bank conducted regular supervision of the project from the Country Office in Nepal as well as periodic supervision missions, and a Mid Term Review in 2006\. A few supervision missions were conducted jointly with DFID\. Implementation Status and Results reports were detailed and informative \. Project counterparts and donors credited the Bank's technical support and guidance for smooth implementation of project activities (ICR, p\. 21)\. During the initial years of implementation, senior Bank management also engaged in active dialogue with the country's financial sector stakeholders including the Ministry of Finance and the Central Bank \. However, the ICR notes that this engagement was not sustained after changes in both senior management at the Bank and the Government\. As the political situation and the Government's commitment to reform deteriorated, and especially after corruption charges were brought against the Governor of the NRB, the project stalled \. The project team and even Bank senior management (at the vice president level) were unsuccessful in getting the project back on track \. The ICR argues that the initial project extension made sense at a time when the FSTAP was progressing well, but that later extensions and restructurings are more difficult to justify \. In four years, 2007-11, the project disbursed just US$0\.1 7 million and achieved very little progress toward the PDOs \. Thus, it should have been either fundamentally restructured or closed earlier \. Quality of Supervision Rating : Moderately Unsatisfactory  Overall Bank Performance Rating : Moderately Unsatisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: The Government was initially very supportive of the project during preparation and appraisal, applying for two PPFs, publishing a Financial Sector Strategy Paper which aligned closely to the FSRP, passing the NRB Act and appointing the NBL management team prior to effectiveness \. Subsequently, however, due to a deteriorating political environment and changing priorities, its commitment wavered \. Delays is in procurement were partly the result of a corruption case brought against the Governor, however the government showed little interest in working around the ostacles by using donor funds and procedures for procurement\. Progress stalled on reengineering of NRB, including finalization of the BFIA, and hiring a bank restructuring advisor for a final resolution of NBL and RBB \. Government Performance Rating Moderately Unsatisfactory b\. Implementing Agency Performance: Due to procurement issues at the CST, elements of the project were delayed, including the hiring of bank supervisors and other experts, automation of credit information functions, capacity building, carrying out a diagnostic study of NBL, and the appointment of replacement management teams at RBB and NBL \. These delays contributed to the failure to achieve the PDOs \. Implementing Agency Performance Rating : Moderately Unsatisfactory Overall Borrower Performance Rating : Moderately Unsatisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: The M&E design was flawed by a weak and imprecise results framework \. None of the indicators were quantitative, and no baseline data were collected \. Impressionistic results were conscientiously described in ISRs, but the results framework conveyed little sense of how much progress was being made, or what remedial actions might have been appropriate \. b\. M&E Implementation: M&E was regularly conducted through implementation support missions and a MTR conducted in September 2006\. Aides Memoires were shared with other stakeholders and served as a basis for dialogue seeking to expedite implementation and reinforce the Government's commitment towards the project's objectives \. At the same time, however, absence of a strong MIS within CST prevented the smooth flow of information and data collection\. Project supervision by NRB, and the Government was inadequate \. c\. M&E Utilization: ISRs regularly reported on the results framework and conveyed a realistic sense of the project's status\. This was useful at the time of the first restructuring, but subsequently when the project went off track due to a change in the Government’s priorities, the M&E process was unable to get things back on track, either because the government was not much involved in the M&E process, or because its priorities had changed irreversibly\. M&E Quality Rating : Modest 11\. Other Issues a\. Safeguards: No issues raised b\. Fiduciary Compliance: No issues raised c\. Unintended Impacts (positive or negative): None d\. Other: 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately The restructuring of the RBB and NBL Unsatisfactory Unsatisfactory is a significant achievement\. However, it is at risk because progress toward a final resolution has stalled\. Should the government proceed in time to this step, MU would certainly understate the project's value\. 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: The ICR draws some clear lessons about projects such as the FSTAP depending on a sustained commitment and the difficulty of maintaining this over a long period \. Especially in fragile states and conflict prone environments, the window is likely to be narrow \. Thus, a more focused project aimed at restructuring and resolving the RBB and NBL -- the most critical problem from a fiscal standpoint -- would have been preferable\. The ICR also argues that the project should have been closed much sooner as the Government's commitment ebbed\. However, this conclusion is more obvious in hindsight than it would have been at the time \. It provided a platform for the Bank to remain engaged on financial sector issues and there was little financial or reputational risk to the Bank since the project was relatively dormant and disbursed little money \. It is only the somewhat arcane internal procedures for allocating BB that made keeping the project open problematic \. Moreover, the project was closed reasonably soon after its performance was downgraded \. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: This was a complicated and increasingly troubled project, which was restructured four times in a four year period, 2007-11, adding and removing actions and objectives and extending the closing date \. The ICR is honest and forthright and it does a reasonably good job of presenting the facts, though it might have attempted a more critical analysis of why and how the project succeeded and failed \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P067774

 ICRR 13260 Report Number : ICRR13260 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 05/20/2010 PROJ ID : P067774 Appraisal Actual Project Name : Social Safety Net US$M ): Project Costs (US$M): 77\.5 120\.3 Project Country : Jamaica Loan/ US$M ): Loan /Credit (US$M): 40\.0 40\.0 Sector Board : SP US$M): Cofinancing (US$M ): Sector (s): Other social services (73%) Central government administration (27%) Theme (s): Education for all (25% - P) Child health (25% - P) Social safety nets (25% - P) Social risk mitigation (25% - P) L/C Number : L7076 Board Approval Date : 09/04/2001 Partners involved : Closing Date : 06/30/2006 03/31/2009 Evaluator : Panel Reviewer : Group Manager : Group : Victoria Monchuk Kris Hallberg IEGSE ICR Reviews IEGSE 2\. Project Objectives and Components: a\. Objectives: The overall objective was to support the Government ’s efforts to transform the Social Safety Net into a fiscally sound and more efficient system of social assistance for the poor and vulnerable \. Specifically, the project’s development objective was “to provide better and more cost -effective social assistance to the extreme poor â€? (identical in the PAD and Loan Agreement )\. To this end, the project would: (a) consolidate the major income transfer programs into a conditional cash transfer program (CCT) that would ensure (i) meaningful level of benefits, (ii) cost-efficient and accessible delivery system, (iii) access to benefits linked to desirable behavioral changes in human capital, (iv) effective targeting of social assistance to special groups; and (b) strengthen institutional capacity to (i) operate the program effectively and efficiently, and (ii) implement overall social safety net reform elements, including a transparent targeting mechanism \. In evaluating the project's achievement of the development objective IEG will assess whether the social safety net is "better", more cost-effective, and reaches the (extreme) poor as compared to prior to the project and compared to other CCT programs\. "Better" is defined by what the project intended to improve, namely to design and implement a more efficient system with a transparent targeting mechanism and that generated outcomes in terms of behavioral changes\. The fiscal soundness of the social safety net system is not specifically addressed \. However, aspects of fiscal sustainability are included within the second objective \. Moreover, although the objective states that the project will target the extreme poor, the project description clarifies that the focus is on particularly vulnerable poor groups \. IEG will assess whether social assistance reached the extreme poor as well as particular vulnerable poor groups \. 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\. Child assistance grants : US$ 50\. Planned costs : US$50 50 \.7M (US$28 US$ 28\. 28 \.7M Bank contribution, ) Actual costs : US$75 US$ 75\. 75 \.3M (US$33 33 \.6M Bank contribution )\. US$ 33\. Finance conditional grants for poor children aged 0-17 eligible under the program\. Receipt of grant is conditioned on at least 85% school attendance for children 6-17 years of age and who are enrolled in school and regular health care visits for children 0-6 years old and not enrolled in school \. 2\. Social assistance grants : US$ 14\. Planned costs : US$14 US$ 36\. 36 \.1M, No Bank contribution \. Finance conditional grants to poor 14 \.1M, Actual costs : US$36 pregnant/lactating mothers, elderly poor over 65, poor disabled and other eligible destitute adults \. Receipt of grant for poor pregnant/lactating mothers is conditioned on regular health clinic visits \. No conditions were imposed on the elderly and disabled\. 3\. Institutional strengthening : US$$ 11\. Planned costs : US$$11 US$ 10\. 10 \.5M Bank contribution, ) Actual costs : US$13 11 \.9M (US$10 13 \.0M (US$6 US$ 13\. US$ 6\.0M Bank contribution )\. Strengthen the institutional capacity of the Ministry of Labour and Social Security (MLSS) and others involved in operating the social safety net \. This involves developing the targeting and enrollment mechanism, monitoring and evaluation and information systems, and strengthening training, promotion, and project management \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The Bank did not support component 2 as it was unable to fund unconditional transfers \. At closing 100% of available credit was disbursed \. Counterpart funds were significantly over spent \. The main reasons were the extension of the program, and the larger number of beneficiaries and higher benefit levels than planned \. As a result of the impact evaluation findings, the government, supported by the Bank, decided to reallocate some of the loan from goods and consultants to finance the increase in the number of beneficiaries \. Hence, the Bank's contribution to institutional strengthening decreased by over 40% while the contribution to child grants increased \. 3\. Relevance of Objectives & Design: The objectives of the project were consistent with the government ’s strategy of protecting the poor and ensuring inclusion\. The objective was also relevant to the inter -governmental Policy Matrix which laid out the reform for the social assistance system \. Moreover, the objectives were consistent with the 2000 CAS objectives which emphasized a focused Bank approach in the social sectors \. The Bank’s support was well integrated with that of other development partners\. While the objectives remained relevant through closing, new priorities emerged \. In the next CAS (2005) the Bank’s focus shifted to accelerating inclusive economic growth and preventing and reducing crime while maintaining the priority of improving human development \. The Bank’s follow-on Social Protection Project, effective in 2009, addressed some of these new priorities \. Based on the relevance to the country ’s reform agenda and the prevailing social and economic context, the relevance of objectives is rated Substantial \. The overall design of the project - to develop a targeting formula to be used throughout Jamaica's social safety net programs; and to finance the start up of the CCT Program of Advancement Through Health and Education (PATH) while strengthening the government ’s capacity to manage the program - was highly consistent with project objectives\. Merging of the three income transfer programs and the development of a transparent targeting formula was based on analytic work and international evidence \. The results framework was adequate for monitoring some of the objectives but not all\. For instance, several indicators focused on health and education outcomes which, while desirable, were not explicitly stated as part of the development objective \. On the other hand, it was not clear from the results framework how fiscal soundness and providing a "better" social assistance system would be assessed \. Also, the project required a strict external audit which caused the project severe delays; the capacity of the health system to absorb the beneficiaries was overestimated \. Relevance of design is rated Modest \. 4\. Achievement of Objectives (Efficacy): With substantial achievement of all three parts of the development objective and only minor shortcomings, overall efficacy is rated Substantial \. In addition to information presented in the ICR, this section was supplemented by information collected during IEG's PPAR research and mission \. ub -objective 1\. Provide a ‘better’ social assistance system\. Rating : Substantial Sub- Output : Two of the existing income transfer programs have been successfully fully consolidated to form the PATH \. Outcome : Replacing the previous transfers programs which commonly handed different benefits for similar purposes to the same groups of people with one cash transfer has reduced administrative duplication \. However, existing legislation still hampers the full merger of the Outdoor Poor Relief program to PATH and some overlap still exists \. For instance, in 2003 half of the households which are eligible for both the Outdoor Poor Relief Program and the PATH receive both\. With the full merge of the three programs there is further scope for efficiency gains \. Output :The scoring formula used in the BIS for targeting benefits were developed \. Outcome : Targeting has been improved compared to before the project and compares well with other CCTs (see evidence in sub-objective 3)\. The scoring formula has made the selection of beneficiaries more transparent and depoliticized\. Although there are no indicators to measure transparency and depolitization, nationwide, PATH uses a standard from for collecting household demographic information and a standard formula for establishing eligibility \. Before the project political groups, churches and NGOs often made recommendations on who should receive the benefits\. But the targeting mechanism has been moderately successful in its application to other social safety net programs (beyond PATH)\. In education, the BIS was initially applied to the school fee waiver and feeding programs \. But the new universal policy on access to free health care and secondary education has reduced the application of the targeting formula\. Output : Benefits levels have been raised although benefit levels (US$9 or 10\.7% of consumption of the poor) were on average low compared to other CCT programs (20% of consumption of the poor on average for 5 CCTs in Latin America), the transfer was higher than the Food Stamps (US$2)\. Outcome : Impact evaluations using living standards data from 2004 show that benefits have somewhat reduced poverty (8\.6% reduction in poverty gap and 13\.2% reduction in severity of poverty )\. There were no baselines or targets on health care utilization of adult beneficiaries and behavior change was not monitored \. Output : PATH has linked receipt of benefits to health and education behaviors\. Outcome : Increases in human development investment and service utilization have been modest \. Evidence demonstrating PATH's ability to promote human capital investments in health and education are relatively weak \. The impact evaluation shows that, on average, PATH children (both primary and secondary students ) have 3% higher school attendance than comparable non -PATH children\. Albeit statistically significant, this average effect is small in economic magnitude\. Nationwide enrollment rates went up marginally (3%) in primary school but substantially in secondary school (14%) However, other factors, such as the ongoing efforts to strengthen secondary school quality, could have lead to the enrollment gain \. School teachers surveyed for the PATH evaluation did not observe an increase in overall enrollment rates \. In the health sector, impacts were stronger, on average (equivalent to 0\.28 more visits per 6 months for the PATH children), but evidence is not convincing enough to assert that health service utilization has increased among the poor \. Both among PATH participants and non -participants, 69 percent report that they attend health clinics with about the same frequency as before \. Also there were no noticeable increases in overall children’s immunization rates\. So far, PATH has not led to any deeper impacts on school achievements and health status\. Tests comparing perceived changes in grade advancement, grades, and health status between PATH beneficiaries and control groups found no significant difference \. Input : The project provided technical assistance, paid for expert consultants, technical training and software \. Outcome : Internal MLSS procedures such as auditing, procurement, financial management, compliance checking and payment mechanisms and check printing have been improved since the start of the project \. Both government and Bank staff testified of these improvements \. MLSS has also received funding from IDB for institutional strengthening (and direct transfers)\. Full attribution to the project is hence not feasible \. However, staff in MLSS expressed great appreciation for Bank technical assistance \. In sum, the project has helped the government to transform its social safety net to a more efficient system \. The system is better targeted than the previous programs; waste and overlap have been reduced; and benefits appear to have had a small effect on poverty rates \. But there is no strong evidence that indicates that PATH has significantly increased human capital investments \. The effectiveness could be further improved by increasing the benefit level, fine-tuning targeting and addressing remaining overlaps \. Sub -objective 2\. Provide a more cost-effective social assistance system \. Rating : Substantial Sub- Output and outcome : Costs have also been contained \. PATH expenditure as a share of GDP has been kept relatively constant (0\.2%), close to the mode (0\.2%), and just below the average (0\.25%) for other CCT programs the region\. Administrative costs have remained low at 10% (target 15%), on par with the Food Stamp program (9%) and much lower than the other two transfer programs (over 40%)\. Delivering payments using Government checks via post offices has proven to be a more efficient method of reaching beneficiaries compared to before the project \. For example, most Food Stamp recipients used stamps for non -food items and printing the stamps was not an efficient use of funds\. PATH checks are widely accepted and beneficiaries can use them directly at most local stores \. Printing, distribution and financial security of Food Stamps were not automated \. In PATH, payment receipt and collection rates are monitored electronically and overdue uncollected checks can be cancelled automatically \. Beyond PATH, efficiency gains from the project on other social assistance programs in Jamaica have been limited \. Cost-effectiveness could have been higher if the targeting mechanism and consolidation of the reform initiatives with other social assistance programs had been more extensive as intended \. On balance, cost-effectiveness has been enhanced\. Sub -objective 3\. Reach the extreme poor and particularly vulnerable groups of the poor \. Rating : Substantial Sub- Output : At closing, PATH benefitted 306,699 people, well above the targeted 217,000\. Eighty percent of PATH beneficiaries are children, 19% are elderly\. Outcome : The project did not have an indicator for reaching the extreme poor but had two poverty targets : more than 70% of beneficiaries should be below the poverty line and more than 70% of the nation’s poor should receive benefits\. These targets were very ambitious and neither was met \. Fifty-eight percent of beneficiaries were below the poverty line\. Estimates on coverage vary between sources all of them estimate coverage to be less than 50% of the country's poor\. However, PATH coverage compares well to the coverage rates of the poor of other programs (ranks 3rd in a comparison with 12 CCT programs) and PATH is better targeted than most existing social safety net programs in Jamaica (58% of beneficiaries are in the poorest quintile compared to 36% for the Food Stamp program)\. Eighty percent of beneficiaries fall in the poorest two quintiles \. The impact evaluation classified 27% of PATH beneficiaries as living in extreme poverty (no target or baseline)\. On the other hand, PATH is reaching the particularly vulnerable groups such as children, large households, those who generally lack household amenities, and those who did not work over the past 12 months as intended\. Compared to all poor Jamaicans PATH is to a greater extent reaching these particular groups among is beneficiaries (data from 2004)\. Qualitative assessments indicate that there is still room for improving the PATH targeting system for reaching the extreme poor and vulnerable\. For instance, there is a large group of elderly and disabled poor who experience difficulties registering for PATH\. The program is currently stepping up its efforts, with the help of a Bank grant, to reach these groups more extensively\. 5\. Efficiency (not applicable to DPLs): The core project activities (develop a targeting formula to be used throughout the social safety net system; and to finance the start up of the PATH while strengthening the government ’s capacity to manage the program ) was carried out with relatively high efficiency \. Although the targeting formula has not been extensively applied to other safety net programs (other than the PATH) it has helped to improve PATH's benefit incidence and targeting of the benefits to the poor (on par with other programs, see section 4)\. Moreover, delivering payments using government checks via post offices has proven to be a more efficient method of reaching beneficiaries compared to before the program \. As a result, the reduction in leakage and better process efficiency in delivering benefits has kept PATH program costs on target (0\.2% of GDP)\. Moreover, administrative costs have remained low at 10% (target 15%), in line with the Food Stamp Program (9%), and much lower than costs in the other two previous transfer programs (over 40%)\. Furthermore, the increase, over the project period, in the share of project costs that went directly to grants (92% at project closing) suggests that overheads were reduced as the project matured \. However, efficiency could have been higher if the targeting and consolidation aims of the projects had also reached other non -core social safety net activities as intended\. In determining program design in the PAD, rate of return analysis showed that the return was almost twice as high if no caps were imposed on the number of children per family (option chosen) compared to capping the number of beneficiaries to three per family \. Based on the increased efficiency in targeting and overall administration of social safety nets, as well as the containment of costs; 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: Based on substantial relevance of objectives, modest relevance of design, and substantial efficacy and efficiency, the overall project outcome ratin g is Satisfactory \. a\. Outcome Rating : Satisfactory 7\. Rationale for Risk to Development Outcome Rating: The risk to development outcome is rated Modera te\. Even after the shift in government, political support for the social safety net reform and for the PATH continues to be strong \. Building on the reforms achieved under the project the Bank has followed up with a second loan to support the PATH in addition to more holistically addressing social protection issues\. The new Social Protection Project aims at implementing “second generation reformsâ€? including fine-tuning the targeting system and benefit levels; linking adult members of PATH households with labor market initiatives; and addressing youth -at-risk issues and pension reform \. But with the continuing debt and poor revenue collection, it is uncertain if the government can keep funding the program without the continued help of development partners\. The key risk to development outcome is the increasingly difficult economic environment that threatens both the fiscal sustainability of the program and the real value of benefits for the poor \. Hard hit by the global crisis, more Jamaicans are falling into poverty\. The PATH program has thus far been effective in responding to local crises \. To compensate those affected by natural disasters the program has been able to temporarily increase benefit levels and void conditionality requirements\. Also, in response to the food price increases in 2008 government expanded PATH coverage to 360,000 people\. But CCT programs that are means tested based on household characteristics and amenities are not well equipped for responding to the temporary needs of new groups of non -traditionally poor who may not be eligible based on their household data but who suddenly lose their source of income as a result of a shock\. As the program has not been able to increase benefits adequately to compensate for the economic downturn, real benefit levels are starting to erode \. For the extreme poor it may become difficult to continue to comply with the education requirements especially for secondary students \. As a result, benefits may be pulled from those who need them the most\. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: On the whole, Bank performance is rated as Moderately Satisfactory \. Quality at entry was weak but many of the weaknesses were improved during supervision \. The Quality of Entry was Moderately Unsatisfactory \. The Bank had the technical capacity to prepare the project but the time needed for preparation of implementation arrangements was underestimated, which caused subsequent delays\. The entry point for Bank lending to social safety net reform was based on significant analytic work\. The inefficiencies with the existing safety net system were well known \. The Bank took a pragmatic approach to intervention and favored carrying out first generation reforms with room for second generation program improvement at a later stage \. This strategy was consistent with government priorities \. But Jamaican authorities and other partners expressed some frustration with the Bank for taking too much of a cookie cutter approach\. Moreover, at the time of appraisal, the state of readiness of the project was not ideal \. The results framework was not fully developed and the Bank had not ensured that implementation arrangements were in place in the MLSS to carry out the PATH \. The capacity of the health system to absorb the increase in required health visits was overestimated (although the recommendation on number of visits per year per child was set by the Ministry of Health itself)\. Furthermore, this was the first time a CCT program was being implemented directly by the ministry\. Despite the Bank’s experience with CCT programs, it was not familiar with operational requirements for cash transfers \. The strict external audit requirement was a poor design choice and caused severe implementation delays\. Bank supervision was Satisfactory \. Most of the gaps in design and implementation readiness were addressed during supervision\. The Bank extensively helped strengthen the capacity and systems within the MLSS to carry out the program\. Throughout the project the dialogue between the Bank, the Planning Institute of Jamaica (PIOJ) and the MLSS was continuous\. Supervision missions were frequent and the balance was adequate between strengthening internal processes and furthering the reform agenda while delivering transfers to beneficiaries \. However, the Bank could have acted sooner in addressing the disbursement delays that resulted from the external audit requirement\. The Bank was instrumental in ensuring rigorous monitoring and evaluation implementation\. Finally, the Bank's focus on maintaining meaningful benefit levels was successful in guaranteeing that benefits were not eroded (until recently) and that the government kept to its commitment to provide adequate support to the poor even during times of extreme fiscal crunch \. at -Entry :Moderately Unsatisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Satisfactory c\. Overall Bank Performance :Moderately Satisfactory 9\. Assessment of Borrower Performance: Overall borrower performance is rated Satisfactory \. Government performance is rated Satisfactory \. The policy decisions for the reform program and financial commitment to the project have been unwavering \. There was buy-in from both sides of the political spectrum \. The government adopted a comprehensive approach to developing the CCT and depoliticizing social assistance \. The financial commitment to the program also remained strong throughout implementation \. The government ensured that beneficiaries could receive their grants when the disbursements from the Bank were on hold \. Moreover, the government maintained its commitment to increasing benefits levels according to the schedule over time\. In 2008 the government made a decision to expand the coverage to 360,000 beneficiaries; part of the process of scaling up\. However, with the new party in place some of the synergies envisioned with the island-wide targeting mechanism have been reduced and targeting weakened \. The government has not yet approved the National Assistance Act necessary for fully merging the three transfer programs \. Implementing agency performance was Satisfactory \. Despite good policy decisions by the government led by the PIOJ, Jamaica traditionally has some weaknesses in implementation capacity \. The Public Assistance Division in the MLSS was the implementing agency \. As mentioned, this was the first time a CCT program was implemented through the ministry directly\. The systems in place in the Public Assistance Division for carrying out the PATH program were not adequate at the time of effectiveness \. Instead of hiring technically qualified staff the ministry opted for using already established staff \. This approach led to initial delays but provided consistency and ownership of program objectives and processes \. At project closing staff and systems were in place to operate the program effectively\. a\. Government Performance :Satisfactory b\. Implementing Agency Performance :Satisfactory c\. Overall Borrower Performance :Satisfactory 10\. M&E Design, Implementation, & Utilization: The results framework was adequate for assessing part of the project objective but not all of it \. Monitoring and evaluation (M&E) systems were well implemented and used \. Therefore, overall M&E is rated Substantial \. Design : At the time of project approval the M&E framework had not yet been finalized \. Some weaknesses existed\. It was adequate for monitoring some of the objectives but not all \. For instance, six out of eight indicators for the development objective focused on health and education outcomes which, while desirable, were not explicitly stated as part of the development objective \. On the other hand, it was not clear from the results framework how fiscal soundness would be assessed and the objective of creating a ‘better’ social assistance system lacked specificity \. Also, given the strong link of the project to the government ’s poverty reduction agenda it might have been expected that the project include an indicator for measuring the impact on poverty (rates or gaps)\. The targets on program targeting and coverage as well as on immunization were unrealistic and there was no definition on who was classified as the extreme poor\. To assess the objectives the M&E system consisted of four parts; a management information system (MIS); two qualitative assessments; two rigorous impact evaluations and a targeting assessment; and various research studies\. Although there were significant weaknesses in the M&E framework for assessing the development objective, the targeting assessment which provided rigorous evidence on how well the project reached and benefitted the poor compensated somewhat \. M&E design was Modest \. Implementation and utilization : The original MIS was basic but was expanded towards the end of the project \. Data was used for bi-monthly progress reports on number and distribution of benefits, compliance rates, payments, uncollected and faulty payments \. Two qualitative assessments were undertaken \. The assessments generated feedback from parish offices, social workers, beneficiaries, schools, and health centers on eligibility and selection processes such as application, case management and appeals processes; the payment mechanism; and beneficiary satisfaction and behavioral change \. The information helped strengthen the case management system and differentiation of the child grant benefit level by gender and grade level \. A rigorous impact evaluation including a detailed targeting assessment was also carried out \. The targeting assessment provided information about the poverty level of PATH participants, and the extent to which the program reached the poor \. It also presented the expected impact on household consumption of the poor \. Based on the findings the program has been deemed one of the best targeted CCT programs in the world \. Moreover, the first impact evaluation provided evidence on the positive impact on school attendance and health care utilization \. It also shed light on the limited impact on longer run human development outcomes\. Based on the findings of the first impact evaluation and on conducive evidence from other CCT programs a second impact evaluation was deemed unnecessary during the project \. In 2009-10 the Social Protection Project is undertaking a second impact evaluation of the PATH \. Implementation and utilization of the M&E system were both Substantial \. a\. M&E Quality Rating : Substantial 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Risk to Development Negligible to Low Moderate The economic downturn in 2009 has Outcome : eroded benefit levels\. Recent political movements towards universally free education and health care has diluted the targeting of the package of benefits and reduced net overall transfers \. 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 project demonstrated that conditional cash transfer programs, such as PATH, can be useful tools for protecting the poor after localized shocks \. PATH was able to quickly double benefit levels and waive compliance requirements in communities seriously affected by Hurricane Ivan, but only to those already participating in the program\. Monitoring and evaluation in conditional cash transfer programs should pay more attention to the objective of protecting the chronically poor and vulnerable \. Six of the eight project indicators reflected human development outcomes without specific reference to poverty \. More attention in designing results frameworks should be given to ensure that the targeted poor are protected from falling deeper into poverty \. While improving human development outcomes is itself desirable and can be part of a poverty reduction strategy, it was not the main objective of the project\. Compliance requirements should be set with attention to supply side constraints (in health), the level of impact that could be expected on outcomes (in education), and any costs incurred in conditioning benefits\. Even though the Ministry of Health advised on the number of health visits required per child, the project still failed to fully consider the limited capacity of the health system to absorb the demand for health care\. Similarly, school attendance rates, at least at the primary level, were already high in Jamaica and significant impacts from the project due to the education conditionality were small \. Any impacts on behavioral changes also need to be viewed in relation to costs incurred for monitoring compliance rates \. 14\. Assessment Recommended? Yes No Why? A Project Performance Assessment Review has been undertaken to serve as input for the IEG evaluation of the Bank's support to developing social safety nets \. 15\. Comments on Quality of ICR: The ICR provides a nuanced account of the project experience \. The discussion about Bank and borrower performance is especially enlightening \. Thanks to the findings from the quality impact evaluation and targeting assessment the ICR could rely on rigorous evidence \. Although these evidence underly the conclusions, the data are not presented to support the outcome on the achievement of the various parts of the development objective \. Instead, this section is very thin, only including statements that the objectives were reached \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P073649

 ICRR 12848 Report Number : ICRR12848 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 03/21/2008 PROJ ID : P073649 Appraisal Actual Project Name : Second Health Sector Project Costs (US$M): US$M ): 1,113\.0 1,057\.0 Program Support Project Country : Ghana Loan/ US$M): Loan /Credit (US$M): 90\.0 107\.0 Sector Board : HE Cofinancing (US$M ): US$M): 310\.4 253\.3 Sector (s): Health (100%) Theme (s): Health system performance (33% - P) Child health (17% - S) HIV/AIDS (17% - S) Population and reproductive health (17% - S) Public expenditure financial management and procurement (16% - S) L/C Number : C3731; CH019 Board Approval Date : 02/06/2003 Partners involved : DfID, DANIDA, Closing Date : 06/30/2007 06/30/2007 European Union, Netherlands, USAID, JICA, WHO Evaluator : Panel Reviewer : Group Manager : Group : Denise A\. Vaillancourt Kris Hallberg Soniya Carvalho IEGSG 2\. Project Objectives and Components: a\. Objectives: The project's objective was to support the Borrower's Program (the second Health Programme of Work for 2002-2007 - PoW II) to improve the health of the Borrower's population, while reducing geographic, socioeconomic and gender inequalities in health and health outcomes \. Over and above health outcome indicators, key indicators for measuring program performance shown in Annex 1 of the PAD are aligned with the five strategic objectives of PoW II: access, quality, efficiency, partnership and financing \. 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): Following on the Bank's preceding investment (Health Sector Support Program), which supported Ghana's decision to embark on a sector-wide approach, this second support to Ghana's health SWAp was designed to contribute annual tranches of financing to a common fund (Health Fund), made up of pooled donor financing that would be used and managed by the Government of Ghana (GoG), along with its own budget, internally generated funds and other (non-pooled) financing, to support the implementation of the PoW II \. The eleven* components of PoW II supported under the Health Fund were : strengthening and support of priority health interventions developing human resources for health enhancing infrastructure and support services fostering partnerships for health promoting private sector participation in health service delivery improving regulation reforming organizational arrangements improving health sector financing, including the introduction of national health insurance improving management systems strengthening management information systems and performance monitoring improving links and synergies with traditional and alternative medicine \. *Note: the ICR indicates only 10 components (excluding the private sector participation component ), but Government's PoW II document lists eleven, as documented in IEG's Project Performance Assessment Report , Ghana, Second Health and Population Project and Health Sector Support Project , July 31, 2007\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Total program cost was 95 percent of the initial estimate\. IDA funding approved for this operation (68 million SDRs, of which 43\.5 credit and 24\.5 grant) was 100 percent disbursed\. At the program's outset other financiers included : (a) those providing pooled funding (DFID, DANIDA, EU and the Netherlands); and (b) those supporting the PoW through earmarked funds or projects (USAID, JICA and WHO)\. By the project's end some of the "poolers" transitioned to budget support and a greater proportion of funds was provided in the form of earmarked funds or projects\. Government's financial contribution to the program was US$ 627 million or 98 percent of initial estimates; and contributions of local communities amounted to US$ 70 million, or 93 percent of initial estimates\. The project closed as scheduled on June 30, 2007, with virtually all (99 percent of) financing provided over a three year period (as opposed to the planned five -year period), with 60 percent provided in one year (2005)\. 3\. Relevance of Objectives & Design: Overall relevance is substantial\. The relevance of objectives is substantial\. The main project development objective and the five strategic objectives of PoW are very relevant to country and global priorities in health and development and also fit in well with the Government's Poverty Reduction Strategy (GPRS)\. The GPRS aimed to eliminate hard-core poverty, with a specific strategy to redefine the role of the state to provide public goods and services and ensure equitable distribution of those benefits \. It highlighted improving human service delivery as one of its five strategic pillars, with health -specific components including : (a) expanding access to health services and enhancing quality; (b) improving the efficiency and equity of health services; and (c) ensuring sustainable financing arrangements that protect the poor \. The Bank's 2004 Country Assistance Strategy, in support of the GPRS, focuses on: (a) sustainable growth and jobs creation; (b) service provision for human development; and (c) governance and empowerment\. The relevance of design is substantial overall, with some shortcomings\. The project's SWAp design support Ghana's goal to assume leadership in the strategic management of its health sector and in the coordination of technical and financial assistance to the sector \. However, the design was deficient in that the sector program results chain and causal links were not clearly laid out, nor were the indicators and M&E plan and system sufficiently developed to ensure the proper tracking and linkage of the various components of the program logframe \. 4\. Achievement of Objectives (Efficacy): Overall efficacy is modest\. Access to services : Modest An assessment of sector-wide indicators of health service coverage shows that there has been little change in most of the general indicators and the (arbitrary) targets have not been met\. Outpatient visits did not change, remaining at 0\.5 visits per capita annually\. Some priority services performed well against their objectives (immunization and antenatal care coverage), although it must be noted that actual baselines for immunizations were higher than initially estimated and in fact approached targets even before the project started \. Other priority services fell short of targets (family planning acceptors, supervised deliveries and post natal care coverage )\. There was little explicit monitoring of equity improvements in health services, but some indication of improvements in equity \. Immunization coverage was highest in the most disadvantaged regions \. Oral rehydration therapy use increased most rapidly among the poor\. But inequities persisted (if not further deteriorated) for skilled birth attendance and family planning use \. Quality : Modest Data indicate a high level of drug availability, improving over the program period, and tuberculosis cure rates steadily improved and achieved the stated target \. Nevertheless, there was a lack of focus on strategies for institutionalizing quality improvement\. Supervision and quality management carried out in the GHS is not systematically documented or used as a basis for changing strategies or reallocating resources, and insufficient attention was paid to disparities in quality of services across regions and wealth quintiles \. This objective was not vigorously addressed or monitored, resulting in a lost opportunity \. Efficiency : Negligible Bed occupancy rates (one measure of efficiency) declined, falling (at 51 percent) far short of the 80 percent target\. Productivity of the health workforce decreased slightly between 2004 and 2006 (Vujicic et al 2006)\. Health spending has been inefficient\. Increases in salaries benefited existing health workers, were not accompanied by increases in the non-salary recurrent financing, which, in fact, was underfinanced \. Increases in health services outputs have been very modest, with little evidence about changes inequality \. Unresolved institutional issues associated with duplication and competition between the MoH and GHS also led to gross inefficiencies \. Partnership : Modest In dealing with development partners, there were some clear successes in working through common management arrangements and continuing the policy and planning dialogue of the SWAp \. Yet, some development partners increasingly moved towards project management support with earmarked funding, including off -budget financing, undermining the effectiveness of the SWAp partnership \. Only one Memorandum of Understanding was signed very late with one umbrella NGO group for mission hospitals (the Christian Health Association of Ghana ), resulting in very little progress in engaging the n on -governmental sector in health services provision during PoW II \. Private sector facilities are still not accounted for during health sector planning or budgeting, nor are they included in monitoring progress in the sector \. Financing : Modest Health sector financing increased over the program period, achieving 18 percent of GoG budget allocated to health (exceeding than the Abuja target of 15 percent and more than double the share at the outset )\. The increase in the recurrent budget was instituted by the wage bill and dedicated funding for personal emoluments, and not met with a commensurate increase in the non -wage budget\. GoG has continually overspent on its capital and wage budgets and underspent on its non -wage recurrent budgets -- to the detriment of needed resources for delivering health services\. The funding of exemptions for the poor and other priority groups has been chronically insufficient throughout PoW II\. The maternal exemptions policy was only partially implemented when funds abruptly ran out in the middle of the year\. The National Health Insurance Scheme is expected to replace the exemption policy, but this will take time\. There is some indication that benefit incidence of public spending at health clinics has improved to a point where it is equally distributed across income groups (Coulombe & Wodon 2007)\. However, the distribution of public spending at hospitals has changed little and still favors the richer segments of the population \. The shift of donor financing away from the Health Fund (towards general budget support and project /earmarked support) undermines the flexibility of funding to decentralized entities and as a consequence their ability to improve health service delivery\. Health Outcomes : Modest Health, fertility and nutrition outcomes will be available when the results of the planned Ghana Demographic and Health Survey 2008 are issued\. Between 1998 and 2003 there were no improvements in child health outcomes, ending the long trend of improvements recorded since independence \. Infant mortality was 57 per 1000 live births in 1998 and 64 in 2003, and under-five mortality was 108 in 1998 and 111 in 2003\. (Neonatal mortality appeared to increase during the last survey period, and is the driving force behind the child mortality rates \.) Likewise, there was no statistically significant change in total fertility (4\.6 in 1998 and 4\.4 in 2003)\. Preliminary data on key indicators for 2006 (UNICEF/MICS) show that infant and under-five mortality and fertility still have not changed substantially since 1998\. GHS data on malnutrition reveal no major trends of improvement \. IEG's analysis of household data on stunted and underweight children show that 2003 rates for each indicator are no different than rates in 1988, corroborating the series of GDHS survey data \. According to these data, in 1988 and again in 2003, one in four children is stunted and one in four children is underweight \. DHS data do provide indication of faster declines in child mortality among the poorest (who have the highest rates ), revealing possible improvements in equity of outcomes \. Inequities in mortality between rural and urban groups also appear to have been reduced \. 5\. Efficiency (not applicable to DPLs): Project efficiency is modest\. The increased financial resources for health were not used efficiently \. Trends indicate a growth in investment and salaries budgets to the detriment of non -salary recurrent financing\. There is still inefficiency in resource allocations across regions and distribution of human resources for health is chronically inequitable\. Hospital occupancy rates reveal an under -utilization of this level of service \. Furthermore, hospitals still deliver primary health care services, which are an expensive proposition \. The underutilization of the non-governmental sector in the delivery of health services is also an indicator of inefficiency \. During the project life the integration and decentralization of health programs and services led to inefficiencies in the delivery of these programs at the district level, with priorities accorded these programs by the districts and not always commensurate with the epidemiological justification for action \. While the benefits of two Summit meetings every year and similar meetings at regional and district levels are evident (in support of the SWAp), the costs and opportunity costs of these meetings have not been calculated \. Chronic overlap and competition between MoH and GHS also undermine efficiency\. 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: Rating is based on substantial relevance and modest efficacy and efficiency \. a\. Outcome Rating : Moderately Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating: Diligent efforts will be required to ensure that the past gains made under the SWAp are not lost \. The sector currently faces a number of challenges that may jeopardize progress \. First, financing of the health sector has become more complicated\. Donor commitments have dropped off following the shift from pooling funds to budget support and there are signs that the Government's execution rate is retarding as processes become more complicated\. The increase in earmarked funds means that Ghana's priority health programs are financed largely by unpredictable financing\. There is a risk that, as the Health Fund has been replaced by funds provided through the Ministry of Finance and Economic Planning, the absence of flexible funds will undermine the capacity of peripheral budget and management centers to manage resources and deliver services \. Second, it is not clear how the poor and vulnerable will fare as the NHIS is rolled out nationwide, with some concern that the scheme will not be financially viable enough to cover those in exempt categories until about 50 percent of the country is enrolled \. Third, the human resources for health crisis continues to plague Ghana, with the Government's recurrent budget for health tied up in personal emoluments and salaries \. Fourth, the potential decentralization of budgets and financial management may cause fragmentation in health financing and conflict over resources and implementation responsibilities between MoH, GHS, local governments and the NHIS \. a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: Although the Bank ensured that the project was strategically relevant, the Bank failed to conduct the sufficient analysis and evaluation that could have contributed greatly to the design of the project \. Such analysis might have covered institutions, equity, public expenditure \. Another important design shortcoming was the weak logframe and problems associated with the indicators (appropriate choice, definition, links to objectives )\. The Bank was a cooperative and supportive partner to Government and to donors and provided strong technical guidance on fiduciary matters \. More proactivity in assessing and supplementing key information on program performance (equity and expenditures, in particular ) would have been appropriate\. 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: Government was strongly committed to the PoW II objectives and engaged with stakeholders and development partners in SWAp discussions \. It could have expanded its consultations by including more non -governmental actors\. Government's performance faced moderate shortcomings in the design, implementation and utilization of monitoring and evaluation\. The performance of the implementing agencies (MoH and GHS) suffered due to their failure to be able to work together more coherently, which undermined policy and implementation of the PoW II \. a\. Government Performance :Moderately Satisfactory b\. Implementing Agency Performance :Moderately Unsatisfactory c\. Overall Borrower Performance :Moderately Unsatisfactory 10\. M&E Design, Implementation, & Utilization: Design \. A revised set of sector-wide indicators (derived from lessons under the first SWAp ) was established for PoW II, but was still inadequate for the purposes of tracking and strategically managing program progress \. And they changed over time (both in terms of the number of indicators and, in some cases, their definitions )\. The M&E framework was not based on a coherent results framework, and neglected important measures of key strategic objectives (e\.g\., equity)\. Neither did it provide for the tracking of expenditures \. Implementation \. There are still variations in data quality and management, despite significant investment and improvements in MoH and GHS information systems \. Inconsistencies in the indicators compromise the opportunity to identify trends over time and create confusion among stakeholders over which indicators are valid measures of objectives\. Indicators for health financing are often subject to change, oftentimes with the definition of the denominator differing over the years and subject to interpretation \. Utilization \. MoH and GHS have developed systems to collect detailed health service use and outcome data at both regional and district levels, but decentralized data were hardly ever used in annual reports \. Despite lack of effective use at the national level of regional and district -level data, there is evidence that some regions have made progress in this area\. There was little evidence at the national level that data monitoring was used to improve resource allocation\. Relevant operational research was not used to inform refinements to policy and programs \. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): The Ghana Environmental Protection Agency developed and disseminated guidelines on proper procedures for handling health care waste and the MoH agreed to use environmentally -friendly insecticides in bednets \. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately Unsatisfactory Unsatisfactory Risk to Development Moderate Significant Health sector financing has become Outcome : more complicated, with a move by some donors to budget support and by others back to earmarking and project support, thus undermining the SWAp approach and the capacity and flexibility of decentralized levels to manage and deliver services \. Scale-up of the NHIS to nation-wide coverage may delay health services, particularly for the poor\. Human resources for health (stability, remuneration, equitable distribution) remains a challenge\. And Decentralization of budgets to district governments may cause fragmentation and potential conflict/duplication among MoH, GHS, local governments and NHIS\. Bank Performance : Moderately Moderately Unsatisfactory Unsatisfactory Borrower Performance : Moderately Moderately  Unsatisfactory Unsatisfactory 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: A strong analytic base is needed, even when things appear to be going well, as was the case when the project was approved\. In-depth analysis and debate concerning equity of health services and outcomes, efficiency of health services and institutional analysis would have been particularly helpful in anticipating problems and furthering the agenda set by the PoW II and the GPRS; Success in establishing a process for sector -wide management and dialogue will not by itself ensure the achievement of health services performance and outcome targets \. The absence of a strong results focus, the absence of a viable system and incentives for M&E and the failure to move towards a performance -based health system to ensure accountabilities can seriously undermine the achievement of sector objectives; A dialogue between Government and its health partners, which is not sufficiently rigorous or frank, can result in the neglect of critical constraints to sector performance \. The institutional competition and overlap between MoH and GHS and the failure to harness the potential of the non -governmental sector for delivering health services are issues with both technical and political dimensions, which might have benefited from the technical input and leverage of outsiders; and Sector efficiency needs to be measured in order to be achieved \. The failure to carry out annual public expenditure reviews and incidence analyses (to measure efficiency of resource use, and equity ), and to define fully a program results chain and monitor progress on each link has undermined Ghana's ability to measure and fine-tune the development effectiveness of the substantial investments in the health sector \. 14\. Assessment Recommended? Yes No Why? A review of this project's outcome would be interesting to undertake in a year or so (a) once the GDHS 2008 data are available to show trends in outcomes and service delivery; and (b) when the evolution in donor support (budget support and earmarked funding ) might be more advanced and subject to more analysis \. This PPAR would build on a PPAR prepared in 2007 on the Health and Population Project and the Health Sector Support Program (Bank's support to PoW )\. 15\. Comments on Quality of ICR: The ICR is very candid, and well argued and substantiated \. It provides fresh and insightful analysis of monitoring and evaluation weaknesses and of the Bank's performance \. It is unusually outcome-oriented and draws on external resources to contribute to its extensive analysis \. a\.Quality of ICR Rating : Exemplary

REVIEW

P078024

 ICRR 12388 Report Number : ICRR12388 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 02/27/2006 PROJ ID :P078024 Appraisal Actual Project Name :PCN - Canceled-ug-bujagali Project Costs 582 0 Hydropower Gu(fy02) US$M ) (US$M) Country :Uganda Loan/ Loan US$M ) /Credit (US$M) see 2(c) below 0 Sector (s):Power ): (100%) US$M ) Cofinancing (US$M) see 2(c) below 0 L/C Number : FY ) Board Approval (FY) 01 Partners involved : African Development Bank, Closing Date AES Corporation, IFC Evaluator : Panel Reviewer : Division Manager : Division : Lei Liu George T\. K\. Pitman Alain A\. Barbu IEGSG 2\. Project Objectives and Components a\. Objectives 1) To promote growth through developing least -cost power generation for domestic use in an environmentally sustainable and efficient manner \. 2) In addition to mobilizing private capital, the proposed project would promote private sector ownership and management of the power sector, and sector reform \. b\. Components (or Key Conditions in the case of Adjustment Loans ): The proposed Project consists of a small reservoir, a powerhouse, a rockfill dam, spillway, a 100 km transmission line, substations, and other associated works \. c\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Figures were not entered for the Loan /credit/cofinancing boxes above since the project did not involve any Bank loan/IDA credit or donor cofinancing \. The project cost at appraisal was US$ 582 million\. The project financing plan included US$115 million IDA partial risk guarantee, an IFC "A" loan up to US$60 million, an IFC "B" loan up to US$40 million, and an IFC risk management instrument of up to US$ 10 million\. Also included were US$234 million of export credits, US$55 million loans from the African Development Bank, US$ 3 million from Net Interim Energy Revenues, and US$115 million in equity from the project sponsor AES Nile Power \. Shortly after receiving the joint IFC /IDA approval, the project encountered difficulties \. In January 2002, the export credit agency withdrew from the deal due to the high level of perceived country and business risks \. Moreover, there had been already an ongoing investigation in the US, Norway, the UK and Uganda concerning allegations of corruption involving one of the project contractors \. Finally, the private sponsor AES pulled out from the project in August 2003 due to the continuing deterioration of its global financial situation \. As a result, the project was never brought to financial closure nor became effective \. No disbursements were made\. The project received Board approval on December 18, 2001\. No closing dates were entered into the above box as the Bank does not set closing dates for private sector projects involving guarantees \. 3\. Relevance of Objectives & Design : The project objectives are in line with Uganda's poverty reduction strategies, as spelled out in the Government's Poverty Eradication Action Plan/Poverty Reduction Strategy Paper, which calls for direct increase in the quality of life of the poor, and for the creation of an enabling environment for economic growth and structural transformation \. 4\. Achievement of Objectives (Efficacy) : Project objectives could not be achieved due to loan cancellation \. However, the government has moved forward and has selected a new private sector project sponsor and continued with its energy sector reform program \. 5\. Efficiency : Non-evaluable\. The project was never implemented \.  6\. M&E Design, Implementation, & Utilization: The PAD included a section on key performance indicators \. The designated performance indicators were the rates of commercial power consumption increase, tax revenue increase from the power sales, foreign exchange revenue increase from the sale of surplus power and electricity sales increase, electricity revenues increase \. 7\. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative): The project was a Category A project in accordance with OP 4\.01 (Environmental Assessment)\. An Environmental Impact Assessment was prepared \. A Resettlement and Community Development Action Plan was developed for the hydropower facility and a Resettlement Action Plan was prepared for the transmission component of the project \. Safeguards on Natural Habitat OP 4\.04, Safety of Dams OP 4\.37, and Projects on International Waters OP 7\.5 were also triggered\. 8\. Ratings : ICR ICR Review Reason for Disagreement /Comments Outcome : Not Rated Not Rated Institutional Dev \.: Not Rated Not Rated Sustainability : Not Rated Not Applicable Bank Performance : Not Rated Satisfactory Based on limited information in the PCN and subject to be revisited in the forthcoming cluster PPAR (see section 9) Borrower Perf \.: Not Rated Satisfactory Based on limited information in the PCN and subject to be revisited in the forthcoming cluster PPAR (see section 9) 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\. It is very important to have a robust financing plan, as contemplated in the Project Completion Note \. 2\. Efficient operations of the power distribution business need be assured, since its cash flows and financial viability will help mitigate perceived risks and will prove crucial when private investors assess the ability of a country's power sector to repay new investments \. 10\. Assessment Recommended? Yes No Why? A cluster PPAR of several Uganda power projects will be scheduled upon completion of the on-going Third Power project\. 11\. Comments on Quality of ICR: The project never became effective therefore only a Project Completion Note (instead of ICR) was prepared\. The Project Completion Note mainly explains why the project was not implemented and does not assess nor rate Bank performance (quality at entry) and Borrower performance (project preparation)\.

REVIEW

P044973

 ICRR 12156 Report Number : ICRR12156 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 08/25/2005 PROJ ID : P044973 Appraisal Actual Project Name : La-Southern Province Project Costs 39\.30 41\.42 Rural Electrification US$M ) (US$M) Country : Laos Loan/ Loan US$M ) 34\.68 /Credit (US$M) 34\.38 Sector (s): Board: EMT - Power (82%), Cofinancing GEF: 0\.74; Gov't of GEF: 0\.74; Gov't of Central government US$M ) Laos: 3\.88 (US$M) Laos: 6\.30 administration (15%), Renewable energy (3%) L/C Number : C3047 Board Approval 98 FY) (FY) Partners involved : Closing Date 06/30/2004 12/31/2004 Prepared by : Reviewed by : Group Manager : Group : Ashwin Digambar Fernando Manibog Alain A\. Barbu OEDSG Bhouraskar 2\. Project Objectives and Components a\. Objectives The objectives were to (i) expand rural electricity service in 7 central and southern provinces where economically justified, through grid extension and off -grid electrification; and ii) strengthen the electric company's (EDL) capacity to plan and implement electrification investments and to operate on a commercial basis \. b\. Components The project consisted of 3 components: i) Distribution Extension (appraisal: US$27\.3 million; actual: US$31\.22 million) to increase electricity service in 7 provinces and thus reach 520 villages, benefiting 50,000 households, through the construction of voltage lines, transformer capacity, distribution transformers and consumer meters, and pilot low -cost single wire earth return (SWER) systems in rural areas\. ii) Off-Grid Rural Electrification (appraisal: US$2\.0 million; actual: US$2\.21 million) to pilot small-scale, standalone electricity systems, including the renewable energy technologies of micro -hydro, and solar battery charging stations, and diesel mini-grids, on a financially sustainable basis to provide electricity to 4,600 households in 46 villages\. 3) Institution Building (appraisal: US$5\.0 million; actual: US$7\.39 million) to improve EDL's efficiency by building its project management capability, improving its technical management and enhancing its commercial focus; and to assist the Ministry of Industry and Handicraft (MIH) in conducting hydropower planning studies and implementing the Electricity Law\. c\. Comments on Project Cost, Financing and Dates Project Cost The actual project cost, US$41\.42 million, which includes US$0\.6 million of interest during construction, slightly exceeded the appraisal estimate of US$ 39\.3 million\. The actual Bank credit amount was US$ 34\.38 million, as compared to US$34\.68 million at appraisal\. Actual financing required, with the interest during construction, was US$41\.42 million\. Government of Lao PDR (GOL) resources made up for the differences \. Financing The credit was in the amount of SDR 25\.7 million and equivalent to US$34\.7 million\. Similarly, the GEF grant, which financed a Project Adviser and consultants for the off -grid component and a small capital contribution toward solar battery charging stations, was in the amount of SDR 0\.5 million and equivalent to US$0\.74 million\. Dates The project closed 6 months later than expected due to delays in the procurement and delivery of goods for the off-grid electrification, which delayed the completion of that component \. 3\. Achievement of Relevant Objectives: i) Expand rural electricity service in 7 central and southern provinces where economically justified, through grid extension and off-grid electrification Achieved\. Although some implementation delays occurred, the targets for both grid extension and off-grid electrification were surpassed (see Sec\. 4)\. Furthermore, due to cost savings, the Bank approved a request to include a new activity under the Distribution Extension component, and signed a contract for a subsidiary loan of US$3\.9 million\. This loan allowed additional outputs, such as the upgrading of a 115/22 kV substation and the installation of another one \. Off-grid systems were made available to remote households through hire -purchase agreements and subsidies for solar home systems and micro-hydro, involving private provincial energy service companies (PESCOs) and village-level electricity associations (Village Electricity Managers, VEMs)\. The project provided electricity to 6,097 households, but it is important to note that in spite of the participatory approach that VEMs allowed, uptake in villages was on average only 60%\. Implementation responsibility for the off -grid component was transferred to the Department of Energy of the MIH in late 2001, through an amendment of the Credit Agreement and the related Subsidiary Loan Agreement, to relieve EDL of the financial pressure \. Without this transfer, it is doubtful that this component would have been successful \. However, while institutional arrangement for the off -grid systems was sustainable, the component did not operate on a full cost -recovery basis\. Although the component's ERR was 26% (compared to 14% at appraisal) due to a consumer surplus factor, the FRR (with the subsidy) was -15\.9% (as opposed to an estimated 13%) because the component's cost was 10% higher than estimated at appraisal and future operational costs were higher than anticipated \. The operational cost of the supply chain, involving PESCOs and village electricity associations, accounted for much of the added expense \. ii) Strengthen the electric company's (EDL) capacity to plan and implement electrification investments and to operate on a commercial basis Partially Achieved\. Technical assistance enabled EDL to develop capacity in system planning, project design, and procurement \. Financial management capabilities also increased with the establishment of billing and accounting systems \. Technical assistance provided to MIH for implementation of the off -grid component\. Improved efficiency in project implementation allowed cost savings and expanded physical outputs \. However, EDL's financial situation continued to worsen between 1999 due to EDL's neglect of financial covenants for a time and despite an increase in tariffs, which meant that EDL was even farther from being able to operate on a commercial basis\. 4\. Significant Outcomes/Impacts: The grid-extension component connected 51,805 provincial households (slightly exceeding the target of 50,000) through grid extension and the GEF -supported off-grid component provided electricity to 6,097 households (which was 32% greater than the target of 4,600), mainly through solar home systems and micro -hydropower\. It thereby achieved an electrification ratio in the project provinces of 42%, exceeding significantly the appraisal target of 20%\. As a result of the institutional development component, the GOL issued a Statement of Power Sector Objectives as a policy statement\. This statement has helped it to develop the legal and regulatory framework to facilitate power sector development, and maintain and expand affordable and reliable electricity supply \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): The financial situation of EDL continued to deteriorate during the project largely because the GOL, due to a lack of leadership in 1998/1999, took no action from 1999 to 2002 on the Financial Recovery Plan (FRP) to place EDL on a commercial footing\. The project at closing saw an improvement in EDL's situation, but, according to the Log Frame Matrix in Annex 1 of the ICR, the covenants for reducing GOL arrears to EDL and increasing tariffs were not met and will be addressed only in a follow -up project, Southern Provinces Rural Electrification 2\. The Bank underestimated the risk of EDL continuing to perform poorly and the lack of GOL commitment to address this problem\. While the project included several covenants for the GOL to meet, as the ICR notes, financial restructuring should have been made a step for the borrower to take during appraisal \. Up to 2003, resettlement was carried out inadequately due to lack of knowledge or understanding at the provincial level of the Resettlement Action Plan (RAP), some provincial offices' delayed approval of the compensation guidelines, and disparity between the compensation rates in the RAP and that which the provinces approved\. In 2003, the situation was resolved with RAP -based compensation agreements being signed with all the households \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Although EDL's financial status is weak, it has improved since it implemented the FRP\. Institutional Dev \.: Substantial Substantial Sustainability : Likely Likely This rating is based on the progress that was achieved in improving EDL's financial performance and indications that the remaining problems will be resolved in the follow-up project\. EDL's situation in the present and past, however, has been precarious and the Bank itself raised concerns about it in an assessment of the Provincial Grid Integration Project in  2002\. Although the off-grid component did not operate on a cost-recovery basis, the satisfactory performance of MIH in implementing it, the successes the component otherwise achieved, and the support that the follow-up SPRE 2 will provide to off-grid electrification suggest a likelihood that their benefits will be sustained\. Bank Performance : Satisfactory Satisfactory Risk assessment in Quality-at-Entry was weak though, as the Bank was over-optimistic about EDL's financial situation and government commitment to restructuring the institution\. Borrower Perf \.: Satisfactory Unsatisfactory While implementing agency performance was satisfactory, GOL delayed carrying out the FRP for EDL, and thus failed to abide by the financial covenants till late 2002\. Also, EDL did not inform provincial offices of the RAP and its requirements as it had agreed to under the project \. 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 OED review considers the following as important lessons : Lower-income households are unable to benefit as much from grid and off -grid rural electrification as better -off families do\. As the results of the socio -economic survey conducted for this project show, while electricity use can significantly reduce the monthly energy expense of low - (and other) income households, the poor make little use of electrification because of a lack of disposable income \. This may be the case even where costly, participatory approaches are adopted for off -grid electrification\. Electrification may therefore contribute to increasing the gap between the wealthy and the poor \. While covenants may be seen as essential for a project, particularly where risks regarding borrower performance exist, there is the possibility that they may not serve during implementation as effective tools in getting the borrower to carry out the necessary steps \. Quality risk assessment during project design is therefore critical, and based on it the required actions to minimize the risks and ensure that all the necessary conditions for project success exist should be taken during appraisal \. Where resettlement is involved, the Bank must ensure that all implementing parties, particularly those at lower levels of government which may be directly responsible for implementing Resettlement Action Plans, are knowledgeable on the RAP and its requirements, and agree to comply with them \. 8\. Assessment Recommended? Yes No Why? An assessment would achieve the following : Provide the Bank with important lessons from succesful renewable energy -based off-grid electrification in a poor IDA country that could be applicable to the Bank's current renewable energy scale -up program and efforts to promote renewables, particularly in Africa \. More carefully assess to what extent is EDL's financial weakness a risk to the otherwise positive development outcomes of the project\. Assist in updating OED's findings and lessons on rural electrification based on more recent projects \. 9\. Comments on Quality of ICR: The ICR is satisfactory\. It fairly assesses the project's achievements and shortcomings \. However, one area where room for improvement exists is the lessons learned \. As presented, most of the lessons are more in the nature of findings than lessons\.

REVIEW